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Offshoring Jobs Falls Short in Efficiency

March 25, 2008

Recently, TNTalk! has been discussing job offshoring or outsourcing. There is still plenty of information to be uncovered, so we will forge ahead in continuation of Dr. Manning’s series of articles this week.

offshoring-bw020303.jpgJob outsourcing or offshoring is recognized by Multinational Corporate America as a major strategy for producing cost savings. Determining the values of these elusive savings has been challenging. Even experts, like U.S. economic arch-nemesis and corporate efficiency proponent, Deloitte Touche are uncertain of real savings garnered from corporate and multinational offshoring activities. In their surveys, Deloitte decided that 83% of corporate entities that participated in their offshoring surveys surpassed their monetary goals by 25%. Of those, 70% of executives stated that they were “satisfied” or “very satisfied” with their offshoring arrangements simply because they imagined they were saving money.

There were also negative findings. 39% of corporate respondents claimed that they had terminated at least one outsourcing contract and 50% had brought offshored functions back to their corporate location. 61% reported major problems with offshoring efforts that required intervention from senior management. This is far from the panacea that Multinational Corporate America often reports. Job outsourcing and offshoring clearly works in regards to finances. Major issues, communication and the threat of terminations are persistent problems.

Contrary to what computer empire magnate Bill Gates maintains, only 34% of multinational and corporate bodies reported that they had gained important benefits from innovative ideas or through positive change in their corporate operations because of job offshoring. Lack of satisfaction has been defined by executives as higher-than-expected costs as well as poor quality communications, services and reporting from offshoring and job outsourcing buddies. In personal experience, adequate communication with foreign offices and foreign outsourcing vendors is the most problematic. Solving simple problems often requires hours of extra time and repeated explanation in order to achieve the required results and accuracy for any task. Extra management meetings are typically required. Creating engagement and understanding between two cultures often proves as a large barrier to overcome when applying the simplest business principles and tasks. True efficiency is often questionable at best. Working with English-speaking foreigners operating from third-world countries is often as efficient as hiring inexperienced high-school students on spring break in an effort to get extra help. Matters of communication are compounded by working over the phone. The learning curve is large and retraining of offshored staff is difficult and fraught with problems. The situation creates a heightened stress level within the organization, resulting in missed deadlines and problems with internal data. These scenarios are the norm in multinational corporate job offshoring and outsourcing efficiencies.

Clearly, saving money in terms of dollars spent is being met by offshoring jobs because of low labor rates. Tax and payroll savings are large over U.S. and first-world situations. 56% of executives desired to gain access to technology expertise. The reality has proven to fall far short of the desire for gains in technology or expertise. Only 37% of executives claimed to use strategic assessment for offshoring and outsourcing. This shows the lack of understanding and time taken before transferring operations offshore. Even Deloitte admits “that companies must take into account any trade-offs that may be involved when taking a transformational approach.”

The preponderance of evidence shows that multinational and corporate businesses that offshore or outsource work to third-world businesses have not set their sights on strategic benefits beyond cost-cutting. Business has not put the mental effort into coordinating or matching skills with offshore workers, while expecting transformation to evolve out of a haphazard process of trial and error. In the opinion of manpower experts like Deloitte and McKinsey, “as global, competitive pressures intensify, companies will have little choice but to leverage outsourcing as a strategic tool.” This requires commitment, discipline and forethought while Deloitte intends to ply the “leveraged expertise” of their corporate service and opinion. Life is all about positioning yourself in the global marketplace. The likes of Deloitte and McKinsey are proof enough of that. ~ E. Manning

Find out what more about job outsourcing at TNTalk!

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