Global Delivery Models

and the internationalization of service companies
Global Delivery Models are paramount to the internationalization of service companies
04/12/2018 The people from Cocolabs

GDMs allow you to use time zones differences to produce a 24/7 service delivery chain.

“That precious commodity –time!”
Seneca

1. Introduction

A 1st-century Roman philosopher, Seneca, would console his dear friend Lucilius of the hardships of existence in these words, still famous today: “nothing is ours, except time.”

For the Stoics, time, like money, is the most fleeting of things. But while the latter was regarded as vain and distracting, the former was valued as “the most precious commodity.”

For us, time in a globalized world is money. Therefore, ill-using time inevitably causes the most terrible damage to all: to lose money.

In our previous article, we’ve shown that all services can be offshored, except personal services. Offshoring means working in different time zones in the home country, and in the country hosting the company’s production hub. This piece discusses how Global Delivery Models (GDMs) are paramount to transforming time zone differences into an asset for the internationalization of service companies.

2. The impact of time zones on businesses

How people as individuals or as nations relate to time is one of the cultural traits inherent to their way of being. Business-wise, lots of online content show that if the home company personnel and the offshored personnel don’t have the same appreciation of time, such conceptual discrepancies become a practical issue.

2.1 “Internationalization” vs. “Globalization”: same difference?

In Commerce, internationalization is the growing tendency of corporations to operate across national boundaries. In Marketing and Computing, internationalization is an approach to designing products and services that are easily adaptable to different cultures and languages.

The definition of globalization is still an object of discussion in UN institutions, such as the UNESCO. In the sense restricted to International Business and Economy, globalization is characterized by “the acceptance of a set of economic rules for the entire world designed to maximize profits and productivity by universalizing markets and production, and to obtain the support of the state with a view to making the national economy more productive and competitive.”

Are internationalization and globalization synonymous? No, they’re not. While both point towards the same process of suppressing national borders to facilitate commercial exchanges, internationalization is based on the concept of nation. In effect, when companies look to settle abroad, they have to understand the host nation’s cultural, social and political traits. In broad terms, internationalization refers to Business growth strategies that globalization facilitates.

2.2 How London and Madrid bridge the time gap with business partners differently

London is a good example of how adhering to the right time zone facilitates business exchanges. For instance, according to top VC Eileen Burbidge, London is like Wall Street, plus Silicon Valley, plus Washington DC operating in one city: in London, you can conduct a financial services transaction and settle within the same business day in Asia and America because of the time zone in London.

In most cases, however, the effects of geographical distance on business for either countries or companies are negative. Spain, for instance, has struggled to develop its business partnerships. As The Guardian and El Mundo point out, Madrid should be in the same time zone as the UK, Portugal and the Canary Islands (GMT +1), but Spain is adhering to the Central European Time (GMT +2). This decision was made 50 years ago, under Franco. The actual government, led by Pedro Sánchez, is considering switching back to GMT +1.

As surprising as it sounds, the national geographic position has effects on the way partners conduct business.

Like countries, service companies struggle with time zones. Different time zones impact negatively their production process:

“When businesses expand across the globe and change time zones, a large communication gap instills. During the waking hours of one country, another across the globe experiences nighttime. This presents an obstacle for companies with speed and customer service as core values since different time zones cause delays.” — Jeffrey Simons

This effect is called a time gap. The problem it causes is far from insoluble. Firstly, because telecommunications bridge the hour gap. Secondly, service companies use Global Delivery Services (GDMs) to optimize their service delivery chain.

3. The deployment of GDMs for service companies internationalization strategies

3.1 What are GDMs?

In “Global Delivery Models: the role of talent, speed and time zones in the global outsourcing industry”, Stephen Manning and Marcus Larsen focus on how service companies use GDMs as part of their internationalization strategy. These are processes in which time zones play a paramount role: optimizing to the full the production and delivery chain.

Basically, GDMs optimize the service delivery chain by ensuring a 24/7 production capacity. The products industry is far from reaching such an objective, even with the fiercest of outsourcing strategies.

Service providers are establishing Global Delivery Models (GDMs) to optimize how they integrate the provision of services with their client: “GDMs characterize overall networks of delivery centers that are designed to develop optimized delivery configurations. As Carmel (2006: 46) argues, “GDM is a rather loose model that encompasses the concept of task allocation, project structure, and governance.”

We’ve summed up the main findings in four key points. Manning and Larsen focus in particular on the proximity to the client to explain the role of time zones in the internationalization strategies of service companies.

1. Service companies use GDMs to:

  • Acquire new temporary business relations (or “relational quasi-rents”) in a non-domestic territory.

2. Services do not require to be transported. A service company can choose to locate closer to its client so as to:

  • Better manage time zone differences to major clients.
  • Reduce client losses due to inefficiencies, service quality problems and lack of qualified personnel needed for particular operations.

In short, client proximity ensures:

  • The capacity to hire a talented workforce.
  • The speed of coordination between the home company and its offshore delivery platform.
  • The speed of service delivery.

3. Service providers optimize their production process and facilitate offshoring by:

  • Breaking down the production process into steps. These steps are dispatched across different time zones. The goal is to ensure the continuity of the working process 24 hours of the day.

GDMs allow companies to utilize “all 24h as working hours: somebody, somewhere, must work.” (Mandal et al.)

  • Commoditizing services. Commoditization is “the extent to which a task or a service is standardized, modular and unspecific to a particular client of the industry.”

4. There are two levels of service commoditization: high and low.

  • Low service commoditization means that services are more specific to the particular needs of clients and industries.
  • High service commoditization means that services are less specific to the particular needs of clients and industries.

5. How do low service commoditization and high service commoditization compare?

Low commoditization services are dispatched throughout several locations across the globe.

  • On the one hand, low commoditization (for example, analytical services, product design work or client-specific software) may provide a competitive advantage.
  • On the other hand, providers face the constant challenge of making resources available to perform these particular tasks.

High commoditization enables to allocate work to teams with generic skills in various locations.

4. Conclusion

At the turning point of their evolution, service companies must decide when to implement an internationalization program in order to successfully scale.

Outsourcing is widely linked to cost-reduction. Internationalization, which is part of the same process, can be related more specifically to the optimization of delivery processes. It increases the company’s proximity to its major clients.

No matter the business context, many service companies decide to standardize the services they provide to their clients in order to increase their speed of delivery and secure client fidelity.

Here at Cocolabs, we’ve insisted many times, however, on how service e-commerce and product e-commerce differ. And so, we’ve come across a new problem: is there another way to successfully achieve company scaling without treating services as if they were products?

Now, back to Seneca. When Seneca defines time as a precious commodity, he was, of course, inciting the aspiring philosopher –his friend Lucilius– to take possession of time. How does a Stoic possess time? By writing.

Selling services is about selling time. Like time, services are intangible and fleeting by essence.


At Cocolabs we’re working on the standardization of services. We build custom service marketplaces. Each new project is an opportunity to further our reflection and refine our understanding of what is at stake: human interactions set in a given time and space dimension.

Resources

Anderson, Edward. “Time Differences, Communication and Trade: Longitude Matters II.” Review of World Economics, vol. 150, no. 2, May 2014, pp. 337–69. Crossref, doi:10.1007/s10290–013–0179–9.

Eileen Burbidge Q&A: “London Is the Financial Services Capital of the World.”Accessed 28 Nov. 2018.

Henricks, Mark“How Time Zones Affect Global Businesses.” Entrepreneur, 1 June 2006.

Iriarte, Marcos, “El Gobierno abre la puerta a que España abandone el huso horario de Berlín tras la decisión de Bruselas.” ELMUNDO, 31 Aug. 2018.

Kay, John“The Advantages of Dwelling in a Decent Timezone.” Financial Times, 9 Feb. 2016.

Kelley, Paul“Spaniards’ Lack of Sleep Isn’t a Cultural Thing — They’re in the Wrong Time Zone.” The Guardian, 22 Feb. 2017.

Manning, Stephan, and Marcus Larsen“Global Delivery Models: The Role of Talent, Speed and Time Zones in the Global Outsourcing Industry.” Journal of International Business Studies. Accessed 22 Nov. 2018.

Mandal, Biswajit, Marjit Sugata and Nakanishi Noritsugu, “Outsourcing, factor prices and skill formation in countries with non-overlapping time zones”. Eurasian Economic Review, vol. 8, no. 2, 2018, pp. 289–304.

Olson, Jeffrey JamesDate and Time Dimensions for Contact Center Reporting in Arbitrary International Time Zones. US8737173B2, 27 May 2014,

Prasad, et al. “Time Zone Difference, Comparative Advantage and Trade: A Trade Review of Literature.” Eurasian Journal of Economics and Finance, vol. 5, no. 3, 2017, pp. 1–16.

SenecaVolume IV, Epistles 1–65. Accessed 22 Nov. 2018.

Simon, Jacob“Time Is Money: How Time Zones Impact International Business.”Globaledge, 4 Oct. 2013.

“What Is Internationalization? Definition and Meaning.”BusinessDictionary.Com, Accessed 23 Nov. 2018.

What Is the Difference between Internationalization and Globalization?. Quora. Accessed 23 Nov. 2018.

 

 

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