High-minded rhetoric about protecting U.S. jobs and publicly bashing corporations who engage in offshoring has become a politically compulsive distraction from the real bottom-line driven issue of how US businesses will endure the potentially crunching consequences of the new Heathcare reform law. The $939 billion law, approved in March, is set to usher in assorted new costs for US businesses, while also eliminating tax exemptions many of them enjoyed previously.
The law is clearly reverberating throughout the offshore outsourcing industry where dozens of outsourcing providers continue to analyze how the law will trickle down and potentially help or hurt their operating models. We’d like to take a quick snapshot at two players in this drama, DialAmerica, an exclusively US-based contact center outsourced provider, and Patni Computer Systems, the sixth-largest India-based IT services firm which maintains a balance of nearshore, farshore and onshore operations.
A major calling card for DialAmerica historically has been the firm’s ability to sell an “all-American” brand – where, no matter what, an American will be at the other end of the phone whether taking a cable TV repair call or telemarketing to drive magazine subscriptions. The company employs about 5,000 associates across 20-some locations in the US, from El Paso, Texas to Eric, Pennsylvania.
Because the company has multiple locations in second and third tier locations, one might try to develop the argument that it is immune to cost pressures because its operations are not burden by the high costs of big city salaries and higher urban overhead. In fact, some might contend that DialAmerica is a first-class rural outsourcer, taking advantage of the desire to send work to the back-country of America – where jobs are few and the work ethic is more robust.
Does that make DialAmerica immune to the uncertainty of the healthcare law? Based on some conversations recently with individuals close to the company – nothing is for sure – and if, according to the source, the new costs become too crippling the company will closely scrutinize the benefits of establishing operations or partnerships either in nearshore or farshore locations.
Meanwhile, on the other end of the equation, you have a company like Patni which too has an operation in El Paso. But in this case, it’s a non-US firm that has managed to smartly leverage the incentives around creating jobs onshore and also is well positioned to benefit from the huge paperwork and data management complexity insurers face going forward.
Parts of the new heathcare law contain restrictions that certain patient information remain onshore. As a result, Patni is promoting a righshoring strategy enabling the company to shift and redirect functions and workers to the most suitable geography depending on the client and job requirements.
The fact is companies like Patni are going to be in a far better position going forward because they are building flexibility into their operational makeup. If the political winds turn foul onshore, the company can retreat to two legs of its stool, calling on nearshore and farshore locations to carry the weight. If however the business climate grows more favorable then the company is well prepared to dial up its onshore programs.
Meanwhile, DialAmerica faces the uneasy dilemma of whether to first serve the bottom line or cling to the uncertainty of the all-American tightrope. Will DialAmerica be able to absorb the new healthcare burdens or will politicians reward the firm, and others like it, for providing jobs in an anemic economy?
Who bets the politicians will remember the DialAmericas of this country past the November elections?