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Offshoring - Pros and cons


Guest Offshore option

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Guest Offshore option

Hello

I would like to know the views of everyone on offshoring of some of the monotonous and mundane daily tasks to India. I ask since I am running a small retirement offshoring services firm based out of New Delhi, India.

Your views would be most helpful.

Best regards

Offshore Option

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I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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Guest Offshore option

Thanks for the links. However, I would disagree completely with Lori on the disadvantages of Offshoring. There has been a drastic change in the country vis a vis 10 years back. I faced similar concerns while working with my US counterparts in Hewitt Associates and Mercer when I went to transition the work back. The electricity, roads are a thig of the past. We have a highly skilled workforce with a very high emphasis on quality which if I may say so is even if not higher than our american counterparts. While I agree that turnover is on the higher side, it is because the companies pay peanuts to the associates and hence they switch. If a decent salary is given, there is no reason why people will switch.

Our team has transitioned work such as Form 5500s, Compliance Testing, Setting up of plans on systems apart the other admin activities. I have personally overseen the transtion of Pension Calculations work in my last stint with one of the largest benefits providers in the US.

I would like to invite you all to have a holiday in India and see the changing times.

There are no doubt huge cost savings involved but more importantly it is the quality of service which is the real benefit.

Thoughts ???????

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Guest Pensions in Paradise

Could offshoring work for large bundled providers. Sure

Could offshoring work for smaller TPAs. Doubtful.

I think most clients would look elsewhere once you disclose to them that you offshore your work to a foreign country. Doesn't matter if its India, Japan, Canada, or Mongolia.

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Although our TPA firm has clients from coast to coast, we not choose to outsource our services abroad for the following reasons:

1. Our clients expect us to be accessible, including operating within 1 hour of their time zone;

2. When clients or their advisers call, they expect to speak to someone who can answer their questions. I can train a person within a year or two to understand enough about our services and our clients' plans to be able to answer their questions intelligently. I cannot imagine how to train someone who is thousands of miles away;

3. I would much rather create jobs here than there. Our balance of payments deficit is too large already for me to add to.

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A month or so ago, a former Employer of mine gave out pink slips to about 20 of my former team members who performed/reviewed benefit calculations for qualified DB plans (and nonqualified). They were part of a DB outsourcing department - meaning the calcs (years ago) had been done by the HR departments of the various clients, which was later outsourced to this large consulting firm.

They have until sometime in November to find employment elsewhere, and I'm sure they'll all do fine, perhaps even better than they think. I was blessed enough to be able to voluntarily leave 2-1/2 years ago (for a better job) before this all occurred (but the direction was obvious even back then). In order to keep costs low enough to stay competitive, this large firm had few options. Few clients were willing to pay extra just to keep their outsourcer in the US - they had already outsourced the work from their HR to them anyway!

The calculations/calc reviews will be done in India now. However, the firm still needed to keep 4 or 5 people in the US to handle the more complicated items and to act as the "local" technical voice on the phone that the client can meet with in person when needed. The DB outsourcing department was profitable, but when the DB outsourcing and H&W outsourcing departments were combined into one, the overall effect was showing a departmental loss in the millions. This should not be confused with the actuarial department (doing valuations) which was also profitable at that time.

This will not end after it is outsourced, however. It appears that the goal is to automate and certify the overall programming on many of the calculations as well, such that a large number can be done and sent off of the system without a mathematical review (other than a statistical sampling). Once that programming effort is complete, then the India jobs will also be getting pink slips - assuming that this employer doesn't sell its employee benefits unit to another company first (which also appears likely).

The number crunching repetitive jobs appear to be the easiest to send overseas to lower costs, perhap even the phone centers for the large market can be sent over as well.

But the "ideas" jobs can hardly begin to do that yet. Now that I am in the micro-small market, the face-to-face meeting and the ability to truly say "I was in your town last week when my nephew had a district track meet there . . ." is best met with local people, especially when the client stops by the office and wants to just say hello. Most of our jobs are "ideas" jobs in this market - the administrator must intently listen (and truly hear what the client is saying) so they can ask the right questions based on their statements - how else can we make sure their plan is still designed to suit them best? This ability is especially important now after August 17th, 2006. I'm sure Congress will continue to provide more design opportunities for the small TPA.

Off topic: As more and more fee disclosure becomes transparent, I think we will see more pressure for brokers/financial advisors to lower their basis points further. It's interesting to see the look a client's face when they see exactly how much was paid in fees by the plan, they usually look at the largest amount and say "who is that?" - that's your broker or financial advisor. Then they ask "what do they do?" and "Is that a reasonable fee?" Gotta be careful there.

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3. I would much rather create jobs here than there. Our balance of payments deficit is too large already for me to add to.

Amen. It's not supposed to be only about who has the lowest cost. Think "value".

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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Guest Offshore option

Vebaguru

To answer points 1 and 2 of your argument, we are already doing Compliance testing and Form 5500 preparation here in India apart from setting up of the plans reading the plan documents. And all of this is just in 3 months of training and that too in India. Also there are 3 options which the offshore service providers give to the TPAs

1) Work as per the american time.

2) Work during american night time (our day time) so that the work is on your desks when you come to work the next day.

3) Work both the american day as well as the night.

It cannot get more efficient and faster than this. Because of a young and skilled work force the learning curve here is much faster than you would believe. Even for a small TPA, you can outsource 2-3 man/woman work and the savings are still 40% as per the various findings.

I will agree with point no. 3 being a nationalist myself. However the money that the clients save is routed back into the american economy albeit in different departments.

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Guest Offshore option

John, you are right that 15 years down the line, the Indians also will lose their jobs as their work will be outsourced to an even lower cost destination. But that is business after all. At this time, the non-client facing jobs will find their way to India and the ideas based jobs will be difficult to outsource. But a balance can definitely be achieved profitable to all.

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Guest Offshore option
Could offshoring work for large bundled providers. Sure

Could offshoring work for smaller TPAs. Doubtful.

I think most clients would look elsewhere once you disclose to them that you offshore your work to a foreign country. Doesn't matter if its India, Japan, Canada, or Mongolia.

If you offer your clients the benefit of offshoring by lowering your costs a little, I doubt if anyoe would look elsewhere. They might just increase the sales for your TPA.

Lower costs - increased sales - increased profits - more jobs created - more money invested in american economy- more jobs

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Guest Pensions in Paradise

Ah, but you are overlooking one thing. You are assuming that the vendor will lower their fees once they outsource. That's not going to happen. The vendor will just take a larger profit.

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Lower costs - increased sales - increased profits - more jobs created - more money invested in american economy- more jobs

No. That is incorrect. When money goes elsewhere, it is not available for reinvestment locally. Please, no more idiotic economic theory that states we all are better off because we make less money.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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Guest Offshore option

Outsourcing does add value both when done locally or to another country. There is a fresh set of brains trying to find out better ways to do something. It does lead to a higher productivity. In all the companies I have worked with, I have always found that the associates have all the knowledge in their heads and never on documents. What we term as difficult, is actually not difficult at all when some procedures are put in place. It also ensures continuity for an organisation and makes it less dependent on people.

As regards the idiotic economic theory, well get used to it. We have Coke, HP, Pepsi and countless others doing business all over and sending profits back to their mothership. But with their doing business in other countries, everybody does stand to gain. Walmart would'nt have been Walmart had China not been there.

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Guest Offshore option

Had I not been there, it would have been 'Offshoring - Cons and Cons'

For a good discussion to take place, there must be points to cover both sides of the coin.

Also, I am running a very small firm, which provides Offshoring services to the TPAs based in the US on 401(k) plans, Pensions and Health and Welfare plans. So I have to correct some of the the wrong notions people have about India. No offence meant, but limited knowledge is very dangerous.

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No offense, but I won't even consider spending time on the phone with someone who is speaking to me in less than perfect English. That tells me the company has off-shored their labor. They can off-shore their product as well since I won't be purchasing it. Nothing turns me off more than someone mangling my name--although my son had a pretty funny comeback when someone asked for Je nine. (J 9). He told him J 9 wasn't here but Jeleven was.

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No offense, but I won't even consider spending time on the phone with someone who is speaking to me in less than perfect English.

Wow. You must not deal with anyone in Texas. Or, California. Or, South Florida. Or, Boston, New Yawk or Minneapolis.

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Wow. You must not deal with anyone in Texas. Or, California. Or, South Florida. Or, Boston, New Yawk or Minneapolis.

Or London! Or Dublin!

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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Guest Pensions in Paradise

We are a small TPA. It wouldn't matter whether we farm the work off to someone in a different state or a different country. Our clients retain us because they get personal service and know that the people doing the work are the same ones they talk to on the phone and can see in person. If our clients wanted a cheaper product they would retain the large bundled providers. Same thing if the client didn't care about customer service. They would retain a large provider.

And please don't insult me by saying that the large providers can provide the same level of customer service that a small TPA can. That dog don't bark.

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No offense, but I won't even consider spending time on the phone with someone who is speaking to me in less than perfect English.
Wow. You must not deal with anyone in Texas. Or, California. Or, South Florida. Or, Boston, New Yawk or Minneapolis.
Or London! Or Dublin!
That dog don't bark.

Or Pensions in Paradise?

...but then again, What Do I Know?

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Guest Offshore option

Guys

All work where personal service/touch is important can/will/should never be outsourced. What can be easily outsourced is the work which is going to be the same most of the times eg: backoffice work such as entering terminations requests, setting up new participants, withdrawls etc.

I am not saying that you cannot service customers from other states or countries, but it involves a huge cost in training as well as a long learning curve. But mundane tasks or work which can be defined as a process can easily be outsourced which does result in cost savings as well as increase in productivity even an improvement in process if possible.

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