Heard on the Street: Offshore Outsourcing Stays on American Soil
By Scott H. Cytron, ABC
It seems that you can’t have a conversation with an accounting professional or call center-oriented business without the discussion turning to outsourcing work to foreign countries. It even has taken national prominence as one of the talking points associated with the 2004 presidential election. Similarly – and just as controversial – outsourcing hits too close to home for many CPAs and accounting professionals who either want to keep U.S. business on our own soil, or find ways to build their bottom lines by finding alternative methods to getting the job done.
This topic also is all over the national news practically every day. In mid-April, IBM announced its intention to acquire Daksh eServices Ltd., one of India's largest business outsourcing firms, for an estimated purchase price between $100 and $150 million. IBM said the deal will enhance its capabilities in several areas – including customer relationship management and financial management services – in key industries such as banking, insurance, retail, technology, telecommunications, and travel and transportation. | |
Barry Picker, CPA, CFP
“I’m just not comfortable with outsourcing, and we have no plans to outsource in the future"
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In a related story, a recent Gartner Inc. study reported that as many as 25 percent of all information technology jobs in developed countries could be outsourced by 2010. India is the main location for outsourced tech operations, with China and Russia becoming increasingly popular as well.
The CPA Perspective
What’s the word on the street? The opinions held by Barry C. Picker, CPA, CFP, owner of his own tax and accounting practice in Brooklyn, N.Y. may be representative of many professionals who work in accounting services.
“I’m just not comfortable with outsourcing, and we have no plans to outsource in the future,” he says. “In this day and age, it makes me nervous to have my clients’ information leave the office – much less leave the country.”
Picker says his clients have not asked about outsourcing – yet.
“While I would think people would want to know the answer to that question, no one has asked,” he says. “I’ve had discussions with others, not necessarily clients, but others who have said they would be very uncomfortable having their information outsourced.”
Picker attributes the thinking to a competitive factor. For example, it might become a competitive disadvantage if the public hires a practitioner who charges $150 for a return – one in which he or she normally would charge $350.
“If firms charge less because they outsource work to a foreign country, will that make me rethink my position? What about the reaction from the client? Would the client be willing to pay more if the return were not outsourced? The bottom line for me is that I hope I’m not forced into having to make a decision to outsource.”
Creative Solutions Stays Home
It’s been proven that Fortune 1,000 companies agree with this train of thought. According to a late 2003 study by Forrester Research, about two thirds of Fortune 1,000 companies in the United States do not have any kind of offshore outsourcing. Forrester says companies fall into one of four “stances:”
1. Bystanders – Sixty percent are either doing nothing or just starting to investigate the potential of offshore, and are not spending any of their IT services budget offshore.
2. Experimenters – Twenty-five to 30 percent have relationships with offshore vendors for small projects, but have yet to make it a key element of their IT strategy. IT services spending on offshore falls below five percent.
3. Committeds – Five to 10 percent are using offshore suppliers for more complex applications and mission-critical development services, spending 10 to 30 percent of their IT services budget offshore.
4. Full Exploiters – fewer than 5 percent have developed global sourcing as a core skill and documented best practices for large-scale development. IT services spending offshore ranges from 40 to 50 percent.
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Jon Baron, CEO
Creative Solutions
“To outsource any development would be compromising our future,” |
According to Jonathan Baron, president and CEO of Thomson/Creative Solutions in Dexter, Mich., no Creative Solutions software, support or any other entity is outsourced to foreign countries. All development, support and sales are done in the Dexter/Ann Arbor area.
“We think we have benefited greatly, as have our customers, from having tight communication between the development organization, and our support and sales teams,” says Baron. “In fact, during peak times, such as the early releases in tax season, there are daily meetings between development and support.”
Although the company has several relationships with a few firms that operate outsourcing businesses, including SurePrep, Baron says Creative Solutions views this arrangement as a customer decision and does not want to dictate the decision-making process for its audience.
“To outsource any development would be compromising our future,” he says. “We have a very strong development organization with top-flight software engineers. We want them in Dexter because we want them to communicate with our analysts and sales staff.”
Baron adds, “This isn’t a cost issue with us; we just want the best quality, most responsive and tightest communications between companies and customers so we can deliver the best products possible. The Web has made the world smaller, but my personal belief is that doing business face to face, across the aisle, is much stronger than you would find by outsourcing work overseas.”
Lacerte Discontinues Pilot Program
Another high-profile accounting software vendor, Lacerte, recently made the news by discontinuing its offshore outsourcing. In June 2003, Lacerte began testing the use of supplemental resources in India to gain additional capability for handling some of Lacerte’s routine tax support calls and e-mails. In mid-December 2003, supplemental offshore systems support went live.
“Our goal was to determine if this supplemental support could improve the Lacerte customer experience during our next busy season,” says Karl Grass, vice president and general manager of Intuit ProTax in Plano, Texas. “We wanted to see if we could provide faster peak-period response times, and give our product-support agents more time and flexibility to address the more complex, higher-value needs of our customers by offloading some routine tasks to offshore agents trained by the Lacerte technical-support team. We also wanted to provide business continuity in the unlikely event of a service disruption at one of our call centers.”
Although customer satisfaction data for the pilot program was positive, Grass says the effort was not progressing fast enough to ensure “excellent support for the ’03 tax preparation season.” | |
Karl Grass
Vice President, Intuit Pro Tax
"The pilot did not meet the expectations of our accounting customers. As a result, in mid-January 2004, we decided to discontinue the pilot program"
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“The pilot did not meet the expectations of our accounting customers. As a result, in mid-January 2004, we decided to discontinue the pilot program. Tax support was discontinued by January 26 and systems support by February 9.”
Grass says customer feedback to this decision has been very positive – a predictable outcome for the company since the decision was driven by customer feedback. However, from the company’s perspective, Grass says outsourcing, whether offshore, domestic or even internal, has been and always will be a part of Intuit’s strategy to provide the same or better customer experience at a lower cost.
“We have successfully outsourced some of our technical support activity for many years, which has helped us successfully manage the growth and seasonality of our business,” he says. “Our ongoing strategy is that we constantly strive for optimal balance between quality, cost and core competency. We continue to monitor, measure and improve quality across all of our businesses. If we found the customer service quality of any customer segment was not up to our standards or customer expectations in any product area, we would reevaluate our strategy.”
About Author:
Scott H. Cytron, ABC, is an accredited communications and public relations consultant working in the accounting, health care, high-tech and finance industries. He can be reached at scott@cytronandcompany.com or through his Web site, http://www.cytronandcompany.com .
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