Offshoring Our Collective Knowledge
What do we make of the latest public scorn being heaped upon the Royal Bank of Canada for laying off / now hiring back? full time Canadian workers only to have them train their replacements who came to Canada on a temporary work visa via the Indian-based company iGate?
When I first learned of this I was amazed someone at RBC could be unaware of the potential fallout from a public relation and brand image point of view, but then it became obvious how interconnected iGate and RBC are and have been for a number of years. This as it turns out was just an incremental step in their long history of moving jobs off shore to gain efficiency and cut costs. I assume the individual at RBC probably thought nothing of this as it is not much different than laying off a whole department and then moving the work directly to an off-shore facility. In fact if they had done that there probably would have been much less of an outcry than what we see by bringing in foreign workers on a temporary work permit to learn their jobs and then move the work back to India.
The good thing is it happened this way as it will bring to the forefront the long standing tradition of sending our expertise and corporate / industrial knowledge base to a foreign jurisdiction so they may create the economic output to sell back to the North American market.
Being in the technology industry since the early eighties, I have seen all kinds of ways to decrease the cost of doing business starting with the introduction of personal computers and client / server technology which was introduced to drastically reduce the cost of information gathering and processing. With Moore’s law proving accurate year after year, the cost of computing hardware plummeted for consumers and business but as most of the early innovations were created in North America; the overall wealth associated with the technology grew as we exported those innovations all over the world. This fed the North American explosion of intellectual capital, entrepreneurship and the general knowledge buildup inside industry and our universities. People from all over the world marveled at the North American culture, innovation and sheer size of the economy, so much so, they sent their kids here to study in our universities and then come home to help replicate the North American machine. To the credit of these people from countries like Japan, Korea, China and India, they knew this was a long term investment, a very long term. But the big difference between those cultures and the North American culture, they think long term verses our quarter to quarter measurement of success.
Our business success is measured on the latest quarter and the latest year end, rewarding executive’s massive bonuses for what they did last year as opposed to what they are planning to do to achieve success the next year, the next decade or even the next century. Now you might say, that the executive at RBC who made that decision that outsourcing jobs to India made a good economic sense and his only obligation was to the shareholders of RBC and no one else. While somewhat true, I think it is time that we as a society and RBC as a typical company need to think about the long term impact of systematically moving the North American knowledge base to competing low cost jurisdictions to satisfy the narrow short term results oriented business environment.
Let’s look at this RBC executive and their decision to drive down costs to improve the bottom line through some different filters and push things out on the timeline a bit to see what might be in store for RBC and other companies like them in North America.
RBC for the most part only has to answer to the shareholders and stay within the laws of the land and I would probably say they do a very good job of this with record profits and a good record of governance and corporate citizenship. However, RBC is basically in the business of using money provided by people and other entities to lend to people and entities for various purposes (mortgages, business loans, student loans, lines of credit, etc.) and they rely on those various groups to pay them back the principle with interest.
To illustrate a point, let’s suppose for a second, all IT jobs in North America are moved offshore. What would happen?
In the usual short term measurement cycle the businesses that outsourced the jobs would save money and make the shareholders happy which is good for the shareholders, the company executives and the company. There would be huge dividends, massive bonuses and increased stock prices. Business as usual, right?