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Published Articles by David Balovich

Title: Centralization vs Decentralization Takes on a Whole New Meaning
Published in: Creditworthy News
Date: 8/27/03
The dilemma many large organizations have anguished over is whether to centralize or decentralize key operating functions such as sales, credit, accounts payable, etc. In the past it has been common for companies to decentralize sales, credit and other offices scattered about the country responsible for customers and activities in their respective region.

However, decentralization is no longer being restricted within our continental boundaries. Major U.S. companies. including IBM, Procter & Gamble, Dell, Microsoft and Oracle, too name just a few, are decentralizing their operations to other countries including India, Cost Rica, Ireland and China. We are not talking about manufacturing jobs but rather professional jobs that include financial analysts, accountants, human resources, payroll, collectors, customer service and others at higher levels in the labor pool.

Employer’s say moving jobs to foreign countries makes them more competitive because they can realize enormous savings in labor costs. According to A.T. Kearney, a management consulting firm, an MBA with three years experience in India will make about $12,000 a year, compared with $100,000 in the U.S. A debt collector will make $5,000 compared with $50,000.

Over the next five years financial service companies plan to move more than 500,000 jobs to countries such as India. Proctor and Gamble currently handles payroll, accounts payable and invoice processing in the United Kingdom, Costa Rica and the Philippines.

In addition to lower wages, major companies are able to work around the clock because of their presence in other countries. For example, Oracle, which has two large R&D centers in India, plans to have 4000 employees in place by year’s end. Programmers there will pick up projects when their American counterparts leave for the day, and vice versa. Oracle will be able to operate 24 hours a day at a third of the cost it would pay to operate 24 hours in the U.S.

Another consulting firm recently surveyed 38 large companies about moving white-collar jobs overseas. While only seven companies admitted to seriously considering moving jobs overseas, they all said they were evaluating it.

Dell has operated a customer service and technical support center in India for several years, where the deregulation of the telephone industry has caused rates for international calls to fall as much as 30%. Many of their employees assume an American name and take training in U.S. customs, making it hard to distinguish between a call from Austin or Mumbai (formerly called Bombay).

A major concern of this movement to offshore decentralization should be security. The more removed the information is from the corporate office the higher the risk that the information is susceptible to compromise.

I wish you well. 

This information is provided as information only and not legal advice. Legal advice should be obtained from a competent, licensed attorney, in good standing with the state bar association.

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