SSC Location Selection: Inside Schneider Electric’s Decision-Making Process
Schneider Electric recently expanded its Finance GBS model by adding a North American Global Business Services center. Philip Woodburn, VP, Finance Global Shared Services and Operations at Schneider Electric, who is based in their Polish centre, took a leading role in identifying and selecting a North American location for this new centre.
Barbara Hodge, SSON’s Editor, sat down with Philip recently to ask him about their final location choice and the factors that played into this decision.
Barbara Hodge: What was the driver for establishing this new US Finance Centre?
Philip Woodburn: Globally, Schneider Electric has already been operating across five GBS centers: Mexico, Poland, India, China, and the Philippines. What was still missing was a consistent strategy for US Finance services support.
More specifically, however, within Schneider Electric today, we differentiate between what we call "competency" services and "worldwide operational" services. The latter is mainly transactional in nature, but the former is where we are focusing our strategy. “Competency” is based on specialist, more value-adding skills.
Although we wanted a consolidated approach for North America, we had chosen to separate record-to-report into a new competency center, while keeping procure-to-pay and order-to-cash in an “operational” or “transactional” center in Mexico. That center also provides financial services to Latin American operations.
BH: Can you explain in more detail how you differentiate between competency and operational services?
PW: Competency is about providing quality over quantity. It requires sharper skills and knowledgeable staff. For the North American market, we wanted to promote competency services as a differentiator, given that the trend is towards automating many transactional services and/or providing them from lower-cost near- or offshore centers.
BH: Considering that your choice was being driven by competency skills, which cities did you narrow your choices down to?
PW: We originally started with five potential locations across the US: Schaumberg, IL; Phoenix, AZ; Nashville, TN; Dallas, TX; and Raleigh-Durham, NC. These locations represented a mixture of Greenfield and Brownfield sites for Schneider Electric, with our some of our existing US finance staff based in Schaumberg.
After drawing up this shortlist of locations, we commissioned SSON Analytics to do some research for us on the key metrics that would play a significant role in our decision-making.
SSON Analytics created a customised data report for us that contained more 300 different data points and allowed us to objectively compare these locations against each other across a range of metrics, including number of existing SSCs in each location, average salaries and talent availability across a number of different roles and skills, and cost of living.
In the meantime, a decision had been made by leadership not to go with a Greenfield site, but to choose an existing, or Brownfield, location. That eliminated Phoenix, therefore, which actually presents an interesting opportunity, certainly for less mature centers or startups.
Another consideration for us was that we wanted our existing operations to be able to leverage the proximity of other Finance teams. This further reduced our choices down to three: Schaumburg near Chicago, Dallas, and Nashville.
BH: How useful was the data provided by SSON Analytics in your decision-making?
PW: What SSON Analytics’ city comparison report provided was objectivity. So many of these kinds of decisions can be sensitive and/or politically motivated, internally. Having clear data from a respected source like the Shared Services and Outsourcing Network meant that we could always refer back to trusted numbers. Throughout all of our discussions, including with Schneider Electric’s North American CFO and our Global Transition lead, the validity of the numbers was never questioned.
Without doubt, the city comparison data provided a strong foundation for us to base our decision-making on.Of course, after that, many things weigh into an organizational decision, but having trusted data is certainly a fundamental starting point.
BH: You eventually decided on Schaumburg, although it was not the cheapest option. What determined that decision?
PW: In talking with the CFO of North America and the Global Head of Transformation (who reports into the global CFO), another perspective became apparent. Although Nashville offered the cheapest option, given the type of competency based services we were planning, there was a concern around finding the right quality of talent, both in the short as well as in the longer term. Despite the fact that we planned to start with just 35 people, we were looking for specialist skills, and potential growth opportunities. In analyzing SSON Analytics’ data, we could clearly see that the skills we were looking for were represented in far greater numbers in both Schaumburg and Dallas, than in Nashville. Schaumburg, by a factor of four, and Dallas by a factor of five. In addition, a lot of those skills were already present in our Schaumburg office, and could effectively be rebadged.
BH: Were there other considerations that weighed in on the final decision?
PW: Yes, we also took into account our internal real estate availability. Although the Nashville office was expanding, we would have had to wait for more than a year to leverage that additional space. In the meantime, Dallas offered some space availability, and Schaumburg, although near full capacity, actually had two thirds of the skills that we were looking for already, which could easily be redeployed for our purposes. At the end, the significant cost of winding down roles in Schaumburg and relocating those to Dallas was also a key consideration.
Dallas has a lot going for it, notably a lower cost of living which is a great incentive for talent. There is also a lot of new building work going on there with many businesses moving into the metropolis, and the proximity to Mexico is also attractive to anyone seeking a near-shore lever.
Finally, another factor that influenced our decision was that we wanted to leverage the proximity of a Boston-based team that was not yet in the control of Finance, but might be shifting into our scope.
BH: What kind of additional data would have been useful to you in making a location will decision?
PW: One data set that we leveraged internally and that was important in assessing potential locations, was the availability of Schneider Electric’s current real estate. That's not something that would be available to an outside party.
However, another key metric that is valuable is "cost per seat". This, combined with salary, provides a more holistic idea of the total cost of employing staff. Cost per seat includes fixed costs like the structure of an office, rental, utilities, commercial networking, etc. It's arrived at by combining all these structural costs and dividing by the actual number of seats. It excludes variable costs like travel and training.