Outsourcing Cost Evaluation

Hiring one mid-level engineer in the U.S. under H-1B rules can cost ~$307,000 in the first year. In Pakistan, a comparable remote engineer costs $20,000–$35,000 per year. That’s a 10–15× saving. For the cost of one H-1B engineer in the U.S., a company could instead outsource an entire remote team in Pakistan including 1 Product Manager 3 Software Engineers 1 QA Tester 1 UI/UX Designer and still spend less than half of the U.S. cost. This allows startups and enterprises alike to deliver full projects offshore at a fraction of the budget. If even 5–10% of U.S. H-1B demand shifts offshore, Pakistan’s IT export revenues (currently ~$3.5–4B annually) could increase by $1–2B in 3 years. The disruption to Indian IT firms opens the door for Pakistan to capture more contracts, especially in software development, fintech, and product outsourcing. Pakistan’s cost advantage makes it attractive for outsourcing, but long-term success depends on more than low prices. To become a true strategic partner, the workforce must strengthen soft skills, business understanding, and professional setups like reliable internet, modern offices, and time-zone alignment.

TLDR: A company had a decision to continue their operations in house or outsource. Outsourcing would save the company $1.4M in savings. I advised them not to outsource.   Now, I know some of you short-sighted, quick cash grab folks will stop reading here. But for the rest of you, come find out the appropriate way to approach this situation.   On Monday, I shared about a company faced with the decision to keep their operations within the US or outsource to China. The company produced two products at their US facility that were their top selling, but also their more specialized manufacturing processes. The company did identify a $1.4M average saving per year via outsourcing.   So how did I get to the decision to keep their US plant? 1️⃣ I evaluated the financial impact of keeping the plant in the US versus outsourcing to China for just the facility comparison. This included all costs of raw material, labor, electricity/utility costs, lease costs, management costs, overhead costs, capital outlays, and start-up costs at each facility over a 10-year period. 2️⃣ I analyzed and forecasted transportation costs for each facility. 3️⃣ I analyzed and forecasted inventory and the costs associated for each facility. 4️⃣ I identified and did a risk assessment on the quality, capital investment, and macro-level risks with transferring operations from the US to China.   Why did I advise to not outsource? ❌ Two of their top selling items require a specialized manufacturing and assembly process that is competitive advantage for the company. Duplicating the process would be a high impact risk. ❌ To effectively maintain quality standards and execute the manufacturing and assembly process, labor in China would need to increase (decreasing savings). ❌ Freight costs and transit times would increase, leading to an increase in safety stock (inventory), additional use of warehouses (holding and storage costs), and increase in lead time for product replenishment. ❌ There is risk with price fluctuations related to transportation costs that would diminish potential savings. ❌ Wage increases over time will lead to a diminished return. ❌ US operations created a more responsive and agile supply chain to service US based customers.   Are you starting to see how $1.4M in yearly savings doesn’t look as promising?   What were the recommendations to reduce costs in other ways? ✅ Renegotiate the lease on the facility to lower operating expenses (~$3M). ✅ Process improvement initiatives including enhancing ERP capabilities to improve forecast accuracy, better production scheduling, and manufacturing processes (this would improve just utility costs by 2% within a year). ✅ Leverage the in-house manufacturing and assembly process that is proprietary as a potential new business unit in itself.   Don’t be blinded by a dollar sign! Stay tuned for Friday where I’ll give you tips on how to approach these business impacting decisions. #supplychain #processimprovement #manufacturing

2 ways outsourcing your CX can help you cut costs: We recently helped a large Ed-Tech company reduce their CX and operational costs by 43% in just one year by outsourcing their customer support with these 2 strategies: 1. Staffing Staffing is most likely one of your biggest costs right now, but also not one you can eliminate. You need your team to operate! Tapping into a global talent pool opens your company up to markets where labor costs are often lower. But it’s important to choose wisely here. There is no point in reducing labor costs if you replace them with a low quality team of contact center agents. That’s why we specialize in two emerging markets that are leading the way in high-quality agents - South African and South American. In fact, South Africa alone adds 410,000 English speakers to the workforce annually, ensuring a steady supply of agents qualified to service US clientele. 2. Advanced Technology Staying on top of new technology to drive a high level of customer support means paying full price for licenses. Is this the best use of your budget? It might be yes. But contact centers are already working with multiple programs, software and technology like • automating Quality Assurance • advanced data analytics and reporting tools and Agent Assist • rationalizing training/learning by leveraging eLearning, automation, and ChatGPT • omnichannel communication platforms, including bots for low hanging frequently asked questions and interaction type across all client portfolios and they know how to use them! This shared service model means you only pay for the services you use. 2 strategies, huge potential for cost cutting - allowing you to reinvest those savings into other critical areas of your business, such as product development or marketing.