Opportunities in the “new normal” for Shared Services ... · 0 to 10 days 10 to 20 days More...
Transcript of Opportunities in the “new normal” for Shared Services ... · 0 to 10 days 10 to 20 days More...
JULY 2020
Opportunities in the “new normal” for Shared Services located in Spain
Content
COVID-19 impact on Shared Services
Update Shared Services located in Spain
Trends and opportunities in the post-COVID era
Who to contact
COVID-19 impact on
Shared Services
How COVID-19 situation has impacted theoperations at Shared Services Centers
Manage continuity of service
Respond Recover Thrive
Work remotely and digital training
Cash Management
Labor measures and flexibility of Operations
Crisis Management phases
Learn and recover
Grow stronger in the “new normal”
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02
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A s p e c t s t h a t h a v e b e c o m e c r i t i c a l f o r o p e r a t i o n s m a n a g e m e n t :
Lack ofpreparation
Some aspects obser ved in the management
of COVID -19 cr i s i s
Challenges with goingDigital
Accelerated mindsetchanges
Legal / labor implications
Importance of global/ international oversight
Difficulties managing collections and payables
How COVID-19 situation has impacted Shared Services Centers delivery
Going through COVID-19 crisis and lockdown, how did the Service Centers located in Spain respond?
In early June Deloitte hosted a meeting among executives of multinational companies specialized in the shared services sector in
order to contrast some trends and get insight
40%
14%
14%
21%
0 to 10 days
10 to 20 days
More than 20 days
Still not completely recovered
Given the COVID-19 crisis and lockdown, most of the Service Centers located in Spain have shown great response capacity
100%
Answers from high level executives of multinational companies specialized in the sector, June 09th 2020
H o w l o n g d i d i t t a k e t o s t a b i l i z e a n d r e c o v e r y o u r S S C o p e r a t i o n s ?
Answers from Global In-House Centers, India, May 22nd 2020
0 to 10 days
Update Shared Serviceslocated in Spain
The level of infrastructure and telecommunications available in Spain
The availability of laptops
Importance of a strong pre-COVID business contingency plan
K e y a s p e c t s t h a t a l l o w e d t h e C e n t e r s l o c a t e d i n S p a i n t o s h o w a g r e a t r e a c t i o n c a p a c i t y :
On the other hand, centers located offshore have faced more difficulties due to more fragile infrastructure (Internet, utilities, etc.) and lack of information/visibility in some cases. Some operations still had not recovered weeks after.
Top speed home internet connections used widely (compared to other countries)
The active role and speed of action of IT teams
Given the COVID-19 crisis and lockdown, most of the Service Centers located in Spain have shown great response capacity
Globally, “offshore” operations are optimal locations to manage transactional and high volume functions, where primarily the lowest possible labor cost is pursued (India, Malaysia or Philippines are some of the main examples).
“Nearshore” centres are located where access to multiple languages, qualified talent, same time zone, etc. prevail.
Spain has long been a perfect example in this segment, probably only behind Poland, which continues to be the main location in Europe due to availability of resources with certain languages and their low cost.
When the main objective is to minimize costs, countries like Romania, Czech Republic, Bulgaria or Hungary are still options to consider in Europe. However, these might have much higher inflation levels.
Portugal has become in recent years one of the main competitors of Spain for offering almost everything Spain does, being “comparable” countries, at lower costs.
Aspects that were already relevant in terms of location will continue to be so
IRELANDDUBLIN
CORK
Tier 1 cities
Tier 2 cities
POLAND
POZNAN
WROCLAW
TRI-CITY
WARSAW
KATOWICE
KRAKOW
LODZ
LUBLINCZECHREPUBLIC
PRAGUE
BRNO
OSTRAVIA
HUNGARYBUDAPEST
DEBRECEN
ROMANIA
BUCHAREST
CLUJ-NAPOCA
BULGARIASOFIA
SPAINPORTUGAL
PORTO
LISBON
BARCELONA
MADRID PALMA DE MALLORCA
BILBAO
MALAGA
ZARAGOZA
Many factors make Spain a top location for Shared Services
The metropolitan areas of Barcelona and Madrid are the main areas where these centers are usually housed in Spain and for this reason they are considered Tier-1. Tier-2 cities are further down in terms of number of centers than they are in other countries.
With no doubt, access to top-level talent is one of the strengths of Spain as a location, which includes professionals with native languages, highly qualified profiles and technological skills, also supported by the abundance of good universities and business schools. The “time to hire" is much better than it is in most of the alternatives.
Spain, in addition to being a cosmopolitan country with a high quality of life, stands out for its location close to the main European markets, coincident time zone with EMEA and very good connections for continental and intercontinental flights.
89%
78%
44%
44%
33%
33%
33%
22%
22%
0%
Access to qualified talent with native languages and cultural skills
Quality of life
European time zone & travel distance to most european key markets
Value added/ transformation capabilities
Ecosystem SSC/ Talent/ Consulting firms/ Recruiters
Labor arbitrage
Capacity to host multifunctional centres or CoE
Availability and cost of real estate
Capacity to host large size transactional centres (+500HC)
Government support and incentives
Which of these factors make Spain
a TOP location?
Which factors make other locations better than Spain?
The two main aspects (and probably the only ones) where other locations surpass Spain are a lower labor cost and the lack of support from public institutions.
The limited level of support from the government not only includes a lack of subsidies or direct aid, but also the shortage of generating stability, promoting labor flexibility, recognizing the strategic value of the sector and enhancing specific education fields.
While Spain generates and attracts young and international talent, further actions should be taken to maintain and continue attracting that talent.
Which factors make other locations better than Spain?
67%
56%
11%
11%
11%
11%
11%
0%
0%
0%
Government support and incentives
Labour arbitrage
Capacity to host large size transactional centres (+500HC)
Value added/ transformation capabilities
Availability and cost of real estate
European time zone & travel distance to most european key markets
Ecosystem SSC/ Talent/ Consulting firms/ Recruiters
Access to qualified talent with native languages and cultural skills
Quality of life
Capacity to host multifunctional centres or CoE
Trends and opportunities in the post-COVID era
LOCATION CRITERIA TREND IMPACT POST-COVID
RISKPolitical, financial, macro-economical
Populist governments and anti-European movements
Traditional locations continues to thrive
Untapped locations will be less solicited
Human ResourcesExperienced, graduates
Competition for (tech) talentGig Economy and contractors are solicited.Less availability at Tier-2 & 3
Flexibility will be key. Lay-offs from industry are expected for traditional roles
Infrastructures & hazardsOffice, telecom
WFH increasing and demand for office space and is decreasing
Many SSC operate (partly) in serviced offices
WFH will only increase
AccessibilityCar, plane, train
Morning in – evening out: extension of HQ
Mostly tier-1 locationsWill accessibility stay this important?
Operating EnvironmentBusiness regulations
Industry associations are gaining power
Traditional locations continues to thrive
Regulations will be more employer friendly
Location appealQuality of life, expats
Quality of life and healthcare is increasingly important
Mostly tier-1 locationsWill only increase
Costs, tax and incentivesPayroll, rent
Payroll cost differential between locations is eroding
Inflation is now more important than actual salary
Untapped locations are less solicited
T h e e v o l u t i o n o f t h e k e y l o c a t i o n c r i t e r i a w h e n d e c i d i n g t h e o p t i m a l l o c a t i o n f o r a S e r v i c e D e l i v e r y C e n t e r r e i n f o r c e s T i e r - 1 o p t i o n s
Main location criteria and how they are expected to evolve in a post-COVID environment
Opportunities and challenges for Spain as a location for Service Centers in the immediate future
Regarding the impact that the pandemic may have in the immediate future, on the one hand, the centers in Spain have been able to respond quickly thanks to their top-level infrastructures and telecommunications. On the other hand, the international image has been affected as a consequence of the health crisis management, also generating economic, labor, and fiscal uncertainty in relation to what lies ahead. Although this might affect Spain as a receiver country in the short term, it is likely that this feeling will not last over time.
There are new opportunities in the analysis phase and everything seems to indicate that companies will continue to cover their needs from Spain because the response of the centers has been quick and effective. Although a possible threat in the new normality could be the lack of attractiveness for foreign talent if high unemployment levels are maintained, these jobless rates can also be an opportunity for these centers.
Barcelona and Madrid are very attractive locations for value-added services and services that are critical or closely related to the client. Beyond the "traditional" functions (Finance, HR, IT, Procurement, ...), many Centers of Excellence are being created in Spain in areas such as Analytics, Cybersecurity, Digital Marketing, Digital Finance, Robotics, Supply Chain and Artificial Intelligence.
Barcelona and Madrid and their
metropolitan areas are once
again on the radar for a large number
of operations
Areas in which organizations should focus on thriving post COVID-19
Flexibility and scalable (and unscalable) service models
Comprehensive digitalization
Agility and operational responsiveness (Including BCP / DR)
Ecosystem and partnershipmodels
Automation and transformation
Some insight on the priorities post COVID-19 in the Shared Service Centers
Real time data availability
What will be the main transformation opportunities for the global delivery models in the near future?
75%
63%
38%
38%
38%
25%
13%
13%
0%
0%
Agility
Accelerate digitalization &
reduce human dependency
Transformation capabilities
Provide value added to Business
& Business partnering
Cost efficient delivery model (quality,
cost, productivity & variabilization)
New talent sourcing/liquid talent
Proximity to HQ/Business
Cost reduction
Better business continuity plan
Reduce offshoring exposure
Which of these areas will be the most critical in the medium term, in the "new normal“?
The current situation has meant that all business functions have been interacting remotely for months. Centers already located in Spain could have post-COVID opportunities to manage new services that until now had not been considered.
Although most meetings are temporarily being managed remotely, geographical proximity and the ability to be closely located to both headquarters and the main European markets will soon be key again. Likewise, the ability to react, already demonstrated, and cultural and language affinity will continue to be vital.
In the short-term, it will be essential to promote agility, flexibility (including the variability of the cost structure), innovation, collaboration (internal and with third parties) and automation.
There are many opportunities ahead.
Spain has a great opportunity as the optimal location for highly-specialized services focused on value-added
activities where enhancing corporate culture and the ability to transform operations will be key
Short Term: 3 – 6 months
• Focusing on Business critical processes
• Re-engineering processes to enable remote working & collaboration
• Developing adapted leadership skills
• Adapting the office for social distancing and safety
• Improving flexibility and working capital management
• Reinforcing Controls and compliance
• Revisiting Business Continuity Plans
• Providing support to the Business through recover and thrive phases
Long Term: 2 years +
• Delivering business value beyond transaction processing
• Having a seat at the Executive table
• Being truly insight driven
• A fully flexible and agile approach to processes and the workforce
• True Business partners• Expansion of service offering
• Right-sizing the office
• Agility of processes
• Increasing digital and automation capabilities
• Testing Business Continuity Plans
• Revisiting delivery models (captive, hybrid, outsourcing)
• Re-shore – Right-shore
Medium Term: 6 months – 2 years
What’s next in the Shared Services Journey
Who to contact
José María RojoManaging PartnerBusiness Process [email protected]
Sergi LemusPartnerBusiness Process [email protected]
Lydia GonzalezPartnerBusiness Process [email protected]
Ignacio Ruiz de LoizagaPartnerBusiness Process [email protected]
Gaëlle OrdronneauSenior ManagerBusiness Process [email protected]
The making of this document has relied on the voluntary participation of a group of well-renowned professionals in the sector. Said participation has had the objective of sharing and enriching the initial basis of the analysis.
The content, conclusions and recommendations described in this document do not necessarily reflect the opinion of Deloitte or the contributing experts.The document has been prepared for informative purposes only and it is based on information gathered from different sessions, reflecting a series of general observations. Deloitte will not accept any responsibility arising as a consequence of decisions or actions adopted based on the content of this document.
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