Globalization at AboutUs
The other day the Customer Support phone rang and I picked it up. It was a client in New York City, he asked for Ayesha. I informed him that Ayesha wasn’t available, but could I take a message. He mentioned she was working on his article and sent him an email request for feedback. He really needed to speak with her because there was too much to put into an email. He seemed shocked, maybe even upset when I told him it’s not always easy to schedule phone number with her in the States because she’s in Pakistan. I wasn’t really able to read the reason for his reaction, but surmised maybe he was surprised that this “American” company had writers overseas. Further I surmised maybe he just wanted to talk with someone living in a nearby time zone. I wasn’t sure, so I asked him if we could talk.
I spent nearly 40 minutes on the phone, going through the wiki page for his comments and taking lots of notes for things we’d change. I also asked him about his personal history and how he got into the business (the website said online since 1999, but it turns out it’s a family business that his father has been in for 50 years!) Great stuff.
I also talked to him about how we don’t consider our office in Pakistan to be an “outsource” situation, that we have an office in Lahore with full-time employees, with all benefits including health and stock options. He seemed impressed by that and the kicker for him turning around his reaction was when I told him that I spent time there in January. He got more interested and wanted to know how it was over there.
When I told this story to my partner, she said that globalization is a fact of life in business these days and that the way we’re doing it at AboutUs is different than many (most?) other companies, and is a point to be proud of and promote.
A few other points: Both the development team and the Customer Service team are split between Pakistan and the US, with the majority in Pakistan in both teams. This means we’re an “around the clock” company, making us that much more efficient.
I have nothing against global business ventures so long as management “comes clean” on the real reasons that offices are started up outside the USA. For example often times a major portion of a company’s customer base is within another country, and to give them better service one needs services located locally. I suspect that is not why aboutus started an office in Pakistan.
A big problem for most high growth start up companies is cash flow – typically they chew through early stage investor money so fast it is referred to as the “burn rate”. Paying for the time of the worker bees within the start up company typically burns up a major portion of this cash.
So how can one reduce this upfront cash consuming burden? It is to employ talent that can do similar function as done in the USA, but at far reduced labor rates. Later in the business growth cycle, when there is less cash flow problem, meaning after the start up grows big and successful, one can then more easily offer perks like stock options. It is also a relief on early stage cash flow to offer the talent in Pakistan health benefits, because for that person to go to their local doctor, is much less expensive than it is for an aboutus USA employee to go to the doctor in the USA.
Also there are other imbalances that favor going outside the USA for talent. The USA government at state and local levels taxes the heck out of a business operation for all manner of stuff, and also burdens it with all manner of regulations that do not exist in places like Pakistan. Make a list of all of this stuff, and then compare the tax rates and regulation burden in Pakistan for the same items, and I’ll wager it is much lower in Pakistan. This dynamic also allows the Pakistan talent to offer their services at lower rates than in the USA.
Are you saying that if these differences did not exist aboutus would still have been very motivated to start an office in Pakistan, simply because of the very exceptional talent, or to perform some form of social uplift?
I argue that entrepreneurs that start high growth companies are typically smart cookies, and if they see a way to gain leverage or competitive advantage, they will do it – and increasingly that is had by “leveraging” (others might call it “exploiting”) the difference in taxation rates, regulatory burden, and labor rates between less developed countries, and the more developed countries.
In the spirit of “Wiki” and openness and transparency, this particular weblog content struck me as more “PR” piece than exposing the real issues that caused an aboutus office to open in Pakistan. In the shoes of your executives I would likely have done the same – but then would hope I could “come clean” on the real motivating reasons.
Comment by Martin Pfahler — July 14, 2008 @ 7:12 pm
Martin,
We wouldn’t have an office in Pakistan if it didn’t make financial sense.
Comment by Brandon CS Sanders — July 15, 2008 @ 3:37 pm
Hmmm I see Martin’s point.
But financial incentive is the main reason for globalization anyway. Like even when a company goes global because there is a large consumer base outside its country even they are only looking towards the extra finances by catering to that consumer base are they really thinking about providing a better service without any financial gains??
~Priyanka
Comment by Priyanka — July 15, 2008 @ 11:19 pm
“Making the world a better place” too often gravitates to “making one part of the world a better place, at the expense of another part”, due to corporations being driven to do things that “make financial sense”. How to uplift the world without negative consequences to any particular country is admittedly a very tough nut to crack – due to today’s underlying business dynamics.
Comment by Martin Pfahler — July 16, 2008 @ 5:31 am
Now that it has come where it is, I feel it my responsibility to clarify a few points. In the initial draft of this post, that Ted Ernst showed to me, he had mentioned it in clear terms that having employees in Pakistan is cheaper. However, I asked him to remove that part since that might hurt some people here - I found it offensive myself. Being born in Pakistan wasn’t my decision, and surely it has its negative consequences, like for example being paid less - even if not by Pakistan’s standards. Now, AboutUs or other companies for that matter, come to “less developed” countries in search of cost effective resources. There is no question about that. But emphasizing this point is hardly a motivating factor for the “cheaper” employees or for the richer employees at any rate, to be able to feel less superior, since they are paid more - a fact that Ted is perhaps in a better position to appreciate than Martin. So, Martin, while you might be right from an analytical point of view, I doubt if you are looking at all the pieces.
Besides, there are other components of the equation here. AboutUs might have come to Pakistan with purely business motives, but the decision still has its effect on the social uplift. For example, if I wasn’t working for AboutUs, I would have been working for someone else, perhaps for lesser compensation. Now, the fact that money is flowing into the country in exchange for something that the country might have to pay for from within itself, and the fact that I am able to spend more, on services and products provided inside the country, benefiting someone more than what I could if I had less money, does have its effect on the social uplift - whether intended or not - this also means that an additional motivation for me is that if AboutUs becomes a big success, it will benefit my country by encouraging more foreign companies to come here earning something for the country for excess humans resources. It benefits the employees by giving them exposure with international organization - I personally feel that I would do a lot of things differently than what I would have done had I not been with AboutUs. Moreover, I remember having talked with our overseas employers about how AboutUs can do something that will be good for the Pakistani society and I am certain, that AboutUs will proceed in that direction one day.
Coming back to the point, I am fine with being paid less than my US colleagues ( and bearing the “negative consequences” of being born in a poorer and less developed country ) since I know that though my cheque is small, my opinion in the matters of the company does not weigh less on that count. But if you tell me that I am working for AboutUs only because I cost less, I would rather not cost them anything and leave, “whatever” the consequences. And you, my friend Martin, while I hope that you will have the courage to come clean on the issue, I also hope that you will have the heart not to do it.
Best,
Asad
Comment by Asad Butt — July 17, 2008 @ 4:46 am
Asad, if I were in your shoes I would feel the same way that you do. I don’t think anything you have said contradicts any of the points I have previously made. When companies in the USA move resources to developing countries to gain market place competitive advantages this can stimulate social uplift in such countries. However if you interview a broad demographic of “blue color” workers in the USA, I think you will discover that this dynamic has a negative impact on many of them – thus my mention that there does not seem to be equal uplift for all – your uplift potential comes at a price to many “worker bees” in the USA. In rebuttal there are those that argue, “people in developed countries like the USA have had their ‘good times’, now it is time for people in developing countries to gain the same, and if that comes at the price of decreasing living standards for some in the USA, tough luck”. I think the better uplift scenario would be one that uplifts all parts of the globe, without negative impact on people in another part. I am not saying I have the answer to this problem – I have yet to see any that do.
Comment by Martin Pfahler — July 17, 2008 @ 8:58 pm
I remember Bill Gates saying that if you want more people to join altruistic causes, you have to make it profitable. So at the end of the day, it’s simply the corporate interest that drives all our actions. I know that many jobs are being lost in the developed countries because of their moving to the less developed countries, and I don’t think anybody has a control over it. The concept of common lot is a fallacy. Did anyone in the developed countries raise concerns on the plight of under-developed countries in the age of imperialism or more recently, when their own economy wasn’t being affected by them. How many people in the US realize that 32% of the global CO2 emissions is not the right thing to do and that other people also share the same planet with them? How many have given a serious thought to the fact that a child in the US costs 35 times more than a child in countries like India and Pakistan, and 200 times more than a child of the Sub-Saharan Africa? I hear you talking about the loss of the “blue color workers in the USA” but I have yet to hear that an average person in the US “still” earns 8 times more than an average person in China, 9 times more than an Indian, 11 times more than a Pakistani, and a 100 times more than someone in Sierra Leone.
Besides, if Pepsi can destroy all local soft drinks by sending its cheaper and better products in the less developed countries, what’s wrong if it opens some job opportunities too? All these, again are parts of the equation no one can do anything about.
Comment by Asad Butt — July 18, 2008 @ 12:23 am
Martin, I’ve read all you’ve written here, and I’m not getting it. Are you advocating something? Of course it makes financial sense for AboutUs to have an office in Pakistan. And?
Comment by TedErnst — July 18, 2008 @ 8:43 am
Ted, I’m making “big picture” process observations. I no longer have the time nor energy for advocacy work. It seems Asad has become “hot under the collar” (not my intent to do so) as if I try to justify that the USA has never done anything that has had negative impacts on other countries – I have never stated that, nor do I believe it. I just wonder why uplift of one global region, today has to come at the expense of another. One would think with all the smart global minds so “linked” by Wiki and internet, there would spring up a better solution to this “imbalance” problem.
Comment by Martin Pfahler — July 18, 2008 @ 5:07 pm
Awesome blog post Ted! :].
Globalization is becoming more and more common but however not many companies treat their offices as “equals” as AboutUs does. I actually love that I can talk to the American employees and the Pakistani employees during the week; even some of them come on over the weekends (I’d assume they get that time off).
A dedicated staff, two dedicated offices, a great and thriving website, strong development team, strong system operators, awesome WikiCoaches, what more is there to ask for?
I do not view the Pakistan office any different then the Portland office. I know we have some people up in Seattle and Chicago as well, AboutUs treats the employees well, the owner, Ray King listens to points made even though IRC. The development team is keen to answer questions and take error reports. The paid staff have great entertainment skills and awesome personalities.
AboutUs’ popularity is growing. In the sources I seen Pakistan is an ‘unstable’ country. The United States government feels Pakistan is one of the most unsafe places in the world a citizen of the United States may travel to, the staff in the United States go there anyway, spend time with the people in Pakistan. This company puts aside differences in my opinion and goes beyond anything that I have seen expected. In the state I live in I have to tell the government exact details if I ever decide to travel there.
Comment by Nick Burrus — July 20, 2008 @ 7:00 am
Ted,
I agree with Nick. This is a great story on how the world works today.
Jan
Comment by J.D. Holiday — July 20, 2008 @ 7:22 am
Martin, I’m sorry but I’m still not getting it. When a company anywhere in the world, makes a hiring choice, doesn’t that impact equally all those not hired? This is true of all the people that apply for an AboutUs job in Lahore just as much as it is true of all the people that apply for an AboutUs job in Portland, yes? So I’m not sure what you’re saying about one thing coming at the expense of another. To me that seems to be always the case. Some businesses actually lay off staff in one region to hire in another region, presumably for financial reasons. To date AboutUs hasn’t done that. I’m not sure if that’s relevant here or not? I’m honestly not even sure what we’re discussing anymore.
Comment by TedErnst — July 22, 2008 @ 4:06 pm
Ted, what is so difficult to “get”? Globally there are developing countries where many people have lower standards of living than those in the USA. Due to the nature of “competitive” business dynamics (as Brandon said aboutus decisions must make “financial sense”)there is a trend in which some developing countries gain increased living standard, at the price of decreased living standard for some growing demographics within the USA (one can find academic or scholarly papers about this “tend” phenomenon via a web search). I’m simply saying that the better social uplift or business dynamic is one that gains ever increasing living standard in a developing country, while still maintaining the higher living standard of today’s downward sliding demographics in the USA – and so far the global supply of smart minds linked via the web and Wiki don’t seem to have figured out how to accomplish this. Some in the USA argue: To solve we must better educate such USA demographics (blue collar workers, etc.). The answer is not so simple. I know of people in the USA with PhD status put out of work by equally educated PhD’s in developing countries, that relative to USA costs associated with employing such highly educated talent is orders of magnitude less (due to the inequality of governments’ tax and regulation burdens). Note it is no secret that large corporations in the USA are increasingly moving their R&D centers “off-shore”. So whereas in early years of this phenomenon it was the USA blue collar worker that was negatively affected, now it is increasingly also the attorney, the CPA, and the scientist.
Comment by Martin Pfahler — July 23, 2008 @ 9:55 am
Martin, I take issue with the assertion that the AboutUs office in Lahore somehow hurts standard of living in the US. I just don’t see how that could possibly be the case. There are no US workers displaced by the Lahore AboutUs office. If it was impossible to have an office in Lahore, AboutUs would either be a very different business with a much smaller workforce overall, or it would not exist.
Comment by TedErnst — July 23, 2008 @ 5:17 pm
Ted, I am talking about general “global” trends and how they effect some of the workforce in the USA. Aboutus as a company is currently far too small in staff size and resources to have an impact. I would not say the same of much larger corporations that work in the computer or Internet space. And I mean not just the totality of such companies, but also companies working in other market spaces. We could probably go on and on about this subject matter, but for those with more interest I might suggest they search the web, the issues I mention are documented in various studies and scholarly papers. They also show up in articles that involve political issues and policies - the types that our next President will have to deal with.
Comment by Martin Pfahler — July 23, 2008 @ 8:19 pm
Martin, I think I hear you talking specifically about AboutUs, and how our decisions have impact. I think that’s true. I think that large impacts are made up of lots and lots and lots of small decisions. And, I see that there are many, many possibilities, and that these possibilities are there because we invent them. AboutUs invented for itself the possibility of being global, for all of the reasons we’ve discussed above, accepting all of the risks and consequences. I look forward to inventing more possibilities together.
Comment by TedErnst — July 28, 2008 @ 10:08 am