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service delivery

Should Your Global Service Delivery Locations Portfolio Include Western Europe? | Sherpas in Blue Shirts

By | Blog, Outsourcing

As enterprises move from an arbitrage-first to a digital-first model to gain business value beyond cost savings, and to lessen the impact of potential immigration-related issues, service delivery from locations that were traditionally considered “onshore” is gaining prominence.

Western Europe* is one region that has gained significant importance as a global/regional delivery geography over the last several years. Indeed, Everest Group’s research on the growth of back- and middle-office services delivery demonstrates a compellingly strong value proposition across all the countries in the region.

 

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* The Western European region is defined as Austria, Belgium, Denmark, France, Finland, Germany, Greece, Italy, Ireland, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and United Kingdom.

Yet, due to multiple misconceptions about the region, some readers may need to be convinced of its viability as a digital-first delivery location. Thus, here are some fallacy-busting facts from our recently-released report, “Emergence of Western Europe for Centralized Global Service Delivery to Europe”:

  • Myth 1: Western Europe is predominantly a source geography, not a delivery geography
  • Reality 1: Global in-house Center (GIC) setup activity has seen significant growth, with double the number of new setups in 2014-2016 compared to 2011-2013

service delivery

  • Myth 2: Western European cities cannot offer more than 10-20 percent savings
  • Reality 2: Contrary to popular belief, selected locations in Western Europe can offer cost savings up to 30-50 percent over tier-1 locations (e.g., London, Frankfurt, and Paris)
    • Barcelona, Belfast, and Lisbon offer the highest cost savings due to lower salaries and infrastructure costs

 

  • Myth 3: Western Europe is primarily leveraged by Western Europe-based enterprises for service delivery
  • Reality 3: In 2016, U.S-based enterprises established the largest percentage of new GICs in the region

 

service delivery

 

  • Myth 4: The value proposition offered by Western European locations is limited to support of European languages
  • Reality 4: Western Europe’s value proposition extends far beyond language to the availability of skilled talent, stable business/operating environment, cultural affinity, high maturity for certain niche services, and delivery of skill-intensive work. Multiple locations in Western Europe are particularly well suited for complex digital services (e.g., analytics, blockchain, and mobile development.)

Clearly, there are many reasons why Western European cities are playing a strong role in the delivery portfolio of a growing number of organizations that have highly advanced locations strategies.

Of course, there are multiple factors that could potentially alter the landscape of delivery from Western Europe. Issues global services leaders need to carefully consider include Brexit, adoption of digital technologies (e.g., social, mobile, analytics, and cloud), and likely changes driven by the General Data Protection Regulation (GDPR) and the European Central Bank (ECB.)

For a more detailed analysis of the value proposition of Western European cities, and relative comparisons of leading locations, please see our recent report, “Emergence of Western Europe for Centralized Global Service Delivery to Europe.”

Six Common Mistakes Enterprises Make when Developing Service Delivery Location Business Cases | Sherpas in Blue Shirts

By | Blog, Outsourcing

Everest Group regularly supports clients in developing fact-based business case models to assess all relevant costs and benefits associated with their service delivery portfolio and delivery location decisions.

Not surprisingly, we’ve seen an increase in this type of activity in the last several years due to technology disruptions, potential immigration reform laws, intensifying competition for talent, and macroeconomic and geopolitical uncertainties. We’ve also seen an increase in the number of faulty/incomplete business cases that, if unresolved, can result in unnecessarily high costs and less than expected benefits.

Six common mistakes enterprises make when creating their global service delivery location business cases.

#1 Clarity on the primary objective of the business case:

Establishing clarity on the key objectives of the business case for service delivery location selection is of utmost importance. Companies often include benefits of other initiatives (e.g., transformation) which may impact their overall locations footprint, but fail to include costs associated with these initiatives, resulting in a faulty business case. As business case assessment is typically done for long-term strategic decisions, it is critical to ensure clarity on the locations strategy and implementation roadmap under consideration.

#2 Underestimating the costs of “what it takes to get there”:

Companies often underestimate the costs associated with exiting their current location (e.g., lease termination and severance costs); disruption in their existing locations (e.g., loss of knowledge due to higher than expected attrition); migrations (e.g., employee relocation, technology migration, parallel/shadow run); and set-up of new centers (e.g., capex, cost of hiring and ramp-up, training costs, etc.)

Example: A global Financial Services company had a 12-month long shadow/parallel run to effectively complete knowledge transfer for high complexity processes. This negated most of the arbitrage-related benefits for the initial 12-18 months. In fact, the company incurred relatively higher total cost of operations (TCO) until steady state operations was achieved.

Example: In a recent engagement, the location selection for a Latin American client’s shared services center was greatly influenced by applicable withholding taxes (i.e., the Argentinean government levies a ~31.5% withholding tax on import of global services from certain locations such as Mexico). These factors significantly impacted the relative cost attractiveness of locations under consideration.

#3 Overestimating benefits:

Companies often plan multiple transformation and optimization initiatives in parallel with changes to their services delivery portfolio. In such cases, things seldom pan out as planned, and the savings achieved are significantly lower than expected in areas including:

  1. Headcount reduction from process improvements
  2. Delivery pyramid optimization
  3. Implementation of automation/technology solutions
  4. Economies of scale (in cases of location consolidation)
  5. Optimization of management and administrative overheads

Example: A BFSI firm changed its planned strategy midstream, as its initial plans to fund the business case for large scale service delivery location consolidation by reducing FTE headcount by ~ 6,000 could not be realistically achieved.

#4 Stakeholder misalignment:

A service delivery location decision must involve multiple stakeholders including onshore business leaders, offshore delivery leads, functional and GIC leaders, migrations and/or transformation teams, corporate real estate, and technology teams. Any lack of coordination among these stakeholders can pose challenges in alignment on data used, key assumptions, the roadmap for service delivery portfolio changes, and the plan for other transformation/optimization initiatives. All stakeholders must be kept in the loop from the beginning of the location evaluation, and they must periodically periodic sign-off on the approach.

#5 Industry benchmarks:

While it is important to leverage industry benchmarks, companies must contextualize information to their own unique situation. The specificity of operations or the role a location plays for the company can be different from the typical value proposition of that location/geography.

Example: A recent engagement for a global Financial Services client demonstrated that, despite industry benchmarks that indicated Location A offered ~20 percent cost savings over Location B for typical BPO processes, the client’s specific processes and talent needs reversed the cost attractiveness of the two locations.

#6 Talent competition in the local market:

Companies often underestimate the true extent of competition in the local talent market, and the impact of attrition on sustainability of their operations. This impacts a company’s ability to scale initially, retain talent, and back-fill lost staff.

Example: A global manufacturing company faced significant challenges in hiring language skills for its newly setup shared services center in the APAC region, resulting in significantly lower arbitrage savings than expected.

While developing business cases models can be a significant challenge, we believe that addressing the above-mentioned points can reduce chances of error significantly. Learn more about Everest Group’s Service Delivery Locations practice.

Service Delivery Locations

By | Uncategorized

Service Delivery Locations

From Asia to Central & Eastern Europe to Latin America and Africa, we have
assisted hundreds of organizations with their service delivery location decisions

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Onshore, Nearshore, or Offshore Delivery?

As global service delivery models have matured, hundreds of onshore, nearshore, and offshore locations have emerged and matured. Each has unique attributes in terms of costs structures, talent markets, and risk profiles. As the recognized leader in service delivery locations, we provide a range of services from access to data and insights to location selection and portfolio optimization

Advanced Locations Tool

Power users of global services not only need to select locations and occasionally rebalance their portfolio, but also proactively monitor location developments in their current locations and make frequent decisions on how to place work in their priority geographies. Our Advanced Locations Tools is designed to both help track locations trends and provide the fact base for making standard work placement decisions (not to mention educating executive leadership on variations in cost, attrition, talent pool, risk, and other factors).

The Advanced Locations Tool covers location-specific detailed information on:

  • 13 mature traditional functions (e.g., Finance, HR, IT, ADM, Procurement, Contact Center)
  • 4 emerging traditional functions (e.g., Marketing BPO, Legal)
  • 20 processes in digital services under Social & Interactive, Cloud, Mobility, and Analytics

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Global Sourcing Risk Radar

Global events (such as political crises, natural disasters, and currency fluctuations) coupled with developments in the provider community (visa irregularities, management changes, and corporate fraud concerns) amplify the need to strategically and intentionally monitor global sourcing risk. Everest Group’s Global Sourcing Risk Radar offering provides the insight to effectively monitor, manage, and mitigate your global sourcing risk.

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Location Optimization

Combining our unparalleled location datasets and expertise in locations, we assist organizations with a wide array of service delivery location issues – selection, sustainability, portfolio balancing and more across all geographies (on-world, only, please). Trusted by the world’s leading users of global services, we can assist with any need.

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Locations Insider™ Published Reports

Our Location Insider offering provides ongoing analysis of service delivery location trends and the most important cities, regions, and skill sets. Access to reports and our analysts is available as an annual membership.

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Download our Complimentary Viewpoint | Locations Optimization 3.0

Read our complimentary executive viewpoint, which discusses what a locations strategy entails and how organizations are maturing into what we call “Locations Optimization 3.0.”

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Service Delivery and Demand Dynamics in Latin America | Webinar

By | Webinars

Tuesday, March 29, 2016 | 9 a.m. CST, 10 a.m. EST, 3 p.m BST, 7:30 p.m. IST

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The global services market in Latin America continues to grow at a healthy pace both as a source of demand and as a destination for delivery of a wide variety of services.

However, global services practitioners should remember that this is a diverse region in terms of capabilities, opportunities, and potential risks. As Global In-house Centers (GICs), or Shared Services, and service providers look to expand their presence in the region, there are multiple factors, such as talent profiles, demand characteristics, inflationary pressures, currency fluctuations, and ongoing geo-political issues they must keep in mind.

For GICs, it is imperative to understand the dynamics at play from delivery perspective to ensure they are leveraging the right locations. For service providers, it is additionally important to recognize domestic demand trends to ensure they target the right segments.

Join us for an insightful one-hour webinar in which our experts will discuss:

  • What are the key factors impacting global sourcing in Latin America?
  • How do different delivery locations in the region stack up against each other and globally?
  • What is current BPO adoption levels within Latin America market and its variation by segments?
  • Is pan-Latin America delivery possible? Which segments are best suited?
  • What are the future market trends from demand and supply perspective?

Who should attend:

  • C-level and VPs of GICs in the region wanting to better understand specific economic, geo-political factors, and specific location considerations
  • C-level and VPs of service providers who seek to better understand the dynamics, such as economic, geo-political, and demand/adoption trends, of Latin America to grow their presence in the region

What they will learn

  • Key global sourcing dynamics impacting current and future growth in the region
  • Adoption trends to weigh when making your next decision
  • Unique characteristics of pan-Latin America service delivery
  • Location delivery capabilities and considerations

Presented by:

  • Rajesh Ranjan, Partner, Business Process Services, Everest Group
  • Anurag Srivastava, Practice Director, Locations Optimization practice, Everest Group
  • Mario Tucci, Senior Partner and Co – Founder, MVD Consulting