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Diary of a Night Owl Who Enjoys Outsourcing

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Diary of a Night Owl Who Enjoys Outsourcing
The night is young from a night owls perspective and the Indian programmers have already finished installing ten new pages with meta-tags, meta-titles and links.  The night owl says, “Wow, this is the way to do business — I didn’t even go to bed yet, and the work is done…. lets assign more”.  A feeling of relief that the Indian Software company in Pune is so fast on the draw, that the entire stack of emails that have the information for five dozen new pages will be done soon.
I’ve been writing customized SEO pages for dozens of pages for my new site for a few weeks now.  They are going online one by one, and google is responding generously to my hard work.  But, its so nice that with my odd schedule, I can find companies that are in full function, when I am in full function with my Leo schedule.  Its hard doing business with Americans.  By the time I get out of bed, have my mocha, finish my emails and other pressing matters, its too late to call the East Coast, and the West Coast only has a few hours to go. 
India is perfect.  If only we could move it to Australia, then it would have the perfect time zone for my schedule, but I’m not complaining, its excellent already. If only all companies could be like Indian Software companies!   Emails are the way I communicate these days.  Sure, a phone call is easier if there is a lot of back and forth in the communication.  But, emails are best for straight instructions and perhaps one or two quick questions for what the work entails.  Its amazing for me to get back and forth at 10pm when I’m in full swing, and America is unconscious.
My schedule is only normal when I take my break and go into the redwoods.  Its a six hour drive to Santa Cruz from here and the various state parts are waiting for me.  There is a feeling of peace there in any of the redwood forests, especially when there is a slight drizzle.  The earth is so soft as its composed of disintegrating pine needles.  Thats the only time I wake up as a civilized hour.  Last trip up North I woke up at 6am the last day and went hiking near Felton, CA at Henry Cowell state park.  I save all of my hundreds of business calls to the East coast for when I go on my trips.  Thats the only time I’m not a night owl.  Its up North that I do my welcome calls for new clients, and reminder calls for existing clients.  I wouldn’t be able to call India from there because I fall asleep at 10pm when India has just gotten to work since its +13.5 hours.
If you are a night owl who is in a software business, Indian Software companies are a dream to work with.  Try it!

Labor Costs & Overall Pricing

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Labor costs within a pricing formula

The way large companies choose which companies to outsource work to is based on a very complicated algorithmic formula that takes into consideration many aspects. We’re all aware that labor cost is one of the major considerations that effect the price of outsourced labor. But, there is a lot more involved, and since prices are always changing, long term cost considerations need to be included in a calculation.

Per capita income and prices
Statistically, India is a very poor country with per capita income around $700 per year (rough figure) while American income is around $40,000 per year. Therefore, the price of labor in India must be 57 times as cheap, right? Wrong. American income doesn’t vary so dramatically from place to place and from city to countryside. Although extreme cases exist including NYC which has wages that might be double what wages are for similar jobs in Mississippi, the rest of the country doesn’t vary so significantly. There are parts of India such as Bangalore or Chennai where a highly skilled Indian software worker makes $20,000 to $100,000 per year while a peasant in the Bihari countryside might only make 50 cents per day and might only eat once per day (on a good day).

The BPO jobs that happen in India are generally located in high cost urban areas where the price of labor and everything else is sky high. This is why the price of outsourced labor in India is only four times as cheap as in the U.S., and not fifty-seven times as cheap.

Job conditions in India
The next problem is that inflated and rising land prices in India make companies conserve on space. India has less land than the U.S., yet has four times the population, and the population shows no sign of declining either. Indians are typically squeezed in offices with their small desks crammed together like sardines. The American “dream” of having your own 6×6 cubical simply doesn’t exist for most Indian Software or call center workers. The price of land continues to rise in Indian metros making outsouring costs higher and higer. A 2 bedroom condo in the outskirts of Pune costs even more than it would in Portland, OR on a square foot by square foot basis.

High turnover is another cost in India
A few decades ago, it was only the lucky in India who could get a decent job, and the rest had to take menial jobs just to survive working for pennies per day.  Nowadays, there are too many good BPO and Indian software jobs. Its common for young techno-saavy Indians to skip from job to job chasing better working conditions, more likeable bosses, higher salaries, and nicer looking female work counterparts. Every time an employee jumps boat, that costs the boss a bundle to try to find someone new and train them. This cost gets transfered to the customer in the long run.

Management costs can vary
This is a very difficult issue to pinpoint, but there is always a management cost for the company who hires and outsourcing company. If your company is nearby or on a similar time zone, communication is easier and travel to see your outsourcing company is quick. If the company is working while you are sleeping, unless you sleep late, you will have trouble interacting with that company, not to mention the 30 hour plane flight to Mumbai! If you need to visit a company frequently, then outsourcing to India will carry a hefty management tab, but what if you only need to visit for initiating new complicated projects?

Transportation costs can add up
A business that involves shipping would choose a new location primarily on access to good transportation arteries with low warehousing costs. Reno and Memphis are famous shipping hubs in the U.S. as they are centrally located for their respective East and West halves of the nation. A call center doesn’t need to ship anything, but there are still costs for moving workers around. Cab fare in Hyderabad is not cheap. If a Hyderabad software company pays worker’s transportation, it can add up, even if workers cab-pool. Transport is yet another factor in the pricing formula.

Labor costs are only about 20-30% of the total cost of outsourced work. The rest go to infrastructure, management, and other costs.

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