Offshore Workers Are Efficient According To McKinsey Study

11-Apr-2008

A recent study done by the McKinsey Global Institute (MGI) refutes the commonly held perception that offshore developers are less efficient.

Web developers at the Loggedongroup Cebu officeThere is a perception in western countries that workers in developing countries are much less efficient than their western counterparts. It is often believed that tasks will take twice as long, thereby reducing the cost advantage of outsourcing work offshore.

But how real is this perception?

A recent study done by the prestigious McKinsey Global Institute (MGI) suggests quite the opposite. According to the study: “Many of the jobs sent offshore may be considered undesirable and lacking in prestige in developed countries yet are highly attractive in developing ones. So offshore workers not only cost far less but also are often more highly motivated, which means that  they perform better.”

The author cites the example of a British bank’s call-center agents in India, where they process 20 percent more transactions, with 3 percent more accuracy, than their counterparts do in the United Kingdom. Aside from the prestige of jobs, a big factor influencing the efficiency of a workforce is motivation. In the case of web developers and artists, demand exceeds supply in countries like Australia. It is very hard to command their loyalty and they will not value their job with you unless you are paying them more than the market rate - and of course, they are rarely as productive as they could be in that situation.

In developing countries that have good education systems, like the Philippines, there is an oversupply of designers and developers. These people are very keen to work with a foreign owned company where pay and conditions are better and they value their jobs much more than their counterparts in the west.

Most send a percentage of their pay home to their parents each fortnight or put their brothers and sisters through school or university. Because there is no welfare or safety net and family are depending on them, they have tremendous incentive to keep their jobs.

Inefficiencies can be the result of the corporate culture of local companies in the developing world. They will usually pay workers the minimum rate and try and save money by cutting back on infrastructure including equipment that helps staff to be more efficient and systems that monitor their activity.

Profits are usually very high, so local companies tend not to make staff accountable for the time spent on projects, or put resources into managing and measuring that. They simply work to a deadline and provided the project is delivered by that date, it doesn't matter what happens or how many hours are spent during the process.

We overcome this by introducing accountability for time spent on projects and ensuring our workforce is young, flexible and not molded in the culture of local companies. They quickly embraced this accountability and as a result are every bit as efficient as developers in western countries. Probably more efficient.