services, gbs & bpo conference - deloitte uk · pdf filecost reduction service standards...

Deloitte Shared

Services, GBS &

BPO Conference

Locations to Enable

a Global Delivery

Model: What are the

Options?

Berlin, Germany

Elias van Herwaarden &

Val Popovici, Deloitte

22 – 23 September 2015

²

Business

regulations &

practices

Human

resources

Infrastructure,

accessibility

& hazards

Location

attractiveness

Taxation &

incentives

Political & macro-

economic environment

Durable

advantage

Process quality

Scalability

Why and when location matters

Process drives location options, location impacts design

Deloitte Shared Services, GBS & BPO Conference 2015 2

Location choice

Vision & Design

Requir

em

ents

Constr

ain

ts

Some other basic principles …

Designing / upgrading your delivery organisation


•Potential to leverage

•No need for local controls

•No significant tax/ legal issues

•Low/moderate dependency on local

information

•Little communication complexity

•Potential cost/other benefits

•Process stability

•Required cultural understanding

•Process criticality

•Risk

•Cost of systems/communications

breakdown

•Comprehensiveness of contingency

plans/back-ups

•Time zone impact

Criteria for sharing Selecting the location

Site Support Business Partner Center of Excellence Shared Services

Local or Regional Local, Regional

and/or Corporate

Virtual, Regional or

Global

Regional or Global

On shore Off shore

Evolution of shared services SSOs have been evolving and so have the requirements for locations


Local SSO Regional SSO Global SSO / Global

Business Services

Internet of

Competencies?

De

live

ry

mo

de

ls

Prio

ritie

s a

nd

ch

ara

cte

ristics

Ke

y lo

ca

tio

n

drive

rs

Cost reduction Service standards Value creation Innovation

+ Financial stability and safety

+ Multi-lingual specialised skills

+ Transport connectivity

+ Technology savvy talent

+ Technical infrastructure

+ Local innovation cluster

+ Natural hazards and risks

+ Political & economic stability

+ Taxation and incentives

+ Market proximity

+ Proximity to corp operations

+ Labour costs

+ Property costs

1990s 2000s 2010s 2020s

Evolution of shared services SSOs have been evolving and so have the locations options


Local SSO Regional SSO Global SSO / Global

Business Services

Internet of

Competencies?

De

live

ry

mo

de

ls

Lo

ca

tio

n

op

tio

ns

Mostly: In existing operations

Offshoring begins with pioneers:

British Airways, American

Express, General Electric,

Swissair set up back offices in

India

Bangalore

Barcelona

Beijing

Belfast

Bucharest

Budapest

Buenos Aires

Chennai

Dalian

Dublin

Glasgow

Hyderabad

Kuala Lumpur

Manila

Mexico City

Mumbai

New Delhi

Prague

Sao Paulo

Shanghai

Shenzhen

Singapore

Warsaw

1990s 2000s 2010s 2020s

Bratislava

Brno

Bogota

Casablanca

Cebu

Cluj

Cochin

Gdansk

Gurgaon

Iasi

Katowice

Kolkata

Krakow

Monterrey

Noida

Port Louis

Poznan

Pune

San Jose

Sofia

Szczecin

Timisoara

Vilnius

Wroclaw

Build on top of existing

SSC/GBS competencies and

infrastructures in more mature

locations

GBS and location requirements GBS require mature and quality locations to be successful. Talent and operating

ecosystem must trump cost in the decision making


Requirements Implications on locations

Multiple sets of specialised skills across different functional

domains

Need for high quality graduates to sustain long-term growth

Large and wide pools of experienced specialised talent

Quality business and technical universities

Local investments/initiatives for new skilling and up-skilling

Ability to support a wide range of important local and

regional entities

Ability to stay connected to main business operations in the

region

Multi-lingual specialised staff (combination of skills and

languages)

Good and frequent multi-modal transport connectivity

Quality telco infrastructure

Consolidate to achieve economies of scale

Be able to attract talent from outside

Ensure sustainability and stability of operations

Favourable fiscal regime justifying consolidation

Healthy labour market (i.e. no war for talent)

Large pools of experienced specialised talent

Sizeable pools of university graduates

High quality of living to act as magnet for regional talent

Stable operating environment

Ability to combine in-/out- sourcing models per GBS activity

Ability to decide on and manage GBS SLAs and service

delivery

Local presence of strategic sourcing vendors’/partners’

operations

Maturity and quality of local management skills

Industry-specific or specific sector knowledge Presence of relevant industry / sector clusters

Presence of similar industry GBS operations

Mul

ti-re

gion

M

ulti-

func

tion

Mul

ti-lo

catio

n M

ulti-

sour

ced

Mul

ti-bu

sine

ss

Too few locations?

Our client’s TOM aimed for a GBS with 3 regional hubs


Finance Customer Service / Master Data HR Management + Support

Drivers

• PMI

• Accommodate growth

• Service excellence

• Cost reduction

69% 12%

10%

9%

46%

27%

9%

9% 9%

60%

15%

13%

4% 8%

Supply Chain

Too few locations?

Over 40 cities were initially considered


Proven Hotspot Emerging Under the Radar

Mumbai KL

Bangkok

Manila

Dalian

Kochi

Cebu

Johor Bahru

HCM City

Mexico City

Bogota

Guadalajara

Guatemala City

Medellin

Montevideo

Panama City

San José

Santiago de Chile

Bratislava Bucharest

Budapest

Krakow

Prague

Riga

Vilnius

Warsaw

Sofia

Wroclaw

Poznan

Szczecin

Gdansk Kaunas

Kosice

Cluj-Napoca Brno

Tallinn

Belgrade

Zagreb

Ljubljana

Chennai

Too few locations?

21 made it to the long list



Mumbai KL

Bangkok

Manila

Dalian

Johor Bahru

Mexico City

Bogota

Montevideo

Panama City

San José

Santiago de Chile

Bratislava Bucharest

Budapest

Krakow

Prague

Riga

Vilnius

Warsaw

Chennai

Too few locations?

Of the 8 visited cities, 3 were selected



Mumbai KL

Manila

Johor Bahru

Mexico City

Bogota

San José

Bucharest

Warsaw

Sourcing strategies

If cost would drive the decision …


-

10

20

30

40

50

60

Finance team member wage costs (annual, Berlin = 100)

Sourcing strategies

Bit costs aren’t everything: Saturated and emerging locations


Emerging

Hotspot Hotspot Proven Under the Radar

Process Moderate V-A

Increased

interaction

High V-A

Increased

Consultation

Highest V-A

Consultation, MIS Low Value-add

AP AR

GL

GMD VAT

T&E Purchasing

Recruiting

2nd line IT support

Low cost

Many graduates

Higher cost

Many experts

Sourcing locations - What’s hot and what’s not (2014-15)

CE (33%) capitalises on its success, LATAM (14%) is expanding,

APAC (45%) remains stable as SSC destination


Cebu

Manila

Quezon

KL

Colombo

Pune

Mumbai

Bangalore

Hyderabad

Belen Araraquara

Montevideo

San Jose

Belfast

Dublin

Newcastle

Lisbon

Swansea

Bucharest

Budapest

Krakow

Prague

Riga

Vilnius

Warsaw

Sofia

Wroclaw

Gdansk

Kazan

Cluj-Napoca Ostrava

Tallinn

Katowice

Lodz


Sourcing locations – Global optimisation

HR shared services case example


Regional DC

Learning Admin

Mexico, Panama,

Argentina

Spanish CountryDC

Learning Admin

Brazil

Portuguese

Regional DC

Learning Admin

Malta, France,

Germany

French

Canadian French

Regional DC

Learning Admin

UAE, Egypt,

Saudi Arabia

Arabic

Regional DC

China, Hong

Kong

Cantonese,

Mandarin

Global /

Regional DC

Reward

Performance

Management

Learning Admin

UK, NAM,

Malaysia,

Singapore,

Philippines, Hong

Kong

English

Global /

Regional DC

Global Mobility

Reporting

System Support

Reward

UK, NAM, India,

Hong Kong

English

• Tiered SDM

• Some global processes

mirrored regionally

• Key languages supported

from global / regional

SDCs

Mexico City

Sao Paulo

Cairo

Prague

Shanghai

Manila Bangalore

Prevailing TOMs

SSO maturity, historical geographic footprint impact GBS location

choice Tentative insights

• Apparently no single “best-in-class” TOM

• More mature SSOs are more prone to locate their

GBS hub offshore, relative newcomers prefer

Europe

• Companies with a historic multi-site SSO footprint

evolve into integrated structure of CoEs


Regional spoke

Main / global hub or Mnt. office

Examples

Transport company

Energy company

FMCG company

Cities in 2020

Large city doesn’t equal right city


Africa as next destination for GBS? Despite favourable demographic prospects, a multilingual skilled work force will remain in limited

supply in most of the African countries to serve as GBS destination. Some new African countries

will emerge as Pan-Africa regional SSC hubs, such as Egypt, Algeria, Ghana.


Ethiopia

0,3

Madagascar 0,7

3,0

Algeria 3,4

1,7

Morocco 3,9

Hungary

Czech Republic 4,6

Romania 5,0

Botswana

6,0

Mauritius

Nigeria

Poland

2,0

0,1 Namibia

Ghana

0,3

12,7

15,7

Egypt

South Africa

12,0

82

38

20

11

33

39

10

94

1

2

2

Size of local labour pool for SSC/GBD type profiles (estimate based on numbers for administrative, professional, and technical professional staff, in millions)

53

Population

23

174

21

FDI inflow into Africa (in billion $ at current prices and exchange rates)

0

1980 2010 1970 1990 2000 1995 1985 2005 2015 1975

60

25

15

30

35

5

40

50

55

45

20

10

Sources: GLS analysis based on UNCTAD, ILO data

Africa as next destination for GBS?

Spectrum of options, though few mature ecosystems

First observations

• Cost arbitrage

• Many competitors

• PanAfrica countries positioning throughout

the spectrum

• For language skills only French might lead

to competitive advantage

Key cities

• Accra, Alexandria, Antananarivo, Cairo,

Cape Town, Durban, Ebene, Jo’burg,

Maputo, Nairobi,


W-EU Apac Latam Meneat C&EE

IN

CN

MY

MX

ID

TH

PH

BG

EG

PL

VN

CL

US

LK

RO

AE

LV

CR

UK

TN GH PA

HU

CZ

MA

SK

MU

TR

SN

CO

PT

JM

FR ZA

0

1

2

3

4

5

6

7

8

9

10

0 1 2 3 4 5 6 7 8 9 10

Bu

sin

ess S

erv

ice

s A

ttra

ctive

ne

ss

Financial Attractiveness

Financial attractiveness vs. Business services climate

Lessons from the trenches

Typical mistakes made by companies in their location selection


Inexperienced in-house resources

Stakeholders involvement

Politics and emotions

Confidentiality

People

Single factor / unidimensional focus

Quick investigation

Follow the crowd

Process

Generic open source data

Outdated data

Insufficient criticism / calibration of data

Biased local government data

Data

Local business environment

Local labour, tax, business permitting, environmental, data protection regulations

Regional/local regulatory variations

Regulations

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, and its network of member firms,

each of which is a legally separate and independent entity. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and

its member firms.

Deloitte LLP is the United Kingdom member firm of DTTL.

This publication has been written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will

depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of

the contents of this publication. Deloitte LLP would be pleased to advise readers on how to apply the principles set out in this publication to their specific

circumstances. Deloitte LLP accepts no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any material

in this publication.

© 2015 Deloitte LLP. All rights reserved.

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20 Deloitte Shared Services, GBS & BPO Conference 2015

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