In this day and age, we see a strong shift in the market for companies, especially in the IT service industry, to more professionally optimize their global shoring models. While in the past simply the minimization of costs was a major goal to do offshoring of services to lower-cost countries like India, it has been realized that without a strategy, it will often not save the cost problem but can even generate additional quality and time challenges, e.g. due to lack of communication or skill sets on both sides.
1. The Global Delivery Model
To overcome this situation and to maximize the quality of the services being offered to the market, shoring has to be seen as a part of a true Global Delivery Model with dependencies everywhere and focusing on the responsibilities of every single resource in a global network of people which is maybe the most important aspect in the game. The Analyst firm, Gartner, defines “Global Delivery” as “the technical skills, process rigor, tools, methodologies, overall structure and strategies for seamlessly delivering IT-enabled or business process services from global locations” where the own resources are located and which can be distinguished as follows:
- Onsite: Located directly at client’s site
- Onshore: Located within a delivery center in the same country as the client
- Nearshore: Located within a location in a country nearby
- Offshore: Located truly remotely in an offshore country, very often far away
While onsite and onshore locations are naturally where the clients are, the foundation of nearshore and offshore delivery centers is the key to success in the market! Hereby, the selection of the right locations involves specific criteria to be taken into account.
2. Selecting the right shoring locations
One approach is to start evaluating the financial attractiveness, people skills and availability, and business environment, which is the standard method of ATKearny that is explained in their Global Services Location Index 2014. Using this method, exemplarily the following top 20 countries become the top targets of building up shoring capabilities:
As a result, top shoring countries keep to be India (having all strengths across the offshoring spectrum) and China (which fights with rising wages while it seems to be a good nearshore option for countries overall APAC). Malaysia and Philippines are already established shoring players, while new entrants (with still improving English skills) are Indonesia and Thailand. The next candidates come from Latin America, and are generally a large pool of skilled people, ready to get involved in global IT endeavors. Key shoring countries are still Brazil and Mexico, while Colombia appears as new entrant on the index. Additionally, European countries also appear on the list. The leader is Poland due to its large labor force which has developed a lot over the past years. Other Eastern European countries also appear (like Romania) which offer a more stable environment because of their integration in the European Union (EU). North America, especially the United States, also shows up on the list (but mainly as an onshore option) because of the existence of high-talented HR pool areas like Pittsburgh and Raleigh. These have excellent universities plus lower cost pressure than other areas in the United States.
3. Key Success Criteria
As we have seen now, one of the key success criteria for global delivery lays especially in the right selection of global delivery centers and once they are live, in the right balance between client facing and the right mix of delivery from those centers – but not only that. Also indispensable is to have a strong, truly global delivery methodology in place with standardized processes and tools (Best Practices) which needs to be rolled out to all centres globally. Without that, client engagements might already fail, especially when serving a global customer in multi-countries. One more success criteria is to have the right strategy in place on how to improve and how to setup new delivery centers in new regions and countries, and of course to continuously improve existing ones (e.g. for capability increasing, method version-ups/roll-outs, adding of new offerings). But, everything will not be successful if there is not a strong Executive commitment from the top of the company, which should lead to the nomination of a strong global leader being responsible for the setup and further management of Global Delivery. This leader needs enough power to implement the global model, to manage resistance, to be responsible for the readiness of the company to use the Global Delivery Model to the fullest, and to change and optimize the global setup in the right way to get prepared for the future.
A Global Delivery Model in current days is more than offshoring from one single country. It is a global network of locations and people in a multi-country setup, where the optimal combination of resources, processes, global standards and quality procedures is crucial. Companies have to carefully decide in which regions and countries they establish and grow nearshore and offshore locations, and how to manage the right mix of usage within the overall framework. Finally, there must be the right global leader in place who is responsible for making sure that every stakeholder understands the Global Delivery Model and is committed to the global setup.