| Many business executives believe
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| | standards of customer service, and
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| "offshoring" to be the destiny of any
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| | business analysis often requires a good
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| company that wants to remain competitive.
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| | understanding of American business
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| Labor costs can be reduced by 25-30% or
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| | practices. Cultural differences may be
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| more, and companies across the country
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| | the source of some disconcerting
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| are doing it. How can responsible
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| | surprises.· Language: It may be obvious,
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| corporate officers not consider the
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| | but language differences can be a major
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| offshoring option for their companies?
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| | stumbling block to getting the work
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| But what are the real benefits and the
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| | product and the working relationship you
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| pitfalls of offshoring? When does it make
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| | expect. Even different dialects and
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| sense to pursue outsourcing, and how can
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| | accents can cause problems in areas
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| you safely take advantage of lower cost
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| | involving direct customer contact.·
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| resources in other countries without risk
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| | Infrastructure: The country's
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| or loss of quality?Background:Moving jobs
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| | telecommunications infrastructure may be
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| to cheaper work forces is nothing new.
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| | inadequate for some types of IT work.
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| Even as recently as a few decades ago,
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| | Even poor roads and airports may cause
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| significant segments of the manufacturing
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| | major headaches.· Security & Property
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| sector were transferred to locations such
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| | Rights: Security and the status of
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| as Mexico, where labor was cheaper.
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| | intellectual property rights are often
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| Although the transfer caused some social
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| | major considerations for those
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| turmoil, it was regarded as a growing
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| | organizations dealing with sensitive
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| pain on the way to a more sophisticated
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| | data.· Movement of Money & People: Some
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| economy. Workers were retrained in new
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| | countries impose burdensome restrictions
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| skills and assimilated into the "new"
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| | on the movement of money out of the
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| economy, based largely upon free trade
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| | country. And obtaining visas in short
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| and emerging technologies. It was
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| | order may be impossible for residents of
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| reluctantly acknowledged that those jobs
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| | some countries.· Politics: Finally, the
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| were gone forever, and that in the end
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| | political stability of the country must
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| both the workers and the economy would be
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| | be considered, and the laws of the
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| better off.A new variation on this
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| | location must be carefully examined to
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| familiar story occurred in the late
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| | avoid unforeseen consequences." By
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| 1990's. As the technology boom reached
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| | following some basic guidelines and
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| its peak, demand for skilled IT workers
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| | having a clear plan of execution,
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| was far exceeding supply, driving labor
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| | offshoring may be the right strategy for
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| costs to unsustainable levels and leaving
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| | your company."Tips For Success:· Scope
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| companies without personnel for new
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| | the work: Carefully define and scope the
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| projects. With the Y2K crisis putting
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| | work to be offshored. Know what you want
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| additional pressure on technology,
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| | to accomplish and how much it should cost
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| companies began to look to other
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| | you.· Offshore non-critical functions:
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| locations to fill some of the excess
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| | Maintain the integrity of your core
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| demand for IT workers.India and other
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| | competencies by offshoring only
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| countries had a wealth of highly skilled
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| | non-critical functions. And start small.
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| workers willing to work for dramatically
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| | Just as you wouldn't jump in too deeply
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| less than was demanded by comparably
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| | with a domestic company before gaining
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| skilled American workers.With the Y2K
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| | some history and confidence in the
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| crisis, the current wave of IT and other
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| | company, so should you be similarly
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| white collar job sector offshoring was
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| | cautious with offshoring partners.· Know
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| initiated."The new telecommunications
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| | what to offshore: Software development,
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| technologies are now making possible this
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| | data entry, and transaction processing
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| pitting of domestic workforces against
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| | have been successful; customer service
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| foreign workforces just as for centuries
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| | and voice interaction are more risky.·
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| before domestic products have been pitted
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| | Choose the right location: The type of
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| against foreign products."Current
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| | work being outsourced will influence the
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| State:It is estimated by Goldman Sachs
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| | location. India has gained a reputation
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| that since 2000 U.S. companies have sent
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| | for software development. Between 2003
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| 400,000 service jobs overseas, and the
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| | and 2004 it has seen over a 30% growth in
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| Information Technology Association of
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| | software and IT service exports, and by
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| America (ITAA) believes that during the
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| | the year ending in March, 2004, Indian
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| same period 104,000 technology jobs have
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| | companies have earned $12.5 billion in
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| moved overseas. Everyone agrees that
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| | technology exports. But India is not the
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| this number will grow dramatically over
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| | only source of reliable but inexpensive
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| the next five years. Some have estimated
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| | labor. Countries such as China, the
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| that as many as one million jobs may be
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| | Philippines, Romania, Argentina, and even
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| sent to India alone by the end of the
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| | Ghana and Ireland are all centers for
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| year, and that a million jobs a year may
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| | offshore operations of various
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| be lost to overseas locations for the
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| | kinds.Matching an outsourcing effort with
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| next several years. But who is
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| | the appropriate labor force requires
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| offshoring, what kinds of jobs are being
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| | consideration of a whole host of
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| transferred, and how is it working?Forty
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| | factors.· Measure performance: A plan
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| percent of the Fortune 1000 firms have
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| | for measuring performance and evaluating
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| begun to offshore, according to Forrester
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| | success must be in place. Companies must
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| Research, Inc., though 25 to 30 percent
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| | be able to measure the work. In order to
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| of these are offshoring on a limited
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| | measure the financial success of the
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| basis, for small projects, spending no
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| | offshore operation, current costs must be
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| more than 5 percent of their IT budgets
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| | understood. Pay may be linked to
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| on offshore work. Only 5 to 10 percent
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| | performance benchmarks to safeguard
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| are using offshoring for complex projects
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| | against poor performance.An overall
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| and mission-critical operations.
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| | savings of 20 to 30% is reasonable to
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| However, this is likely to
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| | expect as a bottom line measure of
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| change.Sixty-four percent of finance
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| | success.· Monitor the work: Monitoring
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| executives polled recently responded that
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| | the work is critical if surprises are to
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| they planned to do more offshoring in the
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| | be avoided. Personal interaction with the
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| next two years. A great portion of
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| | offshore site should be incorporated in
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| recently offshored jobs paid $50,000 or
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| | some fashion. Placing one or more
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| more before being transferred overseas.
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| | managers on-site is ideal, but at least
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| Although much of the offshoring has been
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| | some face-to-face contact should be
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| in the information technology area, call
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| | planned. An on-site presence will also
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| centers, finance functions, data entry,
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| | help to alleviate security concerns.·
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| and human resource operations have also
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| | Consult experts: Extra caution must be
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| been outsourced.Benefits:There is no
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| | used when negotiating the deal.
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| doubt that the primary benefit of
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| | International specialists should be
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| offshoring is the cost savings. The ITAA
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| | consulted and intellectual property
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| estimates that outsourcing currently
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| | rights retained.· Exit strategy: An exit
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| saves U.S. companies about $7 billion and
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| | strategy should be place in case the
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| that by 2008 the number will climb to $20
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| | operation does not work out.Summary:With
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| billion. The savings from offshoring
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| | large populations of educated workers in
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| varies. In the same survey cited above,
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| | foreign lands willing to work for
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| over forty percent surveyed said they
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| | considerably less than similar workers in
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| were saving as much as twenty percent or
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| | the U.S., the offshoring of strategic
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| more. Nearly the same number are saving
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| | segments of work traditionally thought of
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| from ten to twenty percent.Hazards:The
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| | as white collar work has begun. And this
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| savings do not tell the whole story,
| |
| | shift of work and work forces will
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| however. Offshoring does have hazards
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| | continue as long as these conditions
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| which companies considering the option
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| | exist. Companies with operations ripe for
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| must weigh.· Finding Skilled Labor:
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| | offshoring must consider this option if
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| Before investing in a region, you must be
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| | they are to remain competitive.About
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| sure there will continue to be an
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| | Ralph Dandrea:Ralph Dandrea is the
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| adequate supply of labor skilled in your
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| | President of ITX Corp., and leads its
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| areas of need. Look at the rates of
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| | Business Performance practice. He is
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| graduation and the demand for the skills
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| | experienced in business and information
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| in the country.· Geography Gap: Inherent
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| | technology management and holds graduate
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| in offshoring is the distance obstacle.
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| | degrees in business and law.About ITX:ITX
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| Since work is being done in a different
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| | Corp is a business consulting and
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| country, it is often more difficult to
| |
| | technology solutions firm focused in
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| ensure that companies are getting what
| |
| | eight practice areas including Business
|
| they are paying for until it is too late.
| |
| | Performance, Internet Marketing, IT
|
| Rework and quality control are
| |
| | Staffing, IT Solution Strategies, IT
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| problems.Distances also mean travel and
| |
| | Solutions Implementation, Technical
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| other communication costs.· Cultural
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| | Services, Internet Services, and
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| Gap: Cultural gaps may be a problem for
| |
| | Technology Research. To learn more about
|
| some types of work, such as call centers
| |
| | what ITX can do for you visit our website
|
| and business analysis. For example,
| |
| | at or contact us at (800) 600-7785.
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| different cultures may have differing
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| |
|
