Offshoring – (What do we Dutch learn from US-Backshoring trend?) – is a value creation question –

Offshoring Customer Services or Contact Center Services has been a trend over the past decade or so, mostly for English, French and Spanish languages. The dutch have been waiting for quite some time, but over the past few years an increasing number of Service providers offer Offshore services for the Dutch market. There are mainly three countries to offshore dutch business to: Surinam, Turkey and South Africa. The latter seemes difficult, because language proficiency is not to great. In Surinam and Turkey this is different. Surinam because of its past as a Dutch colony and Turkey because of re-migration picking up and the desire of 2nd and 3rd generation Turks to go back “home”.

The advantage is clear: money can be saved, because costs (of labour mainly) are lower and technology makes it easy to set-up these days.

In the USA there are some big discussions going on about backshoring, mostly driven by consumer sentiments in tough economic times. “Made in the USA” seems to be popular these days and a real driver for increased sales. Another reason is that providing excellent customer service experiences seems to be difficult from outside the US. At least that is the current perception of mainstream USA. I can actually relate to that, but cannot substantiate it with own experience or facts. Nevertheless, both sentiments are resulting in backshoring initiatives from different US companies:

Several major U.S. companies including Sallie Mae, Delta, Dell and the Home Shopping Network are moving some of the work that they had offshored back home. IBM announced in January that it would open a new technology service center in Dubuque, Iowa. The company plans to employ up to 1,300 white-collar workers at the new center by the end of 2010. (quote from Pam Baker on CIO.com)

The question is: What do we Dutch learn from this? Are these sentiments in the USA a reason for Dutch companies to reconsider any initiatives they might have taken or are currently considering? Will the Dutch people also be tempted to buy more from companies that can be labelled: “Made in Holland” or “Serviced out of Holland”. I truely do not know. At least I haven’t seen a lot of turmoil around offshoring initiatives from Dutch companies.

To create or to destroy value

I believe these sentiments should not be the reason for companies not to offshore or start backshoring initiatives. There should be only one consideration these companies need to take into account: Will I be creating multiple and lasting value through offshoring or not? Let me explain my thoughts:

If the only value you create is cost-savings, from my perspective this is single short term value creation. Single because it is the only value, and short term because in the long term (and this may be > 20 years) standards of living in offshoring locations will increase, costs will go up and competitive advantage will erode. This might have worked in the “old – prior credit crunch – economy” in which pass-through or pass-by managers did everything for short term increase in shareholder value. By doing that filling their pockets with a nice bonus. In the post-credit crunch economy these single value creating actions will not work anymore. Multiple value creation is what goes.

Multiple value creation

Over the past few months consumers and customers have been disgusted worldwide by fill-pocket managers. Consumers feel like they have been robbed. In return they now seek products and services from companies that choose to listen to the customer. Companies that seek interaction with the customer. Companies that create value for the customer and not only for themselves. Multiple value creation is about creating awesome products, services and experiences for customers that add value to their lives. And of course this should result in value creation for the company, its employees and its shareholders too. Companies that create value for all of these stakeholders will be the winners of the post-crunch-era. It is no longer about I Win. It is again about We win-win-win for the long term.

Anyone or any company that is currently offshoring or considering offshoring customer services activities, should at least take the value creation question in consideration. The outcome might still be “yes” for offshoring. If, and only if, you are certain (beyond a reasonable doubt) it will deliver multiple long lasting value creation, you have made the right choice.

What’s your thought?

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