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)

[email protected]

Andrew Shapiro

Biggins Lacy Shapiro & Company

47 Hulfish Street

Princeton, NJ 08542

609-613-4273

609-651-7765 (mobile)

[email protected]

19th Annual North American Shared Services and Outsourcing Week

1

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

2

1 Introduction


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

3

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)


4

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:


5

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


Sample Corporate Clients of BCI

6 © Buck Consultants International, BLS & Company, 2015

Recent BCI Back Office Clients


http://www.sap.com/index.epx

http://images.google.nl/imgres?imgurl=http://www.calltime.com.au/images/caselogo_sitel.gif&imgrefurl=http://www.calltime.com.au/casestudies.html&usg=__A_aI5KimcahHpxJohHCHOZoFfAQ=&h=155&w=314&sz=4&hl=nl&start=2&tbnid=TujVK4GMu06gAM:&tbnh=58&tbnw=117&prev=/images?q%3Dsitel%26gbv%3D2%26hl%3Dnl

http://www.americanmedicalsystems.com/home.html

http://www.servier.com/Default.aspx

8

1 Introduction

Biggins Lacy Shapiro & Company

8

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.


9

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


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.

10

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


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.

11

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.


12

Select Corporate Clients of BLS & Co


13

Recent BLS & Co Back Office Clients


14

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


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

15

Benefits from

Economies of

Scale

Increasing Cost

of Complexity


Geographical business model 1:

National markets have national centers


Regional markets served by various

own/outsourced regional centers


Regional markets served by

centralised centers



own/outsourced off-shored centers

Captive SSCOutsourced SSC


1 National markets have

national centers

2 Regional markets served by various own/

outsourced regional centers Geographical business model 1:







centralised centers






3 Regional markets served by

centralized centers








centralised centers





Captive SSCOutsourced SSC4 Regional markets served by own/

outsourced off-shored centers








centralised centers






Geographical Business Models

Finding the balance in centralization or decentralization is key


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


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

18

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


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

19

Phase 4 First negotiations


Project-Specific Location Criteria

Our approach focuses on the location specific costs, quality and risk factors of

the new location

20

+ 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)


Example: Cost-Quality-Risk Positioning of Locations

21

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


22

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


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

23

Detailed Location Talent Factors

C.

Language Skills

C1 Quality & availability

C2 Writing & speaking

C3 Accents / Natives

C4 Competition on the market


24

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


4 International Location Choices: Options &

Trends

Technology, Economic Conditions & Globalization Have Changed the Industry

25

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


High-Level Positioning of Regions: Drivers and Strategies Differ by Geography

26

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


Key Home Markets On, Near & Offshore Strategies Differ per Home Market

27

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


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


4A. Europe, Africa & Middle East (EMEA)

European Support Center Hotspots

29

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


Western Europe Location Strategies Onshore & Offshore Strategies Differ from the U.S.

30

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


31

Sample: Some Support Centers in CEE

Source: BCI, 2014

Poland Czech

Republic

Slovakia Hungary Romania Baltics

at&t


http://www.sap.com/index.epx

http://www.ibm.com/us/


http://www.alcoa.com/global/en/home.asp

http://www.europe.nokia.com/

http://www.diageo.com/


http://www.avis.com/AvisWeb/home/AvisHome;jsessionid=GTBs5d3ZkQK8DTVVJ1kJfQLtnMwnFktPjLt7yss529Vgbt19NsLJ!-1511127708

http://www.dhl-usa.com/home/Home.asp

http://www.acer.nl/acereuro/page74.do;jsessionid=B9ED73E7A75943AB12F84C6F6644B008?UserCtxParam=0&GroupCtxParam=0&dctx1=3&CountryISOCtxParam=NL&LanguageISOCtxParam=nl&crc=2406880814

http://www.electrolux.com/index.aspx

http://www.gsk.com/index.htm

http://www.internationalpaper.com/index.html

http://www.oracle.com/index.html

http://www.alcatel.com/

http://www.hilton.com/en/hi/index.jhtml;jsessionid=HQWXQIHGRKXEWCSGBIU2VCQKIYFC3UUC

http://www.hansagroup.com/eng/index.html


Average annual total employers cost for a basic BPO agent speaking English + another European language (in USD)

32

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


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

33

Source: BCI, 2014


34

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

35

Recent Back Office Investments in Central & Eastern

Europe: 2014

Source: Research BCI based on IPA World, 2014 / 2015


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


36

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


37

Tampa, FL Miami, FL Nashville, TN Dallas, TX Charlotte, NC Phoenix, AZ

Shared Services Centers in Preferred U.S Markets


38

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


39 39

Source: Research by Biggins Lacy Shapiro & Company

Representative Near-shore Locations in the Americas


Costa Rica Mexico Argentina Puerto Rico Chile Brazil

40

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


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


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


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


in 29 countries

North Africa

Sub-Sahara Africa

Arabic


in 59 countries

Source: BCI, 2014


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


Representative Support Centers in Africa

45

South Africa Morocco Tunisia Egypt Ghana

Kenya



46

Recent Back Office Investments in Africa: 2014

Source: Research BCI based on IPA World, 2014 / 2015


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)


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


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


49

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


50

Representative Support Centers in Asia

China India Philippines Malaysia

Source: Research BCI, 2014


http://anz.tw/zh/index.jsp

51

Recent Back Office Investments in APAC Mature Markets


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


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


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


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


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


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


57

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:

+


58

Key question

How to organize the back and front office

organisation in Europe ?

Premier Farnell

Key facts

Industry : Electronics


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


http://nl.farnell.com/circuitco/beagle-xm/kit-dev-beagleboard-xm-dm3730/dp/1823269

http://nl.farnell.com/jsp/search/productListing.jsp?MER=i-9b10-00002065&SKUS=3622174,3622149,3622228,3622216,3622101,4231934,3622290,3622095,4231960,4231958,3622060,3622046,3622265,4232021,3622186,4231879,3622083,3622125,3622058,3622289,3622162,3622137,4231855,4231910,3622230,3622411,3622253,3622071,4231922,3622113,3622204,4231867,4231946,3622241

http://nl.farnell.com/jsp/search/productListing.jsp?MER=i-9b10-00002065&SKUS=1350506,3787977,1350507,1182878,473261,1503949,1285779,1643732,1503949,1350508,1285779,1602385,1602392,1350507,1182875,1643730,1182878,1285784,473261,1769527,1285781,1350505,1518579,1769525,1643730,1602388,1769528,3787977,1491539,1285784,1602390,1285781,1602384,1734746,4318663,1350505,1643731,1602389,1350506,1643726,1602385,1602392,1182875,1602386,1491539,1734774,1602387,1643731,1518579,1643726

http://nl.farnell.com/jsp/search/productListing.jsp?MER=i-9b10-00002065&SKUS=1144453,1220220,1220221,1220217,1220223,1220222,1220218,1220224

http://nl.farnell.com/jsp/search/productListing.jsp?MER=i-9b10-00002065&SKUS=9759000,9760423,9759042,9759026,1216921,9759034,9759018,9758992,1137332,9760571,9762027,9760555,9760466,1439541,9761306,9760520,1123006,9760431,1439542,9760547

http://nl.farnell.com/jsp/search/productListing.jsp?MER=i-9b10-00002065&SKUS=1851607,1851608,1865635,1865636,873615,1018750,1582381,977974,3804379,1279345,9993991,1560738,9993991,972009,1447700,1506666,1359522,1015504,1712854,1582381,1697226,1629771,1705188,1697226,1466490,1279326,4422820,1341268,4950379,1498366,1777569,1498360,1498361,1339575,1296771,1629771,4422820,1174842,1629929,1712855,1705190,4950367,1466491,873615,1267505,1317218,1625358,1015504,1299806,1821375

59

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


http://www.shell.com.my/

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


61

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


http://www.eon-uk.com/

http://www.eon-uk.com/

62

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


63

Tate & Lyle

Key facts

Industry : Food processing


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



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


http://www.xceedcc.com/home/default.aspx

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


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

E: [email protected]


mailto:[email protected]

6. How to Contact Us


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

E: [email protected]

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