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Global Expansion for Small Businesses

Luis Aburto recognized the advantages of outsourcing development work when he decided to start Scio Consulting International LLC, an information technology company. But he still has a question: Where in the world (literally) should he go for the talent he needs? He has considered linking up with a service provider in Bangalore, India, because the wages are very low, the pool of well-trained employees is deep, and technical skills are strongly emphasized in the university system. But India is a long way from the company's home office in San Jose, California, which means greater travel costs and dealing with the hassle of working between times zones that are nearly opposite one another. Also, the cultural gap would be significant, even though most educated workers in India speak English. Aburto has also been in touch with an operation in Morelia, Mexico. His contacts there tell him that the skilled workers he needs are available, the cultural gap is limited, turnover is very low, and technical staff will not need special visas to travel between Mexico and project sites in the United States. However, wages are significantly higher than in Bangalore, university graduates in Mexico receive little practical training, and the law makes it very difficult to restaff once you hire them. The clock is ticking. Aburto needs to line up employees for three big contracts he is currently negotiating, and his potential clients all want to get their projects started within a month or so of a final decision. If he even gets two of the three deals to pan out, he will have much more work than his staff in the United States can handle. He will need additional employees - he's just not certain where to go for outsourcing support.

Question 1 What additional information would be helpful to Aburto as he ponders this decision?

Question 2 What additional advantages and disadvantages can you think of that Aburto should consider when
choosing between off shoring this work to India and "nearshoring" it to Mexico?

Question 3 Which location would you choose - India or Mexico? Be sure to build a strong case for your final

Solution Preview

1. Additional information that will be helpful in making this decision, would include whether or not the Indian workers are faster at completing this type of work than the Mexican workers, what is the average turnover rate differential between Indian workers and Mexican workers, if on-the-job training would bring the Mexican workers up to the same level of technical knowledge as the Indian workers, and if videoconferencing would help ...