Charles Schwab Strategic Analysis

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.