Offshore outsourcing is a fact of life for valley
Your Special Friend
Published: Friday, October 03, 2003
Offshore outsourcing is a fact of life for valley
Punita Pandey, an offshoring expert, says the phenomonon is a paradigm
shift, not a fad
BY TOM KANESHIGE
Funny thing about offshore outsourcing in the valley -- it's nothing
new. In fact, Punita Pandey, co-founder and CEO of NetCustomer Inc. in
San Jose, has been offering call-center outsourcing services out of
her facilities in India for years.
"There's a lot of unrest around the term today, though," says Pandey.
"It has little to do with offshore and more to do with underlying
economic fundamentals. And once they correct themselves, everyone will
see offshoring as just another basic business practice."
In the late 1990s, the value proposition for outsourcing critical
services offshore, such as call-center operations and product
development, was very different. Tech giants sought NetCustomer's
services, in part to mitigate risks in a global economy by
distributing services over many geographies and in multiple time
zones.
Only after the dot-com crash did the notion of offshore outsourcing's
cheap labor, as well as related displacement of valley workers, take
center stage.
Nevertheless, offshore outsourcing has led to valley workers voicing
their anger over the corporate practice. (See Organizing the Valley,
Biz Ink, Sept. 19.) The noise has caused some of NetCustomer's
prospective customers to become wary of a potential employee-moral
fallout, if they use Pandey's services.
Undaunted, Pandey points to her ability to attract valley venture
capital and marquee customers such as software vendor PeopleSoft Corp.
in Pleasanton and outsourcer Computer Sciences Corp. in El Segundo, as
testaments to the power of her business model. Pandey talked to Biz
Ink reporter Tom Kaneshige about the unstoppable paradigm shift toward
offshore outsourcing and how it will affect valley life and business.
Why do you call offshore outsourcing of services a paradigm shift?
The whole point is that companies have a global supply chain these
days. Just look at manufacturing. A U.S. car, for instance, has parts
from around the globe. The same thing is going to happen in the
services economy, thanks to the Internet. Why? Because it makes good
business sense. There is a significant difference in net savings in
offshore verses onshore outsourcing agreements.
If a typical onshore outsourcing arrangement saves a company 20 to 30
percent per year, the same arrangement with an offshore outsourcing
partner may bring savings of closer to 50 percent. This is mainly due
to significantly lower labor costs. In locations such as India,
professionals with advanced technical education and with good command
of English are readily available. And having outsourcing partners in
offshore locations allows companies to provide better service to their
global customers in different time zones and reduces their exposure to
environmental or economic fluctuations.
What are some of the risks?
Infrastructure in developing countries, especially as it relates to
power and telecom, is always behind that of the western world. Certain
types of business processes that are unique to a geographic location
may be hard to take offshore, due to lack of sufficient domain
knowledge or cultural differences. This may be true for certain types
of consumer support, particularly those that require call-center
agents to speak the local language and be aware of the cultural
nuances of the specific support function. Some business processes
related to government regulations or strict licensing requirements
also may not be suitable to be handled offshore. And, lastly, certain
parts of the world have greater political instability compared to the
developed nations.
Speaking of politics, will U.S. legislation derail offshore
outsourcing?
Anything that makes sense will happen. No one can fight it. Not
companies or governments or unions.
How will this affect valley workers who fear job losses due to
offshoring and offshore outsourcing?
What's happening right now is a reflection of the overall economy.
Having said that, the global distributed model is prompting people to
move up the value chain. Folks who have done fairly mundane things
here may not have to do them because someone else can probably do them
more cost effectively elsewhere.
For marginal performers, this may be a scary time. But there's also an
opportunity for innovative thinkers who have the ability to create,
manage and improvise on this model. Offshore models are not about
doing away with U.S. resources. Most of our key clients did not resort
to job reduction as a direct result of working with us. In many cases,
companies use outsourcers as strategic partners to establish a
long-term, flexible execution model rather than use ad hoc onsite
contractors. This allows companies to scale efficiently as their
businesses grow or to deal with downturns more effectively. In many
cases, U.S. staff may be even busier as they move up the value chain.
Any company in their right mind should not be losing good people. They
should be figuring out how to retrain them.
Why are local expertise and a valley presence important in the
offshore outsourcing model?
Silicon Valley is so in tune with venture capital and the latest
innovations. No one can take away or replicate that entirely in any
part of the world, at least not for several decades. The valley will
always have access to the next best idea. Just look at us. We started
in Silicon Valley, not in India. Everyone who can see what sort of
things will make a difference are all here. The innovators can convert
ideas to actions simply by having proximity to venture capital and,
more importantly, to U.S. companies willing to take chances.
Any other thoughts on opportunities for U.S. employees?
It is important for those of us in the U.S. work force to recognize
that outsourcing to global locations is not a fad. It is a paradigm
shift and an irreversible trend. Having said that, it should not be
all gloom and doom for U.S. employees. There will always be a need for
those who understand the U.S. business climate, those who can innovate
and produce new ideas about technology and services, those who can be
most effective in dealing with complicated customer environments, and
those with the ability to work within a global team structure. Get
ready for the new economy, it will have opportunities for everyone.
You can reach Punita Pandey at con...@netcustomer.com and Tom
Kaneshige
at tkane...@svbizink.com.
abirdsi
tendencies of businesses to look for the most bang for it's buck.
Because she happens to be a recipient of that buck she is more than
happy to expound the virtues of said outsourcing.
If and when the competition for that buck becomes stiffer then will
she be singing the praises of outsourcing? If China evetually secures
a sizeable portion of the call center business will her attitude be so
upbeat?
Here's a great idea that could certainly have her seeing red.
Introduce a elective to college students today where that have to work
say 4 hours a week one semester as a call-center rep. The work would
be administered as a class and graded as such.
The benefits would be tremendous. Students could be paid a small
wage similar to those currently being paid overseas thus keeping the
cost down for business. Students would get real-life experience
dealing with customers. Logistically speaking it doesn't seem far
fetched that the system could be implemented with benefits for
schools, students and businesses. Businesses especially would be
content knowing that the students would be especially attentive to
their work as it is a requirement towards graduation.
Then again perhaps I am being too narrow minded and in a sense I
know that to be the case. The point of the above however is to
underline the fact that as Americans we have a hundred different
options if we so desired to capitalize on the vast oppurtunities out
there. Unfortunately politics, red tapes and an adherance to the
status quo prevents us from moving forward on many of these
oppurtunities.
Instead businesses become narrow minded as well and when they see
someone getting in on a good thing then they all jump aboard hoping
they'll be one of the lucky ones to grab the brass ring. To further
the point I don't recall the use of extremely cheap labor as a
provision that Capitalism needed in order to survive.
Lastly remember that the forces that propel consumerism are very
fickle. What seemed like a great thing today maybe the next dot.com
tommorow.
Scott Auge
Where does it end?
abi...@yahoo.com (abirdsi) wrote in message news:<cfeaeb03.0310...@posting.google.com>...