Tuesday, July 1, 2008

Part II How Low can the Cost of Name Generation go?

Let me make some clarifications on some of the comments so far.

Mary: Please re-read the original post. This is question about the cost of delivering a service. It's not about process. No matter how you slice it if Sourcing Firm A base in India/South America/Eastern Europe/Africa etc pays their people $200 a month and the US based firm pays $1280 (min wage of $8 per hour times 160 hours per month) then all the process in the world will not make a difference in the price the US firm can charge their client, it can not be lower that the cost to produce said service. My point was that Internet Name Generation can be done by anyone, anywhere in the world at any time. All you need is access to the internet and a few hours of training and off you go. (I'm over exaggerating the amount of training needed to make a point) But it was a nice plug for SGA none-the-less no matter how irrelevant I feel your comment was to the topic at hand.

Josh/Vipul - Great banter. Good points made and let me add that employee costs will climb for companies in those offshore locations. The more companies have to compete for experienced employees the more their employees costs shift. In the beginning these offshore companies will spend a lot of time and money training employees, as an employee base gains experience over many years other companies will attempt to recruit them away to reduce their training costs. By speaking with many RPO companies in India, SA and Eastern Europe I'm seeing this happening already. A few companies are in those three areas are in strategic battles with their competitors to keep employee costs to a minimum. In one area employees costs have tripled in the past 5 years and are continuing to rise. Inevitably, as the market matures and employees gain more experience, there will be more employment options for people with those skills and salaries in those offshore areas will rise. Disclaimer: As with any investment opportunity individual results may vary. These statements are not in any way a guarantee that you or your company will obtain any level of success should you decide to take part in this opportunity. Use of, being associated with or providing these services may cause fever, fainting, rash, sleeplessness, vomiting and in rare cases body odor and addiction to caffeine, chocolate or other substances. Sorry, I felt had to lighten the post up a bit

Cultural issues and language barriers will not be barriers for much longer. These companies will find ways to offset those issues, they will shift their training tactics from a "how and what to do to" to a cultural training and language training. Admittedly this is (from my understanding) is much harder to train for but the successful companies will hire people that were educated here in the USA or UK or Australia so that they will have less of a hurdle. In short, it is difficult but not impossible. There are challenges but they can be overcome with the right training and if they companies hire people with the right backgrounds.

Patrick: CPD-Candidate Pipeline Development(TM) is actually trade marked by my company HTC Research and so as not to confuse the market I'd like to state that the prices quoted in your comment were not HTC's prices or service offerings.

Also let's extrapolate Patrick's point a bit further. Instead of $8 a name what if a company opens up an office somewhere where the employee costs could be $1 USD per day. They would now offer their names at let's say 50 cents per name. And the quality is just as good if not better. This same thing happened to the data service providers when email addresses started being farmed on the Internet. Sales People and list brokers would sell names at a $5 per name not they are 50 cents, 5 cents, 1 cent per name and even lower for unverified Sales Leads. What force in the staffing market that will stop this from happening to Internet Generated names? AND if you can get a computer to do all of it for you that could reduce costs even further.

Stella: Time difference is not as big a problem as you may think. The fact that India is 12 hrs ahead of us makes little difference. India is not the only off-shoring country out there and SA is for the most part in the US time zone. The Internet is open 24 hours a day, 7 days a week. Now verifying those names by telephone is more difficult at night but not entirely impossible with the right techniques ;-) I know of one offshore company that does the internet name generation in India then they dump those names into their DB for their group in Eastern Europe and Africa to call and verify and then they have their group in SA recruit the candidates for contingency fees and all their business development people are based here in the USA. Amazingly though, they still charge a full 20%-30% placement fee. So it's what the market will accept.

OK I didn’t mean to ramble on for this long so enough for now, replies/rebuttals welcome.

Jeff Weidner
HTC Research Corp
925 313 9005 X 200

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