Corporations need to perform an in-depth analysis of people and place to determine location:

• People. What are the qualities and skills your employees need to serve your customers? What level of education? What age group? What salary range keeps you competitive?

• Place. Where can these people be found? North Dakota? India? Some combination? Once you find them, where will the labor rates be most attractive?

FINDING THE BEST PEOPLE

To determine the locations with the people that are most suitable for your company's requirements, a number of steps should be considered:

1. Understand the Employee's Profile. Corporations should obtain a profile of the targeted employee in order to evaluate his/her availability in a community. You will need to understand, and potentially project, what their demographic traits should encompass. Those traits might include typical age group, educational level, household income, ability to speak or read English, as well as special skills and expertise.

2. Obtain Reliable, Consistent Labor Statistics. Accurate labor and demographic information is critical to the success of the project, yet it can be very difficult to obtain. Data needs to be gathered from various reliable, non-biased resources. Inconsistent data can skew an entire analysis. Therefore, the analysis must consist of an apples-to-apples comparison, which can prove to be difficult, or, in the worst case, impossible, when dealing with multiple international locations.

3. Compare Data Using Analytical Models. Comparative analytical models need to be created to compare statistics. By establishing weighted modeling analyses and labor forecasting models, a corporation can interpret the data, rather than glance over statistics. Keep in mind that it has taken numerous years for some of the best location consultants in the world to create effective models and analyses.

4. Find an English-Speaking Workforce. One of the biggest drivers in identifying the Best Shore location is the need to find a qualified English-speaking workforce to service U.S. customers. You need to evaluate locations across the world depending on the availability of an English-speaking population; however, the quality of those employees may vary and requires further evaluation based on project needs.

The availability of quality English-speaking labor is obviously one of the most important criteria when assessing locations. For example, India, one of the most publicized offshore locations, is also one of the most misrepresented.

India has a population of more than 1 billion people. An often hidden fact, however, is that today only six metropolitan areas can feasibly harbor a call center or back-office function. Those communities include Bangalore, Delhi, Mumbai, Chennai, Hyderabad, and Pune, whose total cumulative population is approximately 55 million. Of these 55 million people, fewer than 40% actually participate in the labor force, which reduces the target labor pool to about 22 million people. Of these 22 million people, fewer than 15% speak English, further reducing the target labor pool to approximately 3.3 million people.

Careful review of potential locations is of utmost importance. With regard to labor force, the Englishspeaking labor availability in many markets is very low when compared to that of the U.S. and Canada. Labor rates for English-speaking employees will range from less than $1 per hour in places like China to over $10 per hour in U.S. Tier I markets like Atlanta, Dallas, Phoenix, and Salt Lake City.

The price point of labor will vary based on the skill set required and the attrition levels a company is trying to achieve. As a result, in the more mature offshore markets like India and the Philippines, labor rates and turnover are increasing due to higher demand and competition. A recent Financial Times Information Asia Intelligence wire reported that the acceptance rate of Filipinos applying for call center positions has plunged to a mere 1% from 10% a few years ago.

FINDING THE BEST PLACE

1. Determine Customer/Market Reach. The best place to locate jobs and functions can depend on a corporation's current and anticipated customer reach. For example, if a company wishes to break into the Canadian market, or if a significant portion of a company's clientele currently exists in Canada, it might be prudent for that company to outsource certain jobs or functions that are part of its operations to Canada.

2. Understand the Competition and Labor Base. A true understanding of labor costs and the presence of competition is necessary in choosing the right location. Gaining this understanding requires saturation analyses, employer interviews, community visits, test advertisements, and job fairs to draw final conclusions. This process can be very time consuming and requires significant resources.

3. Identify How Similar Companies Operate. It is always important to identify other companies, especially those in a business similar to yours, which have successfully implemented strategies in locations you are considering. The executive team and/or board of directors will ask you for these and other details.

4. Understand Economic Incentives. Economic incentives bring significant value to a project and can often be a necessity in offshore markets where a tax holiday is critical to project success. Economic incentives, however, are the "icing on the cake" for a location with the right labor force. Negotiating these incentives and actually receiving them can be very complex, so be prepared to seek external tax advice.

5. Choose the Right Real Estate. Even though real estate is not the driver of the decision, it may dictate how a decision is made in the end, because it comprises one of the largest components of a corporation's operating expenses. The quality of buildings, type of real estate, lease terms, and financial structure of the real estate options will vary significantly across the world. In most offshore markets, the tenant will be responsible for the tenant improvement costs, which typically exceed $40 per square foot, while the lease term is limited to 3 to 5 years.

To determine which locations have been tested for offshoring, one can review the current areas where BPO (Business Process Outsourcing) companies are located. Markets like India, Canada, and Ireland are fairly mature markets for BPO companies. Emerging markets are likely to see growth as the more mature markets see increased labor cost and turnover.

Even though the depth of offshore labor markets is fairly shallow, many of the regions cited in this report are currently increasing educational skill sets. Although it may take more than a decade, qualified labor forces should increase. As the markets become Englisheducated, we will likely see wage rates increase as well. Rising labor costs and access to qualified labor will cause the offshore value proposition to decrease over time. It is uncertain whether or not this will drive job growth back to the U.S.

Corporations need to carefully understand their goals, objectives, and needs and must conduct thorough due diligence to determine if Best Shoring is the right strategy for them. Assessing the business functions, ownership model, location, and potential risks and rewards associated with the Best Shoring strategy is critical to ensuring success. A strong Best Shore strategy presents corporations with more options to achieve cost savings and streamline the organization in an increasingly global workplace.

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King R. White can be reached at 214-979-6193 or kwhite@trammellcrow.com.

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The Global Annual Operating Cost Comparison is based on a 500-seat call center with a 59-person support staff operating in a single shift 50,000 square-foot facility with a call volume of 18,703,300 minutes per year. The comparison provides an overview of the potential savings achieved through locating a call center throughout various regions of the world. Costs are subject to currency fluctuations and labor conditions. Source: Trammell Crow