In the year 1492, three ships- the Nina, the Pinta, and the Santa Maria set sail from the Spanish port of Palos in search of India—the land of riches and spices. But the calm seas and the steady winds had a whole other plan for the sailors on board. After a long expedition, when the crew was all fed up and ready to return home, the ship’s Captain, Christopher Columbus, discovered land—America! And just five years later, a Portuguese explorer, Vasco de Gama, set sail across the Atlantic Ocean and finally discovered a long coveted direct sea route to the land of spices- India. Today, when millions zoom across the globe in jumbo jets and titanic container ships call at the world’s largest ports every day with containing cargo from the other end of the world, the voyages embarked by these two mighty sailors in the late 15th century should be remembered, because lest we forget, among many other things, globalization as we know it today, traces its roots to these two singular events in History.
Over 500 years of globalization has not only witnessed changes in lifestyle, but also a significant shift dictated by need and economic benefits. While trading led to an Ethiopian beverage-coffee, to become every American’s way of life, the migration of people with various skills bridged the territorial and cultural borders, thereby giving way to higher economic growth. But just as living the “American Dream” became popular, a massive change occurred in the mindsets of people. The “Land of Opportunities” where millions had flocked at the start of the last century dreaming of new lives, began to feel the pinch of this mass migration of people to its shores. Sections within the American society eventually began to perceive outsourcing, globalization, and free trade as a threat to not just American jobs, but also as a threat to their economy.
Google, one of America’s top MNCs and the world’s favorite search engine, earned over $26 billion in revenue in 2017, which was a massive 21% increase from the year 2016. But these billions in revenue also came from Google’s outsourced projects, where several AdWords support jobs and non-essential IT functions were outsourced to technology service providers. Google made use of this outsourcing strategy in order to stabilize its customer service operations, and utilize its work force to develop Google’s core IT related projects. This led to Google earning more in revenue, and in-turn, aiding the US economy as well.
Google isn’t the only MNC that has benefitted from outsourcing. WhatsApp’s founders, Brian Acton and Jan Koum, outsourced their app development to a Russian contractor named, Igor Solomennikov. Although Igor eventually joined the company as the CIO, and WhatsApp later got acquired by Facebook in 2014, this messenger app relied heavily on outsourcing for its software and core development. And as of 2018, WhatsApp listed a total of 1.5 billion users, surpassing Facebook’s Messenger and Instagram users. Conclusion?
Right from Skype to Slack, outsourcing has been used successfully by world’s top MNCs to aid industry growth. In the long haul, this has eventually led to the respective countries earning much more in revenue, thereby strengthening its economy.
How Do We Perceive?
We, as humans, perceive the world and interpret the events around us with the help of 5 senses; touch, smell, taste, sight, and sound. The information received through each of these senses provide sufficient data for our brains to perceive. Top MNCs around the world have benefitted by correctly perceiving the market trends to aid their businesses, and by outsourcing IT services and other non-essential IT tasks, their growth has only doubled. So, if MNCs can reap the benefits of outsourcing (despite their ability to afford in-house staff), SMEs can benefit as well.
What Brand Failures Teach us
Jumping head-on into offshoring your business needs can be challenging, and in-fact, a scary venture as well, especially if you have no prior experience of the same. This is why one needs to learn from top brands around the world, and how some of them failed in different markets despite their grand success in their home country.
Walmart--America’s top retail corporation, despite its massive success in US, has failed massively in both, Asia and Europe. While every country and every continent has its own story of failure for Walmart, here’s why this company failed in Japan. Walmart launched an “Every Day Low Prices” campaign in Japan, a sure-shot strategy that worked for this retail chain in the past. However, this failed miserably in Japan, as in this Asia Pacific country, low prices are often associated with cheap quality, thereby making customers wary about making a purchase. So, what is the one mistake Walmart committed? They failed to see and understand the retail market in Japan and applied a formula, tried and tested in the US, without studying the trends in Japan. Similarly, while outsourcing, if you fail to understand which country specializes in which resource pool and which vendor offers expertise in what fields, your business is bound to fail just like Walmart did in Japan. You can outsource programming services to a country like India that specializes in IT, while customer support can be directed to countries like Philippines. Understanding your offshore country specialization is key to outsourcing success.
This American fast food company is known for its deliciously juicy and flavored beef patties in most parts of the world. However, if you visit India, a beef patty is the one thing this fast food chain doesn’t sell. Reason? Vast majority of Indians do not consume beef for religious reasons. But when McDonalds first arrived in India, entirely unaware of this trend, they failed to receive an authorization to open an outlet. It wasn’t until McDonalds moved away from its signature beef patties that things changed. Today, this chain understands the palate of the Indian market and has localized several of its burgers accordingly. Similarly, when you outsource, you need to understand that every vendor or agency has a specific palate (a particular set of services they offer). Getting a clear understanding of the services they offer, their business models, their data security measures, contracts, etc., is essential if you wish to make your outsourcing project a success.
E-bay is a popular American e-commerce brand that has been successful in various countries. However, e-bay failed to leave a mark in China. At the time, China already had TaoBao, with a built-in messaging system that allowed a customer to communicate with a seller directly; a feature that was not enabled in China’s e-bay system. E-bay’s failure to assist a customer in developing trust with their interactions rather than relying on user ratings, led to its failure in China. Similarly, if you’re availing a service from a vendor or agency, you need to rely on your own interactions as opposed to word-of-mouth. Personal interactions will heighten your intuitions far more, thereby enabling you to make a better pick. Additionally, be extra diligent on your part; thoroughly check on agreements, payment modes, transaction charges, staff qualifications, agency experience, etc.
Yet another popular American fast food chain, and this one failed to leave a mark in Japan. Reason? At the time of Wendy’s establishment in Japan, the country already had McDonalds, Burger King, and a ton of other local burger chains that catered to the Japanese palate. And Wendy’s, on the other hand, entered this market with burgers that was not only priced higher in comparison to the other outlets, but also lacked in superior quality, failed to cater to the local palate, and had no element of ‘newness’. Eventually, Wendy’s was left with no other option but to retract its stores from Japan. Similarly, just because you’re outsourcing your business needs and you expect it to be cheaper, refrain from being unreasonable. Do not expect your offshore staff to work for you for 7 days a week, 10 hours a day, or at extremely low prices. The inability to be reasonable will only result in what Wendy’s experienced in Japan, despite their burgers being a wholesome of greasy goodness.
- Coca Cola
Coca Cola is the one brand that has experienced massive success in almost every country around the world. And the recipe for this global success—they nurture their relationship with every region. Be it their strategies to help children in Somalia, or their ad campaigns to focus on India-Pakistan relations, by connecting to the local masses, this brand has turned out to be a grand success in every region. So, if you wish for your outsourcing project to be a success as well, you need to establish a good relationship with your offshore staff. If you perceive your outsourced work as one that’s “not as important”, your offshore staff will perceive your work in the same manner as well.
To sum it up, if used rightly, outsourcing is a blessing in disguise, and MNCs are well aware of this. 500 years of globalization has taught business leaders around the world several valuable lessons, and it is now time for entrepreneurs to pay heed too. The time has come for every business owner to change their perception about outsourcing, because no matter how big a brand, or how large a business, no business in today’s competitive world is invincible!