While offshoring work to low-cost countries has saved many companies time and money it may also mean employees here put in longer days to keep pace with the demands of a 24-7 globalized economy, according to outsourcing experts.
To alleviate offshoring woes, a lot of companies are now turning
to vendors like IBM and EDS to do application development or management, said IDC Canada analyst Jim Westcott, who tracks application and business outsourcing.
“It becomes less of a time management issue for the end user and it becomes just a question for the vendor to manage its own resources against the cost of the project and the profitability that it wants to gain from any of those projects,” said Westcott.
The issue of outsourcing agreements and overtime has been brought to the forefront with major cases in the U.S. like Electronic Arts (EA). Following several suits filed by workers who claim the computer game maker violated overtime rules, EA moved to reclassify some of its employees as hourly workers eligible for overtime pay.
One of the better ways to deal with salary employees working overtime is to give them time off in lieu, said Peter Thompson, CEO of Calgary-based applications support and maintenance company RIS . “If you work extra hours, there’s consideration you get time off,” he said.
Another way is paid overtime, which, in some cases, can be harder to manage. “You aren’t sure whether there’s a problem in the middle of the night or the contractor is short of breakfast money,” said Thompson.
But like the old adage goes, the best defense is often good offense, said Judy Wilson at Toronto law firm Blakes, Cassels & Graydon. “People don’t get into a jam because they’ve addressed the issue and dealt with it,” she said. “People get into a jam because they haven’t seen the issue coming because the right experts weren’t at the table or you’ve got inexperienced people doing the outsourcing.”
Anticipation, planning and a good human resources team are three key elements that can help companies with offshore outsourcing agreements avoid potential time-consuming and costly labour and employment issues, said Wilson.
“At the beginning of the development of outsource documents companies should identify and anticipate the human resources issues,” said Wilson. “They should have an identified human resources team staff with HR professionals and labour and employment lawyers.”
Next, Wilson said companies need to identify any collective agreements and determine the impact of the outsource arrangement on the collective agreement. “The new employer needs to look at the terms and conditions of the old agreement and ask explicitly whether anything will change,” said Wilson.
In some cases where there are extreme time zone differences companies might consider asking, for example, whether or not they’re going to move from a 9-to-5 operation to a shift operation, added Wilson.
The time difference between Canada and India was one of the key factors in RIS deciding not to open up an office in India, said company chief executive officer Peter Thompson.
“(India) is just entirely opposite,” said Thompson. “If it’s 8 a.m. here, it’s 8 p.m. there.”
RIS, which supports, maintains and enhances mission critical applications for global companies, currently has an offshore solutions centre in Romania.
“We find there is a natural overlap in communicating with Europe,” said Thompson. “The end of their day is the beginning of our day. We set up meetings early in the morning. It really doesn’t distract us that much and cause much work overtime.”
Westcott has seen a lot of growth in business offshoring in central Europe, said Jim Westcott, who tracks application and business outsourcing for the research firm. There’s a lot of engineering talent in former eastern block countries that was displaced following the collapse of the former Soviet Union over a decade ago, said Westcott.
“(IDC) has seen a lot of companies come out of Eastern Europe and companies going into Eastern Europe primarily to support Western European companies,” said Westcott. “It’s a nearshore model for them and there’s some wage disparities there that they can take advantage of.”
Westcott, however, added that if the offshore model in Eastern Europe continues to expand it will eventually become an overcrowded market like India.
However, IT services firm Tata Consultancy Services (TCS), which has its corporate headquarters in Mumbai, India, said having offices there gives it a competitive advantage.
“We are able to do the work closer to the client through our offshore onsite methodology. While the client is away, the work continues,” said Mukesh Gupta, director of strategic relations at TCS in Ottawa. “The 24-7 becomes an advantage. We are able to bring our offshore mechanism the following day when the client comes back to the office.”
TCS, which also has an office in Budapest, Hungary, recently opened a centre of excellence in Mississauga, Ont. to showcase to clients its industry expertise, tools and technology. The company will also open a development centre to deliver strategy services training, added Gupta.
Because Canada has the same time zones as the U.S. and shares many cultural similarities, it remains one of the best options for companies looking to outsource parts of their business, according to several experts. Despite a strong Canadian dollar, Westcott said Canada is still a viable option for many U.S. businesses.
“From a pure cost perspective there’s more saving to go with an Indian provider in a pure offshore model, said Westcott. “For Canada I think there’s still cost savings there as a lot of companies are in lower cost regions within Canada.”
In terms of customer service, Gupta added Canada has very strategic advantages because of its close proximity to the customer. “Being close to the customer is always an advantage in order to achieve that comfort level,” he said.