Internet Marketing Blog

On Offshore Outsourcing…Part 3

December 27, 2007 – 7:15 pm

Over the past couple of weeks I have taken the time to evaluate the issue of offshore outsourcing, a controversial topic which brings out intense passion from those who discuss it, no matter what side they are one. In my first entry, I discussed the issue of jobs, how many people blame offshore outsourcing for the loss of jobs while companies see it as an affordable path to gain quality professionals. In my second entry, I discussed the careful balance companies must maintain when distributing the cost savings of outsourcing: whether that money should be absorbed internally to fuel growth (and fatten paychecks) or if it should be passed onto the customer.

Today I would like to try my thoughts and experience against the issue of the falling dollar. Has it damaged the benefits of offshore outsourcing as a long-term strategy, or is this merely a hic-up in the grand scheme of the global economy?

There’s no denying that the American economy is facing real challenges. The slump in the housing marketing and the credit crunch, inexorably tied to the tragedy of billions of dollars lost from irresponsible lending to the lower middle class, has sprouted poisonous tendrils in other, one might say “innocent,” sectors of the economy like retail, construction, the auto industry and direct marketing firms. Unprecedented gas prices, which flirted with the historic $100 a barrel, certainly haven’t helped. Neither has a ballooning American deficit. With all of these factors crushing down, the dollar has suffering next to the euro, the pound, even the Canadian dollar and the Indian rupee.

This has taken a bite out of offshore profits, especially in India and Eastern Europe, but there is little to suggest that the dollar is going to remain a pariah forever. Major investors from the oil-rich Middle East, as well is GDP-happy China are coming in to save the day for financial institutions in the US that are writing off billions and billions of dollars. Investors, successful ones anyway, rarely throw good money after bad, which means that America’s historic stability is such that investors can see a rosy future. In the meantime, America’s sad trade deficit is getting lift, something most businesses should celebrate.

Aside from the patience to endure until the dollar regains its value, another solution to the volatility of international currency is to establish what our VP of Business Development likes to call the OOM – optimal offshore mix. Placing all of your eggs in one basket, or offshore offices in one country, means that your profits are tied to shifts in currency exchange, as well as the social shifts, of just one other country. It might be simple to manage, but it makes for volatile profits. Instead, a careful evaluation of the individual strengths of different offshore locals can allow a company to develop the optimal mix of offshore offices for various projects.

When Blueliner Marketing first made the decision to open an office in Bangladesh, it experienced cost savings of up to 50%. An outside observer might wonder why we didn’t quickly consolidate the team there and there alone. The answer is that India and Bangladesh have individual strengths and weaknesses, which complement each other for client projects. India has more in-depth programming experience while the Bangladesh team features more designers and more experience with open-source software. Add to the mix our team in China, which handles product development and production, plus free lancers from Eastern Europe, and you have an global mix of people producing high-level work at a fair price.

So the solution to the downward spiral of the American dollar? Patience, and a mix of workers from several countries, whose strengths and weaknesses create a streamlined offshore outsourcing unit.