Off-shore outsourcing has been hailed as a quick way to address cost pressures, and decried it as a threat to job security in developed countries.
While that debate has waxed and waned, more and more companies have explored offshoring – essentially, the movement of work from higher-wage locations to lower-wage locations. In the process, offshoring has become a widely accepted business relationship practice.
Along the way, companies have learned a number of lessons about setting up and managing their operations – and especially, their people – around the globe. One of these is that the movement of work to an offshore location should not be seen as a quick fix, but as a long-term effort.
As that view takes hold, the idea of offshoring is essentially being replaced with a much broader concept. Experience is showing companies that the practice of offshoring should not be treated as an isolated phenomenon, but rather as another set of skills and tools that support the larger goal of creating and managing the relationships within a flexible global workforce. As a growing range of work is shifted to a growing range of countries, the simplistic “here or there” view of the overseas workforce is changing. As New York Times columnist Thomas Friedman – whose best selling book, The World is Flat, has chronicled the growth of outsourcing and offshoring – recently wrote, “It’s called ‘around sourcing’ instead of outsourcing, because there is no more ‘out’ anymore. Out is over.”
This shift is being driven by a basic reality: Globalisation is no longer something on the horizon; it is here. Companies are now “a collection, inevitably, of processes, services and supply chain dynamics spread around the globe,” said Robert Reich, professor at University of California-Berkeley and former US Labour Secretary. Increasingly, that means having a workforce to match – one that can work efficiently across borders, cultures and markets.
And offshoring is giving companies a platform for learning how to make it all work. Ultimately, it is also enabling them to get better and better at putting the right work with the right talent, anywhere in the world, to manage internal and external relationships and to compete on a global stage. Through offshoring, companies are getting valuable insights into the larger issue of managing a global workforce and working with partners across borders. They are learning to effectively develop and draw on a seamless pool of skills and strengths – internal and external – from around the world. This is the premise for Relationship Management – managing relationships within a company to manage the customer relationships outside of the enterprise.
Businesses have been using overseas facilities to handle work for decades, but the practice of offshoring really took off when companies in low-cost markets began taking on large amounts of contact centre and IT support work at the beginning of this decade.
The value proposition was clear: By tapping into relatively low wages in those countries, a company could quickly cut costs by half. But experience has shown that effective global sourcing takes time and patience. Decisions about where to locate work should be based not just on cost, but on a variety of factors, including the skills of the workforce, the political environment, the infrastructure and the business environment. Considering such factors, A.T. Kearney, the management consulting firm, found that India, China and the Philippines rank at the top in terms of offshoring “attractiveness” – and that the US ranks as high as 11th.
The key, of course, is being able to manage those operations in numerous countries in an integrated manner. The concept is that when customer demand is generated anywhere in the world, you should be able to handle it anywhere else in the world where you have the right tool sets and language skills. You can route the information and work from any point to any point in a fairly cost-effective fashion.
However, turning that vision into reality is not always simple. As many have found, successfully working across boundaries often requires innovation, adaptability and investment. A key lesson for many companies was that even if you have a great model that works domestically, you can’t just parachute it into an another labour market, plug it in and have it work right.
The management of global human resources, for example, typically requires significant planning, because people working in various countries are subject to a wide range of currencies, languages, labour rules, directives, tax laws and data privacy regulations.
As companies moving into China, Malaysia and other developing markets can attest, even the basics of local infrastructure can present a challenge. In India, for example, some areas have limited public transport, especially at night when facilities supporting overseas North American customers operate. This often makes it necessary for Indian companies to maintain a fleet of vehicles to provide employees with transportation to and from work, and to provide on-site services such as banking and laundry pickup. As many companies have discovered, your success can depend on your being extremely competent in areas that were never part of your business before.
