Industry: Toy manufacturer / wholesaler & software game developer
Headquarters: Scottsdale, Arizona
ModelWorks provided the original idea, and is the platform on which for Extension Corporation. is based. Management acquired the business from the original founders in 2008. While the Company was in growth industry, had some awesome products and was growing rapidly, the business was in…well, let’s just say it was not dong great: it was hemorrhaging money. Something had to be done, and fast!
Management set about re-engineering the business, turning it from a U.S. company with all of its employees in Arizona and procurement in Asia – to a U.S. company with an Asian employee and operational base and only a distribution center in the US.
The first team hired in Manila was an e-business group.
The $150,000 investment in U.S. based labor of just two FTE’s was converted into a team of 9 professional e-business staff in Manila. This provided the business with more resources and a platform on which to grow resulting in sales growth of over 500% in just 12 months.
The Company added more resources included a dedicated team focused on search engine optimization (SEO) and search engine marketing (SEM) – something the Company could not previously afford in the U.S. This pushed naturally keywords onto the front page of Google and Yahoo resulting in massive sales growth.
Next to be hired was the customer service and client contact team. For the first time the Company could afford 24/7 coverage. Even with this extra coverage, the Company was still able to save on contact center costs.
With the e-business and contact centers now based in Manila, management took the final leap of faith, and closed the head office in Arizona, relocating remaining finance and operations functions to the Philippines.
The results were beyond expectation:
- Finance and accounting costs reduced by 75% while simultaneously increasing FTE hours from 80 to 120 hours per week
- Operations cost reduced by 80% without loss of FTE hours per week.
- Contact center costs were reduced by 55% and FTE hours increased from 120 to 200 hours per week.
- Warehousing costs were reduced by 80% while simultaneously increasing FTE hours from 80 to 200 hours per week.
- E-Business costs were reduced by 25% with FTE hours increasing from 80 to 280 hours per week.
The ModelWorks experience was illustrative – by moving operations to Manila, the Company could get more people doing more things for a whole lot less cash.
AdGent 007 Inc.
Headquarters: San Francisco, CA with key office in New York City and London, UK.
Industry: Digital Media
AdGent 007 is a venture backed start-up digital media business and ad network focused on showing relevant ads to consumers wherever they are on the Web. The Company has operations around the globe, including offices in San Francisco, London and New York. Launched at an auspicious moment, just prior to the global recession, the Company, that by its very nature had to be global from the get-go, set about building teams of people in various locations around the world.
When the global meltdown began Management was faced with difficult decisions. The Company could not afford to hire all the resources it needed. In addition, it was faced with an unsustainable cash-burn in an economic environment that was rapidly slowing.
While the answer is clear now, at the time Management was reluctant to move resources to a low cost center in Asia. Their questions (and fears) included: Would they lose control of the business by shifting mission critical resources to the Philippines? Would the teams in the U.S. and Europe resist the changes? How would they communicate with the team in the Philippines?
Management decided to dip a toe in the water and hire a financial analyst in Manila. What they got was a fluent English speaking, double degree executive who had previously worked for U.S. Fortune 100 companies and was prepared to work New York hours. And the work the analyst produced was exceptional.
Following the success of this ‘test’, Management decided to move more resources to the Philippines. Eventually, they moved all non-revenue driving positions from the high cost centers of San Francisco, New York and London to Manila. This included technology development, finance, operations, customer support and account management. Cost savings to the business were incredible.
But what about the fears Management had prior to the changes?
From AdGent 007 CEO:
We had a lot of concerns about moving even part of our Company to Manila. I’d never been to the Philippines so I had no idea about the infrastructure of the country, whether the people spoke English or even where it was on the map. And our previous attempts at outsourcing had been less than successful.
Our biggest concern was that we would lose control of our operations. The unique thing about the Extension Corporation model is that all the people you hire are your employees. They are 100% dedicated to your business. This is profoundly different to our previous experience where we were hiring a Company with offshore resources that were shifted from project to project. Sometimes they worked on our projects but they never worked for us. Having people on your team that are your employees makes all the difference. They live and breathe your business.
Perhaps, the greatest fear we had was the pushback from the teams in the rest of the World. Clearly, some people would be losing their jobs. What we experienced really surprised me: the vast majority of our team, including those employees that were going to lose their jobs, embraced the changes. Once it became clear, that the Company needed to make these changes to survive and grow, everyone pitched in. Training of the team in Manila was handled smoothly and professionally and with the minimum disruption to our business. I will be forever grateful to the U.S. based employees that handed their roles to Manila employees with grace, professionalism and, indeed, enthusiasm.
Of course, once U.S. and European teams realized they could get 24/7 support and more people to do more things, they jumped head long into supporting the Manila operation.
Long after we hired our first employee in Manila, I decided to go to down to the Philippines for the first time. I was really surprised. The city of Manila is modern, clean and safe. You could be in Dallas, Chicago or any other U.S. city. Our team is in a modern city skyscraper with a 24-hour McDonalds on the ground floor. The hotel I stay in is world class and the mall next door is as good as any I have seen in the U.S.
My parting wisdom: I am still kicking myself we did not start our Company with an operational base in Manila. We would have saved a lot of money, had access to many more resources and frankly, been a lot further down the road. This model works for established businesses and start-ups alike.
