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  • CFO Magazine

Small World

In the wake of Y2K, U.S. companies are outsourcing even more technology tasks overseas.

The Year 2000 problem didn’t bring the world to an end, but it did make it smaller. Many U.S. companies established offshore computer-support operations in the mid-1990s, when the Millennium Bug created an urgent need for software talent. The most popular locations, such as Ireland and India, offered well-educated, English-speaking programmers and convenient time differences for round-the-clock remediation.

As the Y2K threat subsided, so did the demand for Cobol coders. But other offshore support functions have blossomed, as U.S. multinationals have grown comfortable with the cost-saving notion of sending IT chores overseas. Today, for example, shared services centers that handle not only transaction processing but also sophisticated finance functions abound in Ireland’s capital city, Dublin. So do customer service centers, which are also popping up in such countries as India and the Philippines. With U.S. companies suffering from a chronic and substantial deficit of domestic IT talent, the vogue for offshore operations is bound to grow.

The original attraction of low cost is fading in such countries as Ireland, where an economic boom has caused wages to rise. But that loss is being offset by greater sophistication in the workforce and in the technology infrastructure. Meanwhile, other countries are stepping in to provide low-cost IT services.

Erin Go Boom

For the past five years, the Irish economy has grown 9 percent annually, notes Enda Connolly, director of IDA North America, the New York-­based arm of Ireland’s Industrial Development Agency. And the shared services centers of multinational companies have been a major factor in that phenomenal growth. “There are now about 50 shared services centers in Dublin,” says Glen Walker, former CFO of Comerio, Italy-based Whirlpool Europe, the first large U.S.-owned multinational to choose Dublin as a shared services site.

Dublin was first proposed to Walker in 1995 by the managing director of the company’s Irish sales organization. Intrigued, Walker visited the Dublin operations of Gateway and Microsoft, and also met with finance minister Bertie Ahearn, now the country’s prime minister. A cost comparison showed that Dublin was at least 10 percent cheaper than the Heathrow corridor, just outside London.

With no shared services centers to emulate, Walker’s staff devised their own criteria. Beyond low costs, says Walker, “we wanted a green-field site, with a good telecom system and a young, readily accessible, highly educated workforce.” Language was also an important consideration, but Walker claims it was polyglots, not mere English speakers, that he sought. “We wanted to talk to vendors throughout Europe in their local language,” he explains.

Dublin was a different place six years ago, recalls Walker. “No one had done this in 1995, and the unemployment rate was 17 percent,” he says. “The Irish were living all over the world — there were no jobs for them at home. We were able to attract college graduates to fill both high-level jobs and clerical jobs.”

Victims of Popularity?

Obviously, one factor that first-mover Whirlpool did not consider was the number of other shared services centers nearby, but that has since become both a plus and a minus for companies locating in Ireland.


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