The Grandeur of Canada (as an Outsourcing Destination)

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    Ah, well. Technical problems beset the global sourcing Webinar on Canada, hosted by law firm Baker & McKenzie and neoIT. First, the server eliminated the slide feeds. Then it eliminated the audio feed. Then, using the call-in number took me precious minutes to get through to the actual event. But here’s what I picked up (aside from: Don’t use Vcall/communicast for your Webinar needs any time soon).

    neoIT’s Eugene Kublanov offered these four reasons why companies take their service business to Canada:

    • Geographic Proximity
    • Time zone similarities
    • Language compatibility
    • Cultural compatibility

    In the worst case, those factors can greatly impair offshoring efforts — particularly when west meets east. Heading north doesn’t have the same negative impact.

    Mr. Kublanov said heading to Canada with work also provides a level of comfort around control and risk mitigation. “As you take business processes from in-house to external, the issue of control tends to be top of mind for clients. Having your center or service provider in a nearshore location, where you can literally fly to the facility within an hour or two provides clients a real good sense of control,” he said. Risk factors such as quality control and geopolitical issues become “to some extent a non-factor.” Related to this are a long-standing trade relationship, comparable legal systems, strong IP protection laws and a mature market with a “strong supplier base.”

    Other key factors in choosing Canada: infrastructure (Canada has a world-class computing and telecommunications infrastructure on a par wit the US) and the ease of travel (business visas are no issue in cross-border travel).

    He brought up an interesting point regarding the cost factor. Mr. Kublanov believes that cost is not the priority it was two or three years ago; it’s now preceded by quality and risk issues. Yet moving work to Canada can generate a “10 to 20% cost savings, compared to the US.” (The rewards aren’t as great relative to India, China, the Philippines, Russia or Mexico, but advantageous all the same.) When you add that on top of the other advantages, suddenly Canada looks extra attractive as a destination.

    InformationWeek editor Paul McDougall asked a useful question: Is Canada a good place to go to learn the ropes of offshoring before going to countries like India?

    Mr. Kublanov responded that particular vertical industries — financial services, telecom and diversified manufacturing companies — especially are experimenting this way. “They see the success of other industries, but they’re not ready to send operations 13 time zones away.”

    Canada is also a popular destination among small and mid-sized companies “that may not have the scale in terms of what they’re looking to outsource and scale in their management structures. Those smaller companies tend to see Canada as a good solution to reduce cost while managing risk and maintaining quality.”

    He cited three ways companies are leveraging Canada right now:

    • Through the captive model — followed by Dell, Microsoft, Kodak and American Express. These Canadian operations provide a range of services for the parent company: call center, data processing, data management.
    • Through third-party sourcing relationships — followed by Fireman’s Fund, AIG, Shell, Goldman Sachs, AT&T and Citibank. These companies reduce and control costs while minimizing risk.
    • Through service providers leveraging capabilities to expand their delivery capabilities — followed by Keane, ADP, TCS, Wipro, iGate, Sutherland and others. (I’d add that we’ll see more and more Asian companies going to Canada to put a “North American face) on their businesses.)

    Alas, there was much useful legal and tax material provided too — but the technical snafus prevented me from getting a solid picture worth sharing here. I’ll have to do some follow-up interviews with those people and share them as “Advice from Experts” articles.

    The next Webinar looks at the Philippines. Register here:

    http://www.bakernet.com/BakerNet/Events/Events+by+Date/GSDestinationPhilippines.htm

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