Labor Costs

In India Labor costs have crept upward over the years but have been offset by falling telecom rates. Typical salaries range from $5,000 to $12,000 for technical staff, while back-office salaries range from $3,500 to $7,500. In PHILIPPINES Higher labor costs than India; technical salaries range from $5,000 to $10,000 annually and back office from $3,000 to $8,000. In Russia IT salaries range from $6,000 to $10,000. The country hasn't yet developed back-office competence. Telecom infrastructure costs are higher than average.

In China IT salaries range from $3,000 to $8,000 annually. No real BPO competency. In Canada Being a nearshore alternative to the U.S. means IT salaries are much higher than most offshore countries, ranging from $25,000 to $50,000. Being a nearshore alternative to the U.S. means IT salaries are much higher than most offshore countries, ranging from $25,000 to $50,000. In Mexico Low labor costs; companies can save up to 50% by outsourcing to Mexico. Costs could be offset by unreliable infrastructure.

In Ireland Tech salaries range from $25,000 to $35,000, making Ireland unattractive if primary objective is cost savings. The tremendous economic benefits of labor arbitrage also drive increased investment in reengineering the process for maximum efficiency and effectiveness. Traditionally, outsourcers have expended some effort on reengineering people processes, but seldom at the level required in offshore situations. Additionally, the reengineered processes are more rigid in order to drive the standardization that allows for management of the process across geographies.

Since no one person can literally see what is going on, the process must be so well-defined that issues seldom arise and when they do, the trouble-shooting process is straightforward.
Outsourcers face another challenge in developing best practices: allowing some degree of customer-specific customization without losing the benefits of standardization. The trick in overcoming this challenge is to define the overall process in such a way that the buyer can tailor the most important requirements, while still allowing the outsourcing supplier to retain the required leverage points. In short, the best practice must reflect both the supplier's need for operational efficiency and buyer's need for customization.

In an IT environment this can generally be handled through some level of automation - not so with labor arbitrage. The customization impacts employee training and required skills sets The infrastructure required to transmit the work material to the offshore site must be designed to achieve sufficient scale. In some cases, the required scale can be significant. For example, imaging centers only become economical when designed for high volumes with 24 hour operations. However, the transportation cost of paper (both time and money) to an imaging center can also be significant. In this situation, outsourcing suppliers must be able to create regional imaging centers that achieve the required scale.