GSM Case 2 - 62210400

1. The parameters which Mark Fuller should consider in offshoring business research activities are

- Would benefit of lower labour costs be offset by lower labor productivity? – Benefits of
lower labour costs is straight forward since they were 45% of all costs (at a margin of 9% to
15%). However, this might be offset by low labour productivity (4-5 Indian analysts for doing
same amount of work as 2 US/Europe analysts) and hence this must be considered. For
example, Indian research analysts take 1.5 months more time to get off the ground and start
contributing to projects, therefore the cost impact of under performance of these analysts
has to be compared with the benefits of lower wages paid to these analysts.

- Would Cultural differences improve or compromise project output? – While these

differences did manifest in willingness of employees to work long hours, this could also
result in an attitude of compromising and putting up with sub-standard work (occasional
tendency to copy information from internet and passing it off as secondary research), which
inturn might compromise output of frontline consultants.

- Would lack of infrastructure be an impediment or can it be overcome? – There is lack of

reliable and cost - effective business infrastructure (frequent power cuts, higher cost of
telephones/networks/IT infra), one must certainly consider if this would interrupt
information flow between back office and business units and slow down overall progress of
work and lead to lost revenue.

2. We can categorize savings from primarily two sources – labour personnel and rent/infrastructure.

Calculating savings from labor personnel = $245160/annum

Assumptions:

1. 2 Indian employees are equivalent to 1 US employee (factoring in labour productivity)

2. There is 32.5% turnover every year – requiring additional staffing to that extent in every
project.

Productivity
India US Savings
Adjusted (=*2.35)
Graduate business researcher 16000 37200 130000 92800
UG business researcher 6000 13950 65000 51050
Graphic Designer 5500 12788 38000 25212.5
Accountant 4000 9300 51000 41700
Secretary 2100 4883 26500 21617.5
Computer Programmer 6600 15345 63000 47655
Admin Expenses 15000 34875 0 -34875
245160

Calculating savings from rent and infrastructure

Per annum, there would be extra costs of $9000/internet connection and $1000/IT infra/employee.
3. Loss in benefits due to offshoring business research would occur due to reduction in operational
productivity as well as any increased operating/infrastructure costs.

- Loss in operating/infrastructure costs – This is mainly due to increased rental costs per task
(since for a specific task done by one US employee, we require 2 Indian employees, this
effectively translates to $60 rent/task in India vs $50/task in US)

- Reduction in operational productivity – Every Indian employee would be unproductive for

first 1.5 months – when they are purely cost centres and are not generating any benefit for
clients (internal/external). This would impact profits by $837.5/employee/year
($6700/annum prorated to 1.5 months) on an average. Additionally, due to increased
employee turnover, there would be additional headhunting cost to the tune of
$363/employee/annum. Lastly, there would be extra costs of $9000/internet connection
and $1000/IT infra/employee.

4. Monitor should serve external clients as well

- Provides outside in knowledge sharing (capabilities/information flow/best practices)which

can be used to improve execution for Monitor’s business activities as well.
- Brings in operational excellence (adherence to timelines, cost efficient way of project
execution, polishing of communication skills, more efficient ways to analyse and synthesize
data) – all of which can only be achieved by serving external clients.
- Strategic cost management of fixed investments such as IT, accountants etc – which might
otherwise be underutilized if only used for servicing Monitor business. Servicing external
clients provides an opportunity to recover some of these fixed investments.
- Enables recurrent revenue stream by enabling usage of IP and research findings developed
for monitor to be repackaged and presented to other clients with similar requirements.