Choosing a near-shore location: Dharma at Big Sur
Where can you efficiently locate offices for risk management and capital markets analysts? Whether you are looking at near-shore or off-shore locations, or indeed which corner of your trading floor you want to place people in, there are three key considerations. These are as important as infrastructure considerations such as connectivity and cost..
Integration
Social capital
The politics of home and the world
Twelve years ago I was setting up Frontline Analysts’ Indian office. My enjoyable tour of the potential locations took me to the southern province of Kerala. In wonderful irony, the communist state had a highly sophisticated understanding of business needs. I was shown a business park with its own power station and satellite relay for internet connectivity. The park manager took me to a high-up floor in one of the glass office towers. She said to me
“We’d like to offer you this office space”
“Is that what I think it is over there?” I asked, looking away west, at the shimmering water.
“Yes – the Indian Ocean. I prefer the view out of the eastern window though”
She beckoned me to the other side of the office, from where I saw a lush green canopy studded with farming villages and with rivers running though it in silver ribbons.
“Jungle? It’s beautiful”
“More than a jungle, sir! These are the world famous backwaters”
“An impressive space” I said, and that was my effort at understatement. This was, after all, a negotiation. I thought I should get down to brass tacks
“So how much is it?” I asked, cool as a cucumber who is willing to pay a lot for this place and trying not to show it.
“It’s free for the first year sir”
“Sorry?”
“We are keen to build up a cluster of financial companies you see”
“So you have others here?”
“Oh indeed yes. Perhaps you’d like to meet the head of [massive German insurer]’s office. They’re just two floors down”
I was almost ready to move in, but due diligence is wired into analysts like us, so down I went. When I was alone with the head of this German insurer’s support centre, a lovely chap from up north (India), I asked him what he thought.
“Don’t do it” he said
“Pardon me?”
“Don’t do it. I’m getting incessant cribbing” I knew that was Indian English for grumbling, and now you do too. This is, as you may already know dear reader, an enriching blog.
“Why?! It’s perfect here. The infrastructure is world class, it’s a conducive environment and it’s cheap”
He went on to explain the problems
Staff felt second, or even third grade. Not only were they not spoken to much by Germany, but the other office in Mumbai didn’t want much to do with them either. This was a problem of INTEGRATION
Secondly, a sleepy beach-side spot was not the environment that the MBAs dreamed of when they imagined their careers in global finance. They felt that the action was in the bright lights of the big city. This was an issue of SOCIAL CAPITAL
Lastly, a high portion of the analysts were from north India. While all the professional staff shared two lingua franca (English and Hindi), their dealings outside the office often left them at a loss if they didn’t speak the local, outstandingly mellifluous language of Malayalam. It turned out that the German firm’s strategy, set during high level discussion between their executives and Indian politicians, encouraged offices around India. For better or for worse, location was influenced by the POLITICS of home and the world.
What does this story tell us about choosing a near-shore location, if home for you is London, Berlin, New York or Toronto? Well, all the same problems arise. To distill them into business commandments
Integration: You must have a proper culture and practice of integration. This includes tight methods of communication which are robust to multiple locations. Failing this, whether you are a hundred miles away or a hundred metres away, there will be isolation.
Social capital: Your nearshore centre has to give a sense of prestige to your staff. In the UK, Birmingham is a big city with a lot going on for nearshore staff (full disclosure: I’m a Brummie). In Germany, Leipzig is a student town, and it’s cool. If you cannot easily find Hoxton on the prairies, then be aware that you will need to compensate staff for the loss of social capital.
Politics: If you are deciding between near-shore and off-shore, big politics may make the decision for you. You could argue the ethics of internationalism, but for every George Orwell in Spain, there will always be a Henry Cabot Lodge (“Internationalism, illustrated by the Bolshevik and by the men to whom all countries are alike provided they can make money out of them, is to me repulsive”).
If you would like to know more about locating and running analyst and risk teams across multiple offices, draw on the experience that Frontline Analysts has built up since 2005 and get in touch.