Synergroup Systems, Inc.
27068 La Paz , Suite 408
Aliso Viejo, CA 92656

Phone: (909) 980-7171
Fax: (909) 980-8381
E-mail Us

Offshore outsourcing.  The very words incite an emotional response from many people in our country today.  Hundreds of thousands have been directly affected, or know some one that has been.  In addition, thousands more wake up everyday in a cold sweat, wondering if their job will be next.  For many people, this is more than a remote possibility. One thing is for sure, we now live in a global economy, and going forward, we must learn to compete effectively.  We must adapt.

The question is, HOW?

First, we must understand the reason behind the offshore movement.  Efficiency.  All companies, large and small, are in business to win a customer, then deliver to that customer goods and services in a profitable way.  In today’s hyper-competitive environment, as customers insist on extreme value for every dollar spent, companies can only be profitable if they continually find ways to deliver those goods and services more efficiently than they did the year before.

After the market crash of 2000 and the recession that followed, the focus of most companies shifted from “first to market” to Return On Investment (ROI).  This meant that companies began to look at their budgets, and cut out the “fat” they believed existed.  In addition, companies examined projects, and cut out most of the projects that didn’t have a justifiable ROI.  (Many companies also raised the ROI “hurdle” rate, to making it harder to justify capital projects). 

As the recession continued and top line revenues stagnated, executives continued to look for places to cut.  Productivity gains due to computer technology had certainly helped firms to do more with less, but cuts still needed to be made.  However, workloads and budgets were now going in opposite directions.  Cutting more headcount wasn’t a viable option given workloads, and cutting salaries would certainly be met with strong resistance.  The answer to lowering costs without cutting manpower was to shift work overseas.

The good news is, that the offshore approach is far from perfect.  If implemented correctly and on the right applications, it may save companies money over the long run.  But if your strategy is to wait for Corporate America to “wake up” and bring all those jobs back at the wage they were paying pre 2000, then you may quickly reconsider the wisdom in that.  It’s not going to happen.  As time goes on, given the money involved, offshore providers will become better at delivering their product, and honing their skills. They’re going to continue to improve. 

So how can the domestic worker compete with an opponent that has such huge price advantages?  Do weaknesses exist that can be exploited?  I believe there are, and I’d like to suggest an approach that exploits those weaknesses, and involves all interested parties:  The employee, the employer and the Federal Government.

How The Employer, Employee And The Government Can Work Together To Keep The Domestic Worker Competitive In A Global Market

The Employee

If the employer must find ways to become more efficient so he can competitively deliver his goods and services, then why can’t the employee think along the same lines?  How can you, as the employee, deliver your services to your employer more efficiently, allowing you to compete more effectively in the global market place?  One way may be to suggest to your employer that he allow you to Telework from home.  For this privilege, you may consider a pay cut, or be willing to work an extra hour per day.  Now before you start throwing things at your computer screen, consider the advantages:

1. Cutting out commute times
2. Savings on Gas and vehicle wear and tear
3. More time with the family
4. Less Stress
5. More Flexible Schedule

I’m sure if you thought about it, you could come up with more.  How much are the above items worth to you?  If you job was in jeopardy of moving offshore, is the prospect of a pay cut or committing to an extra hour a day more scary than losing you income?

The Employer

While it may be true that the offshore worker charges less for his services than the domestic worker, there are many other cost factors that need to be considered before a final comparison can be made. Items such as transition costs, networking costs, and travel expenses are often overlooked when calculating the cost comparisons.  Risk should also be considered.  What about time zone differences?  Do the overseas coders have a good enough understanding of the business to be able to translate user requirements into usable code?  Are you going to burn out your remaining U.S. staff fixing bad code, and expecting them to conduct overseas conference calls at 2:00 am?

Now let’s consider how to make the domestic worker more appealing on a cost basis using our telecommuting model:

1. If the employee works from home, certain overhead items (office real estate, furniture, and other infrastructure items) are shifted to the employee.
2. The employee can be more productive at home, not to mention happier.
3. Utilize the contractor model.  Why pay burden when you don’t have to.  Shift the costs to some one else. (Using this model, we’ve been able to cut cost up to 40% for our clients).
4. This model allows employers to take advantage of  “lower cost jurisdictions” throughout the U.S.
5. Elimination of all the hidden costs and risks of using offshore resources.

The Government

The Government (Federal, State or both) also has a stake in doing what it can to help make the domestic worker more competitive in the global marketplace.  However, we don’t believe that negative incentives, (such as eliminating tax breaks or raising taxes on corporations you deem as “bad”) will help.  All that will do is help raise the costs of goods and services that those firms provide, making them less competitive in the global market and in turn threaten more jobs. 

We would like to propose a positive approach instead:  For every worker (Contractor or Full Time, working 40 or more hours a week) a corporation has working for them, the Federal Government will allow a $5,000.00 tax credit to that company each year for two years.  This should give any corporation enough time to build the appropriate systems, processes, and infrastructure to support large scale Telework efforts, and start measuring cost savings of the domestic work force verses those overseas.

We believe that an opportunity exists for the Federal and State Governments to contribute to the cause in a positive way.  Should Telecommuting gain wide spread acceptance, less people will be using our already overcrowded roads.  Expansion projects can be slowed, and more money diverted to next generation public transportation systems such as high-speed rail.  In addition, gasoline consumption will decrease, which should have some impact on pricing.  It also follows that air quality should improve. 

Conclusion

The threat of jobs leaving for “lower cost jurisdictions” overseas is a monumental challenge facing our economy and workers, but it’s not insurmountable.  Working together to face the challenge, employees, employers and the governments all stand to win in the near term and long run.   We believe that this three pronged approach, and the cost savings it will generate to the employer, will be make it more difficult for U.S. employers to justify sending over many jobs strictly on a cost basis, as the “risk to reward” gap will be significantly impacted. 

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Published on: 2004-09-12 (1793 reads)