Can outsourcing one job to India save or even create jobs in the US?
David Andersen, a partner at Bryan Cave LLP, maintains the answer is a qualified yes. The outsourcing attorney, who has been representing high tech outsourcing suppliers for a decade, has noticed offshoring certain tasks can benefit US workers and their employers and can even help struggling companies remain solvent (therefore saving US jobs). The ability to access offshore resources has even created new entrepreneurial opportunities in the US that would not exist without it.
“People look at outsourcing in a black and white way,” says Andersen. “Offshoring can cost Americans jobs. I would never argue that these transactions always strengthen the US workforce because they do not. On the other hand, I have seen offshoring make US companies bigger, better, and stronger,” he reports.
Andersen says 20 years ago when Kodak signed the industry’s first IT outsourcing contract, the goal was to allow corporate buyers to focus on their core competencies and let the supplier manage the IT minutia. “Outsourcing wasn’t about reducing head count,” he recalls, although it often reshuffled careers by moving the buyer’s IT department to the supplier’s payroll.
Today, on the other hand, outsourcing is often about reducing head count, he posits. “It’s hard to ignore the staggering efficiencies you can get if you offshore the right way,” says Andersen.
He says in the last 12 months he has seen “another world of offshore outsourcing,” one that’s “more discrete in scope.” This world is growing, according to the transactions he’s worked on.
How Offshoring Saved a Struggling US Company
In one case, a US company was in trouble and about to shutter the office. It was an outsourcing supplier that provided remote administration for its buyers’ computer networks through its US operations center.
In the mid-1990’s, its business model came under intense stress. A host of players entered its market during the dot com boom. Increased competition forced prices down. Then a lot of their clients went bankrupt during the dot com bust. The company found itself swimming in red ink.
In a desperate move, the company outsourced 20 jobs to India. The significant cost savings that move generated increased its profit margin, allowing the company to keep its doors open. “They had to send the work offshore to stay alive,” says their attorney.
In this case, Andersen says offshoring actually saved 80 American jobs that would have been lost when the company shut down. “You have to step back and look at the bigger picture,” he says.
How Offshoring Helped a US Company Compete
Scott Harden is Vice President, Marketing, for OSI Consulting, a systems integrator with a specialty in Oracle implementations. OSI, a Bryan Cave client, found its revenues under pressure for the last five years because its clients demanded reduced implementation costs. Offshoring was the only way OSI could meet those pricing challenges.
Offshoring allows OSI to compete with bigger names like BearingPoint and Accenture, Harden notes.
OSI developed a hybrid or blended offshoring model using both local and offshore staffers. The company now sends certain parts of the project offshore to centers in either India or Ireland; the offshore team members, who are OSI employees, work closely with the American management team operating at the customer’s site. This program management team, as OSI terms it, includes Americans who have moved to India and Indians who worked for OSI for a number of years in the US.
“The hybrid model is the key to our success because our clients want the savings but don’t feel comfortable sending mission critical projects overseas,” observes Harden. American employees interact with OSI’s customers “because they know how to interpret their business requirements.” Cultural differences make it too difficult to let the offshore teams do this, the executive explains.
Another advantage to offshoring allows OSI “to work around the clock,” says Harden. This is important to the company because our customers expect rapid implementations; what used to take a year now needs to be done in 90 days. Once again, offshoring made this change in market demands possible.
How Offshoring Added a New Product Offering
The company’s new ability to work 24/7 allowed OSI to add a new service line, what it calls Enterprise Technology Assurance. This program provides a complete outsourced IT solution, including round-the-clock support, for companies using Oracle or any other combination of systems. Harden says OSI’s 100-person US team was too small to assign people to work around-the-clock; the logistics didn’t work for American workers. But the time zone difference made it simple to offer this comprehensive coverage using its global staffers.
The result: OSI has added a significant number of technology and sales staff to support this new offering through its regional US offices. In this case, offshoring created US jobs that were not necessary before.
Andersen says this is not an isolated instance. He’s seen many situations where American entrepreneurs created companies with US-based sales and support staffs while global teams perform the commodity-type work at great savings.
He says the global marketplace now demands the labor arbitrage benefits of offshoring. Yet many Americans prefer to deal with their fellow countrymen. “These entrepreneurs are putting an American face on the offshoring work,” he says. Their efforts are succeeding because American buyers want a “comfort level. They want someone who is local and accountable,” the lawyer explains.
Isn’t that the American way? Finding a way to turn lemons (job losses because of offshoring) into lemonade (job gain thanks to offshoring).