Location Strategy

Where work is done has a large effect on what it costs, who can do it and how well it gets done. A software team in a major tech hub costs very different amounts from one in a secondary city or another country. A customer service center close to customers may serve them better than one on the other side of the world. And since the pandemic, remote and hybrid work have added new options alongside traditional offices. Location strategy is the deliberate plan for where each kind of work should sit, balancing cost, access to talent, proximity to customers, collaboration needs and risk.

Location decisions used to be made one at a time, often driven by cost savings from offshoring. Today many organizations take a broader view, building networks of hubs and centers, including global capability centers that perform high-value work such as engineering, analytics and digital operations. Remote and hybrid work have also expanded the talent pool beyond any single city. For executives, workforce planners, HR, real estate and finance leaders, location strategy has become a core part of workforce and cost planning.

Definition of Location Strategy

Location strategy is a structured plan that determines where an organization's activities and roles should be performed, across headquarters, regional offices, shared service and capability centers, nearshore and offshore locations, partner sites and remote work, based on cost, talent availability, customer needs, collaboration requirements and risk.

It shapes the total cost of workforce, often involves offshore outsourcing or nearshore outsourcing and is a key part of strategic workforce planning.

Common Location Models

Headquarters and major hubs. Locations with leadership, core functions and roles that benefit from close collaboration.

Onshore lower-cost locations. Domestic cities with lower costs and good talent pools, used for operations, technology and service roles.

Nearshore centers. Locations in nearby countries with similar time zones, often used for technology and customer service.

Offshore centers. Locations in distant countries with lower costs and large talent pools, run directly or through partners.

Remote and hybrid work. Roles performed partly or fully from home, which widens access to talent regardless of office location.

Factors in Location Decisions

Cost, including salaries, benefits, taxes, real estate and travel.

Talent availability, including the size and quality of the talent pool, competition for skills and language capabilities.

Proximity to customers and colleagues, including time zones and the need for in-person collaboration.

Risk, including political, regulatory, data protection, currency and business continuity considerations.

Incentives, such as government grants or tax benefits for creating jobs in certain locations. Infrastructure and quality of life, which affect the ability to attract and retain people in a location.

Importance of Location Strategy in Workforce and Operations

Location strategy affects cost significantly. Moving suitable work to lower-cost locations can reduce labor costs substantially.

It shapes access to talent. Expanding beyond expensive, competitive hubs can make scarce skills easier to find and keep.

It also affects resilience. A well-designed network of locations reduces dependence on any single site and supports business continuity. It also supports growth, since new locations can give access to new markets and customers.

Location Strategy and Financial Management

Salary differences between locations can be large, but savings should be calculated on fully loaded costs, including management, travel, transition and quality.

Setting up a new center involves one-time costs for recruiting, facilities, systems and knowledge transfer, which affect the payback period.

Remote work can reduce real estate costs but may require investment in equipment, collaboration tools and travel for in-person meetings. Pay policies for remote employees, such as whether pay varies by location, also affect cost and fairness.

Currency movements and wage inflation in growing locations can erode savings over time, so plans should include realistic assumptions.

Common Challenges

Decisions based only on salary differences may overlook costs of coordination, quality and turnover.

Knowledge transfer to new locations takes longer than expected, causing temporary drops in performance. Planning for overlap, where both locations work in parallel for a period, reduces this risk.

Splitting closely connected work across time zones can slow collaboration and decisions.

Fast-growing talent markets may become competitive, driving up wages and attrition. Employees in the original locations may worry about their own roles, which affects morale during transitions.