Charles Schwab

Option 1: After a careful analysis of the business environment I recommend that the Transfer of Accounts department be offshored to India. For my reasoning please read below.

Option 2: Looking carefully at the situation and the business environment I would not recommend that Charles Schwab offshore part of its Customer Service department to India. Please read the analysis for more details.

Analysis:

The main drivers that have contributed to the explosive growth of the offshore service industry are the globalization phenomenon and other demographics, social political, technological and economical factors.

Demographic: It is very likely that a decline in the ratio of the working population in wealthier countries will take place in the near future. And in order for developed countries to continue their functionality and stay competitive, they will have to seek employees from the outside. This shortage of skilled labor in wealthier countries can be covered by external resources located abroad. India and other developing countries have a younger workforce with the levels of skills and education required to fill the likely scarcity of high skilled employees in the developed world. India produces over 2 million graduates each year for example; this gives companies sufficient options to select from, when they recruit workers for their offshore operations.

Economic: One of the greatest advantages of offshoring to India is cost savings. By offshoring operations there, corporations are able to save in the range of 40% - 60%. Indian workers can be employed for much lower wage compare to their counterparts in the US. Also the infrastructure costs in India are lower, which allows for significant savings on capital. There are also the tax incentives, the Indian government is granting fiscal concessions, for example the 35% tax on corporate profits is waved for corporations that offshore their operations to India. Also the Indian government offers a ten year tax break for new corporation within industrial parks or economic zones.

Technological: Decreasing communication costs, strong increase in the telecommunications infrastructure, the availability of high speed data connection, internet and ever evolving hardware and software technologies have made it possible to move information in an inexpensive, quicker and quality efficient way, allowing geographically dispersed teams to work together.

One of the main reasons for India being so lucrative to foreign corporation is their low cost supply base. The factors that make India so attractive for selecting as an offshore destination are the English language, the English legal system and the huge highly trained and educated workers. Although English is not a native language in India, there are an estimated 250 million fluent English speakers, which gives India a significant advantage as an offshore destination. Another advantage is the time shifting.

By offshoring some of its Transfer of Accounts department operations to India, Charles Schwab will be able to offer multi shift services to its customers, thus providing the capability to provide round the clock services, so when operations are closing down in the US, they are just beginning in India. This move will give our customers the freedom to transfer their financial assets when ever they like. So by shifting a part of its department to India Charles Schwab can offer a greater flexibility to its customers and thus increase customer service at a reasonable cost.

In order for Charles Schwab to be successful in India, the following things should be done:

A special team should be assigned to oversee the offshore operation. This team will also be responsible for educating the senior executives about the advantages of offshoring in order to get them to understand the potential of such an action. A very good idea would be to ensure the support of shareholders as well. This is important because many shareholders may be concerned about pertaining to changes that an offshore operation may bring.

Another important issue is that the company must decide on what business model and ownership structure it wants to implement in India. I would recommend that the company go with the captive facility approach, in this model the offshore operation is 100% reliant on the parent corporation for business, that’s why is it called captive. This approach offers fewer risks to a corporation compare to other forms of approaches, because dedicated management from the parent company directly oversee the offshore operations. So this approach will allow Charles Schwab without offshoring experience to retain control over its offshore operation. Having implemented a captive facility in India, will allow the transfer account department managers to export and put into practice the same management style and