Nowadays almost every other BPO service delivery center is called a Center of Excellence. This sounds like the right aspiration, but shouldn’t we be more precise when defining a location strategy and assigning clear roles to our delivery network? I remember the good old “lift & shift” days – when things were simpler and services were provided from geographies based on a labor arbitrage model. The focus was on transactions, economies of scale and operational costs. And innovation was limited to process improvements with ‘King Lean’ and ‘Queen Six Sigma’ on the throne. Depending on their courage and an appetite for change, organizations were locating most of the scope in a single offshore or near shore location, and proudly counted the cost savings achieved.
But the service world has dramatically shifted since then. With the creation of Global Business Services units many firms have decided to push much more work out of their traditional onshore geographies. For instance, looking at Finance & Accounting or HR, one can imagine that practically any end-to-end process may now be delivered from a global delivery network. And this is why I believe it’s critical to define particular roles for the service centers within the global network. As part of Capgemini’s standard target operating model called GEM (Global Enterprise Model) we distinguish three types of centers:
- Processing Centre – focused on transactional type of work to deliver quality services at the best price. Processes in scope typically don’t require language capabilities – language needs are supported by the right tools (translators) and training (a vocabulary of around 100-200 words). Preferred locations are offshore, and if possible a tier 2 or 3 city.
- Interaction Centre – focused on voice skills and very good business knowledge to interact with third parties. Processes in scope require an extensive use of multiple languages, communication tools (e.g. advanced telephony systems) and strong cultural fit. An Interaction Center is likely to be located near shore with access to multiple languages.
- Expertise Centre – focused on advanced service line expert skills and offering value adding professional services. Processes in scope are high-end and based on horizontal and vertical knowledge. As operating costs might be of less importance than process outcomes, a location can be onshore, near shore or offshore (usually a tier 1 city), depending on an access to subject matter expertise.
Take for example a manufacturing client I worked with who was looking to transform their Finance & Accounting function. They started their journey 9 years ago with the consolidation of 100+ roles in Krakow, Poland. The scope was quite broad and covered various F&A processes for chosen EMEA units. Following the success of the first phase, the client decided to go for a radical change, outsourcing 1,000 positions to Capgemini and adding Procurement tasks to the scope of work. Based on their objectives, we calibrated their location mix whereby the Processing Centre in Trichy, India handles their cash applications, invoice and T&E processing as well as some recurring journal entries. The Interaction Centers in Guatemala City, Krakow and Nanhai, China run Finance & Procurement helpdesks (query and problem resolution) for Americas, EMEA and APAC respectively. The Expertise Centre in Campinas, Brazil does all country related services (complex tax and legal rules), while European tax accounting and Intrastat have been delivered out of Poland. The Bangalore Expertise Center specializes in the Record-to-Analyze processes as well as Operational Procurement. As a result the client has been able to achieve significant cost reductions through increased productivity of processes and a wider use of labor arbitrage. In addition, such a Global Delivery Model provides:
- A clear long-term strategy for particular locations resulting in better overall management of the delivery network while reducing risks,
- Better utilization of assets and targeted capital investments, particularly in technology tools,
- Greater user satisfaction thanks to establishing a single point of contact in Interaction Centers,
- Stronger focus on enterprise value (process outcomes) in both Interaction (e.g. cash collection) and Expertise Centers (e.g. effective tax accounting),
- Clear human capital development strategies with optimal usage of managerial as well as expert career paths.
Whether you’re considering BPO or already on your transformation journey, one of the most important questions you can ask yourself is ‘do I have the right processes in the right locations?’