Over the last few years we have been hearing repeatedly about the successes of ‘off-shoring’, which is the sending of low level work to third world countries who it is believed can perform the work equally successfully for a fraction of the money of local employees.
In the rush for short-term quarterly results, executives are forgetting the long term costs associated with their actions. They are seeking to show profits and their associated bonus cheques. Shareholders are pacified that their interests are being tended. Unfortunately, the long term results are devastating to the local economies.
By outsourcing to third world countries, their economies are growing exponentially at the same time as killing local markets. What is not mentioned, is that for every Head-office job lost, there are 5 local service jobs lost.
How is that possible you ask? Let me list the ways.
- Dry cleaners
- Office Supplies
- Office Space
- Telephone services
- Local merchants selling everything from cigarettes to candy bars
Are all affected.
The other issue which is not discussed, is that there is a difficulty with semantics. So if a call-center is sent to China or India, the interpretation is not the same, and the client becomes frustrated and more likely to go to the competitor, who provides service locally.
Furthermore, no Senior Executive is going to admit to failure, so the disastrous stories are rampant, although we never do read about it in the press.
One local company in Software R & D for mobile phones off-shored to India because of a senior executive who wanted to bring jobs to the town where he grew up.
Local software engineers with Bachelor and Master’s degrees, who knew the software, And speak both English and French lost their jobs, as it was deemed they were too expensive.With salaries in the low thousands, as opposed to nearly one hundred thousand dollars annually, and the associated overhead costs, it was sold to shareholders and executives as a cost effective choice.
A mere six months later, with deadlines not being met, and no end of software problems, the CEO was fired and the software engineers who had been let go were being contacted to return. The cost of this 6 month fiasco was in excess of $5 million ,not to mention angry clients. Had it not been that the Venture Capital partners were understanding, this company could have gone bankrupt.
This is but one of the many stories we hear in the Executive Suite.
Due Diligence please.