Digital Transformation will Kill Most of​ Actual Companies’​ Location Strategies

Defining the best possible location strategy for Global Business and/or IT Services hast kept top management in many companies too busy for quite some years now. For most of the companies, millions if not billions were spent to define the appropriate location strategy and even more to implement it. Most of the big players have of course chosen Indian Technopoles like Hyderabad, Delhi or Mumbai for their offshore centers and quite often some Eastern European cities like Prague, Bucarest, Sofia or Warsaw if not Dublin, Barcelona, Mexico City or even Manilla depending on various other criteria.

Although the process was officially mainly driven by the availability of local talents for various reasons (languages, local industry crises, etc.), we would never stop spending millions in moving service centers around and around even at a bigger pace with the digital transformations.

According to one of McKinsey’s reports published in December 2018, completely new hubs are emerging like Singapore, Sydney, Bangalore, Tel Aviv, Madrid, London, Seattle and NewYork or Boston. This are only a few examples pictured in the above map if you think about other cities targeting to become for example the blockchain hubs like Zug or the digitalized healthcare hubs like Basel without even mentioning the tremendous developments happening in China in all regions from Shenzhen to Beijing via Shanghai and Guangzhou without forgetting Hangzhou and many other high paced developing Chinese cities.

There are not only a growing number of cities for GBS and IT Services out there but added to the shortages and scarcity of digitally skilled resources, this is increasing the risk of taking the wrong location with the tremendous costs associated either to select one or to close such a center.

Although most of us have already done or are still in the middle of such an expensive location strategy implementation, nobody is really questioning if that is still the right strategy, We all talk about the new business models which are going to disrupt barely every single industry in their Digital Transformation journey, but nobody starts to really question why actual location strategies should not also be impacted by a major new business model disruption too.

The special specificities of those scarce digital resources from data scientists to cybersecurity experts via Internet of Things specialists should have already triggered the following thoughts:

  1. Proximity: Those new generation’s talents would not be forced to relocate to a specific city or hub as they should find enough opportunities around them and they would decide where to work from and preferably even from their home. Additionally topics like IoT (Internet of Things) are by design very local and should in the initial phase adopt most of the time what I would call the old traditional LEAN walkthrough techniques on the ground being it in a manufacturing facility or in a smart city project rather than just producing tons of presentation slides in a board room.
  2. Crowdsourcing: We are still more talking that really leveraging crowdsourcing processes in order to become more agile in a virtual world which would allow us to become not only faster but also to get access to those best talents who are actually so rare and difficult to find. We are still living in an old “hire and fire” model instead of a real connected world which would allow you to access the required skills within minutes all around the world to work on your specific requirements and we would only pay for the time they are working on your project if they are selected. HR would also have to move into new business models and the new generation might rather choose the interesting work that could be proposed on a crowdsourcing platform than a specific company that is putting its logo on the top of their digitized salary statement.

In conclusion I would highly recommend to reshuffle the dices and to recognise that what was probably the right thing to do in the recent years is not going to fit the purpose of the new business models and we should learn to better work in a dynamic, virtual, connected and physically de-localized world if we want to become more successful in our Digital Transformation journey.