Cost-Maturity Framework for Location Selection
The Everest Research Institute uses a cost-maturity framework to support its location decisions.
As shown in the exhibit, savings potential includes all elements of direct operating cost. Using a delivery center as the basic structure, costs are built-up by incorporating current levels of salaries, real estate, telecom rates, etc.
The maturity dimension captures the intrinsic capabilities, risks and current levels of activity at the locations. It reflects the overall capability and stability of the location. This dimension is almost completely customer-specific and is tailored to meet the customer’s needs.
The framework is distinctive on the following points:
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It compares locations at a city level rather than at a country level
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It incorporates process sensitivity and specificity
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It is customizable and can be adapted to meet customer-specific needs
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Its results have been market tested through various location-assessment engagements
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Everest Research Institute currently tracks 50+ cities globally, across a variety of processes including IT-ADM, F&A, call centers and HR outsourcing.
Call Center: Case Study
Everest’s client was looking to consolidate its existing customer-service centers across non-English speaking Europe. The complexity in the situation was three-fold. First, the location selected needed to provide resources fluent in multiple languages (including German, French, Italian, Dutch and the Nordic languages). Second, it needed to provide attractive cost levels, lower than current costs. Third, it needed to provide a strong infrastructure to mitigate business risk.
The client had precise requirements for the level of fluency for the language support, specifically at the “B2-Vantage” level as reflected in the Common European Framework of Reference for Languages. This was driven by the client’s customer profiles, which needed a level of interaction comfortable and close to that of a native speaker. Everest conducted an analysis of over 50 location options across Europe to identify suitable candidates.
To address the first level of “sufficient” language support, Everest used a novel approach to match supply to demand, and estimate the total pool of talent required at a location to satisfy a given level of client demand. Based on the analyses, it quickly became clear that no single location would be attractive for all language needs.
The Everest team then considered several multilocation models against client objectives. The different delivery models were compared on their ability to provide a quality solution versus their risk and cost profile. The client finally chose to go with a combination of cities that together would provide the necessary language capabilities and desired cost levels, while minimizing business risk.
Exhibit 2
Variation of costs savings
and maturity within a country
Exhibit 3
Variation of location attractiveness with process
Joe Fernandes is a Principal of the Everest Group and leads the Everest Research Institute. He is based in New York. Nikhil Rajpal is an Engagement Director with the Everest Group. He leads the Global Sourcing Practice, and is also based in New York. Anand Ramesh is a Senior Research Analyst-Location Optimization and is based in Delhi, India
