Finding the Next High-Performing Shared Services Location · BCI’s Corporate Consulting Services...
Transcript of Finding the Next High-Performing Shared Services Location · BCI’s Corporate Consulting Services...
Finding the Next High-Performing
Shared Services Location
Josefien Glaudemans
Buck Consultants International
P.O. Box 1456
6501 BL Nijmegen
The Netherlands
+31 24 379 02 22
+31 6 22 42 32 07 (mobile)
+31 24 379 01 20 (fax)
Andrew Shapiro
Biggins Lacy Shapiro & Company
47 Hulfish Street
Princeton, NJ 08542
609-613-4273
609-651-7765 (mobile)
19th Annual North American Shared Services and Outsourcing Week
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Contents
1 Introductions to BCI Global and BLS & Co
2 Right Location Strategy
3 Site Selection Methodology
4 International Location Choices, Options & Trends
A. EMEA
B. North and Latin America
C. Africa
D. Asia
5 Trends for Support Centers
6 How to Contact Us
© Buck Consultants International, BLS & Company, 2015
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1 Introduction
Buck Consultants International
Profile Buck Consultants International Areas of activity for
Corporate clients
Location advice
Real estate strategy and projects
Business strategy development
Supply chain optimization
Strategic outsourcing
Public clients
Transport, logistics and infrastructure projects
Economic development
Programs and strategies to attract foreign enterprises Frankfurt
Paris
London Brussels
The Hague Nijmegen HQ
Chicago, IL
Office locations in U.S.
Profile
Established in Nijmegen, the Netherlands in 1985
Employs 60 full-time professionals
Performed studies in more than 30 EMEA countries
Track record: assistance to more than 800 companies
ISO-9001 certified © Buck Consultants International, BLS & Company, 2015
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BCI’s Corporate Consulting Services Delivering Strategic Solutions to Corporations
Business case
development/scenarios
Dedicated market research and
industry analysis
Investment decision making support
(go/no-go)
Practical assistance in regional roll-
out
International Business Strategy
International strategy development
(markets, products, channels):
international market research
international expansion planning
Corporate real estate advice (CRE)
Development of CRE strategies and real estate master/planning
Strategic portfolio reviews
Assistance in rationalisation plans and optimisation of real estate
and property Scenario assessment, including in-, or
outsourcing, sale & lease
back, off balance agreements
Identification and acquisition of new
sites and buildings
(including negotiations)
Disposition of property and site
restructuring advice
Supply chain consulting services
Supply chain strategy development
Supply chain design & optimization
Inventory analysis & optimization
Transport & carrier optimization
Logistics outsourcing (3PL search)
S&OP design & implementation
Operations design & realization
Operations audit
Footprint / Site selection
Development and assessment of
footprint & location scenarios/models
Full-fledge site searches for:
(inter)national headquarters
Production/assembly plants
distribution centres and logistics facilities
research and development centres
shared services centres and customer support centres
In-depth assessments of promising locations on project specific
cost factors and quality factors
Hands-on support in implementation (e.g. negotiations,
project management, incentives)
© Buck Consultants International, BLS & Company, 2015
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Customer support centers
Shared services centers
Back offices
Technical support centers
BPO centers
National or European headquarters
Sales & marketing offices
Manufacturing/assembly plants
International distribution centers
R&D centers
Data centers
Buck Consultants International (BCI) offers strategy development & corporate location and site selection consulting services for:
© Buck Consultants International, BLS & Company, 2015
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Close co-operation with the client using a tailor-made approach
Pan-European services (offices in 8 countries: of which 7 in Europe)
Global partnerships & alliances to cover global projects
In-depth market knowledge on different locations all over Europe covering key
aspects in the decision making process such as quality, availability and costs of
personnel, labor regulations, infrastructure, telecommunications, real estate
market, the overall investment climate and last but not least the availability of
investment incentives and grants
Vast knowledge about recent trends and opportunities in the investment arena
in EMEA
Truly independent
Using state-of-art methods and tools, including in-house developed decision
support systems
Cost-effective and with fixed time frame
Characteristics of BCI’s Consulting Services
© Buck Consultants International, BLS & Company, 2015
Sample Corporate Clients of BCI
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Recent BCI Back Office Clients
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1 Introduction
Biggins Lacy Shapiro & Company
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Value-added strategic consulting and real estate transactions services to global
clients throughout USA, and in Europe and Asia via strategic partners
Offices in Princeton, New York, Chicago and Cleveland.
25+ years experience.
Recognized experts and frequent lecturers on site selection and incentives negotiations best practices.
Cleveland
Chicago
Princeton
New York
Leading strategic location and
incentives advisory services firm,
based in North America.
combine best-in-class site
selection, real estate acquisition
and investment incentives
negotiations expertise.
© Buck Consultants International, BLS & Company, 2015
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SITE SELECTION
• Relocation
• Expansion
• Consolidation
• Labor Market Analysis
INCENTIVES
• Strategies
• Transactions & Documents
• Restructuring
• Compliance
• Tax Credit Sales
LAND USE & APPROVALS
• Market Analysis
• Impact Analysis
• Disposition Strategies
• Financing
ENERGY
• Purchases
• Assessment
• Incentives & Compliance
• Mission Critical Facilities
BLS & Co Consulting Services
© Buck Consultants International, BLS & Company, 2015
Our four service lines address the needs of both users and owners of real
estate and facilities.
Our Site Selection and Incentives Advisory practices are the most relevant to
shared services organizations
Location and site selection are critical factors and activities in
determining a firm’s success or failure in a new market. BLS & Co helps
clients optimize their location choices with thorough evaluation of labor
markets, operating costs, infrastructure and other critical location
variables. Labor market due diligence is especially important in second-
and third-tier North American markets.
Our in-depth analysis probes beyond the obvious data sets to include all
operating issues that can influence the success of a project. Based on
the premise that successful site selection anticipates future trends, our
methodology identifies an optimal location that gives our clients a long-
term competitive advantage and maximizes their ROI.
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SITE SELECTION
• Relocation
• Expansion
• Consolidation
• Labor Market Analysis
BLS &Co also is uniquely qualified to assist multinational corporations by performing thorough
analysis of the critical factors necessary for successful operations. Our customized approach to each
project allows us to avoid the "herd" mentality that all too often leads foreign investors to locate in
popular, fast-growing areas. Our recommendations are based on an in depth, independent analysis
of what our client needs and what each potential site offers.
Our integrated project teams are organized to efficiently deliver a mix of senior strategic advice and
representation, and analytic and project management skills suited to each engagement.
Site Selection at BLS & Co
© Buck Consultants International, BLS & Company, 2015
BLS & Co develops creative incentives strategies in support of our
client’s corporate relocations and expansions, while positioning
projects for business flexibility and positive ongoing community and
government relations. We also manage incentives opportunities
and risks on a portfolio basis in support of acquisitions and
consolidations. Incentives transactions structure and
documentation must maximize clients’ ability to enjoy their benefits
while maintaining business flexibility.
Selected issues that arise in connection with Incentives Design /
Negotiations / Documentation / Compliance for projects:
Exposure in Incentives Agreements: We limit clients’ long-term
obligations and exposure by negotiating specific language to minimize
default and recapture risks in incentives documentation.
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Incentives Advisory at BLS & Co
INCENTIVES
• Strategies
• Transactions & Documents
• Restructuring
• Compliance
• Tax Credit Sales
Constraints on Use: Companies often confront incentives of various forms that are of limited value to them due to
their state tax position or corporate structure. Early in the process we identify such issues and develops
transaction structures to maximize the actual realizable value to each client.
Workforce flexibility: We have negotiated more flexible contractual provisions to overcome restrictions limiting
incentives to traditional full time employees, obtaining credit for the growing range of contract employment.
Lease or Purchase & Sale Agreements: We advise clients and their brokers on the use of contingency language
in the lease or P&S agreements which condition these agreements upon successful completion of the incentives
approval process.
Managing Confidentiality: We bring special expertise and care to the legal and political subtleties of managing
confidentiality for sensitive projects.
© Buck Consultants International, BLS & Company, 2015
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Select Corporate Clients of BLS & Co
© Buck Consultants International, BLS & Company, 2015
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Recent BLS & Co Back Office Clients
© Buck Consultants International, BLS & Company, 2015
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2 Right location strategy
Overall: increasing global view and global scope of services
Many international companies already have a global view and are currently
balancing the activities and locations worldwide
Different activities in and for different regions
Companies are constantly looking for ways to adjust their geographical
business model to best meet the needs of the business units
What is the right geographical scope for your activities?
Geographical Business Models
© Buck Consultants International, BLS & Company, 2015
Finding the balance between centralization and
decentralization is key
While the size of centers can differ widely - with some as large
as 1,000 employees - they typically employ 50 to 500 people
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Benefits from
Economies of
Scale
Increasing Cost
of Complexity
© Buck Consultants International, BLS & Company, 2015
Geographical business model 1:
National markets have national centers
Geographical business model 2:
Regional markets served by various
own/outsourced regional centers
Geographical business model 3:
Regional markets served by
centralised centers
Geographical business model 4:
Regional markets served by
own/outsourced off-shored centers
Captive SSCOutsourced SSC
Captive SSCOutsourced SSC
1 National markets have
national centers
2 Regional markets served by various own/
outsourced regional centers Geographical business model 1:
National markets have national centers
Geographical business model 2:
Regional markets served by various
own/outsourced regional centers
Geographical business model 3:
Regional markets served by
centralised centers
Geographical business model 4:
Regional markets served by
own/outsourced off-shored centers
Captive SSCOutsourced SSC
Captive SSCOutsourced SSC
3 Regional markets served by
centralized centers
Geographical business model 1:
National markets have national centers
Geographical business model 2:
Regional markets served by various
own/outsourced regional centers
Geographical business model 3:
Regional markets served by
centralised centers
Geographical business model 4:
Regional markets served by
own/outsourced off-shored centers
Captive SSCOutsourced SSC
Captive SSCOutsourced SSC4 Regional markets served by own/
outsourced off-shored centers
Geographical business model 1:
National markets have national centers
Geographical business model 2:
Regional markets served by various
own/outsourced regional centers
Geographical business model 3:
Regional markets served by
centralised centers
Geographical business model 4:
Regional markets served by
own/outsourced off-shored centers
Captive SSCOutsourced SSC
Captive SSCOutsourced SSC
Geographical Business Models
Finding the balance in centralization or decentralization is key
16 © Buck Consultants International, BLS & Company, 2015
Onshore, Near-Shore or Offshore?
Matching Location to the Function
Sample delivery options for customer support functions based on the strategic
importance and location dependency
Onshore Center Near-shore Captive
Center
Local Outsourcing Near-shore Outsourcing
Strategic
Importance
Location Dependency
Core
Non
Core
Proximate Remote
Source: Adjusted by BCI, based on the Offshoring Institute, 2011
Language, Time Zone and Cultural Affinity
Offshore Captive
Center
Offshore Outsourcing
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One vs. Multiple Shared Services Centers
Key considerations for assessing the number of shared services include:
Geographies and languages to be supported
Scope of services to be supported
Processes in scope that are language dependent
Consistency in process execution and performance
Potential leverage of existing assets and resources
Size of talent pool available relative to the size of support center
Time zone differences
Source: Adjusted by BCI, based on the Accenture, 2013
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Single Support Center location Multiple Support Center locations
Pros
• Lower overheads and more synergies
• Leaner management structure
• Cross training/skills development
• Easier standardization of processes
• Clearer roles and responsibilities
• Consistent service management framework
• Expanded language coverage for
process/scope
• Platform for localized growth
• Business continuity
• Same time-zone service for global work
Cons
• Total scope can be smaller as some processes
remain locally due to languages
• More complex business continuity
• More challenges for standardization of end-to-
end processes due t the need to maintain local
support for language dependent processes
• Additional services support overhead with
duplicate roles & activities
• Challenging to maintain consistency in
continuous improvement activities
• Management complexity and interfaces with
the business are more complex
© Buck Consultants International, BLS & Company, 2015
3 Approach to Site Selection
Site selection process: narrowing down from global to site level
Phase 2
In-depth assessment selected target areas
Phase 3 Site visits and identification of sites
Site visits to top
3-5 locations *
Detail analysis
of top 10
locations *
Profile, location
requirements & all location
options Phase 1
Start up: Definition investment profile, skills sets,
location requirements, geographical scope,
Selection of long list of locations
Phase 5 Recommendation: preferred and back up location
1 location
*Indicative number
Short listing process:
Kick off &
Project brief
Desk research &
Reporting
Site visits &
Reporting
Conclusions &
Recommendations
Methodology Step by step approach
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Phase 4 First negotiations
© Buck Consultants International, BLS & Company, 2015
Project-Specific Location Criteria
Our approach focuses on the location specific costs, quality and risk factors of
the new location
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+ Running cost:
employment, occupancy
cost
Cost to achieve: start up
(building, travel,
recruitment, training),
relocation & exit cost
-/- Economic
development incentives
& grants
Labor availability &
quality
Experience &
competition
Labor flexibility
Language skills
Accessibility
IT reliability
Strategic alignment
Business environment
COST FACTORS QUALITY FACTORS + Political risk
Economic risk
Financial risk
Transparency risk
Legal risk
Natural disaster risk
RISK FACTORS
Total Inflated
3-5 year cost (in Mln US $)
Total Weighted
Attractiveness Score (1 = negative, 5 = positive)
Total Weighted
Risk Score (Low / Medium / High)
© Buck Consultants International, BLS & Company, 2015
Example: Cost-Quality-Risk Positioning of Locations
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Risk Score
Weighted quality scores
Eu
ro (
firs
t 5 y
ea
rs)
2.5 4.5 3
120
80
110
100
4
90
3.5
Location 4
Location 6
Location 8
Theoretic
optimum
J
L
High
Medium
Low
To
tal
co
st
in U
S $
mil
lio
n
2.5 4.5 3 4 3.5
Theoretic
optimum
J
L
Location 7
Location 1 High
Medium
Low
High
Medium
Low Location 2
Location 3
Location 5
Location 9
Onshore / CoE’s
Cost leaders
Best cost-quality ratio
© Buck Consultants International, BLS & Company, 2015
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Detailed Location Cost Factors
1. Running Cost:
Total employer’s cost
1.1 Function x
1.2 Function y
1.3 Function z
1.4 Management
2. Running Cost:
Real estate costs
2.1 Total cost (rent & charges)
2.2 Transition cost
2.3 Other cost
6. Cost to Achieve:
Exit costs
6.1 Severance cost
6.2 Loyalty premiums
6.3 Other costs
7. Cost Offsets:
Investment Incentives
7.1 Capital grants
7.2 Tax credits/abatements
7.3 Training grants
7.4 Other incentives
COST
5. Cost to Achieve:
Build out costs
5.1 Design cost
5.2 Build out cost
5.3 Transition cost
5.4 -/- Rent free period
4.1 Recruitment cost
4.2 Training cost
4.3 Dual running cost
4.4 Travel cost & expenses
4.5 Relocation cost / Expat cost
4. Cost to Achieve:
Labour Related
3. Running Cost:
Other operating costs
3.1 Telecom cost
3.2 Management time
3.3 Travel & transportation cost
3.4 Other cost
© Buck Consultants International, BLS & Company, 2015
A.
Labor Costs
A1 Total employer’s cost
A2 Annual hours worked
A3 Productivity
B.
Availability of
Qualified Labor
B1 Size of the labor pool
B2 Skill sets
B3 Unemployment levels
B4 Competition on the market
D.
Labour Flexibility
D1 Worker motivation
D2 Flexibility
D3 Working schedule flexibility
E.
Labour Relations
E1 Prevalence & Attitude of Unions
E2 Hiring and Firing Regulations
E3 Work Stoppages
E4 Informal Bargaining Units
F.
Quality of life
F1 Cost of Living
F2 School Quality
F3 Visa Regulations (for offshore)
TALENT
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Detailed Location Talent Factors
C.
Language Skills
C1 Quality & availability
C2 Writing & speaking
C3 Accents / Natives
C4 Competition on the market
© Buck Consultants International, BLS & Company, 2015
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Detailed Location Risk Factors
A.
Political Risk
A1 Government
stability/democracy
A2 Geopolitical conflicts
A3 Religious & ethnic tensions
B.
Economic Risk
B1 GDP per capita
B2 Development economy
B3 Inflation
B4 Budget balance
C1 Financial risk rating
C2 Exchange rate
C3 Exchange rate stability
C4 Total (foreign) debt
C5 Banking system
E.
Legal Risk
E1 Permits
E2 Litigiousness
E3 IP Protections
F.
Natural Disaster Risk
F1 Climatic catastrophes
F2 Hydrological catastrophes
F3 Meteorological events
F4 Geophysical events
RISK
D.
Transparency Risk
D1 Corruption
D2 Bureaucracy
C.
Financial Risk
© Buck Consultants International, BLS & Company, 2015
4 International Location Choices: Options &
Trends
Technology, Economic Conditions & Globalization Have Changed the Industry
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Targeted Geographies
Location Drivers
Consolidation
Right-Sizing
Operational Efficiencies
Geographic Diversification
Disaster Recovery
Late
90’s
USA Western Europe Globalization
Labor Arbitrage
Offshoring
Geo-Political Concerns
Dot Com Era
India Philippines
Central Europe
Wage Inflation
Labor Saturation
Labor Market Longevity
Near-shoring
Reshoring
Risk Aversion
Home Agents
Post Great
Recession
Philippines Eastern Europe Northern Africa
Latin America USA
UK/Ireland
© Buck Consultants International, BLS & Company, 2015
High-Level Positioning of Regions: Drivers and Strategies Differ by Geography
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Americas Asia-Pacific
(APAC)
Europe, Africa,
Middle East (EMEA)
Mainly
country
only or
offshored
National
solutions
Mature
market
Upcoming
‘China for
China’
Mature +
upcoming
Upcoming
‘Russia for
Russia’
• Mature market
• Upcoming new locations
• US near-shoring
• Mature market
• 2nd & 3rd tier cities
• Reshoring
• Mature market
• Upcoming locations
• 2nd & 3rd tier cities
• Re- & near-shoring
• Mature market
• Further growth
Upcoming
© Buck Consultants International, BLS & Company, 2015
Key Home Markets On, Near & Offshore Strategies Differ per Home Market
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Geography Onshore Near-shore Offshore
USA
• Continue through current
cycle
• Focus on larger labor
markets – but move
towards secondary
markets
• Wage inflation?
• Regional Shared
Services consolidation
continues
• Lack of scalability
• Lack of scalability
• Wage inflation of 7%
to 12%
• Continued search
for the next
Philippines
Europe
• Continue through current
cycle
• Focus on 2nd and 3rd tier
cities
• Slow economic growth
and debt crisis in Europe
• Regional Shared
Services consolidation
continues
• Focus on 2nd and 3rd tier
cities in Eastern Europe
• Focus on low(er)
cost at high quality
and low risk
• Africa emerging
slowly
© Buck Consultants International, BLS & Company, 2015
1 Location in smaller cities / metro areas to take advantage of favorable labor markets/lower
costs
2 Near-shore locations instead of offshore locations (Europe & USA)
3 Re-shoring activities back from Asia to Europe & USA due to quality issues & increasing
labor market competition / cost
4 Hot locations (near and offshore):
UK & Ireland: secondary and tertiary locations
Central Eastern Europe: secondary and tertiary locations
North and Southeast Europe: ‘Ukraine’ now a ‘no-go’ area, Russia for Russia
Turkey, Egypt and Africa: still hindered by social unrest
Asia: India (third tier cities), Malaysia, Philippines, Vietnam, China for China
North America: secondary metros, third-tier markets only for smaller centers
LATAM: Mexico, Costa Rica, Emerging: Chile, Uruguay, Puerto Rico
Our General Global Observations
28 © Buck Consultants International, BLS & Company, 2015
4A. Europe, Africa & Middle East (EMEA)
European Support Center Hotspots
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Hotspot
National capital
Sofia, Bulgaria
Timisoara / Cluj-Napoca,
Romania
Gdansk /Lodz Poland
Belfast, UK
Lisbon, Portugal
Baltic States
Zagreb, Croatia
Istanbul, Turkey
Debrecen, Hungary
Bratislava, Slovakia
Budapest, Hungary
Prague, Czech Republic
Warsaw & Krakow,
Poland
Glasgow/Edinburgh, UK
Cork, Ireland
Manchester, UK Leeds, UK
Barcelona, Spain
Bucharest, Romania
Belgrade, Serbia
CURRENT HOTSPOTS FUTURE HOTSPOTS
© Buck Consultants International, BLS & Company, 2015
Western Europe Location Strategies Onshore & Offshore Strategies Differ from the U.S.
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UK Spain France Germany Italy Benelux Nordics
On-
Shore
Scotland,
Wales, N.Ireland
Lower cost
cities
Lower cost
cities
Lower cost
cities (East)
Lower cost
cities (South)
Lower cost
cities
Lower cost
cities
Near-
Shore
• Malta/ CEE
• Egypt
• South Africa
• Ghana
• Morocco
• Tunisia
• Romania
• Morocco
• Tunisia
• Romania
• Turkey
• Egypt
• Poland/
Czech Rep./
Slovakia
• Romania/
Croatia
• Turkey
• Egypt
• Romania
• Croatia
• Egypt /
Libya limited
• Turkey
• Morocco
• Baltic
States
Off-
Shore
• India
• Philippines
• LATAM
• Argentina
• Mauritius • Namibia
• South Africa
• LATAM but
very limited
• South Africa
• Surinam
• NA
Source: FirstSource, completed with experiences BCI, 2015
Central/Eastern Europe is often considered for pan-European activities, as European language skills are more available near-shore then offshore
Lower cost options in Northern Africa with language skills available, however political unrest in the region still hinders potential
Low-cost Sub-Sahara Africa emerging slowly
© Buck Consultants International, BLS & Company, 2015
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Sample: Some Support Centers in CEE
Source: BCI, 2014
Poland Czech
Republic
Slovakia Hungary Romania Baltics
at&t
© Buck Consultants International, BLS & Company, 2015
Average annual total employers cost for a basic BPO agent speaking English + another European language (in USD)
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Source: Buck Consultants International, 2015
Labor Arbitrage Strategies Wage Reduction of 20% to 60%
-
10.000
20.000
30.000
40.000
50.000
Lond
on
Frank
furt
Belfa
st
Ber
lin
Bud
apes
t
Buc
harest
Cairo
Casa
blanc
a
Man
illa
Ban
galore
Western European benchmark locations
Onshore Near shore Central & Eastern
Europe
Near shore North Africa
Offshore Asia
© Buck Consultants International, BLS & Company, 2015
Development Phase of Selected Support Center Markets
Start - up
market
Zagreb
Bucharest
Cluj
Napoca
Sofia
Developing
market
Growth
market
Mature
market
Varna
Tallinn
Riga
Budapest
Krakow Warsaw
Prague
Development
Time
There are pro’s and con’s for the different types of locations and different value propositions for added value or transactional activities
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Source: BCI, 2014
© Buck Consultants International, BLS & Company, 2015
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Recent Back Office Investments in Western Europe: 2014
Source: Research BCI based on IPA World, 2014
Company Type of center Location Comments
Alert Logic Security Operations Center Cardiff, UK 130 FTE
Samsung New Customer Call Centre Leeds 358 FTE
Sitel BPO Center Coventry, UK Expansion of 300 FTE
ResQ Contact Center Hull, UK Expansion of 50 FTE
Accenture Expanding Delivery Centre Newcastle + 150 FTE
PwC Financial Advisory Services Centre Belfast 800 FTE
GoDaddy Customer Care Center Belfast, Northern Ireland Not available
Baker & McKenzie New Business & Legal Services Centre Belfast, Northern Ireland 250+ FTE
Convergys Customer Service Centre Londonderry, NI 333 FTE
IBM Multilingual Software Support Center Dublin, Ireland 40 FTE
SAP Development Center Dublin, Ireland Expansion of 60 FTE
Calypso Techn. Managed Services Center Dublin, Ireland 150 FTE
Ericsson Software Development Center Dublin & Athlone, Ireland Expansion of 120 FTE
OpenText Global Customer Support Center Cork, Ireland Expansion of 105 FTE
Tyco Business Services Center Cork, Ireland Not available
Avaya Customer Engagement Center Galway, Ireland Expansion of 75 FTE
Wipro BPO IT Center Shannon, Ireland Expansion of 100 FTE
Metsi Service Center Leuna, Germany Not available
Significant investments & expansions in the UK & Ireland © Buck Consultants International, BLS & Company, 2015
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Recent Back Office Investments in Central & Eastern
Europe: 2014
Source: Research BCI based on IPA World, 2014 / 2015
Company Type of center Location Comments
Google Center for technology start ups Warsaw, Poland 500 FTE
MoneyGram Business Center Warsaw, Poland 500 FTE
Luxoft IT Outsourcing Hubs Krakow & Wroclaw 600 FTE total
Fresenius Financial & Accounting Center Wroclaw, Poland 250-300 FTE
ThyssenKrupp Shared Services Center Gdansk, Poland 800 FTE
PwC Business Center Gdansk, Poland Not available
Convergys Contact Center Lublin, Poland 250 FTE
Emirates Airlines Customer Contact Center Budapest, Hungary 300 FTE
Siemens Training Center Budapest, Hungary 100 FTE
ATT Mulls Support Center Bucharest, Romania 200 FTE
Deutsche Bank Technology Center Bucharest, Romania 500 FTE
Deutsche Telekom HR Services Center Bucharest, Romania About 25 FTE
Linde Global Services Center Timisoara, Romania Expansion of 300 FTE
ZTE Services Center for 23 countries Timisoara, Romania 250 FTE
Luxoft Support Services/Delivery Center Sofia, Bulgaria Not available
The larger markets - Poland and Romania - attract most investments and larger projects
© Buck Consultants International, BLS & Company, 2015
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4B. North America and Latin America Hotspots
Mexico City, Mexico
Medellin, Columbia
Salt Lake City, UT
Tampa, FL
Dallas, TX
Baton Rouge, LA
Charlotte, NC
Sao Paulo, Brazil
MATURE MARKETS EMERGING MARKETS
Ann Arbor, MI
Toluca, Mexico
Cali, Colombia
Ogden, UT
Pensacola, FL
El Paso, TX
Lafayette, LA
Greenville, SC
Recife, Brazil
Kalamazoo, MI
San Jose, Costa Rica San Juan, Puerto Rico
© Buck Consultants International, BLS & Company, 2015
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Tampa, FL Miami, FL Nashville, TN Dallas, TX Charlotte, NC Phoenix, AZ
Shared Services Centers in Preferred U.S Markets
© Buck Consultants International, BLS & Company, 2015
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Recent Project Announcements in North America
COMPANY TYPE OF CENTER METRO AREA JOBS
General Electric Shared Services Center Cincinnati, OH 1,400
MetLife Global IT Center Raleigh, NC 1,300
UBS Shared Services Center Nashville, TN 1,000
Aramark Shared Services Center Nashville, TN 1,000
Bristol-Myers
Squibb
Enterprise Services and
Technical/Scientific Management
Tampa, FL 580
Cognizant
Technology
Solutions
BPO Center Charlotte, NC 500
Visa, Inc. Global IT Center Denver, CO Expansion of 400 new jobs
AIG IT Center Charlotte, NC 230
Quest Diagnostics National Operations Center and HR
Shared Services Center
Tampa, FL 350
White & Case Legal Shared Services Center Tampa, FL 100
Serta Simmons Shared Services Center Nashville, TN 100
Source: Research by Biggins Lacy Shapiro & Company; deals announced 2013 to present
© Buck Consultants International, BLS & Company, 2015
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Source: Research by Biggins Lacy Shapiro & Company
Representative Near-shore Locations in the Americas
© Buck Consultants International, BLS & Company, 2015
Costa Rica Mexico Argentina Puerto Rico Chile Brazil
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Recent Back Office Announcements in Latin America
COMPANY TYPE OF CENTER COUNTRY CITY JOBS
CitiGroup Shared Services
Center
Costa Rica Heredia Expansion of 500
new jobs
Procter &
Gamble
Supply Chain Center
for Americas
Costa Rica Santa Ana 500
Cargill Shared Services
Center
Costa Rica Heredia 300
Accenture Shared Services
Center
Costa Rica Heredia Expansion of 300
new jobs
Brightstar Corp. Shared Services
Center
Costa Rica San Jose 150
Bacardi Shared Services
Center
Costa Rica San Jose 100
Cisco Systems Shared Services
Center
Mexico Mexico City 300
BASF Financial Shared
Services Center
Uruguay Montevideo 320
Source: Research by Biggins Lacy Shapiro & Company; deals announced 2013 to present
© Buck Consultants International, BLS & Company, 2015
Local Market: Growth in major emerging economies such as Brazil (50% of
new shared services centers serve Brazil market only)
Proximity: Competitive near-shore destination for U.S. market
Cost Structure: Significant wage arbitrage vs. U.S.
Language and Cultural Homogeneity: Spanish/Portuguese language and
customs
Time Zone: Common time zones
41
Drivers of New Latin America Shared Service Centers
© Buck Consultants International, BLS & Company, 2015
New Deloitte survey reports that Latin America now surpasses Eastern Europe and Asia as
destination for new shared services centers. Brazil, Chile, Mexico and Argentina account
for vast majority.
4C. Lower-Cost Options in Sub-Sahara Africa
42
Source: Oxford Economics, 2014
Projected GDP growth rate (in %) 11 of the world’s 20 fastest-growing economies until 2017 in
Africa
Africa in Headlines Rainbow Nation
Inhabitants > 1 bln
Size economy > 2 trillion $
Countries 54
Land mass: China, India, Japan,
America, Mexico and Europe
combined
GDP current prices
(in US$)
% change Y2Y
2012-2017
Source: IMF , 2014
© Buck Consultants International, BLS & Company, 2015
The African Potential Strategic language groups present in sizable cities
43
Source: MT Magazine, October 2013, adjusted by BCI, 2015
Largest Cities in Sub-Sahara Africa (about 1 million+ inhabitants)
World Languages Spoken
English
Spanish
Arabic
Arab and English
French
English
335 million speakers
in 101 countries
French
338 million speakers
in 29 countries
North Africa
Sub-Sahara Africa
Arabic
223 million speakers
in 59 countries
Source: BCI, 2014
© Buck Consultants International, BLS & Company, 2015
African Country Comparison Many Emerging Markets with Potential Scalability
44
Language Skills/
Former Colonies1
Size BPO/SSC/CC
Community
Labor Cost Per Month for
Language Speaking Agent
South Africa English, German Mature – Large Market
Est: ~100,000 seats Euro 900 - 1,100
Mauritius English, French Mature – Small Market
Est: ~10,000-15,000 seats Euro 800 - 1,000
Morocco Arabic, French, Spanish Mature – Medium Market
Est: ~20,000- 25.000 seats Euro 800 – 950
Tunisia Arabic, French, Italian Mature – Medium Market
Est: ~15,000 -20,000 seats Euro 800 – 950
Egypt Arabic, English, French,
German, Italian
Emerging – Large Market
Est: ~20,000-30,000 seats Euro 650 – 850
Senegal French Upcoming – Small Market
Est: < 10,000 seats Euro 650 - 850
Kenya Swahili, English Upcoming – Small Market
Est: < 10,000 seats Euro 650 – 850
Ghana English Upcoming – Small/Medium Market
Est: < 10,000 seats Euro 300 – 500
Ethiopia Amharic, English Immature – Very Market Euro 300 - 500
1 The first language is the official language, followed by the second and/or third language spoken in a country
© Buck Consultants International, BLS & Company, 2015
Representative Support Centers in Africa
45
South Africa Morocco Tunisia Egypt Ghana
Kenya
© Buck Consultants International, BLS & Company, 2015
46
Recent Back Office Investments in Africa: 2014
Source: Research BCI based on IPA World, 2014 / 2015
Company Type of center Location Comments
Weir Mineral Service Center Morocco Service engineers
IBM Client Service Center Jo’burg, S.Africa Training center
Samsung Premium Services Center Lagos, Nigeria Services, repair, query answering,
training
Royal Dutch Shell Center of Excellence Nigeria Training and environmental studies
and support university education
Samsung Premium Service Center Lagos, Nigeria Service, repairs, enquiries & training
IBM IT Center Lagos, Nigeria Technology Service Delivery
Vodafone Customer Experience Center/
Call Center
Accra, Ghana Insourced from Teletech
Limited pan-European or international support investments in Africa
Focus on providing Services & Support for regional or local markets (esp. in Nigeria)
© Buck Consultants International, BLS & Company, 2015
Commentary on Africa Things to know
47
Labor regulations: longer working weeks, more
flexibility, less women employment, weekly & summer working times (and in case relevant Ramadan)
Accessibility: road & air connections in Northern
Africa comparable to CEE, public transport less developed (organized by companies for staff)
IT infrastructure: Of average quality in Northern
Africa, poor in Sub-Saharan regions (Ghana, Kenya, Botswana), high quality (at decreasing cost) in South Africa
Real estate: relative expensive & availability is not
guaranteed everywhere
Demographics: strong urbanization & very young
population, in some countries (e.g.,Tanzania) more than half of the population is below 15 years of age. Life expectancy is relatively short (~50 – 55 years)
Ease of doing business: bureaucracy & corruption
Risks: political, social, safety, other hazards
Source: United Nations World Population Prospect; McKinsey Global Institute, 2013
Africa’s workforce will become the world’s largest by 2040
© Buck Consultants International, BLS & Company, 2015
4D. Asia
48
APAC SSC/BPO Developments
India is still the largest Business Service market in APAC; second- and third-tier
cities still attract new centers due to improved infrastructure, skilled labour and
lower attrition rates compared to Mumbai, Bangalore and Hyderabad
Southeast Asia offers alternatives in emerging markets, including the
Philippines, Malaysia and Vietnam where English skills are available (also some
some Japanese and French in Vietnam)
China is expected to become a major SC/BPO and IT player within the next few
years and was expected to surpass India for Services Outsourcing in 2013/2014
The growth in China has been driven by the US, Japan, Hong Kong and Indian
outsourcing companies although local demand is rising. Many multinationals are
opening ‘China for China’ service centers
Beijing, Xi’an and Dalian are 3 of the 21 cities designated as ‘Service
Outsourcing Model Cities’ with policies to promote the industry. Dalian also
offers Japanese and Korean language skills
© Buck Consultants International, BLS & Company, 2015
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Very different labour markets
APAC – Some facts & figures
A
Population
((Million)
B
Language Skills
C
Fringe
Benefits
D
Total cost for a
graduate
speaking languages
E
Time
difference
compared to
London
Beijing
(China) 22.0 English 16% of salary +++ + 8 hours
Xi’an
(China) 8.3 English 16% of salary ++ + 8 hours
Dalian
(China) 6.2 English, Japanese, Korean 16% of salary ++ + 8 hours
Mumbai
(India) 22 English 36% of salary ++ + 5.5 hours
Chennai
(India) 7.4 English 36% of salary ++ + 5.5 hours
Bangalore
(India) 6.6 English 36% of salary ++/+ + 5.5 hours
Cebu City
(Philippines) 2.0 English 30 % of salary ++ + 8 hours
Penang
(Malaysia) 1.8 English 15% of salary ++/+ + 8 hours
Ho Chi Minh City
(Vietnam) 7.2
English, Japanese, Some
French 15% of salary + + 7 hours
© Buck Consultants International, BLS & Company, 2015
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Representative Support Centers in Asia
China India Philippines Malaysia
Source: Research BCI, 2014
© Buck Consultants International, BLS & Company, 2015
51
Recent Back Office Investments in APAC Mature Markets
Company Type of center Location Comments
Citrix Customer Experience Center Singapore Not available
EGS BPO Center Quezon City, Manila, Philippines Expansion 200 FTE
Conectys BPO Customer Services Center Davao City, the Philippines 350 FTE
Ubiquity Contact Center Bacolod, the Philippines 1000 FTE
Integreon BPO Center Manila, the Philippines 3,000 square meter
NASDAQ Service Center investor relations Manila, the Philippines 170 FTE
ING Group Back Office Bonifacio, the Philippines Expansion of 200 FTE
Deutsche Bank Back Office Pune, India 3000-3500 FTE
CA Technologies Technology Center Bangalore, India 400FTE
Siemens Center of Competence Mumbai, India Serving 10 countries
Novartis Business Services Center Hyderabad, India Consolidation existing site
Vocera Innovation Center Bangalore, India Not available
Marlabs BPO Center Bangalore, India Not available
Dasnke Bank Technology Center Bangalore, India 1,000 engineers
BMW Training Center Gurgaon, India 18,000 training days /year
Lennox R&D plus IT support Chennai, India 300 FTE
Cap Gemini BPO IT Center Talwade, India 2,800 FTE
Metso Services Center Zibo, China 40 FTE
Genpact/Dephi Shared Services Center Suzhou, China 100 FTE Source: Research BCI based on IPA World, 2014
The Philippines and India remain attractive for relatively large scale projects © Buck Consultants International, BLS & Company, 2015
52
Recent Back Office Investments in APAC Emerging
Markets
Company Type of center Location Comments
Emerson Engineering & Services Center Mueang Rayong, Thailand 2,450 square meter
Aegis Customer Experience Center Colombo, Sri Lanka 600 seats
CMA-CGM Customer Contact Center Sri Lanka 750 FTE
Accenture Innovation Center for financial services Jakarta, Indonesia Not available
Hon Hai R&D, Software & Services Center Jakarta, Indonesia Not available
IFF Creative & Support Center (national?) Jakarta, Indonesia $ 50 million investment
Source: Research BCI based on IPA World, 2014
First back office investments are appearing in Thailand, Sri Lanka & Indonesia
© Buck Consultants International, BLS & Company, 2015
Link the location decision process with the overall corporate strategy
Take a longer term corporate view
Escape from a narrow scope
Verify and record all assumptions of the process
Set clear priorities in location requirements
Focus on regions, not countries
Feelings can be fact too
Anticipate future regional developments (forecast costs)
Search for excellence in terms of region, site & building
Develop an exit scenario (flexibility)
Challenge all information you get
Plan the project’s process thoroughly
Always negotiate a better deal
Site Selection - Lessons learned
53 © Buck Consultants International, BLS & Company, 2015
54
1 Decreasing labour arbitrage
2 Limitations of scalability and
growth due to unfavourable
labour market
3 Offshore location does not meet
the original objectives &
requirements anymore
4 Upcoming locations now
become mature and saturation
effects are visible
5 Social & political unrest is
hindering daily business
Challenges / Risks
1 Focus on value added activities
2 Model possible functional and
geographical footprint
3 Develop the right strategy for the
right shore
4 Shift to 2nd & 3rd tier cities
5 Take risk assessments into
account
Trends for Support Centers
5 Trends for Support Centers
© Buck Consultants International, BLS & Company, 2015
55
Five locational trends
Trend 1 Focus on value added activities
Trend 2 Model possible functional and geographical
footprints
Trend 3 Right shoring
Trend 4 Shift to 2nd and 3rd tier cities
Trend 5 Take risk assessments into account
© Buck Consultants International, BLS & Company, 2015
Trend 1. Focus on Value-Added Activities
56
Key aspects
How to fulfil client expectations and maintain
A&O’s quality?
How to remain competitive?
How to benefit from economies of scale and
deliver cost efficiencies?
Allen & Overy
Key facts
Industry : Legal
Revenues : Euro 1.32 bn
Staff : 5,000 staff
Geogr.scope : 39 offices in 28
countries globally
SSC Location search project
Geography : Global
# of locations : 21
Employees : 325+ fte
Facility size : ~4,000 m2
IT
• IT services
• Back Desk Support
Finance
• Accounts
Payable
• General Ledger
• Billing
Business Services
• Document Production
• Creative Services
Business
Development
• Data stewarding
• Intranet Content
Administration
HR
• HR admin
• HR Systems
Helpdesk
Legal services
• Research/Admin
• Legal secretary
• Paralegal
• Solicitors
A&O’s multifunctional
BPO & LPO center
Scope of activities
© Buck Consultants International, BLS & Company, 2015
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Trend 1. Focus on Value Added Activities
Key Objectives
Drive efficiency and quality
Build pool of domestic talent to serve as a
pipeline for future management
Achieve cost savings while maintaining quality
control, talent development, and coordination
with US-headquarters
Diversify drug development capabilities – first
mover advantage in a new market
Bristol-Myers Squibb
Company
SSC Location Search Criteria:
Geography: East & Central
U.S.
# of locations: 8-10
moderate cost
markets with sizeable clinical
and
BPO presence
Employees : 580
Facility size : 70,000 SF
Enterprise Services:
• Finance
• Human Resources
• Information Technology
Scientific & Technical Mgt
•Clinical Trials Management
•Research & Analytics
North American Capability Center (NACC) – Tampa, FL
Scope of activities:
+
© Buck Consultants International, BLS & Company, 2015
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Key question
How to organize the back and front office
organisation in Europe ?
Premier Farnell
Key facts
Industry : Electronics
Revenues : Euro 1.21 bn
Staff : 4,000 staff
Geogr.scope: 100 countries
BO/FO Location strategy project
Geography : Europe
# of locations: 7
Employees : 275 fte Back office
485 fte Front office
Geographical business models
for PF’s back office operations
1 Super hub 2 Single Back Office & Single Front Office
Back Office Front Office
3 Single Back Office &
Multiple Front Office4 Status Quo
Back Office Front Office Back Office Front Office
Trend 2. Model Possible Functional &
Geographical Footprints
© Buck Consultants International, BLS & Company, 2015
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Shell Business Service Centres
Royal Shell’s Global Footprint
Shell
Key facts
Industry : Oil & Gas
Revenues : Euro 370 bn
Staff : 90,000 staff
Geogr.scope : >80 countries
Global Business Services
Geography : Global
# of locations : 6
Employees : ~ 8,600
Capetown
Glasgow
Krakow
Chennai
KL Manilla
Year CS Fin Acc HR IT Proc. Other Size
Glasgow 1998 500
Manila 2004 2,700
Krakow 2006 1,500
Chennai 2007 1,600
Cape Town 2008 300
Kuala L. 2011 2,000
© Buck Consultants International, BLS & Company, 2015
Trend 3. Right Shoring
60
The right shore for SSC activities according to international law firms
Company Activities Location Country
Onshore
Orrick Herrington & Sutcliffe Global Operations Center Wheeling USA
Bingham McCutchen Global Services Center Kentucky USA
Morgan, Lewis & Bockius Global Services Center Philadelphia USA
Littler Mendelson Services Center Kansas City USA
Pillsbury Winthrop Services Center Nashville USA
Skadden, Arps Services Center White Plains USA
Shearman & Sterling Services Center New York USA
Sedgwick LLP Services Center Kansas City USA
White & Case Services Center Tampa USA
Allen & Overy Global SSC incl. LPO Belfast UK
Herbert Smith Freehills Legal & financial support Belfast UK
Offshore
Berwin Leighton Paisner Legal services delivery team Manchester UK
Baker McKenzie Global Services Manila Philippines
Clifford Chance Global SSC New Delhi India
White & Case Global SSC Manila Philippines
Hogan Lovells Shared Services1) Jo’burg South Africa
Mixture
LinkLaters
European SSC
Admin & Marketing Center
AP GL SSC
Colchester
Warsaw
Outsourced
UK
Poland
Asia
Ashurts
Legal & SSC EMEA
APAC Outsourced
Glasgow
Outsourced
UK
Asia
1) Services to start with include conflict checking, client due diligence and research
© Buck Consultants International, BLS & Company, 2015
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E.ON’s planned Business Services Centres (2015)
E.ON
Key facts
Industry : Utilities
Sales : Euro 113 bn
Staff : 79,000 staff
Geogr.scope : Europe, Russia,
N.America
SSC Location strategy
Geography : Europe
# of locations : 30
Employees : 1,100 fte
Facility size : 2 site solution
E.ON’s Support Center Location Strategy
Drivers for on- & nearshoring
Cost efficiencies and not compromising on quality
Strategic fit with the German business culture
Bad experience with offshoring (see re-shoring example)
HR and Accounting are 2 single functions within E.ON and
therefore spread over 2 single locations:
HR: higher added value, native speakers required
Accounting: more transactional, less (non-native)
languages required
Activities Size Drivers
Berlin HR services 500 German’s largest university city
Excellent infrastructure
Mature SSC location
Availability of native speakers
Cluj-
Napoca
Accounting services 600 University city
Good transport infrastructure
Low business operating costs
Low costs of living
Mature SSC location
Source: E.ON, June 2012
© Buck Consultants International, BLS & Company, 2015
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Santander
Key facts
Industry : Financial Services
Revenues : Euro 50 bn
Staff : 193,000
Geogr.scope: 10 major markets
Call centre relocation
Geography : UK
# of locations: 3
Employees : 500 fte (new)
Relocation of Call Centre from India to UK
Reasons for relocation of activities back to the UK
High level of complaints ‘dealing with an offshore
centre is a frustration that can lead to
dissatisfaction’
Narrowed cost difference between India and the UK
Higher wage inflation in India
Rising cost of living in India
Improved staff retention rates in the UK as a result of
high unemployment
Falling property prices in the UK
Efficiency improvements (shorter average handling
time in the UK) and increasing customer
satisfaction
© Buck Consultants International, BLS & Company, 2015
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Tate & Lyle
Key facts
Industry : Food processing
Revenues : Euro 3.370 bn
Staff : 4,300 fte
Geogr.scope: Global
SSC Location selection project
Geography : Central Eastern
Europe & US
# of locations : 10
Employees : 150 fte
Facility size : 2,650 sqm.
New location for a multi-
functional support centre
Main reasons for location decision in 2nd tier city:
Attractive operating cost savings
Availability of highly skilled workforce and talent pool at the Lodz university
Modern state-of-the-art facilities
New Global SSC: Lodz, Poland
Trend 4. Shift to 2nd and 3rd Tier Cities
© Buck Consultants International, BLS & Company, 2015
64 © Buck Consultants International, BLS & Company, 2015
Trend 4. Shift to 2nd and 3rd Tier Cities
Orrick Herrington
Key facts
Industry : Legal Services
Revenues : +/- $900 million
Geogr.scope : Global
Offices : 24
Partners : 1,100
Global Operations Center
Location Selection Project
Employees : +/- 200
Facility size : 6,000 sqm.
Establishment of one of the first captive legal
shared services centers in Wheeling, West VA
Objectives
Deliver legal services ‘Better and Cheaper’
Reduced work-time, easier delivery of services, easier to do
research, easier access to work product, seamless
communication, improve service
Upgrade technology, upgrade services, drive down costs
Continue to grow/expand
Continue to identify global opportunities and emerging markets for
Build a better service network, (make better use of technology)
Accomplishments Estimated $10 - $15 million annual cost savings
Migration and consolidation of IT, business development, marketing, HR, billing, finance, document review, e-discovery, compliance functions
Access to three dozen “career associates” non-partner track attorneys performing more routine legal work
65
Xceed
Key facts
Industry : BPO
Staff : 3,650
Geogr.scope: Egypt & Morocco
“The unrest in Egypt did not impact our
call centre business in Cairo as our
clients are still there. However potential
new clients with promising contracts in
the pipeline were lost. Our call centre
operations have not been down for
longer than 1 hour during the last 6
months. Employees are very loyal to our
company and continued their daily work
during the protests at the Táchira
Square”,
Ossama Nazmi, Business Development
Manager, Xceed
Business continuity measures taken to face
the unrest in Egypt
Business Continuity Management (BS 25999)
Safeguard the
interest of Xceed
including key
stakeholders by
ensuring continuity
of business
• Risk
identification
• Probability of
occurrence
• Potential loss
Ce
rtif
ied
B
CM
Te
am
Media
Internal
Clients
Live In
Hot
Site
Alternate
Site
Work
From Home
Alternate
Abroad
Site
Possible Solutions
Depending on Suitability
To Severity of Disaster
Communication
Cable Cuts/
Technical
Curfew
Demonstrations
Trend 5 Take risk assessments into account
© Buck Consultants International, BLS & Company, 2015
66
In the event you would like to discuss things further, please do
not hesitate to contact us directly:
Josefien Glaudemans
Partner Location Strategies & Site Selection
Buck Consultants International
P.O. Box 1456
6501 BL Nijmegen
The Netherlands
6 How to Contact Us
P: +31 24 379 02 22
M: +31 6 22 42 32 07
F: +31 24 379 01 20
© Buck Consultants International, BLS & Company, 2015
6. How to Contact Us
67 © Buck Consultants International, BLS & Company, 2015
In the event you would like to discuss things further, please do
not hesitate to contact us directly:
Andrew Shapiro
Managing Director, Location Strategies
67
Biggins Lacy Shapiro & Co
47 Hulfish Street
Suite 400
Princeton, NJ 08542
P: 609-613-4273
M: 609-651-7765