Does a Low Profile Hurt Offshorers?

Many companies don't want to publicize, or even discuss, their offshoring activities. Some experts say that's the worst possible approach companies...
Kris FrieswickJune 7, 2004

Cost savings, of course, are what often make the chief financial officer a company’s foremost proponent of offshoring. In fact, 42 percent of the CFOs in our survey whose companies outsource offshore reported net savings of more than 20 percent on offshored expense areas. While they report that they aren’t concerned about negative publicity from offshoring, they are far less willing to promote those savings or even talk about the topic than they were 12 months ago.

Now, in fact, some companies are actually putting offshoring plans on hold. “We’ve had a couple of clients say that because of the current political situation, they want to defer signing their contracts,” says K. Srinivasan, senior vice president and national sales director for Polaris Software Lab Ltd., an offshoring company based in India. Although the companies he works with are “very supportive” of offshoring, he says, “they want to make sure they don’t rub people the wrong way.”

And consider this: a year ago, Clarence Schmitz, chairman and CEO of Outsource Partners International, a New York-based finance and accounting offshoring firm, was interviewed for what he describes as “a bit of a puff piece” on the “CBS Evening News.” Companies that were using offshoring were even portrayed in a slightly positive light. “It was like a ‘Gee, we didn’t know that companies did this,’ kind of story,” he says. “We even got a couple of new clients from it.” Today, Schmitz says clients don’t even want press releases issued when they sign a contract with OPI. “It’s amazing how much things have changed in one year,” he says.

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Indeed, a year ago, offshoring companies announced dozens of new deals each week, and their clients were usually happy to discuss the anticipated cost savings in public. Today, few if any companies will agree to be interviewed on the topic. Among the companies contacted for CFO magazine’s June story “The Backlash” — all of which are known as leaders in offshoring strategy — the vast majority declined requests to interview their CFOs. Even offshore service providers were hard-pressed to come up with any clients that were willing to speak on the record.

This silence is endemic across the U.S. corporate landscape, says Virginia Garcia, a senior analyst at TowerGroup, a Needham, Massachusetts-based research and advisory firm. “A lot of my clients say, ‘This is what we’re doing, but you can’t talk about it, because we can’t talk about it, because there’s a directive that everything has to go through the marketing department’ — and they’re being very tight-lipped.”

Perhaps the conundrum was best expressed by the communications director of one Fortune 50 company, who told CFO, “If you were the communications director of a multibillion-dollar, multinational company, would you want to be out in front on this subject?”

More often than not, the answer to that question has been a resounding no. And that, say some experts, is the worst possible approach that companies can take if they want to bring the backlash to a speedy end. The deafening silence not only leaves an information black hole, but it also lends credence to the growing popular perception that there is something fundamentally unsavory about offshoring. If there weren’t, why would CFOs and other executives be so reticent to talk about it?

“The silence is being interpreted as deception,” says Garcia, “especially in the financial-services industry. And that’s not a trait you want to associate with your bank, or any business. This silence allows anti-offshoring groups to make the story into whatever they want it to be. Instead of reinforcing a positive message, the silence creates a negative message over which companies have no control.”

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