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Best business services location rankings – Fake News?

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BSCs that serve EMEA have more options than Central Europe alone, within the “EMEA Corridor” location choices abound.

I can’t help but smile every time a new research piece comes out identifying the best country and city to locate a business service center (BSCs) in. My reaction is caused because in all my years of experience I have never seen identical location requirements from a client for their business service center (BSCs).

Location requirements are a function of process characteristics, of the corporate shared services of a Global Business Services organization’s maturity and of company culture. Just to mention a few considerations.

In parallel, to the best of my knowledge, no destination offers a talent pool that can perfectly satisfy all BSC skill needs. Furthermore, locations are not static. Ireland provides a perfect example of that. Back in the late 1980s and early 1990s it merely attracted low value-adding personal computer assembly operations. Today it hosts the world’s top five software companies, nine of the top 10 US tech companies and all of the top three global enterprise software companies.

Colliers’ ExCEEding Borders report on the BSC landscape in Central Europe (https://www.colliers.com/en-xe/research/202109--exceeding-borders-office-markets-and-the-business-services-sector-in-cee15) offers facts and insights but stays clear of any rankings. This is because rankings and ensuing location strategy can only be company – if not project – specific.

In doing so, the report offers food-for-thought to all working in the BSC sector. My personal conclusions based on the data presented are:

  • Size does not necessarily matter. BSC employment across Central Europe varies from around 510 in Montenegro to about 335,300 in Poland. The search for experienced talent could drive companies to countries with larger “ecosystems”. Yet, the number of BSCs created grew fastest in the smaller countries. Some of these have successfully carved-out specific niches – such as Lithuania in Fintech.
  • There is space for growth. Notwithstanding that the war for talent rages both globally and across Central Europe. Just consider that across the region BSC employment as percentage of total country labor force ranges between 0.5 and 2.2%.
  • BSCs must further engage in Employer Value Proposition, training and upskilling. Students and graduates provide a valuable source of talent for the BSC sector. Central Europe’s annual output of such talent is around 1.6 million annually according to the Colliers’ ExCEEding Borders report. You might say that well exceeds the BSC sector’s needs. But a BSC’s recruitment campaign may not completely cover the available talent/recruitment pool, not all young people crave for BSC employment, and of those that do, only a minority may be adequately qualified. In a recent project our client used a 300 to 1 ratio to convert available talent to potentially contracted talent. This brings down the 1.6 million to a worrying level – even if we assume that the sector’s employment needs would increase by less than 5% in the next years.

But BSCs that serve EMEA have more options than Central Europe alone. The examples of companies using India, the Philippines or other Asian countries for English-language, time-zone neutral processes are manifold. But even within the “EMEA Corridor” location choices abound.

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Of course, with this myriad of choices it is tempting to revert to generic rankings. But casting the wrong decision can have far ranging impacts. Just think of delayed ramp-up schedules, talent demand-supply mismatches, or hidden add-ons to payroll costs. On the latter point: it’s sad to see all rankings referring to gross employee pay, rather than the typically higher employment cost.

The better course is for BSC planners to develop a solution that truly reflects the specific processes and needs of their BSC - over the short and midterm. Considering scalability is essential to a sound location strategy.

Employing experienced help through that process could make sense. In-house teams may not necessarily have the expertise nor the time to robustly conduct a site selection project. Nor may they be fully abreast of the destination options and of the complex interdependencies between BSC operating models and location offerings.

The advantage of using true experts is that they will work with BSC leaders to identify project-specific solutions. They will ensure a robust location strategy, and they will accelerate decision-making.

If you think that this is not for you, just consider that there are over 200 cities that successfully host BSC operations in Central Europe. Most bespoke rankings barely cover 25 of them.  And – as stated – such rankings are based on the premise that all BSCs are similar.

So, I class opinion pieces that claim to know the best locations for BSCs in the same category as ‘fake news’. They can be used to stimulate conversation and debate, but the location strategy for one BSC is unlikely to be same as the next.


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Elias van Herwaarden

Head of Location Strategy | EMEA

London - West End

Elias is Head of Location Strategy, Occupier Services - EMEA..

He has advised over 650 companies on where to locate new operations and where to consolidate existing ones.

In doing so he brings to bear a deep understanding of business operations, and of how to tune them to local operating conditions.

Having conducted field work in 47 countries and over 250 cities globally, he applies this expertise across all business functions: headquarters, manufacturing, R&D, warehousing and distribution, and shared services.

Elias expertise ranges from location strategy through tactics to project implementation. He developed robust data-models but holds that experience is key to deliver recommendations that work.

He regularly speaks and publishes on location strategy, emerging markets, business resilience and corporate deployment trends.

Elias teaches International Business Strategy at one of Europe’s top-10 universities, sits on the board of various international business associations and is member of the Site Selectors Guild.

 

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