Tag: services delivery locations

Surprising Sub-saharan Africa and the Continent’s Growing Relevance for Service Delivery: What You Need to Know to Select Your Next Offshore Location | Blog

Looking at offshore destinations for service delivery, Sub-Saharan Africa – particularly Nigeria – is emerging as a surprising location with the potential for forward-looking providers and customers to seize. But what risks come along with the opportunities for doing business in this part of the world? To learn what you need to know to make the right site selection, read on.   

Africa does not immediately come to mind as an offshore destination for service delivery. In the past, the main destinations for low-cost offshore centers, both in-house and outsourced, have been India (for broad BPS operations including customer-facing CXM) and the Philippines (for CXM), particularly when the operation requires a good level of English language proficiency.

However, in recent years, the level of interest in Africa as a destination has been growing as enterprises look for cost-effective alternatives to traditional locations and to balance their risk from too much activity in one country/region.

Within Africa, South Africa has been strong for several years, especially for CXM. North African locations such as Egypt, Tunisia, and Morocco have also experienced growth for IT, back office, and language support for French and other EMEA languages. Up until now, there has been less activity in Sub-Saharan Africa (outside of South Africa), but this is starting to change.

Advantages of Africa

Enterprises are now starting to seriously look at Africa as a destination for outsourcing for many reasons, including:

  • Population – Its huge and youthful population of 1 billion, with over half of the talent pool projected to be under the age of 25 by 2050, makes it a great resource for BPS activities
  • Government support – In many countries, the government helps to enable global services delivery
  • Market potential – Many of the large service providers are yet to enter the market or have small scale operations supporting the local market
  • Infrastructure – Internet and other capabilities are improving. For example, CSquared (a Google subsidiary) announced a four-way partnership in 2017 to build out the shared fiber networks in sub-Saharan Africa
  • Spending growth – The latest African consumer trends show that consumer spending growth in Africa is projected to rise to $2.1 trillion by 2025 and $2.5 trillion by 2030, according to market forecasts

While interest in the continent is growing, enterprises also should be aware of the following risks:

  • Talent – Companies will need to invest in growing and developing talent locally by training recent graduates, building a recruitment engine from the ground up, and other activities to create an experienced talent pool. The low talent availability, limited language support beyond English, and high premiums commands also are concerns
  • Business environment – In comparison to other nearshore European locations, the quality of infrastructure, digital readiness, and safety and security are among the concerns for East and West African countries
  • Low market congestion – While key players supporting global services in most African countries is currently limited, the entry of a few large companies could easily congest the market and quickly increase costs
  • Delivery enablers – Limitations with utilities, transportation, meals/catering, stationery providers, office infrastructure quality, and poorer connectivity to domestic and international locations all present risks

Location selection is key

If an enterprise can balance the opportunities with the risks, we believe sub-Saharan Africa could be a wise choice. But selecting the right location is key. In our report from 2020 Africa: Emerging IT-BP Delivery Force, we reviewed ten of the most mature locations assessing talent availability with the financial attractiveness.

The key takeaway: Egypt and South Africa, the two most mature markets, scored well in terms of both talent availability and financial attractiveness. But a surprising entrant in the top right of the chart was Nigeria. While still relatively immature when it comes to BPS, Nigeria’s high level of talent availability makes it a financially attractive destination.

As an example of recent investments in the region, Microsoft invested $100 million to open a technology development center with sites in Kenya and Nigeria in 2018. Three years later, it released a joint announcement with the Government of Nigeria, detailing several projects aimed at intensifying the nation’s move to become a more digital economy.

Other locations driving conversations with enterprises are Ghana and Kenya, both presenting a high level of financial attractiveness but scoring lower than the leaders in terms of talent availability.

locations

        1    Reflects market average annual costs for English language delivery for steady state of operations blended across the delivery pyramid and excludes capital expenses related to set-up, transition, expat costs, and of economies of scale for large-scale operations

          2    Represents presence of entry level and experienced resources for specific functions blended in a 60:40 ratio

          3    Combination of maturity for services delivery, presence of global / regional GBS and service providers, scaled operations, and other related aspects

Source:   Country-/city-level investment promotion agencies and global services organizations

All the other locations we assessed, apart from Tunisia and Morocco, rated well in terms of financial attractiveness but were less strong when it comes to talent availability, presenting an issue for any enterprise looking to scale.

Talent forecasts

We believe the level of talent available in Africa, particularly in sub-Saharan Africa, will improve over the next few years as global service providers and enterprises begin operations there, and talent from local operators accelerate their development by working for experienced operators. But it may take several more years to reach similar levels to those seen in North Africa or the country of South Africa.

In summary, sub-Saharan Africa is likely to grow in relevance as an offshoring destination for BPS, and forward-thinking service providers are already investing. As an enterprise, if you are considering the use of sub-Saharan Africa as an offshore delivery location, we would recommend several approaches:

  • Undertake a detailed assessment of the location to better understand talent availability and how it aligns with your future business and talent needs
    • Assess talent scalability as well as the capabilities needed to deliver process or skill-specific requirements
  • Understand how it aligns with your corporate strategy and CSR commitments
    • Africa is the main source of impact sourced workers, a growing area of interest for many enterprises
    • Understand how the potential location aligns to target markets for business development. Consider whether the potential location is a key target to grow your business
  • Conduct a detailed review of the service providers with delivery locations in the region to ensure they meet your requirements, especially in terms of talent and skills availability, cost, and business continuity

For more findings from our recent report, 2020 Africa: Emerging IT-BP Delivery Force, and to discuss Africa as a service delivery destination, please reach out to David Rickard ([email protected]) or Anurag  Srivastava ([email protected]).

The Coming of Age of India’s Tier-2 and -3 Service Delivery Locations | Blog

India is widely regarded as a preferred service delivery location for global companies, given its attractive low-cost proposition, skills availability and scalability, and mature global services ecosystem. Until recently, the country’s tier-1 locations shouldered the weight of the services delivery agenda. However, with increasing maturity and saturation, enterprises and service providers are expanding their footprints across tier-2 and -3 locations throughout the country to take advantage of lower competition, cost savings, and better living standards, as well as to diversify location risk.

Read on to learn about the tier-2/3 global services delivery market in India and their accompanying advantages and underlying trade-offs, as well as what it takes to successfully operationalize a tier-2/3 delivery center in the country.

Understanding tier-2/3 locations’ value propositions

Tier-2/3 locations currently account for 18-20% of the global services workforce in India. Unlike most European countries, where a small clutch of cities offer services delivery, India offers a plethora of tier-2/3 location options, including: Ahmedabad, Gujarat; Coimbatore, Tamil Nadu; Jaipur, Rajasthan; Kolkata, West Bengal; Kochi, Kerala; Visakhapatnam, Andhra Pradesh; Chandigarh and Thane, Maharashtra; Lucknow, Uttar Pradesh; Thiruvananthapuram, Kerala; and, Indore.

Delivery of global IT services is more mature than is global business process services (BPS) in most tier-2/3 locations, but the share of global voice and non-voice-based BPS is on the rise. Service providers occupy a larger market share than enterprises’ Global Business Services (GBS) organizations in most tier-2/3 locations, facilitating transactional work, servicing incumbent clients and fixed-price projects, and, at times, supporting complex workstreams.

Multiple factors enhance the tier-2/3 locations’ value propositions:

  • Lower compensation and facility costs translate into considerable cost savings of 10-20% versus a typical tier-1 location
  • Relatively low competition allows the scope to differentiate, create a better brand image, and attain leadership in talent markets, and provides access to a largely untapped talent pool with relevant skills
  • Tier-2/3 locations also experience 10-15% lower attrition than tier-1 cities, resulting in better service delivery and lower hiring and training costs
  • In contrast to most tier-1 locations, which are experiencing increasing traffic congestion, worsening quality of life, and health-related issues, tier-2/3 locations offer a better standard of living at a lower cost, making relocation an attractive proposition
  • Various state governments have started offering incentives such as single window clearances, ease of land allocation, stamp duty exemptions, Floor Area Ratio (FAR) relaxation, and capex/interest subsidies to further increase the attractiveness and viability of tier-2/3 locations

All these advantages have driven companies already to open centers in tier-2/3 cities or at least to begin to explore the viability and value. For instance, a leading telecommunications services firm employs over 40% of its Indian workforce at its tier-2 delivery center; a leading professional services firm is looking to scale its overall GBS headcount at existing tier-2 locations; and, a leading e-commerce firm is evaluating multiple tier-2/3 cities to support customer services delivery. Many service providers are also showing keen interest in expanding their tier-2/3 footprints to support both transactional and complex workstreams.

But, of course, tier-2/3 cities aren’t panaceas, and both enterprises and service providers must be fully cognizant of the realities of establishing a center in one of them and address challenges quickly to unlock their maximum potential.

Key challenges in supporting service delivery from tier-2/3 locations

Scalability, especially beyond 1,000 FTEs, can be a challenge in some tier-2/3 locations (such as Chandigarh, Visakhapatnam, and Coimbatore) with limited peer presence and better opportunities in nearby tier-1 locations. Given the relatively low market maturity and paucity of adequately skilled talent, companies would have to invest in training recent graduates and/or building a recruitment engine from the ground-up. Additionally, the entry of a few large companies can easily congest the market and increase costs quickly.

Challenges with infrastructure and delivery enablers like utilities, transport, meal/catering, and stationery providers, as well as inferior connectivity to domestic/international locations, also pose hindrances. Thus, it might be difficult to relocate experienced talent at the managerial and leadership levels. Further, most tier-2/3 locations primarily deliver transactional services, and companies that want to support more specialized operations would have to make substantial investments in the talent market.

At the same time, we believe that a sound understanding of the location and its advantages and challenges, coupled with a nuanced strategy, can help companies establish successful delivery centers in tier-2/3 locations and integrate them into their portfolios.

How to successfully operationalize a tier-2/3 location delivery center

To extract maximum value from their tier-2/3 centers, we believe that companies should undertake the following steps:

  • Capitalize on the early-mover advantage to access benefits beyond cost savings, such as footprint diversification, lower attrition and competitive intensity, and wider access to talent
  • Create a distinctive employee value proposition, such as defined career paths, exposure to leading technologies, and financial benefits, to ensure better positioning
  • Invest in talent development and revamp the existing operating model to support complex workstreams. A case in point is a leading BFSI firm, which is betting big on its tier-2 delivery center in Thiruvananthapuram to move up the automation and analytics value chain and support new processes
  • Play a talent shaper role by working with the local academic and government bodies to influence educational curricula, training infrastructure, and programs, and reskill/upskill talent or seed talent from other centers. A leading service provider, for instance, has opened one of the largest corporate education centers globally in Mysore, Karnataka, helping it attain leadership in the regional talent market
  • Enhance the relocation proposition for existing talent by providing adequate monetary and non-monetary incentives, especially those that alleviate some of the problems associated with tier-1 locations, such as congestion, pollution, safety, and security

Are you currently leveraging or considering tier-2/3 locations for your service delivery efforts? We’d love to hear your thoughts on including tier-2/3 locations in your portfolio, and/or your views on how the tier-2/3 delivery landscape will evolve in the coming years. Connect with us at [email protected], [email protected], or [email protected].

And keep your eyes peeled for an upcoming blog on how tier-2 and -3 delivery locations can support organizations’ business continuity planning efforts.

Selecting the Best Multilingual European Service Delivery Destination for Your Needs | Blog

Although Europe is the second smallest of the world’s continents by surface area, it packs a huge business and economic punch. And because the continent is home to 24 official languages, businesses that are headquartered or have large operations there need to have workforces proficient in languages beyond the native tongue in the country in which they’re located. Extensive language capabilities will help them penetrate new European markets and enable them to have more productive conversations with stakeholders across the globe.

So, just as we did in a recent blog on service delivery destinations best suited for Asian language delivery, we’re taking a look at the countries best equipped to handle the wide range of European languages.

European Countries and Regions

While Europe is, of course, the go-to continent for European language delivery, there are considerable differences among the Central and Eastern Europe (CEE) and nearshore regions, and among the different countries within each region.

Central and Eastern Europe (CEE)

CEE locations offer high scalability of multiple European languages at relatively moderate cost, but many face certain regulatory and macroeconomic issues.

Poland is the premier location in the CEE region. Because many shared services centers – or global in-house centers – are based in Poland, it has a mature service delivery ecosystem and robust infrastructure. Poland also has significant talent availability with the ability to support complex service delivery, and a multilingual talent pool with high scalability potential for a number of European languages, particularly German and French, and Russian, Italian, and Spanish to a lesser extent. However, because it’s a preferred location in the region, high competition for talent has created sourcing and talent retention issues. The country also lacks the ability to scale delivery in other European languages, such as Dutch and Portuguese.

Romania and Hungary are other good options in the region; they offer particularly high scalability for French, Spanish, and Italian language skills at a moderate cost of operations.

Nearshore Europe

Nearshore locations provide the best quality of life in an optimum business environment, but operational costs are high.

Ireland is the top nearshore destination in Europe. It offers a high quality of life, a favorable business environment and infrastructure, and significant availability of multilingual talent, with high scalability potential for French, German, Spanish, and Italian due to its ability to attract quality talent from other countries. And many companies are attracted to its high proximity to onshore locations.

However, like Poland, it suffers from high global and regional player competition for talent and struggles to achieve scaled service delivery for Dutch and Portuguese. It’s also among the most expensive locations in Europe for service delivery.

Scotland is a good alternative, as it offers comparable languages skills and infrastructure at a lower cost of operations.

Beyond Europe

There are also destinations in Latin America and the Middle East and Africa (MEA) region that can satisfy some European languages needs.

Most Latin American countries have large graduate pools with bilingual capabilities, despite a general lack of high-quality educational infrastructure. In particular, Mexico and Costa Rica provide strong Spanish and English skills, along with mature global services ecosystems and proximity to onshore locations. However, as the premier location in the region, Costa Rica suffers from high competition for talent and the highest cost of operations in Latin America.

Destinations in MEA also have large graduate pools with strong multilingual capabilities. For example, Egypt and Morocco offer abundant French – and, to a lesser extent, Spanish – language skills, driven by a strong cultural and historical affinity to France and Spain. But the cost of operations is high in Morocco, and Egypt is politically unstable.

To learn more about the relative attractiveness of key global locations to support global languages, please see our recently published Talent Handbook for Language Skills.  The report, which assesses locations against 20+ parameters, uses our proprietary ”Enabler-Talent Pulse Framework” to determine the attractiveness of locations for language delivery. You can also reach out to the report authors: Parul Jain, Kunal Anand, and Pagalam Rajeshwaran.

The Many Languages of Asia, and the Delivery Locations Best Positioned to Service Them | Blog

Asia has long been an important business destination, as it’s home to more than 60 percent of the world’s population and accounts for a major share of world consumption. In fact, forecasts suggest that – with increasing access to credit, low inflation, rising income levels, and a favorable regulatory environment – Asia alone will account for 40 percent of the world’s consumption by 2040. The region also accounts for approximately half (about 2.2 billion) of the world’s internet users, which constitutes an enormous pool of digital consumers.

So, it’s no surprise that many businesses have set up facilities closer to the region and that many indigenous organizations have emerged as well. Indeed, about 40 percent of the world’s 5,000 largest companies are based in Asia.

However, to truly succeed in this market, enterprises need a crucial weapon: a multilingual workforce proficient in Asian languages.

Although English is still widely accepted as the universal language for business, a workforce proficient in Asian languages brings additional value to the table. It acts as a conduit between the organization and the region by helping develop a deeper cultural connection with customers, revealing their concerns and preferences, which might not be understood otherwise.

Major Asian business languages include Mandarin, Korean, Thai, Bahasa Indonesian, and Malay, and each one provides access to a different consumer market. Thus, one key strategic consideration for enterprises selecting an Asian service delivery location is the language capabilities of the talent in the destination.

Let’s take a quick look at some of the major multilingual destinations in Asia and the value proposition they offer.

Malaysia

Malaysia ranks among the top service delivery locations for Asian languages, primarily because it lies close to source markets and is a mature destination that supports a wide range of services and languages. The country supports scaled delivery of Mandarin and Bahasa Indonesian and, to a lesser extent, Korean, Japanese, and Thai. The only challenge is the relatively high cost of operations compared to other Asian service delivery locations.

The Philippines

Another attractive location for service delivery in Asian languages, the Philippines offers moderate cost savings, breadth and depth of services, and scalable language delivery. However, the country struggles with achieving scaled service delivery in Thai.

Vietnam

Vietnam is a moderately attractive location for Asian language delivery, driven by the significant cost arbitrage it offers compared to other prominent locations. Organizations can achieve scaled delivery of services in Japanese and Mandarin but will experience challenges in scaling up service delivery in other Asian languages.

India

Although India is a key global services destination, the country falls behind its competitors in multilingual service delivery in Asian languages. India struggles to scale up service delivery in almost all major Asian languages, and compensation for multilingual service delivery approximately costs 50 percent more than service delivery in English.

With India out of the race, what’s the best service delivery location for your organization’s Asian language needs? If cost is an important consideration in setting up your multilingual team, the Philippines and Vietnam are attractive locations. But if you are looking for market maturity, scaled language delivery, and proximity to source markets, Malaysia is the clear winner. The country can comfortably cater to Indonesia, Korea, Japan, China, and Thailand – a huge belt within Asia – which combined house a population of nearly 1.6 billion.

To learn more about key locations for language-based service delivery and the primary drivers – including infrastructure, talent potential, business environment, adoption maturity, competitive intensity, and financial feasibility – that impact location attractiveness, please read our recently published report, Handbook for Language Skills, or reach out to the report authors: Parul Jain, Kunal Anand, and Pagalam Rajeshwaran.

Dark Horses Challenging Mexico City’s Status as Top Mexican Services Delivery Location | Blog

Mexico continues to be the destination of choice for global services delivery across Latin America. Indeed, our  research for our “Global Locations Annual Report 2019: Demand for Next-Gen Services Defining Locations Strategies” report found that 26 percent of LATAM’s new set-ups established during 2017 to 2019 were in Mexico, including those by Atento, Continental, Harman International, Hexaware Technologies, Neoris, Tech Mahindra, and Zensar.

IMG2

There are multiple reasons that Mexico is the top LATAM global services delivery destination. First, while voice and non-voice business process services continue to grow moderately, the country is the leader in digital due to an increase in support for services including analytics, cloud, mobility, big data, IoT, and artificial intelligence. Second, very few locations offer a better cost-talent proposition to North American enterprises than does Mexico. And third, the fact that it’s a nearshore location makes it highly attractive to North America-based companies.

So, what are the top delivery destinations in Mexico?

Mexico City has the largest share of the Mexican market and is the most mature location in terms of breadth and depth of IT and business process services delivered, including IT consulting, digital, accounting, tax, and actuarial services.

However, despite being the country’s capital city and biggest business hub, Mexico City lags behind most of its Mexican counterparts in quality of life aspects including crime rates, traffic congestion, and air pollution. And, it ranks second to last of 32 cities assessed across Mexico on “ease of doing business.” All of this, coupled with the fact that clients care most about the talent capabilities in the destination, is opening the door for several other Mexican cities to carve out greater portions of the Mexico services delivery pie.

Let’s take a quick look at these dark horses.

Guadalajara

Guadalajara, often referred to as the “Silicon Valley of Mexico,” continues to grow due to its availability of IT-related talent and delivery of key skills such as IT-ADM, cyber security, and IT consulting. Large pools of talent from adjoining areas have been migrating to the city. Today, Guadalajara is home to some of the top service providers, including HCL Technologies, IBM, and TCS.

Monterrey

Monterrey continues to grow in the finance and accounting space and is one of the country’s most mature locations after Mexico City. The city also delivers some of the more complex functions including tax and accounting. Given its proximity to the U.S. border, the English language proficiency and scalability potential of its global services workers is the highest in the country. The city also offers the best overall business environment, primarily due to better quality of life, infrastructure, and connectivity.

Queretaro

With its proximity to Mexico City, Queretaro has grown steadily as a delivery location across functions over the past several years. The city has had maximum percentage growth in graduates across Mexico since 2015, albeit on a smaller base. However, its development is still nascent, so it’s largely being leveraged as a smaller spoke to a larger hub within the region. From a cost standpoint, most global companies view it as a low-cost alternative, primarily driven by lower people- and non-people costs.

 

IMG1

To learn more about the dynamics shaping the global services locations landscape, please read our recently published report, “Global Locations Annual Report 2019: Demand for Next-Gen Services Defining Locations Strategies.” We developed the report based on deep-dive discussions with regional investment promotion bodies, leading shared services centers, service providers, recruitment agencies, and other market participants.

For more information on Mexico as a global services delivery location, please contact us at [email protected], [email protected], or [email protected].

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