Author: Anand Tatambhotla, Consultant – Globalization Advisory
As referenced in my earlier entry about globalization of corporate wide functions:
- Research & Development
- Marketing & Sales – Covered in this blog
- Finance & Accounting
- Human Resources
- Internal IT
- Procurement
- End Customer Services & Support
This entry will focus on the globalization aspects and the newer models in marketing & sales.
To classify broadly Sales consists of Sales Management (Customer profiling, proposal documentation, cross/up selling, sales force planning etc.) and Sales Support (account management, customer relationship management, training, database management etc.) and Marketing consists of Marketing & Brand Management (Advertisements, collaterals, media planning & strategy, public relations, events & campaign management) and Market Intelligence (Market research, competitive analysis, market segmentation & sampling, business analysis)
With every company small and large going global these days bits and pieces of the above are probably done out of every corner of the world. Statistically speaking, companies typically spend 22 – 30% of their net sales on marketing & sales which accounts for 30 – 35% of the total headcount. In this function the cost per resource is considerably low since globalization here is an imperative here and not an option if companies want extended customer reach and better market understanding.
A company with say 100,000 employees has about 30,000 – 35,000 of its employees working in Marketing & Sales spread out in scores of countries. Interesting thing to know is what exactly these resources are doing. With sales support and market intelligence being the relatively more people intensive groups, the math would suggest that a significant chunk of these folks would be working for these activities. Each location would need a bunch of people into these activities to effectively cater to that that market but in reality these majority of these resources perform redundant tasks and are under-utilized which makes us question their presence in the first place.
In the wake of this reality and popularization of a model, which I am sure most of the readers of this blog are aware of, called Shared Services, companies are increasingly exploring to offshore their Marketing & sales teams in this model. To narrow down on the scope of offshorability, Sales Management and Marketing & Brand Management are relatively harder to segregate out given their close ties to the HQ and multiple other stakeholders.
The sales organizations of technology product companies typically drive sales through multiple ways: Direct Sales, Channel Sales, OEM Sales etc. and this is a tightly knit network and pulling these people away from each other would be nothing short of committing a corporate suicide.
So the beauty of this Shared Services Model (without going into the finer details) is that redundant tasks can be eliminated, resources can be fully utilized and the best part is they can work in an offshore model (at least a few of them) – ergo, cost optimization.
Some quick analysis of a bunch of companies that actually are well into this model shows that the ones with revenues less than USD 5 billion have about 3 shared services locations and the ones between USD 5 – 20 billion have about 5 locations and the ones above USD 20 billion have about 7. Having spoken to the senior management teams of these companies, on an average they have been able to realize about 15 – 20 % cost savings in this model.
I think this as a trend would continue to rise in the coming years, primarily because the highly offshorable/ transaction driven functions like R&D and F&A are pretty much under cruise control for most of the companies and M&S is the next logical thing to look at.
*Unless specified Views/Opinions Expressed in the blog are those of an Individual Consultants.