Location, Shared, Services, Jason, Eliadis, Locations, Companies

Location and culture: in conversation with Andersen's Jason Eliadis

01 Sep 2003 | (Interview)

Jason Eliadis is the London-based Senior Manager for Andersen’s global Business Location Services team. He has worked with a variety of major multinationals on location assignments including Oracle, Bayer and Novartis Pharma. Jason is regularly retained by international governments to advise on investment attraction and economic strategy.

Recent clients include the UK, Ireland and Portugal. Jason has given evidence as an expert witness at the UK’s House of Commons on location strategy, and has presented at the United Nations on the same subject. He speaks frequently at international conferences, most recently the World Direct Investment Forum. He also lectures regularly to representatives from governments worldwide, notably at the International Location Best Practice Masterclass series sponsored by Corporate Location Magazine. Jason was formerly a management consultant with PricewaterhouseCoopers, where he specialized in international location investment and economic development strategies.

sharedxpertise.org: With shared services increasingly moving towards e-solutions and benefiting from combined voice and data networks, the location of a shared services centre may seem an irrelevance to some. Why is location still important, even in a virtual business environment?

Jason Eliadis: It's true that shared services is moving more and more towards automation and e-commerce solutions. However, it still requires skilled labour and, although e-commerce solutions mean a reduction in headcount in shared services, it also creates increasing opportunities for companies to align their shared services functions with their own ever-changing business model. So location is an important factor, but it is inevitable that the location drivers will change in the future.

sharedxpertise.org: How far do you think that the emergence of global shared services will erode a sense of place for shared services centres? Organizations opting for multiple locations, or "hubs", will need to deal with increasingly complex location issues. What are these issues and how will they change the traditional location challenges that we have seen in the past?

Jason Eliadis: Location issues vary from company to company and depend on the balance between back and front office functions within each shared services centre. First, there's the issue of language. As you shift towards regional and global centres, it becomes increasingly difficult to find people within a given location with native language skills in all the different language groups necessary to run a global operation. One of the implications for a regional model is, therefore, the increasing importance of the language issue.

Second, there are also complex cultural issues and this is where we can categorize organizations into two different groups. The first is organizations that implement shared services centres in a new location to get away from an established company culture. The second group are those who want to maintain the established company culture. Organizations face different issues depending on which group they're in.

"As you shift towards regional and global centres, it becomes increasingly difficult to find people within a given location with native language skills in all the different language groups necessary to run a global operation. One of the implications for a regional model is, therefore, the increasing importance of the language issue."

Third, there are also issues concerning quality of life. If you want to attract and maintain staff in an increasingly competitive global environment, companies need to be assessing locations that can offer a good quality of life. For example, we see a lot of projects moving to Barcelona because of the high quality of life allied to the strong language base. When we carry out attrition (or labour turnover) analysis on a particular location, we often find that the main issues are quality of life and these are especially important to expatriates. While expatriates may not be a major part of the workforce in a shared services centre, they're often important at the senior management level. A company needs to be able to retain those people, and that's why locations such as Barcelona are increasingly attractive.

sharedxpertise.org: Looking back at the developments in shared services over the past ten years and the impact these have had on the location of shared services centres, what are the main lessons that organizations have learned?

Jason Eliadis: One of the most successful locations for shared services centres over the past ten years has been Dublin. The Irish government has been particularly successful at attracting American organizations to the location. This has been largely the result of a plentiful supply of relatively cheap and highly skilled labour, combined with intelligent tax incentives. If there's anything for governments to learn here it must be that getting your local labour pool right is fundamental, in addition to setting up an attractive tax structure that will appeal to companies.

From the corporate perspective, it's slightly more difficult to draw reliable conclusions. Companies have definitely learned how to introduce shared services centres, in order to fulfil the back office functions of their business operations. However, as we move towards more complex kinds of shared services arrangements, that learning curve needs to be applied to different parts of the corporate business environment. The second thing that we've seen is that companies are adopting a more sophisticated approach to the selection of locations. Whereas companies have sought to reduce risk by going for traditional and well-established locations, they're now realizing that they can do business very effectively in a variety of different locations. Companies are learning that they can tap into previously unrecognized labour pools and realize significant benefits. This more sophisticated approach to location strategy is very refreshing from our perspective.

"Whereas companies have sought to reduce risk by going for traditional and well-established locations, they're now realizing that they can do business very effectively in a variety of different locations. Companies are learning that they can tap into previously unrecognized labour pools and realize significant benefits. This more sophisticated approach to location strategy is very refreshing from our perspective".

sharedxpertise.org: Looking to the future, what is the next sea-change in the location of shared services centres, and what are the challenges that organizations will have to meet to ensure that the location of their shared services centre remains viable?

Jason Eliadis: Over the past five years several shared services centres have gone to established locations, such as Dublin or the Netherlands. One of the problems we see in these established locations can be a significant overheating of the labour market. Because of this companies are beginning to look at other locations such as Eastern Europe and the Iberian Peninsula.

This brings us to the issue of whether or not location is a determining factor. If we look at the direction in which shared services is heading, location becomes an even more competitive marketplace. If locations put forward a credible offer (with accessibility, people skills and telecommunications - allied to quality of life and low labour costs and low labour turnover), it makes them far more interesting than they may have been in the past.

Of course, the traditional locations have a more established track record and naturally companies looking to reduce risk will take an interest in these established locations. This is especially true of US companies that like locations where there is already considerable business investment and where they feel they can reduce risk. As other locations come forward, a much more competitive marketplace for the location of a shared services centre is coming into being. Cost reduction remains the main reason why organizations invest in shared services and they'll naturally gravitate towards new locations where they can obtain significant savings.

sharedxpertise.org: How do you see the future of location issues taking shape?

Jason Eliadis: The outlook for the future is both complex and exciting. Whereas five years ago a company setting up a shared services centre in, for example, Dublin, would have had access to a large pool of skilled local labour, today there's more competition for skills and people. Now any company looking to set up a shared services centre in a specific location will have considerable difficulty in predicting how attractive that location will remain in the long term. When a company decides to set up a shared services centre, they make the best location choice they can but the pressures on companies are dynamic. Just because a shared services centre is in an optimal location at a particular point in time doesn't mean that it will still be optimal in five years time. When we work with clients we'll often consider the exit costs for a particular location. Much in the way one buys a commodity, a company may buy a certain location but at a certain point they'll need to assess whether or not they're in the right place, or whether perhaps they need to move on to a more cost-effective or higher quality location.

The future of the location of shared services will also be determined by technology, one of the major drivers of the emergence of shared services in the first place. Where back office functions are carried out by people, the development of technology may well make it possible for that work to be automated, and this may effect the optimal location of the centre itself. The move towards lights-out processing will have implications for shared services in terms of locations and costs. Technology will make it possible for the processes to work seamlessly and companies will only have a need for a small number of highly skilled people who deal with exceptional problems. This may well have a bearing on where shared services centres end up in the future.

"Companies are increasingly willing to consider the 'wild card' - the non-traditional location. They may not end up selecting these "wild card" locations, but for many of them it serves as a benchmark in their decision-making".

It's very refreshing for us to see many different locations coming through with very strong offers. The rising sophistication of local government promotion of specific places is impressive and interesting. Companies are increasingly looking at these kinds of offers and are willing to consider the "wild card" - the non-traditional location. They may not end up selecting these "wild card" locations, but for many of them it serves as a benchmark in their decision-making.

Related Content: