The Evolving Service Delivery Model

The 1980’s saw a movement to centralized back office functions and customer service (call) centers driven by advances in technology, mainly online systems and "800" number dialing. In the 1990’s, imaging technology and reductions in data communications enabled both a centralization and nearshoring of data entry to places like Mexico, Jamaica and other nearshore locations. Also in the 1990’s, thousands of call center jobs began to migrate to Canada, while Ireland became a destination for software programming jobs.

The technologies driving the latest evolution in the service delivery model include the Internet, dramatic reductions in international broadband connectivity and VoIP. These technologies, coupled with educational and infrastructure advances in third world (low-cost) countries, are driving the next step in improved business processes. For example, the cost of a 2meg International Private Line Circuit (IPLC) has gone from over $50K per month a few short years ago to less than $10K today. A 2meg IPLC line has enough capacity to support 150 offshore workers.

The following passage was published by the Progressive Policy Institute in their Policy Report: "The trade liberalizations of the 1990’s, coupled with the explosive growth of Internet capacity worldwide, have made it possible to move many information processing and business service jobs offshore to low-wage but increasingly higher-skill countries like India and China. This has exposed a whole new swath of our labor market to global competition, including high-wage, high-value-added jobs in fields such as software programming and accounting.

There are three factors driving this trend. First, when an increasing share of work can be digitized or conducted by telephone, a place like Bangalore, India, is now functionally as close as the neighborhood bank or insurance office. Second, many low-wage developing nations have developed the infrastructure, skilled work forces and business climates to become attractive locations for this work. Finally, wages in low-cost developing nations that are, on average, 20 percent of U.S. rates, mean that companies can reduce their costs, often significantly, by moving offshore." The 20% is hyper-conservative. Savings of up to 50% for outsourced positions are not at all uncommon.

The press and media have published numerous articles about software development and technical support call centers moving offshore. What we are just beginning to see emerge is the next step in offshoring, with activities such as accounting, tax preparation, auditing and payroll services, telemedicine, medical transcriptions, customer relationship management, including call and email centers and telemarketing, claims processing, document and database management, and digitization of information including data entry, production of shop floor drawings for architectural firms, and mapping.

The driving force behind this next step in business evolution is the recognition of the capabilities of offshore workers and the even greater cost savings when you offshore some of these higher value-added jobs. Savings of 50% to 60% are not only possible but are probable. As US companies look to not only survive but also thrive in this highly competitive global marketplace, they should not ignore the next step in the evolution of the service delivery model – offshore outsourcing of high value-added activities.

Are you ready to take the next step?