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Location, location, location!

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The decision making process of where to locate your Shared Service Centre is not straightforward. The optimum answer is very much dependent on your business and should not be made on the basis of wage arbitrage or tax incentives alone. This paper outlines the approach that Chazey Partners take in order to come to a robust decision on selecting a location and provides additional insight from recent case studies.

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Location, location, location!

  1. 1. he decision making process of where to locate your Shared Service Centre is not straightforward. e optimum answer is very much dependent on your business and should not be made on the basis of wage arbitrage or tax incentives alone. is paper outlines the approach that Chazey Partners take in order to come to a robust decision on selecting a location and provides additional insight from recent case studies. In gaining buy in a commitment to a location for a shared service center, an organization can face conflicting internal objectives and differing priorities. Chazey Partners experience suggests that to make the right location decision, an organization needs to follow a robust evaluation based on a set of criteria tailored to the specific circumstances of the organization and the market that the organization operates within. A robust approach facilitates internal buy in and ensures that the organization makes the right decision that delivers the best long term solution with the right level of risk. Figure 1 below illustrates the four core options available in terms of location and the table below provides some of the high level pros and cons for each one. e Chazey Partners approach considers location across a number of dimensions. Within each dimension, we develop a set of requirements specific to organization and its business context. is provides a framework for a comprehensive location analysis. By allocating relevant weighting to these requirements within the dimensions, it is possible to then make a decision on an optimal solution without the emotional element. Location, Location, Location e four dimensions we typically consider are: Human Resource, Business, Infrastructure and Political Environment. Option Description Pros Cons On Site SSC is based within an existing office of the parent organization • Business engagement • Infrastructure • Language • Resistant to change • Limited cost benefits Onshore SSC is based in a new office in the same country as the parent organization • Business engagement • Language • Limited cost benefits Near shore SSC is based in a new office in a country near to the organization • Business engagement • Language • Cultural affinity • Wage arbitrage • Infrastructure • Accessibility Offshore SSC is based in a new office in a country far away from the organization • Wage arbitrage • Alternative service delivery • Language • Culture • Business engagement • Infrastructure 1. The Human Resources Dimension It is people that deliver the services from the Shared Service Centre. As such there are a number of human resource considerations in the high level requirements and an assessment needs to answer the following questions. • Does the location have resources with the necessary skills available to deliver the services and any future anticipated services? • What is the cost of resources and how will the costs change in the near term? • What is the availability of the resources with the right skills in the market place and how challenging will it be to retain the right resources or expand if necessary? • What are the language skills of the location and are they relevant to the types of service being provided? • What is the culture of the people in the location and is that aligned to the delivery of the service? T Figure 1: Options for Shared Service Centre location (US company) North America | Europe | Latin America | Asia | Middle East | Africa www.ChazeyPartners.com
  2. 2. 2. The Business Dimension Businesses have specific ways of working, and cultures in place, that any SSC would need to complement. e business dimension considers these requirements and looks to assess the case for the following. • Does the location make sense for delivering the services and engaging with the customer? • How aligned is the culture of the proposed SSC likely to be to the existing culture of the business and does it make a viable fit? • Is the location a viable place for managing the implementation project and an ongoing service improvement program? 3. The Infrastructure Dimension e infrastructure of a location needs to be in place and sufficiently robust to ensure that the service meets the expected quality. e infrastructure dimension considers the requirements for an SSC location and should consider the following: • Is there the right real estate to support the desired operation and scale to support any anticipated changes? • Is supporting infrastructure such as transport and hotels readily available at the right price? • Is the telecoms infrastructure readily available and robust enough to deliver the right level of service? • What are the costs of the infrastructure and how is that forecast to change? 4. The Political and Economic Dimension e political and economic elements of the country of the location can play a pivotal role in the selection. ere may be government incentives to set up SSC and these need to be considered along with the general political environment. • Is the risk profile of the country acceptable for establishing an SSC? • Is the country stable enough to host an operation? • Is the regulatory environment acceptable for the operation that is planned? • What are the tax implications and benefits of establishing an operation in a location? Selecting the optimal location for setting up or expanding an SSC is a challenging process. Chazey Partners believe it is important to take a structured approach to this process using rigorous analysis based on HR, business context, infrastructure and political dimensions. Any evaluation is then able to balance the trade-offs presented by the selection criteria and requirements. In running through this process, there is also the opportunity to gain buy in for any decision and also ensure that there is a clear and robust business case that has support of senior leadership within the organization. is result of this approach will be a well-supported project which aligns leadership of an organization and minimizes the potential risk of the implementation. is in turn leads to an SSC that will be able to operate effectively and provide the expected service to the organization and deliver the long term benefits. Location Selection in Practice In Chazey, we have delivered successful solutions over the past 10 years in companies such as 3COM, Reuters, Oracle and Travelport. Indeed, the operating models established in these organizations have been instrumental in setting the benchmark and template of leading practice not only within a shared services environment but also with the professional outsourcers such as E&Y, KPMG, BDO, etc., firms who are actively involved in providing third party services in Statutory and Tax Compliance. North America | Europe | Latin America | Asia | Middle East | Africa www.ChazeyPartners.com
  3. 3. e example table shows the results of a typical decision making process. Each of the set criteria within the dimensions has been assessed and rated in a range of 1 to 5 where 5 is best. By then applying the agreed weightings to the scores, it has been possible to rank the locations in order of preference. In order to have a robust selection process, it is necessary to identify the right weightings for an organization’s business and to develop an assessment mechanism for each criteria that allows the assessment team to effectively evaluate the options in an objective manner. For example factors to consider in skills would incorporate an assessment of the countries education system and a countries regulatory environment would consider the corruption perception index. e following two examples summarize how Chazey Partners helped two companies to decide on the location for their SSC based on how the weightings were decided and the output of the assessment. European  FMCG  Company Automo2ve  Parts  Company The  company  was  looking  to  choose  a  site  for   its  European  Shared  Service  Centre.     The  company  was  looking  to  choose  a  site  for  its  South   American  Shared  Service  Centre Human   The  majority  of  the  assessment  was  based  on   the  availability  of  resources  in  terms  of   necessary  skills  at  the  right  price. The  human  element  was  just  under  50%  of  the   considera2on Business   The  opera2on  was  to  be  stand-­‐alone  and  be   allowed  to  develop.    It  was  also  not  going  to  be   too  distant,  so  this  dimension  was  not  a  major   considera2on. The  organiza2on  wanted  good  access  to  the  SSC  to   develop  the  center  and  2e  it  in  with  the  main  business   opera2on. Infrastructure   The  key  considera2on  is  infrastructure  were   cost  and  availability. Infrastructure  was  considered  as  equal  of  importance  as   the  business  engagement  with  specific  cost  being  the  key.   Poli2cal   The  right  regulatory  and  economic   environment  was  seen  as  the  second  most   important  factor.    This  is  so  there  is  a  stable   currency  and  regulatory  environment  for  the   opera2on  and  there  would  be  no  shocks   an2cipated. The  Poli2cal  and  economic  dimension  was  the  second   most  important  factor  to  ensure  a  stable  opera2ng   environment Result Op2on  2,  a  Near  shoring  approach  was   followed  where  the  SSC  is  located  within  the   same  region  as  the  head  quarter  organiza2on.     The  loca2on  was  primarily  selected  on   resource  availability  in  the  right  economic   environment  with  ready  access  to  the  right   infrastructure. Op2on  2,  a  Near  shoring  approach  was  followed  where   the  SSC  was  located  within  the  same  region  as  the  head   quarter  organiza2on.    The  loca2on  was  primarily  selected   on  resource  availability  in  the  right  economic  environment   with  ready  access  to  the  right  infrastructure. What does this mean for YOU? Selecting a location for a Shared Service Centre is not straightforward and the expense of having to recover from the wrong location once the SSC is in operation may be prohibitive. By identifying locations effectively in the first place and then evaluating them against clearly articulated requirements categorized into the core dimensions of human resources, business engagement, infrastructure and political environment, you can ensure that you are evaluating the right things and selecting the result location for the right reasons. At Chazey Partners, we have the experience and a rigorous approach to help you make sure that you are able to make the right decision on where to locate your SSC as well as manage the decision making process and senior management engagement in your organization. For more information, please visit our website www.ChazeyPartners.com Grant Farrell Managing Director United States Chazey Partners +1 408 767 1285 grantfarrell@chazeypartners.com North America | Europe | Latin America | Asia | Middle East | Africa www.ChazeyPartners.com
  4. 4. ABOUT THE AUTHOR Grant Farrell Managing Director United States Chazey Partners Grant has over 20 years of experience in Finance, Shared Services and Technology implementations. He has managed change programs on the back of Shared Service implementations significantly reducing the cost base, enhancing controls and service levels. Prior to his recent assignments he was the Shared Service Controller for Interpublic. Prior to Interpublic Grant was the European Operations Director for McGraw-Hill where he was responsible for the set-up and subsequent running of the European Shared Service Centre. He is well suited to strategic planning and set up but is equally at home focusing on daily operational issues, managing staff at all levels and ensuring a high level of customer service. Grant is a Chartered Accountant and has a BSc Honours Degree in Engineering from the University of Nottingham. ABOUT CHAZEY PARTNERS Chazey Partners is a professional management consultancy business that is committed to adding significant value to our clients through a partnership approach. We bring together a unique wealth of expertise and real life experience in Business Transformation, Shared Services & Outsourcing and Technology Enablement. We pride ourselves in having built, operated and turned around some of the world's most highly commended and ground breaking Shared Services Organisations, and for implementing many highly successful multi-sourced (shared services and outsourced) delivery solutions. Over the last 20 years, we have delivered numerous programmes globally, in the US, Canada, UK, Continental Europe, Bulgaria, Ireland, India, Czech Republic, Hungary, South America, Singapore, Australia and China. Our experience covers both Private and Public Sector, providing expertise in a wide spectrum of business functions, including Finance, HR, IT and Procurement. Visit  www.ChazeyPartners.com  for  more  informa2on.  Follow  Chazey  Partners  on  TwiTer  and  LinkedIn. North America | Europe | Latin America | Asia | Middle East | Africa www.ChazeyPartners.com

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