Académique Documents
Professionnel Documents
Culture Documents
1. Introduction 2. SSC Location Trends in Europe 3. Location Decision Making 4. Final Observations 5. Reference case studies
1. Introduction
Plant Location International: a global IBM service offering for Global Location Strategies
Plant Location International (aka as IBM-PLI) is a global service offering within IBM Global Business Services (and previously PwC Consulting) exclusively specialised in global location strategies Our area of expertise focuses on analyzing international business locations for expanding or consolidating companies to select the optimal location (country/region/community/property) against best shareholder value IBM-PLI is independent from government authorities or other organisations with local interests and fully objective and unbiased in its advice; no conflicts with real estate, tax, incentives or other interests Unique and unrivalled experience as dedicated corporate investment strategy and location consultant: Over 45 years active in this consulting area; over 2,000 corporate projects conducted Multinational, multi-cultural and multilingual team of location experts in key practices for EMEA, Americas, and Asia-Pacific; local satellites in key markets, contact persons in selected markets Functional, regional and industry specialists within IBM in major locations around the world Experience with all types of facilities: manufacturing, distribution, shared services, R&D, call centers, data centers, headquarters, etc.
WWW.IBM.COM/BCS/PLI
WWW.IBM.COM/BCS/PLI
WWW.IBM.COM/BCS/PLI
70
60
50
40
30
20
10
0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
WWW.IBM.COM/BCS/PLI
Wide variations exist in sizes of SSCs, depending on Company & industry Processes & number of processes in scope Geographical coverage & continent Number of clients that need to be served. The majority of centers ranges between 50 and 500 employees, with close to one third having a headcount between 100-250. 20 of the 48 large centers (>1,000 FTE) operate from India.
25
50
75
100
125
150
175
WWW.IBM.COM/BCS/PLI
The early adopters of SSC often started with the establishment of national centers, with initial focus on USA, and large European countries such as UK, France, Germany, as well as Australia in AsiaPac. In a second stage, regional centers were implemented : pan-European, pan-Asian, panAmerican. Particularly in Europe, a sub-regional model also developed due to complexity of the market and overall smaller labor pools. In recent years, transactional processes are increasingly being transferred to global centers, largely concentrated in low cost offshore locations.
National 25%
Subregional 10%
Regional 57%
10
WWW.IBM.COM/BCS/PLI
Functional split
Functional coverage
0% 20% 40% 60% 80%
Shared services emerged in financial services, which still represent the vast majority of services. The range of functions has broadened and still is expanding :
Finance, Accounting & Treasury Information Technology Human Resources Customer Support Supply Chain Management Marketing Purchasing Tax & legal issues Decision support
Finance
IT Customer support HR
Logistics
Purchasing
Marketing
11
WWW.IBM.COM/BCS/PLI
Dublin London
UK 30%
Source : IBM-PLI SSC Monitor (TOTAL = 625 SSCs in Europe registered in IBM-PLI SSC Monitor, August 2006)
12
WWW.IBM.COM/BCS/PLI Copyright IBM Corporation 2008
Second wave
Mancheste r Bristol Myers Squibb AstraZeneca Kelloggs TetraPak Damova Eaton Polaroid Shell Agilent Bayer Citibank General Motors Boston Scientific DHL Mercedes Benz Sony Apple Computer Avery Dennison Black & Decker Pepsi Cola Prague Lisbon
Third wave
IBM-BTO Bratislava
Fourth wave
Kraft Foods IBM Lenovo
Krakow
Glasgow
IBM-BTO Lufthansa Philip Morris ACS Shell Diageo IBM EDS GE Capital ExxonMobil Inbev Accenture Rhodia ExxonMobil SAP DHL ExxonMobil Inbev Regus Grafton
Bucharest
Accenture
Dublin
Budapest
Barcelona
Lodz
Accenture Philips GE
Poznan
Carlsberg GSK
Cork
Sofia
Microsoft
Belfast
13
WWW.IBM.COM/BCS/PLI
2. Analyze Long-list of Candidate Locations 2. Analyze Long-list of Candidate Locations Identify Shortlist Identify Shortlist
3. Evaluate Short-listed Locations 3. Evaluate Short-listed Locations Select Preferred Location Select Preferred Location
4. Site Search & Negotiations 4. Site Search & Negotiations Select Preferred sites and Select Preferred sites and start negotiations start negotiations
5. Implementation 5. Implementation
15
WWW.IBM.COM/BCS/PLI
16
WWW.IBM.COM/BCS/PLI
Assessing the trade off between cost and quality to shortlist best location options
17
WWW.IBM.COM/BCS/PLI
Detailed qualitative analysis of short listed options Different techniques to assess business risks
City Risk Assessment Presence of technical skills Presence of manufacturing workers Knowledge of the industry Competition for similar skills Tightness in labor market Unions & social climate Mastery of English Logistics Local support environment Working time practices On- & off-boarding flexibility
Location A A
Location B B
Location C C
Location D D
Low Risk
Moderate Risk
High Risk
18
WWW.IBM.COM/BCS/PLI
4. Final Observations
But:
Not all requirements for SSCs are easily met: Languages is still a major risk factor Familiarity with SSCs is still limited (implementation support) Growing interest in CEE poses a threat for quick and unexpected overheating of labor markets And labor costs increase yearly by higher rates than in Western Europe Large differences between main cities and rural areas leaving the options limited
20
WWW.IBM.COM/BCS/PLI
But:
The trade off will be a higher operational cost Watch out for signals indicating overheating of labor market
21
WWW.IBM.COM/BCS/PLI
22
WWW.IBM.COM/BCS/PLI
Food & Beverages Industry Location strategy for 2 new regional Financial Services Centers to serve North American and European operations
Business Challenge
The main drivers for the SSC were availability of financial and multilingual skills at low cost, living environment, international access and avoidance of competition for staff in locations that had not yet developed into SSC locations Functions included Finance, Customer services, HR and Procurement. The client wanted to take advantage of being a first mover to an untapped, low cost location and had projected a very tight timeline for location selection and implementation.
Project Approach
In a preliminary phase of the assignment, IBM-PLI performed a quick comparative analysis of operating costs in existing client locations versus representative SSC locations in Europe, the Americas and Asia (as offshore options). The analysis showed major cost savings could be achieved in lower cost, non traditional SSC-locations. As a result, a dozen cities were evaluated both in the Americas and in Europe, through desk research on cost and qualitative business criteria. This analysis led to a shortlist of two cities in the Americas and three cities in Europe - all in Central and Eastern Europe. By means of field research, a thorough analysis was made in these short-listed cities focusing mainly on HR and property issues. In Europe, joint visits with the client team were organized in the two preferred locations
24
WWW.IBM.COM/BCS/PLI
Client Benefits
Based on IBM-PLIs recommendations, the client was able to select the most suitable location for their SSC operations, taking into account the limited timeframe and their specific requirements. In Europe, given the market conditions in the shortlisted Central and Eastern European locations, and the very strong linguistic requirements for the customer service function, IBM-PLI recommended to separate this language sensitive function from the processing functions to avoid recruitment risks at the most attractive locations for the finance center. Within a timeline of 3 months from initial discussions on location selection, the client was able to start implementation at the new location As a pioneer in a new market, full advantage of labor arbitrage was secured for various years.
Consumer Products Manufacturer Global shared services location strategy covering Europe (West, Central and East), Latin America and Asia-Pacific (East AsiaPac, China and Central Asia Middle East / India)
Business Challenge
In Europe alone, the shared services operation would represent more than 1,200 FTEs. Key success factors to implementing shared services included the contribution to cost reduction, maximum retention of present key staff, potential for a fresh start as well as tax optimization potential.
Project Approach
With the client project team, IBM- PLI identified an initial long-list of locations, with countries in Europe and LatAm, and cities for Asia given more limited location options. Based on the most critical success factors, a high-level location screening reduced the number of candidate locations to a shortlist. For the short-listed countries in Europe and Latin America, a second round of high-level screening was performed, this time on a city level, to come to a short-list of cities for all three regions. IBM-PLI investigated various scenarios for servicing the different regions from a sub-regional perspective based on headcount and language requirements, business unit or functional split. For all sub-regions identified , the most critical operation requirements were thoroughly studied by means of intensive field research and with most of the emphasis on HR issues. Validation visits for the client project team were organized in the preferred locations.
Client Benefits
IBM-PLI suggested on how to best service the various regions from a sub-regional perspective based on headcount, language requirements and regulatory constraints. Based on these recommendations, the client opted for a three-center approach in Europe based on linguistic split, a three-center approach in Asia due to size and regulatory issues in terms of data transfer, and a one or two-center approach in Latin America based on accounting regulations and tax issues. IBM-PLI recommended two to three best location options in each sub-region.
25
WWW.IBM.COM/BCS/PLI
IBM Global Business Services Plant Location International Woluwedal 22 1932 Sint-Stevens-Woluwe Belgium Web-site: www.ibm.com/bcs/pli