I get it, you operate globally and the cost of labor in the states is 4 to 5 times higher than the wages in the countries that typically receive outsourced work. I have only one question; is the only factor taken into account when deciding to outsource from the US to a foreign country cost? When the RFP is evaluated does intellectual property protection and security, quality of work product, time zone communication issues, the geopolitical climate or increasing price trends enter into the decision making process?
I once spoke with a purchasing agent employed by a Fortune 500 company and this is how outsourcing was explained to me…”even if takes someone in a foreign low wage country 3 attempts to get the work correct, we are still are saving 25% over their competitors in the US.” Of course, I had a number of responses, including: Was the cost to manage and audit the work 3 times included in the cost saving analysis? Of course not, the cost savings estimate is only documented at the RFP phase.
Each day our company evaluates our internal and customer processes to build automation and intelligent software applications that increase throughput, improve accuracy without manual intervention and provide our customers with a continuous stream of process improvements. I believe long term our cost are competitive, the challenge is educating new customers to understand the unique and beneficial processes that allow them to capitalize long term implementing our data quality solutions.
My hope is that I will never see another response to an RFP “Need more competitive pricing or to include “off shore” solution – This is required for more competitive proposal and for further consideration”
How long will it take US salaries to race to the bottom so work can be outsourced back to the states? I hope that this is not the answer, let’s discuss what US vendors need to do offer the long term value add processes that off shore options do not?
Tags: BPO, Business Intelligence, data, DATAForge, dataquality, ERP, linkedin, masterdata, mdm, SaaS, Software as a Service, Technology
Excellent post. I personally think that way to get around this is to compete on value rather than on cost. Solution and services offered by companies doing business in US should create extreme value and offer exclusive services which require high level of specialization. Any services which are repeated and are low value should be automated (as pointed out by author) thus requiring minimal manual intervention.
I think that cost advantage of countries like India is quickly evaporating (Given rising wages, high travel costs etc…). When I had last looked at hiring people in India Vs hiring people in less expensive areas in the US, we could hire people in US (places which are not expensive…. MidWest, NorthEast etc…) at 30-40% higher cost but with significant advantage (Language, Proximity, Non significant time difference, Protection provided by all US laws and political stability). When you add all those advantages up, it becomes difficult to make case for offshore resources.
Vish Agashe
This is a great post.
Vish has a great point that those other factors should be taken into account when determining cost. However, in my recent job search in the last 3 months, I have not even been considered for opportunities I was well qualified for because my “cost” was too high.
It is not just a problem with outsourcing, but also what I call in-sourcing. There is a huge workforce here in the U.S. either on H1-B Visas or in Green card status that can afford to accept very low (like 50% or less) rates and salaries than established American workers. They do this by living many to a hotel room or apartment and send the money to their country of origin to support their family.
In this competitive job market, these resources are seen as “a bargain” because they cost so much less than well-qualified US workers. If all the factors that Vish mentions were taken into account, and add experience level, employers and clients would find that these workers were not such a bargain after all.
I’m afraid however, that the first thing HR looks at is salary and rates, and overlooks the other factors.
I usually don’t commonly post on many another Blogs, still I just has to say thank you… keep up the amazing work. Ok unfortunately its time to get to school.