Todd Hintze
Todd Hintze

With the displacement of more than two million people, significant infrastructure outages, and the uncertainty of the long-term effects of operational and financial sanctions, organizations are scrambling to navigate the Ukraine-Russia crisis.

Foremost, we recognize the actions in Ukraine as having resulted in the loss of hundreds of lives, the displacements of millions of people, and generated a forbearing sense of uncertainty and instability across eastern Europe.

Across the globe, enterprises are beginning to see how these local events are creating a global disruption of the supply chain of services provided from the region. This is unfolding across multiple dimensions, from availability of regional resources to the viability of key service providers.

With Ukraine and its neighboring countries representing around 50% of the global services headcount in the European nearshore region, the current displacement of around 150,000 resources will not be resolved quickly. The global market does not have the ‘slack’ to rapidly respond with qualified resources.

The rapid evacuation of resources is causing spikes in delivery challenges, as well as financial instability and supply chain issues for service providers in the region – directly impacting the services that enterprises are receiving from partners and/or their delivery centers.

Organizations must go beyond backup and disaster recovery (DR) and rethink how they navigate the challenges.

 
2 parallel paths to take in response to the impact on global services delivery

The situation is fluid and rapidly evolving from day to day. As the crisis intensifies, what must organizations leveraging Ukraine and the Central and Eastern European (CEE) region for global services delivery consider doing to limit disruption to service delivery?

Path #1: Short-Term Actions
Intensify and accelerate the implementation of contingency plans and/or consider reshaping your business continuity planning (BCP) strategy to secure operations being supported from anywhere in Ukraine and the region.

  • Business continuity
    Considering the new challenges arising from the Ukraine-Russia crisis – following in the wake of over two years of service delivery disruptions, delays, and higher costs due to the COVID-19 pandemic – organizations must assess current disruption and post-crisis scenarios and revise financial and business plans to remain agile.

  • Disaster planning
    Review short- and long-term DR measures both you and your service providers are undertaking to limit the disruption to service delivery. Additionally, be sure to strengthen your network infrastructure to insulate your business against potential cyber attacks; monitor cybersecurity, especially data security.

Path #2: Long-Term Actions
Reshape your workforce and sourcing strategies with a deep understanding of risk exposure and vulnerabilities.

  • Rebalance the service provider portfolio and delivery locations
    As you look to expand or modify your existing portfolio by adding new service providers and locations, you must:
 

Evaluate and identify impacts on a broader service delivery portfolio in the CEE region and beyond.

For example, do you rely on one source for critical operational aspects? Do you rely on service providers that are all located in the same region? This introduces vulnerabilities you can avoid with an expanded portfolio.

 

As you look to transition work out of Ukraine, assess your current portfolio for best-fit, not same-fit, and not just in terms of location but also:

  • Labor pool (i.e., qualified resources with the right skillset)
  • Regional delivery cost
  • Inflationary pressures, and potential FOREX challenges
  • Long-term scalability of location
  • Time zone proximity
  • Infrastructure reliability
  • Geopolitical stability

As an example, to move quickly and recognize that you’re making an investment in uncertain times, it may make sense to expand where you’re currently located and grow with your existing service providers. However, you would not want to grow with a service provider that has a large concentration of employees in the impacted area, or most of its revenue coming from that area.

Do consider that rebalancing should not be seen as a short-term fix. Ukraine is a key global delivery location for IT and engineering R&D services due to the proximity of resources to the business unit, time zone, language, and skillset. Moving out of this ecosystem to a new location is costly. And because of the dynamic nature of the cost of setting up new centers and operations, to get your return on investment, consider that you are looking at a three- to five-year term. It is, therefore, crucial to not only move quickly but also cautiously.

 
How can organizations move forward amid supply chain disruption?

As the conflict progresses, and global organizations continue to face uncertainty and the threat of business and operations disruption, there is a multitude of considerations that should be a critical aspect of a rapid and effective response. Here are some key questions to ask when implementing measures in the event of any geopolitical crisis:

  • What is my solution for the next 24 to 36 months and beyond?
  • How can I scale up my current portfolio?
  • What are my priorities as I consider relocating?
  • What are my best-fit options in terms of delivery location in my portfolio within which to expand?

Be a detective. Map out your service provider options. Rebalance your portfolio across multiple geographies. And go in with the awareness that you may not get the same price point, language, skill, or proximity that was being fulfilled by the CEE region, but that by diversifying, you can move forward amid disruption and build operational resilience in preparation for what comes next.

 

Need support in mapping out your next steps and rebalancing your portfolio?

SPEAK WITH OUR SUPPLY CHAIN AND SERVICE DELIVERY EXPERTS TODAY

Todd Hintze
Partner

Todd Hintze has more than 20 years of experience assisting Fortune 500 organizations in reducing costs and improving revenue through operational, organizational, and technical solutions. He effectively leverages his corporate and industry insights to help organizations address transformational challenges. Todd is highly skilled in strategic planning, process reengineering, and change management, as well as solutions evaluation and deployment.

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