May 2, 2010


Sir Terence Matthews 250x176
Foreman says these jobs are going, boys
and they ain’t coming back
--- Bruce Springsteen, My Hometown

While a US engineer earns $70,000, similar talent costs $7,000 in India and $5,000 in China. That’s too big a differential to ignore in today’s ultracompetitive world. IBM alone hires some 3,000 engineers per month in India. This cheaper labour saves companies in countries like Canada about 20% of their IT costs and earns nice returns for the integrators. You won’t be quite as happy if you’re a displaced engineer.

Sir Terence Matthews gave  sobering messages at CALU 2010 today in his presentation ACT or Be Acted Upon. Terry is a low-key Canadian billionaire who does business around the world. He doesn’t golf but is hosting the 2010 Ryder Cup. Of his 80 ventures, he has 75 successes.

He gave a simple prescription for the conundrum of low cost foreign labour.

A Solution

Terry does not advocate anti-competitive measures. With businesses around the globe, he and his clients benefit from lower costs.

Google uses US engineers but remains competitive. How? Because of innovation and being first. Other companies can do the same.

Terry hires entrepreneurial graduates for start-up companies. Since they don’t have spouses or children, they can and do work long hours seven days a week for $25,000 a year. Why? The graduates learn valuable business skills and get partial ownership in the new venture in a year.

Since new companies have trouble getting clients, Terry pairs them with his established companies like Mitel for instant credibility. The clients are approached before the work starts. Rather than using the build-it-and-they-will-come model, Terry prefers to sell first and build second.

There’s hope for the innovative and swift. There’s also hope if you do work that must be done locally. How would you outsource a haircut?


Podcast Episode 65 (coming soon)

(I’ll record the podcast when I’m back in my Toronto studio later this week. I did not lug audio gear to the conference.)

direct download | Internet Archive page

PS More highlights from CALU 2010 to come

2 comments: said...

Outsourcing is definitely a "sore" subject for tons of companies around the world. I think you "hit the nail on the head" when you mentioned the reason why Google is still successful without major outsourcing is the level of consistent innovation. When you're that valuable, the workforce comes to you. said...

I work for a large company which I won’t name but they have recently started outsourcing key areas of the business with horrible results.

One of the first departments to make the move was software development. Once the third party company took over everything went downhill, program stability, functionality and general quality of the product all took a hit....sure they saved some money in the short term but I believe that in the long term they will lose clients/customer...and we all know that businesses without customers doesn't last long...