If you will pay with peanuts, expect monkeys to work for you!

This article is not being published to malign the lovely monkeys. The reference to them was made simply to illustrate the point that humans ought to be paid and employed with a dignified level of wages.

Going through Craigslist, oDesk and a few other outsourcing bulletin boards, you'd most probably encounter people looking for skilled workers at dirt cheap rates. The internet has allowed people to find workers from the inexpensive sides of the planet who will come out with excellent output.

However, just because there are people in some countries who survive with less than $1/day doesn't mean that you can also find "Techies" who can write a new version of Microsoft office at a below poverty line wages.

Let's take the Philippines, for example. There are street people in the poorest parts of the capital who probably survive on an income of $2/day. However, do you honestly believe that you can find a top class web applications programmer in that country at that rate? Geesh, you'd have to couch up much more than that. IT experts there didn't earn their college degrees and accumulated work experiences on that daily budget, call center agents didn't master their American twangs while being fed with garbage and of course, no PC in this world can ever be purchased by anybody living at a couple of bucks a day. The last time I checked, the well, meaning techies at MIT are yet to start mass producing their $175 3rd world laptops that runs on open source software.

To people looking for a good outsourcing remedy, let me tell you... If It costs you $10/hour paying a data encoder in L.A., why not remunerate your outsourced labor with $5/hour? Other than wages, you were also able to save on office space, utilities, benefits, taxes, insurance, etc.. Don't push it too much by offering $1/hour.

With so many starving people in the world, there will always be takers at any wage level. But let me ask you.. Are you willing to risk it? You'll never know, it might be a greasy street scavenger behind a PC, at the other end of the line.

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Thank you for calling. Can you tell I'm undervalued?

WAYS TO FIGHT THREATS TO ASIAN OUTSOURCING

Note: This article is about India but all of the problems discussed in this post are also being faced by most outsourcing companies in the world.

First, it was wage inflation which they are fighting by moving their offices out of the expensive business districts and by hiring fresh (low waged) graduates. Now, it's the Rupee's appreciation which creates an additional worry for India's outsourcing executives. The two events are further compounded by India's recent rationalization of its tax system which is perceived by some to be detrimental to the industry.

The problem of wage inflation increases in magnitude when Forex appreciation occurs. However, the two problems that can be managed with one solution. A creative method proposed by another blog is to settle wages and a few other costs in the currency of the outsourcing firm's contract price. the method effectively arrests the increase in costs brought about by any appreciation in the currency rate.

Should there be any devaluation of the local currency, the employees and suppliers alike are also bound to benefit. I would call that proposal "fair and equitable".

Taking it a step further, the outsourcing company can bring in additional value to their clients by introducing innovations that will result to bigger gains for their clients. A glaring example is India's newly introduced service area called "Knowledge Process Outsourcing (KPO)" industry which is turning out positive growth for 2007.

As for taxes, I maintain my position that Asia's outsourcing businesses should be officially considered a part of its export industry. As such, it deserves all he breaks being enjoyed by all the other exporters in the country. Importations of equipments should be free of any tariff, sales taxes should not be collected and several other incentives should be given to any offshore outsourcing company. An outsourcing firm exports its services and being a labor intensive industry, wages paid to the employees go back to the local economy in terms of consumer spending.

COMBATTING WAGE INFLATION

Thank goodness work ended a bit earlier than expected..

Further to the "Greatest threat to Indian outsourcing", BPO firms are now taking steps to address wage inflation.

Fresh (low salary) employees are now being hired and offices are now being moved out of the metropolies in order to avail of lower real estate and other costs. In addition, other measures are being implemented that will hopefully maintain their competitiveness. The problem is not peculiar to Indian BPO. It's just that India leads the outsourcing world and is the hardest hit by this problem.

Wage inflation in outsourcing

It appears that there's a lot of truth to the fears quoted in a past article (please read it here).

THIS ONE SEEMS TO BE A RUNAWAY WAGE INFLATION

"While manpower costs seem to be surging across sectors, the BPO sector leads the charts with the cost of wages, hiring, training, attrition and other human resources (HR) related expenses accounting for a whopping 50% or more of total costs."

I have written a few articles about this topic and it would be very redundant to repeat it here.

The bottom line is for everyone not to price themselves out of the market.

Wage Inflation: Perceived to be the greatest threat to outsourcing

Syntel, Inc's recent poll showed that IT executives perceive wage inflation as the biggest threat to global outsourcing. The ranking goes:

-- Wage inflation in India 33%
-- Quality concerns 27%
-- Possible outsourcing legislation 21%
-- Perceived security risks 10%
-- Middle-management resistance 9%

Please check the complete report here:

As explained in a past post (please check it here), one should be careful in pricing his/her services. Putting too much premium in thyself might actually be a step out of the roof- straight into the ground!