Tag: service delivery

Impact of Coronavirus on Service Delivery Is Limited But Ongoing | Blog

This is the second in a series of blogs that explores a range of topics related to these issues and will naturally evolve as events unfold and facts reveal themselves. The blogs are in no way intended to provide scientific or health expertise, but rather focus on the implications and options for service delivery organizations.

These insights are based on our ongoing interactions with organizations operating in impacted areas, our expertise in global service delivery, and our previous experience with clients facing challenges from the SARS, MERS, and Zika viruses, as well as other unique risk situations.

To date, over 99 percent of the officially confirmed total of 45,000 (61,000 if the Chinese authorities’ newly expanded definition is used) Covid-19, or Coronavirus, cases are inside China. The impact of the virus is pronounced in a core group of ten Chinese provinces: Hubei, where the virus originated, the six neighboring provinces of Shaanxi, Heinan, Anhui, Jiangxi, Hunan, and Chongqing, plus the adjacent coastal provinces of Guangdong, Fujian, and Zheijiang. As of February 9, these areas account for 90 percent of the total reported confirmed cases and 92 percent of China’s new cases.

While supply chain organizations in these provinces are facing severe impacts due to closures, we believe the level of exposure to risk of disruption for service delivery organizations is limited because the service delivery centers are largely servicing internal customers, which are themselves operating at reduced capacity or are closed completely until further notice.

Data from Everest Group Market Intelligence (EGMI) shows that there are 51 Global Inhouse Centers (GICs) – or shared services centers – and 20 service provider delivery centers located in these 10 provinces. Of the seven GICs in Hubei at the epicenter of the outbreak, two, owned by FedEx and UPS respectively, are thought to deliver internal shared services to domestic and near-Asian employees. The rest are technology research or innovation centers.

In view of restrictions imposed by the Chinese government, provincial governments, or companies implementing business continuity protocols, it is highly likely that most, if not all, of these delivery centers are closed and will remain so until further notice.

Examples of the restrictions imposed by the authorities or by companies themselves that have been in place for at least two weeks and look set to remain include:

  • The Chinese government extended the New Year holiday, which began on January 24, to February 2. Authorities in in 24 provinces and cities further extended closures by a week to February 9, and many businesses look set to remain closed the week of February 10; authorities in Beijing have urged businesses to adopt flexible working policies, including working from home
  • Places of business in Hubei will remain closed until February 15 at the earliest
  • With extensive internal travel restrictions in place, many workers who had returned to their home provinces for the New Year holiday are now unable to return to work
  • All multinationals with offices in China and Hong Kong have imposed either complete travel bans (Amazon, Ford, Google, HSBC, and LG) or non-essential travel (GM, Johnson & Johnson, P&G, PwC, and Siemens) to and from mainland China
  • Many multinationals have imposed a work from home policy for all staff in China and Hong Kong until further notice; in some cases, this policy has been backed by widescale closure of offices and facilities
  • Some businesses have cancelled meetings or conferences involving large numbers of international participants, including, for example, Citibank’s annual investor conference in Singapore, ZTE’s press briefing at MWC in Barcelona, and Ericsson’s attendance at MWC in Barcelona.

As an example of specific defensive measures businesses are taking, all businesses and public facilities in Singapore, in accordance with government guidelines issued on February 10, are now:

  • Scanning people entering and leaving buildings for raised temperature
  • Increasing the frequency and intensity of cleaning
  • Making hand sanitizer widely available
  • Requiring all visitors to make a health and travel declaration
  • Issuing face masks to staff who interact with members of the public

It is possible that some enterprises will use the disruption caused by the outbreak as justification for cost cutting and capacity reduction, but we don’t yet see clear evidence of that.

Visit our COVID-19 resource center to access all our COVD-19 related insights.

Ongoing Coverage of the Service Delivery Impacts of Coronavirus | Blog

Ongoing Coverage of the Service Delivery Impacts of Coronavirus

Coronavirus, or 2019-ncOv, creates many uncertainties for organizations engaged in the delivery of business process, IT, and engineering services. While the initial focus is the delivery of services from China, geographies such as India and the Philippines (and perhaps others) may also become areas of increased concern. Global service delivery organizations are typically large and involve extensive international mobility, increasing their risk exposure; at the same time, they are also leaders in virtual interactions via phone, email, and video.

This is the first in a series of blogs that explores a range of topics related to these issues and will naturally evolve as events unfold and facts reveal themselves. The blogs are in no way intended to provide scientific or health expertise, but rather focus on the implications and options for service delivery organizations.

These insights are based on our ongoing interactions with organizations operating in impacted areas, our expertise in global service delivery, and our previous experience with clients facing challenges from the SARS, MERS, and Zika viruses, as well as other unique risk situations.

Everest Group recently published a Risk Radar update on China related to coronavirus. With this update, we increased our risk rating for service delivery in China from “low-medium” to “medium.” Members of our Locations Insider, Catalyst, and Market Vista memberships can access the report.

We recommend that business process, IT, and engineering services firms migrate their critical operations to alternate delivery locations and promote the use of teleconferencing and work-from-home policies to ensure business continuity with minimal impact to operations. Additionally, companies should implement precautionary measures in compliance with the government guidelines.

In the coming days, we will publish additional blogs covering a range of topics related to this issue. At this point, mortality rates appear low, so the main concern may continue to be basic availability of business operations in China and implications on travel, families, and in-flight initiatives.

Visit our COVID-19 resource center to access all our COVD-19 related insights.

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

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

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  • 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

 

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  • 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

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 and Demand Dynamics in Latin America | Webinar

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

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