This article is reprinted from The Consulting Journal
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Trends: Sunset for offshoring?
by David Blakey
Has offshoring had its day?
[Monday 22 March 2004]
Some business process outsourcing has made mistakes that experienced change managers would have avoided. One example of this is the outsourcing of helpdesk functions.
Change managers know that business processes cannot be simply lifted from one organization and dropped into another. They recognize the cultural and procedural differences between two organizations, and the need to make sure that all the communications connections that are cut when a process is lifted from one organization are restored when the process is dropped into the other organization.
It seems to me that professional change managers were not consulted over offshoring
helpdesks. These change managers would have told their American and European clients that offshoring needed to be handled carefully, especially if the offshoring was to another continent.
The arguments for offshoring were almost all monetary. Many business processes could be run much more cheaply in India than they could in America or Britain. This was because rates of pay in India, expressed, for example, in US dollars, were considerably lower than rates of pay in America.
The arguments against offshoring were almost all cultural. People in India tend to speak differently from people in America. They use different inflections and different idioms. In some situations, both an American customer and an Indian operator can become frustrated by these differences.
It was not possible for an Indian outsourcer to employ Americans, as the rates of pay of American expatriates would be even higher than those of Americans working in the US.
Indian offshorers opened offices in the US and Europe. While these provided a channel for complaints and for renewed efforts to meet service levels, they did not deal with the central problem. There was still a communication gap between American customers and Indian service providers.
Some of the monetary arguments began to falter. Economics was taking over. The major influence was the beginning of demands by Indian workers for pay that was appropriate to the services, in terms of US dollars. If Indians were providing a world class service, they wanted world class pay. This began to erode the advantage of offshoring. If Indian offshorers could no longer undercut American outsourcers, there were strong arguments for pulling the business processes back into the US. Some of these arguments were the common culture and shared communications characteristics of American customers and American outsourcers.
Unless offshorers have some significant advantage to offer, they are reaching their sunset. The disadvantages of trying to cross cultures with helpdesk offshoring are likely to outweigh these advantages. Apart from price, I am not aware of any significant advantages to offshoring.
The price difference can only operate in a growing market. Eventually, prices for offshoring will move closer to the prices for domestic outsourcing.
Another influence is the effect on domestic employment. There are pressures to stop and even reverse offshoring.
Finally, the question remains whether helpdesk offshoring and other direct contacts with customers can be separated from other business functions within a process. Evidence is mounting that separation would be difficult to control. So, if we have reached the sunset of helpdesk offshoring, we may be moving closer to the end of offshoring for any customer-oriented business process.
The opinions expressed are solely those of the author.
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