Focus on Special Libraries: Offshoring Hits Home

Offshoring, cross border business process outsourcing, outsourcing…. Whatever you call it and however you define it, the phenomenon is here to stay. Why should information professionals, particularly those in the corporate environment, care about the offshoring frenzy? Business magazines regularly highlight corporate moves to shift jobs to low-wage, English-speaking work forces in India and elsewhere. Corporate executives are reading these reports and asking, "What's in it for us?"

The phenomenon began with call centers and information technology (IT) jobs. Now accountants, industrial engineers, production control specialists, medical transcriptionists, telemarketers, and others are seeing jobs move overseas.

In December 2003, IBM moved 5000 programming jobs to India. General Electric has an R&D center in Bangalore where it employs 1800 engineers at about one-eighth the salary of their peers in the United States. Gartner, a technology "think tank," estimates that another 500,000 IT positions may leave by year's end.

The March 1, 2004 issue of TIME estimates that outsourcing accounts for less than ten percent of the 2.3 million jobs lost in the United States over the last three years. However, outsourcing accelerated 60 percent in 2003, accounted for by "outsourcing dabblers who finally jumped on the bandwagon." The December 8, 2003 issue of BusinessWeek, in a multipart cover story on offshoring, concludes that only 36 percent of Americans displaced in the past have found jobs at the same or higher pay.

Managers justify offshoring by saying it leads to cost savings, capacity increases, and time benefits—providing service more rapidly plus taking advantage of time zone variations. Observers predict that, unless the cost savings prove ephemeral, offshoring/outsourcing will continue because there are no more places for American-based businesses to cut costs. The question of quality—measuring outputs—gets an occasional mention as a downside to the overall success of offshoring.

Even as information professionals find themselves debating the topic, some have begun to work daily with offshore researchers. McKinsey has a true offshore information center, with a dedicated staff of India-based researchers. To varying degrees, Bear Stearns, Boston Consulting Group, Citibank, Deutschebank, Goldman Sachs, Lehman Bros., J.P. Morgan, Morgan Stanley, Merrill Lynch, and others, particularly the major investment banks and consulting firms, are testing the waters. Few were able to speak on the record for this article.

Management staff of the information services functions at the New York offices of Bear Stearns and Lehman Bros. gave at least two presentations to professional audiences during 2003. They were not at liberty to participate in this article, however.

Looking at the benefits and challenges, the Bear Stearns team said that training the India-based contract researchers took planning. "Following the sun"—time zones in New York, London, and India give 24-hour coverage—is one benefit. Turnover of over 60 percent annually is problematic. To ensure security, the company requires disclosure agreements and bonding of vendors. By sending some routine functions to Bangalore, information professionals in the Business Information Group have been freed to take on more complex research and presentation duties, thus gaining a higher profile with senior bankers.

Lehman Bros., at the pilot level of its involvement in offshoring, had integrated the Indian researchers into the overall workflow, but their results were still being reviewed before being sent to clients. The firm estimated that it would take an Indian researcher six to 12 months before being fully integrated. The U.S.-based Lehman staff now can become better content managers and legal, regulatory, and due diligence researchers, all potential growth areas.

Offshoring in practice does not necessarily match original expectations. Stephen Phillips, VP of business information services in the London office of Morgan Stanley Dean Witter, tells LJ, "The original goal was to do the same work with fewer resources. Over time the bank has decided to delegate tasks from self-service platforms to the lower-cost labor pool to alleviate pressure on resources."

In deciding to go with an "insourced/captive solution," the company sent a full RFP to seven vendors. Issues to be considered while selecting a vendor include training, quality control, business continuity planning, confidentiality, and legal/regulatory matters, among others.

The existing staff have needed to adjust, Phillips says. "It has highlighted the need to train staff who previously were responsible/accountable for their own work to embrace the mindset of delegating tasks to offshore colleagues and not feel threatened," a reality that he labeled "challenging."

If Phillips were to start all over again, he would budget more money for management support to travel to the offshore team. "Have a strategy and a plan with clearly defined but realistic time lines and deliverables," he says.

Even with all the media coverage, little is understood about the real impact of offshoring, particularly in the information resource community. Toby Pearlstein, director of global information services at Bain & Co., told LJ that the consensus among information service providers is that there is insufficient experience with offshoring/outsourcing to generate comments on its success.

An international survey should help address this gap in knowledge. Business360, a business research and intelligence services firm, has partnered with TFPL, a London-based provider of knowledge management and information management services, to conduct a second survey of "Business Research Outsourcing: experience, lessons, and opinions."

The first survey was issued in July 2003. Data for the 2004 survey is under study, and the report should be issued in May or June. The 2004 study, unlike its predecessor, includes specific delineations between outsourcing and offshoring. To participate in the study, or to purchase a copy when it is issued, see www.business360.com/ebic/survey1.asp.

Of last year's 258 submissions, 45 percent were from the UK and 17 percent from the United States. Most respondents believe that outsourcing will grow, shrinking research departments. Those researchers that remain will focus on analysis and consulting roles.

Information professionals who are skeptical about outsourcing are usually those who have not had direct experience with it. Negative opinions are driven by fear of job loss and impact on career prospects. Others see the phenomenon as part of the ongoing change in the profession and overall a good thing for in-house researchers. Twenty-four percent view it as a "wake-up call."

The managing director of Bain & Co., having read the plethora of articles about India and offshoring, wanted to understand whether there were any opportunities for Bain. Pearlstein began her part of the evaluation project by assessing the unique context in which her department operates. The 60 researchers on her staff, located in 23 of Bain's 26 offices in 19 countries, do case team research, provide day-to-day research support, client development, and a host of other value-added services. The headcount has been flat for three years.

A critical competency for researchers is that they know the local country, since case team research is strongly region-specific. All Bain desktops access a robust, 24/7 information database that contains global information as well as resources specific to the local offices. Consultants are expected to locate general information themselves.

While offshoring to India gains workers who speak English, Pearlstein said such workers could not deal with the breadth of language, local culture, and information differences across the worldwide Bain offices. She concluded she would have to keep local people anyway.

Pearlstein asked the Indian vendors, "Who will do the research and what experience do they have?" She also assessed the vendors' familiarity with standard tools. Out of five companies interviewed, most just had access to whatever information is on the web, relying on their clients to provide passwords for specialized databases. Other essential questions for vendors, in Pearlstein's view, concern training as new researchers are hired, longevity in the job, and assurances of confidentiality if a competitor is using the same vendor.

Ultimately, Pearlstein determined that Bain lacks the scale of activity required to make outsourcing cost-effective. She outsources as needed, using a firm in Germany whose staff are former Bain employees. They know the company, its culture, and its objectives and can provide the level of service Bain expects.

Some companies won't go with full-fledged offshoring, others will. While some say that the threat to U.S.-based jobs is overstated, offshoring is a long-term reality.

To get a sense of how it might play out in your company, proactively evaluate what offshoring can and cannot do—and find opportunities in covering the gaps. Ask the "What's in it for me?" questions—the job-enhancement potential. Innovation is key to survival and forewarned is forearmed.

"Fight back," advises John Marchant, CEO of Business360. "As information professionals, you have so much in your arsenal—skills, contacts, experience, and access to internal information." That access is key, he said, because very few outsourced researchers have that advantage. "Embedded" researchers—those who are not confined to a space called the library but who are assigned to teams within the organization—are hard to outsource and offshore, he said. It's the daily, face-to-face working relationship that creates security.