I’ve failed to blog this year because I’ve been too busy; at least that’s my excuse and I’m sticking to it! Business is up (about 50% on last year) and it’s been hard to get space to take a breather.
I’d like to be able to claim credit for this upswing (one of my roles is to get new business, after all) but I can’t – it largely happened without my doing. In fact, there seems to be an inverse relationship – the less I try to sell the more work comes in; it won’t be long before someone cottons on to this and I’m put out to pasture.
So what’s behind this? It doesn’t really make sense – the US economy (still by far the largest source of our business) remains moribund, companies continue to cut back and the general push to make savings by outsourcing to low-cost countries remains the orthodoxy.
A couple of reasons are that I think we do a good job (hey, you’d expect me to say that!):
- We have a good team that does quality work. We get to know clients, our churn rates are very low, we have very experienced people etc – these are the minimum requirements in today’s environment and we tick the boxes.
- We’re easy to work with –no minimum commitment, we do a whole range of services so can help out in many ways, we’re very reachable and responsive and while we’re not super cheap, we’re not super expensive either.
But there are three other reasons I think are at play, driving work our way:
- Clients are overworked
- Indian-based vendors are getting more costly and often still miss the quality mark
- Corporations are increasingly turning to contractors and project based work
Clients are overworked
No surprises here. Over the last two years they’ve cut to the bone and people that remain are working harder, longer and need help. Companies don’t have the bandwidth to train lots of people or vendors and are happy to turn to an external vendor they can trust.
Indian vendors are getting less attractive
Let me say upfront that I have nothing about work being conducted in India, in fact I think it’s often a great idea – we have a good number of people there that work for us, and so I know the benefits. But I also see some of the downsides and I think increasingly clients do too. This is what we hear:
- Outsourcing to India is no longer the bargain it once was. The Rupee/Dollar exchange rates continues to pressure Indian providers (their costs are in Rupees but their income is usually in US$). Since Jan 2009, for instance, the dollar rate has fallen from nearly 52 Rupees to about 45 today, a 14% fall, continuing to erode their cost advantage
- Vendor rates have also gone up as companies try to move up the value chain
- Quality remains an issue, especially in areas of writing and services that require cultural insight (marketing, advertising, trend work etc)
- Churn rates are high and clients are fed-up at having to train and retrain.
- Minimum FTE (full-time equivalent) commitments are off-putting
Here’s an anecdotal example of how things have changed. Over the last month we’ve been recruiting to create a team of five writers for some newsletter work we have. We’ve advertised on online job boards, used Elance, Guru, and leveraged our own teleworking database at ClickNwork and reviewed in detail over 200 applicants from a pool of well over a thousand. In previous years I’d have expected Indian freelancers to be amongst the cheapest, but today its people in Pakistan and Africa (I’m sure they’d have been cheaper a few years ago, but they just weren’t as connected then); good Indian freelance writers are today seeking rates comparable to writers in the US, which would have been unheard of just a few years back.
Shift to contract work
Last, companies are getting used to using contractors. This has been going on a while but the recession gave companies a great excuse to cut back, and instead of hiring back, they’re using project-based, contingent labor. A couple of stats:
- An April 2009 report (“The Emerging New Workforce”) by Littler Mendelson, one of the largest employment law firms in the country, predicted that following the end of the recession, “50% of the workforce added in 2010 will be made up of one form or another of contingent workers. As a result, approximately 25% to as high as 35% of the workforce will be made up of temporary workers, contractors, or other project based labor.”
- This isn’t just unskilled labor; it’s increasingly the domain of professional work. This chart, that comes from Staffing Industry Analysts, via Little, makes the point that over time, spending on contingent labor has increasingly been for professional skills (“Commercial” = Office/clerical or industrial)
- Analyst Christopher Dwyer of Aberdeen Group believes such workers already make up 20% of the labor force, a figure that will rise to 25% as early as next year.
Put it all together and you have companies overburdened, looking for different solutions than putting more work over to India and an emerging acceptance of project-based work completed by a growing cadre of temporary professionals.