Tag: nearshore

The Dichotomy of Current and Future Offshore/Nearshore Delivery Locations | Sherpas in Blue Shirts

An interesting offshore/nearshore locations strategy dichotomy is emerging for today’s major third-party service providers and enterprise firms, as well as their GICs. On one hand, they are continuing to set up delivery centers in new and unexplored locations due to increasing competition, business continuity planning, and risk diversification. On the other hand, the pressure of new disruptive technologies, changing consumer demands, and need to maintain points of parity with competitors is pushing them to consolidate their footprint in the top 10 locations.

Growing Oligopoly of Offshore/Nearshore Locations Driven by the “Digital Winds of Change”

 

Offshore, NearShore

Top-10 offshore/nearshore locations include – India, Poland, Republic of Ireland, the Philippines, Costa Rica, Singapore, Romania, Malaysia, Mexico, and China

In the past few quarters, new center setups in the top-10 locations have jumped by ~10 percent, from 60 percent in 2015 to 70 percent in 2016. The key driver of this change has been availability of talent; only selective locations currently have the capability to support complex digital services. Thus, both external providers and GICs are leveraging these locations for digital services centers and setting up relevant centers of excellence. While several other non-top-10 locations are also investing in building digital talent, they are still not considered a viable option for digital delivery.

  • The major gainers from this shift have been India, Poland, Singapore, the Republic of Ireland, Romania, and Costa Rica. Analytics and cloud are the leading digital services segments in these offshore locations, primarily core software-based analytics. Both types of providers are also building centers in these locations for mobility, social, IoT, and cyber security.
  • The major losers from this shift towards digital have been China and Brazil, given providers’ caution around language constraints and political uncertainty, respectively.

Going Forward, Concentration and Diversification

While most firms are investing in the emerging technologies/digital space, they are still in the nascent stages of building capability. As they mature, they will start diversifying and distinctively leveraging different locations for supporting elements of digital, thus driving a uniform distribution amongst top-10 locations in the next three to six years.

Following are highlights of our research on the future of digital services delivery destinations:

  • India and Singapore will be large scale offshore hubs. Analytics, cloud, and mobility will continue to hold strong, while other technologies, (e.g., IoT, cybersecurity, and blockchain,) will, ultimately, be broadly and deeply supported
  • Nearshore locations such as Ireland, Poland, Mexico, and Costa Rica will support real-time innovation and product development, and provide multilingual service delivery for social media and mobility services
  • Offshore locations such as Tel Aviv, Cairo, and the Baltic states are currently the ”dark horses” in the race towards the top-10, and will gain momentum in the future. Look for them to deliver regional content contextualization, especially for mobility and social and interactive segments. Some of them will deliver digital technology R&D as well.

To learn how locations activity spanned in 2016, please refer to Everest Group’s report titled Market Vista™: 2016 Year in Review: Global Services Industry Facing “Winds of Change.”

Are There Productivity Differences Across Contact Center Locations? Yes, But … | Sherpas in Blue Shirts

The topic of productivity differences in contact center locations has always been of interest to enterprises, GICs, and service providers. In the last few months, there has been a significant increase in firms’ interest in leveraging an integrated global delivery model across offshore, nearshore, and onshore locations for their contact center needs. In addition, the looming prospect of higher barriers to offshoring/nearshoring is also shifting focus from a labor arbitrage model to one of productivity gains.

Against this backdrop, Everest Group conducted targeted research to assess relative differences in contact center productivity across locations, using agent efficiency as a proxy for productivity.

Our research uncovered an interesting finding: while there are location-specific variations, agent productivity does not consistently vary by location category (i.e., onshore versus offshore/nearshore). While agent productivity is influenced by multiple factors, only two – average call handling time and agent utilization – are largely location-dependent. Even after normalizing for other factors such as nature of business, work mix, and scale of operations, there is no evidence to suggest that productivity is higher in onshore locations than in offshore/nearshore locations.

Exhibit 1: Assessment framework for agent productivity in contact centers

Contact Center Outsourcing
The reason that productivity variations are not location specific is that both average call handling time and agent utilization are, in turn, impacted by drivers that largely do not vary consistently across location category. For example, both scheduling efficiency and training effectiveness are influenced more by center-specific policies and work environment than location category. Thus, it’s the interplay of these and multiple other drivers, which often negate and counterbalance each other, that are the key contributors to productivity variations, not the locations themselves.

Exhibit 2: Variation in location-dependent factors that impact agent productivity in contact centers

Contact Center Outsourcing
These findings have some important implications for firms:

  • It is important to focus more on internal levers to improve productivity within individual contact center operations. Factors such as call volume, business cyclicality, skillset availability, and the firm’s overall policies and practices influence productivity more than location-dependent factors
  • Furthermore, global work placement decisions need to incorporate multiple factors beyond productivity, including delivery cost , talent scalability, business/client preferences, and business/operating risks
  • Finally, it is important to recognize that no single metric is sufficient to fully capture productivity. Rather, a holistic assessment that incorporates both efficiency and effectiveness (quality) and both agent and technology-enabled metrics is required

For a detailed analysis of this topic, please see our viewpoint entitled “Are There Productivity Differences across Contact Center Locations?”

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