Tag: EU

21 Months to Brexit and the Case for Digital | Sherpas in Blue Shirts

The United Kingdom (UK) and the European Union (EU) officials have finally agreed on a Brexit transition deal. While some aspects of the agreement still need further work, the principles for the period are clear:

  1. The transition period will run to the end of December 2020. This means that the UK will have to abide by EU rules until then, but it will be able to negotiate new trade deals during that period
  2. The UK must treat EU citizens coming to the country during the transition period the same as those who already are residing there
  3. There will be no border between Northern Ireland (NI) and the Republic of Ireland with the back stop of NI remaining in the EU customs union even after Brexit, if no other solution can be found to a borderless relationship between the two

The Road to Brexit is Digital

Following this announcement, organizations now have a clear timetable to prepare for Brexit, allowing them to plan and define an internal roadmap. One of the key factors when planning is to build with agility in mind. If you’re an executive creating the plan, you’ll want to make sure that the business remains flexible to allow for adjustments to the remaining unknowns.

Digital is a big enabler of agility, and in the run up to Brexit, it is more important than ever that organizations invest in it. Boosting spending on digital solutions and automation will help them adapt and adopt to new market pressures, changing regulatory frameworks, and an uncertain labour pool because of the likelihood of many EU workers deciding to return to their home countries after Brexit.

The ways that digital and automation technologies help organizations in times of uncertainty include:

  • Reduce costs and increase process efficiency while maintaining service quality
  • Decrease hiring and training needs while increasing flexibility to handle fluctuating demand
  • Increase speed to market while decreasing the cost of launching new products and services
  • Empower staff to do more and maintain productivity during a time of change
  • Eliminate capital investment in infrastructure by migrating to the cloud
  • Satisfy new trade requirements and custom checks at EU borders or with new trade partners

Digital Skills will be High in Demand


Digital Skills will be High in Demand


Digital Skills will be High in Demand

Brexit will increase the demand for digital skills as companies prepare for handling new trade and customs requirements. The same goes for the public sector in both the UK and EU member states. For example, they will need a fair bit of digitalization on their borders to deal with the new paradigm of tracking immigration and trade, and handling customs requirements electronically using technology, such as RFID, IoT, and automation, to achieve the goals set out by political agreements while at the same time not creating hard borders.

Meeting Demand for Digital Skills and Services

Investing and tapping into digital skills is a must. This can take the form of internal training and development, recruitment, and contracting outside the organization. In turn, this likely will drive demand for digital consulting and implementation services.

On the supply-side, there are opportunities for service providers and consultancies to provide Brexit-specific services, such as Brexit Competency Centres (BCC) and products. We may well see Brexit specific packaged offerings emerge as well as Brexit specific robots from RPA and AI automation vendors. I expect these will be provided in extended robot libraries or bot-stores.

Northern Ireland – the New UK Gateway to EU

While the approach is unclear, there is certainty that NI will continue to have borderless access to the EU. This would make NI the ideal location for UK-based companies to place new production sites or delivery centres while still maintaining the bulk of business operations in the UK.

The road to Brexit has become clearer this week – but this is only the beginning. Businesses and governments must start detailed planning and preparation for Brexit. In this regard, digital solutions are a key enabler of both business continuity and change and must be on every C-level executive’s agenda.

The Equifax Data Theft: What if GDPR were in Force? | Sherpas in Blue Shirts

The high entropy data protection space has once again gained headlines after Equifax, the U.S- based consumer credit reporting agency, revealed that a July 2017 theft compromised more than 143 million American, British, and Canadian consumers’ personal data. The data breach incident, one of the worst cyber-attacks in history, was conducted by hackers who exploited a vulnerability in the company’s U.S. website and stole information such as social security numbers, birth dates, addresses, and driver’s license numbers. (Equifax maintains and develops its database by purchasing data records from banks, credit unions, credit card companies, retailers, mortgage lenders, and public record providers.)

Much about the situation would have been considerably different had this breach happened after May 2018, at which time the General Data Protection Regulation (GDPR) – a regulation by which the European Parliament, the Council of the European Union, and the European Commission intend to strengthen and unify data protection for all individuals within the European Union (EU) – goes into effect. Even though it is not headquartered in the EU region, Equifax would have come under the purview of GDPR, because it maintains and reports the data of British citizens. And the stringency of requirements and degree of implications would have been significantly higher for the credit rating agency.

GDPR and Equifax

Although not directly related to GDPR, another significant business impact is the sudden “retirement” of Equifax’s CEO less than three weeks after the breach was announced.

This massive cyber-attack is a wake-up call for the services industry. Starting today, operations and businesses must regard data protection regulations with the utmost importance. Non-compliance will not only harm firms financially, but also expose them to brand dilution and business continuity risks.

Some of the key imperatives for enterprises operating in the ever-so-stringent data protection space include:

  • Know and understand the data security laws under which your enterprise falls, especially those such as GDPR that have far reaching impacts
  • Redesign your business processes to incorporate privacy impact assessments to identify high risk processes
  • Implement necessary changes in the contracts with third parties to incorporate the stricter requirements of consent
  • Achieve process transformation to inculcate privacy by design; this includes risk exposure reduction by technological changes such as data minimization
  • Appoint a Data Protection Officer to align the business goals with data protection requirements
  • Make suitable changes in contracting and governance practices to ensure adequate emphasis on data protection

To learn more about the strategic impact of the EU GDPR on the global services industry, please read our recently released viewpoint on GDPR: “EU GDPR: Is There a Silver Lining to the Disruption.”

How Will Brexit Impact Your Europe Delivery Strategy? | Sherpas in Blue Shirts

On June 23, 2016, the United Kingdom (U.K.) voted to leave the European Union (EU) through a referendum, also known as “Brexit.” Indications over the last few months are that it will be a “hard Brexit,” wherein the U.K. makes a clean break from the EU’s common market. If that happens, we can anticipate the following major changes to the global services operating environment:

  • Passporting for companies will become tougher: Banks and financial institutions in the U.K. will find it more challenging to operate/set up new centers across countries in the region, as the U.K. will no longer be a part of the EU free trade market
  • Talent movement across U.K. borders will be a challenge: People will require separate work visas to work in the U.K. and continental Europe. Although this is expected to apply to new work visas, changes to visas for people currently working in these countries are still uncertain.

As many global companies leverage the U.K. and countries in continental Europe to deliver services to all of Europe, passporting and talent movement restrictions could have a significant impact on their business strategy, regardless of their operating location in the region.

Potential Brexit impacts on companies operating in the U.K. and EU

In the wake of the uncertainty, global companies that are planning to service their European customer base would prefer setting up their GICs/back-office centers in continental Europe instead of the U.K. This might cause a surge in back-office activity in continental European locations, and talent demand for multiple IT and business process functions in those countries might go up.

Additionally, companies that are currently operating in the U.K. and the rest of Europe will need to prepare for possible legal/policy changes, and will need to expedite visa, HR, and administrative processes for their employees. We expect this to lead to increased demand for back-office activity in the U.K. and continental Europe.

Moreover, with talent movement restrictions becoming a possibility, companies currently operating only in the U.K. might need to rethink their talent hiring strategy in the region, especially for language-specific needs that were previously easy to fulfill.

To paint a picture of the potential Brexit impacts, following are several sample scenarios about companies operating in the U.K. and EU, and their possible decisions pre- and post-Brexit.

Brexit decision scenarios

What lies ahead for those impacted by Brexit decisions

Until the exact Brexit-related policy changes become clearer, global companies might delay or shelve their investment decisions for the U.K. and rest of Europe. They might also possibly move toward greater levels of automation in their business operations to mitigate potential risks.

While it will be a wait and watch game over the next 10-12 months for companies operating in the U.K. and EU, they’ll need to keep their eyes carefully trained on developments in order to create effective strategies for dealing with the possible changes in the near- and long-term.
For a more detailed discussion on the topic, please refer to the recently released Everest Group viewpoint, “The Road Ahead: A Global Services Perspective on the Impact of Brexit. ”

Initial Reactions to Brexit and the Impact on the Global Services Industry | Sherpas in Blue Shirts

The uncertainty of Brexit is not good for any industry. This is particularly true for the global services industry, since it is based on aligning labour forces, regulatory and legal concepts, and economics across multiple countries. When one country faces such a fundamental discontinuity, it and others intertwined with it are certain to need time to determine how to realign against the new normal.

Our initial reaction to the impact of Brexit on the global services industry follows. We will publish new advisory notes as the UK government releases more details about its exit strategy.

Overall picture:

  • It is possible, but unlikely that Article 50 (A50) of the Lisbon Treaty is invoked very soon. This would mean that for two years there will be no significant change. When A50 is invoked, exit negotiations can potentially run until the next UK General Election. That is a period of three to four years of no real regulatory change. In both of these scenarios we will see the status quo largely unaffected for up to four years but investment decisions on-hold or shelved.
  • Slightly longer term, another Scottish independence referendum would be likely to succeed. Also possible is an independent Scotland being fast-tracked into the EU. For Scotland the appetite for investment north of the border looks good. Who would have thought a week ago that nearshoring would have meant Scotland?
  • Initially, demand for outsourcing services through new contracts is likely to stagnate, as UK companies digest and await government strategy on Brexit. Renewals of existing agreements are also now facing uncertainty – in particular, crafting legal frameworks that adapt to the changing conditions will be challenging.
  • The drop in the value of the Pound will increase sales of British manufactured goods and, thereby, boost the sector. We may see increasing demand for outsourcing contracts to power manufacturing growth within the UK. Service providers will need to show agility and innovation to take on this demand to make the most of an uncertain market.
  • Currency fluctuations will cause volatility in service providers’ contracts and business from the region. This could lead to different ways of hedging and potentially contract renegotiations (those that were pan EU).
  • Outsourcing by the large and mature UK government sector will initially slow down pending Brexit strategy decisions. The sector, however, also has to deal with severe budget cuts. The combination of Brexit uncertainty and budget cuts will enhance demand for services by outsourcing to companies such as Atos, Capita, and HPE/CSC that are already well established in the market in the UK.
  • The picture in the financial services market is a complex one and for the purposes of this discussion, we consider the UK-headquartered financial institutions. On the one hand, financial institutions might see some easing of EU-originated regulatory requirements. This could lead to changes in scope of existing outsourcing contracts. On the other hand, there will be a lot of uncertainty in the sector about its relationship and business with the EU. This could boost demand for cost-cutting outsourcing as banks batten down the hatches and brace themselves for a bumpy ride over the next few years. BFSI will also look to monitor risks better in very uncertain times. We may see increasing investment in big data for managing and monitoring risks.
  • International outsourcing companies will be assessing the number of staff that they have working in the UK and EU countries and will track Brexit to ensure that they have optimized the spread of people who serve EU countries and the UK, which accounts for the largest share of the market in Europe. They will watch for clues relating to how work visas are likely to be sorted out and how this impacts the onshore-offshore model – particularly for staff that might need to travel between the UK and European countries.
  • Uncertainty is often a trigger for economic slowdown and ultimately a recession. The usual outcomes of cuts in expenditure and job losses cannot be disregarded with consequences such as lowering of demand in HR-related services such as RPO. However, it may help increase use of contingent labour and we might see an acceleration in MSP.
  • As the approach to Brexit becomes clearer, we would also expect to see an increase in projects required to alter operating models and data storage/access to comply with the new regulatory constructs. In the interim, many current transformation projects which involve activities that might be impacts by Brexit will be delayed or managed to allow flexibility to adapt to changing conditions.
  • Once the dust has settled (and hopefully quickly), EU and UK leaders are likely go past campaign style rhetoric such as “out is out” and negotiate in order to moderate uncertainty through interim trade deals to allow business and commerce to flow. If the UK economy slows, it will tend to have negative impacts on others as well, so hopefully there should be some natural momentum to get key issues sorted in an expedited manner. However, given we are discussing a political process, that hope is likely misplaced.

Staff travel and working visas

Historically, the UK has had a long and successful sourcing relationship with countries that are outside the EU, for example, India and the Philippines. This is unlikely to change. A relatively simple visa system for outsourcing company staff who come to work in the UK has served the industry well and is likely to be duplicated for people from the EU. However, whether these staff can easily work across the UK and the EU is not yet clear.

Overall, visa and immigration-related costs will increase for service providers operating in Europe and with centers in the UK. This may lead to a preference for placing more work in Europe (such as, CEE) as service providers will be able to more easily tap into the European labor market, especially when requiring European-language support.

Delivery centres

The UK-based delivery centres mainly serve demand from the UK but some also offer services in different language to other EU countries. This is particularly true for Scotland and Northern Ireland. Staff coming from other countries with language skills are likely to come under any new working visa system that is set up.

The UK has been a popular destination for data centres to serve clients in different EU countries. The IT industry will no doubt campaign to have data protection laws that are approved by the EU. However, over time we may see some relocation of data centres to EU countries.

Nearshoring to EU countries will slowdown initially until the details of Britain’s exit from the EU are worked out.

The drop in the value of the Pound will make the cost of “importing” services from nearshore and offshore GICs higher for UK-based parent companies. This will push the need for increased efficiency and we will see increased demand for cost cutting through technologies such as automation.

Although the question of whether there will be a Brexit is now answered, the number of remaining questions just got more complicated and uncertain.

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