Even quite small companies can save money and improve their efficiency, productivity and profits by moving some of their backroom operations abroad. But where do you locate an overseas operation?
There are hundreds of possible destinations.
That’s especially true for what’s usually called a Shared Services Centre or “Insourcing” (wholly-owned Outsourcing) operation. Leaving aside the financial, legal and technical matters that everyone thinks about, here are the key points. Some often don’t get given the consideration that they should.
1. Get the location right
Is Time Zone an issue? How much real-time communication do you need?
Whilst it’s usually possible to hire staff who work nights or non-standard shifts, it’s much more difficult to retain them, and it’s especially difficult to get good management. If it’s data processing work, then work on the other side of the planet where the time difference will help (they work while you sleep), if it’s high-contact, like a call centre, think North-South.
It also needs to be easy to get to. You’ll need regular visits from the mother ship, both by those who can give training and support and by some of the top CXO team. Enthusiasm for travel can quickly wear thin if it’s a horrible journey — and you and your colleagues will need to travel there year after year. Also, if things go wrong, you may need to get people there in a hurry. So, look for locations with daily direct flights, and consider the door-to-door journey time and the effect of jetlag.
So where do you locate an overseas operation? Of course, it also helps if it’s a nice place to visit! OK, you’ll only ever be going on business, but good weather, tourist attractions, food that you like and a happy culture all help.
2. Is it a good base for new regional business?
Think ahead!
You might only be interested in setting up one type of operation today, perhaps just a support centre, but it’s worth thinking about how it could serve as a future hub for the country or region. Once the initial operation is up and running, adding more functions later should be straightforward and cheap.
3. Can you hire the right people?
Make sure you can recruit a team with the right language and technical skills
You might assume the staff you’ll hire will speak and write English, but in almost all lower-cost countries it’ll be their second language, and there are many varieties of English, not just British and American! Where communications will mostly be written — for example, scientific and engineering R&D — that’s perhaps a secondary matter, but for call centre staff it’s obviously critical.
What most of us regard as everyday technical skills vary by country too. IT education can be several years behind the times — someone might be a star on Excel, but on a completely different version to the one we’re used to.
4. Can you keep your new staff?
Make sure it will be easy to hire and retain staff in the future.
Even if it’s easy now, think ahead. If you’re in a location where bigger companies are planning to set up, the competition for skilled staff could drive wage inflation and increase employee turnover.
Plan for the skill sets you may need in the future. You’ll know exactly what operations you want performed now, but once it’s successful, you should want the operation to take on wider scope and responsibility.
Aim high — the higher-skilled the job, the bigger the saving by doing it overseas instead of back home.
5. Think about your staff
You’ll want to make sure they are paid well. When preparing your business plan, remember that salaries in developing countries almost always rise faster than at home — annual rates of 8–15% are common. In some countries, wage rises are government mandated. And any merit increases go on top! But don’t let that discourage you, as it’s manageable. You just need to plan costs for 5 years ahead and stay on top of achieving productivity improvements year after year.
But it’s more than just pay.
For example, How will your staff commute? If the only way home is by bus, and the last one leaves at 18:30, as happens in Mauritius, they won’t ever stay late. If they have a 2-hour trip each way, common in Mumbai and Delhi, any alternative offer that comes along with a shorter commute could be very tempting!
So where do you locate your overseas operation? Every business is different, so each will have different considerations. In every case, though, it’s not just about cost. Look to the future — even the smallest international expansion sets you up for greater business growth in the future.
International Expansion is easier, more affordable and more beneficial than many entrepreneurs think.
Oliver Dowson and other associates offer free initial consultations on any aspect of international expansion to growinternational.org subscribers – just get in touch via our contact page
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