A Momentous Angle to Consider for an Outsourcing Model

In one of my previous past lines of work, we off shored almost a dozen positions in our procurement department to southeast Asia and central Europe. The department that I was in was a Global Business Services operating model. At GBS we were able to perform services at a much cheaper level than an ordinary business unit operating within the United States. Essentially, we would take the procurement and operational work in from the business units for one to two years and then we would standardize the work and streamline all the process inefficiencies the business units have unknowingly been doing all along. It was exciting being able to take something that was once done ineffectively and be able to create a fast and simple way to do that same job (I can be lazy, so I naturally always think of the quickest way to do something correctly).

We created standard operating procedures which helped the offshore team complete the work within a 99% accuracy rate. Variances and escalations from the norm would be escalated to us, in the bubble support phase. Of course, the respective business units would voice their concerns in a disgruntled manner when we would take work in and offshore it. Complaints were commonplace, and it is understood why the complaints were occurring in the first place. Initially offshoring the work was always difficult, because problems would occur with certain service levels or ways of working. These adjustments would be ironed out over a month or two after Go-Live. Striking a balance and pleasing both parties about outsourcing and offshoring is tremendously difficult (corporate finance perspective and a human perspective). From the way, I see it if positions are outsourced or offshored the decision-makers who removed those roles are responsible for reskilling and retooling the respective employees for a new role and transitioned into a new more strategic and less transactional position. While I was one of the fortunate few, this isn’t always the case and I have seen layoffs occur firsthand. After offshoring occurs, the service provider often uses robotic process automation to further optimize the work and increase efficiencies. Once when AI and robots are completing the work, I think it is of great importance that we tax those robots as full-time employees. I think it is of great importance when looking at the business models and take ten steps back and look at the big picture. While I do believe in personal responsibility and fending for oneself, these workers were doing the same tasks for several decades and were rewarded well for doing it! Not always, but often when offshoring or outsourcing occurs layoffs and unemployment occur so now, we have a worker that is on unemployment which was once a tax-paying citizen. Further expanding on tax, is regularly tax revenues are reduced when offshoring occurs, but I still think it is important to recognize that what this software is doing was once completed by a worker. What was once a position that paid a handsome $120k a year in the business unit, then transferred to GBS paying $70K a year, then transferred offshore for about $13.5k a year and is now being completed by RPA for about $5K-10K a year. The business operates in the U.S. and positions are being removed from the U.S (Offshore). While profits are higher than ever; costs are reduced, service level expectations are being met, capabilities are being utilized, compliance goals are being met and a fantastic governance structure is in place we are still missing something of paramount importance. Something I have witnessed firsthand is very large groups of stakeholders such as customers, the local community the company operates in and former employees understand what these company’s practices are and in turn, they choose not to do business with them. For life. A strong debate can be made, and I believe it is always important to look at both sides of the coin as sourcing/procurement/finance professionals when looking at these situations.

Business decisions like these do impact workers and it is of importance as sourcing professionals that we step back and recognize the decisions we make have the potential to impact people and this impact is often debated every four years from both sides of the aisle. While I do believe the GBS model is critical for-profit optimization and an efficiency standpoint, I believe more weight should be considered on the human element. It could be the match in the powder barrel from a political, social sentiment and customer retention standpoint.

-Published 9/25/2019

Nothing stated in this article is a recommendation from Forehand Financial to buy or sell a particular security or asset class. You should wisely consider your tolerance for risk, time horizon, and financial goals before making an investment. With investing, you run the risk of losing money, always read an investment prospectus and make an informed decision before allocating capital to a particular investment.  

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