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:
- 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
- The UK must treat EU citizens coming to the country during the transition period the same as those who already are residing there
- 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.
Everest Group’s March 22 symposium, Thriving in a World of Perpetual Change, brings together industry expertise and rich resources to help you identify practical strategies to thrive in a time of global disruption. Join us as we explore ways leading enterprises are planning and organising to take advantage of disruption to improve outcomes.
About the event
Ongoing global disruption – in the form of economic uncertainty, political upheaval, legal/regulatory change, and technological development – is forcing the global services market to completely transform how service delivery is organised and executed. Keeping up with the latest developments is difficult enough, let alone understanding and planning for potential consequences.
What you will see, hear, and learn
- Findings from our first ever assessment of how leading organisations are achieving Pinnacle, or best-in-class, status in leveraging Robotic Process Automation (RPA) in their service delivery organisations
- Early findings from our RPA Technology PEAK Matrix™ 2018 research
- Predictions for how the global services market will evolve in 2018, including demand trends, impact of RPA and other technology trends, digitalisation, the service provider landscape, delivery locations, vendor management and pricing, GDPR, and more
- A panel discussion about what organisations should do to survive in a changing world
The programme will be followed by a networking session industry colleagues and Everest Group analysts over drinks and canapes.
Thursday, 22nd March, 2018
3:30 to 7:00 pm
Last year’s event exceeded capacity very quickly – register today to save your space!
Cost of operations for digital services varies widely across key locations for service delivery
Maturity of digital services varies among established global services locations
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.
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. ”
There’s no doubt that Brexit created a slowdown in European outsourcing during the last two quarters, especially in the UK. How long will the slowdown last? Let’s look at what’s really going on.
The reason Brexit contributed to slowdown is because it created indecision and senior management attention was captivated by the unthinkable prospect of the UK exiting the EU. That indecision caused the slowdown.
Having just returned from the UK and talking to UK leaders, I believe that the indecision has passed and decisions are reversing back to their normal rhythm. I expect there to be a little ongoing hangover; but going forward, I expect an increasingly low impact on outsourcing growth due to the UK exiting the EU. Yes, it’s still uncertain as to how the UK will exit, but that’s different from the indecision based on whether or not it would actually happen. I’m seeing signs that the indecision and senior management attention necessary to do outsourcing deals has now reverted back to running the business.
On their earnings calls, a number of outsourcing executives called out that they expect Brexit will create an imperative to do more outsourcing and to accelerate deals. I see no indication that is likely to happen. Here’s why:
- The UK has a mature outsourcing market, which is already well along in its shift to cloud, automation and cognitive computing.
- The imperative for UK businesses to save more money due to Brexit is likely to be resolved in an acceleration of the automation strategies, not an acceleration of further outsourcing in the labor arbitrage model. Work that has been available to move offshore has already moved, so I don’t see an uptick in demand for further offshoring. If Brexit has an effect, I believe it will accelerate the move to automation, which provides even greater savings than labor arbitrage.
Summing up, Brexit has had a modest impact on growth of UK outsourcing; but I think that impact is lessening dramatically by the day and will have little or no impact within a month. Where it does have an impact, and counter to well-publicized prophecies, I believe Brexit will not lead to further growth in the labor arbitrage space, but it’s likely to impact the transition to automated solutions.