Outsourcing continues to gain adherents among companies who can’t find the skilled personnel they need locally.
It can be lucrative, but a couple of South Florida companies have also found complications, instability and danger. It sometimes helps to have an AK-47 handy.
Boca Raton-based Revelex Corp., a 70-employee company that offers an Internet platform and technology tools for travel agents, tried to outsource to Bangalore, India, the country’s fifth-largest metropolitan area.
The company couldn’t find enough workers in South Florida as it grew at a rate of 50 percent a year and reached 12,000 clients, said David L. Goodis, it’s founder, president and CEO.
“India, on the other hand, graduates 500,000 software engineers a year,��?he said. Tech workers can be hired for as little as $1,200 a year in India, although Revelex paid more.
Although the Hackett Group, owned by Miami-based Answerthink (NASDAQ: ANSR), says Foretune 500 companies could cut back office costs 50 percent by offshoring, Goodis found workers jump from one employer to another when companies outbid each other. That leads to additional recruiting and training costs, he said.
That adds to the learning curve of working with a new team and new culture. There were also hidden costs and time constraints such as traveling from Boca Raton to Bangalore, he said.
The time difference is often viewed as a plus when offshore groups write code while the U.S. operation sleeps, but Goodis found just the opposite.
“It seems everything was always a day behind,��?he said.
In the end, he decided to close the Bangalore operationi and keep all elements of Revelex in Boca Raton.
“We had employees who were from that area and could talk to the offshore techs in their native language,��?Goodis said. “I would hate to be in a foreign area cold.��?/p>
Alex Funkhouser, president of Sherlock Technology Staffing, spend a month in Karachi, Pakistan, in 2006, setting up recruiting and placement offices, complete with 954 area code phones. His recruiting manager was from the area and six recruiters can be hired in Karachi for the price of one in South Florida.
There was cost savings, but the fate of a Wall Street Journal reporter in 2002 also signaled danger.
“It wasn’t too long after Daniel Pearl had been abducted and killed, so I had a 24-hour, AK-47-armed guard,��?Funkhouser said.
Things went well, with skilled workers being recruited in both the U.S. and Pakistan, along with new business development.
“A supervisor I hired over there went ‘into business��?with my recruiting manager here,��?Funkhouser said. “They were hiring people and diverting them to jobs they developed and were keeping all the money. I only learned of it after a former employee blew the whistle.��?/p>
They were both dismissed. Additional metrics on performance, supervision and security were introduced.
Even that experience hasn’t soured Funkhouser on outsourcing, although he admits there is a great ethical difference between the cultures, and the political instability still makes him nervous.
Last week, only two employees made it into work. There was a crackdown on dissidents and government forces shot 48 people in Karachi.
“The main road in the business section was closed because of the disturbances, but things have gotten back to normal now,��?he said.
One additional cost saving that Funkhouser noted was in the price of AK-47s. They are only $100 on the streets of Karachi.