Offshoring, or Nearshoring, is a proven method for founders to earn more. However, in a post pandemic world the acceptance of remote work has increased, and this has had a profound effect on labor costs across the globe. On this session, Collective 54 member Satyam Kantamneni shares how the cost per hour shifts by location, and how to take advantage of the opportunities being created.
TRANSCRIPT
Greg Alexander [00:00:10] Welcome to the Pro Serv Podcast, a podcast for leaders of thriving boutique professional services firms. If you’re not familiar with us, Collective 54 is the first mastermind community dedicated to the unique needs of founders of boutique pro serve firms. My name is Greg Alexander. I’m the founder and I’ll be your host today. On this episode, we’re going to talk about how professional services firms can improve their margins by leveraging a global workforce. And this is a topic we’ve discussed in the past. However, there’s some interesting dynamics that are happening different places across the world, and I wanted to bring an expert on and have him give us an update on what’s happening. So we do have a role model with us. His name is Satyam Catalini. I hope I got that correct. Satya, it’s good to see you. Please introduce yourself to the audience.
Satyam Kantamneni [00:01:14] Awesome. Thanks for having me, Greg. It’s a privilege. Yeah. And I run a boutique design firm or UX design firm based out of Pleasanton, California. But we have presence in Colombia and India, so it’s kind of fascinating to have a conversation on this site.
Greg Alexander [00:01:32] Yeah, very good. So let’s start there, if you wouldn’t mind. Maybe compare and contrast the the labor cost for those that would be employed by a professional services firm in the U.S., in India, in Colombia, since you’re operating in all three geographies.
Satyam Kantamneni [00:01:50] So I think before I kind of come into contrast those numbers, I would probably break it down into maybe two categories. Okay. I would call it the knowledge worker category versus the back office category.
Greg Alexander [00:02:01] Got it.
Satyam Kantamneni [00:02:02] So the knowledge worker category is where we plan, which is people are directly engaging with clients and driving staff and are being paid as experts rated where they are in the globe. So when you look at and both of them have a very different labor structure, both in terms of cost training, grooming, everything else that goes to it. So I can at least share with you very quickly in our context, when we talk about the knowledge workforce, we actually a dollar in India, that means for labor cost translates to a dollar $0.40 and Colombia translates to about $3. In the United States. That means for the same talent, I pay $3 in the U.S., I pay a dollar in India and dollar 40 in Colombia for knowledge for workforce. That number changes significantly When you are looking at back office fare, you know, it’s basically a dollar in India, it’s a dollar in Colombia and it’s about $4 and in the United States. And just because it’s cheaper in India and Colombia, when you look at back office where there’s no direct working with any of the stakeholders. So that’s kind of what I would kind of on a high level to kind of share with you some numbers on that side.
Greg Alexander [00:03:20] So very interesting. I’m already thrilled that you’re here because I was not distinguishing between the knowledge worker in the back office, and that was a mistake in my behalf. And I understand the distinction and it’s an important one. You know, it strikes me jumps off the page if we use your metrics here, that in the U.S., it’s three bucks for knowledge work and $4 for back office. That seems upside down to me. So if I’m understanding that correctly, the knowledge worker in the U.S. is making less than the back office worker in the U.S..
Satyam Kantamneni [00:03:52] To a large level just because the labor cost is much lower in India and in Colombia. Right. So that’s why the ratios are. So again, if it’s it’s $80,000 to get the Senate contract and nine states, you can get that for 20,000 in India.
Greg Alexander [00:04:08] Okay.
Satyam Kantamneni [00:04:09] Right. Whereas it’s much more expensive to hire knowledge workers outside the country because remember, the variables that are on language, Colombia is not always bilingual. So you got to pay a premium for that. Again, if they have to kind of be an expert so you pay a premium for knowledge workers when you’re outside, but still it is cheaper.
Greg Alexander [00:04:30] Yeah, makes sense. Okay. Very good. And it’s nice to hear how it’s dimensionalize. Language is one of the dimensions. Now, from what I understand, the labor market, the talent market for knowledge work offshore is tightened a bit and that these costs are changing in these different geographies. I’d love to hear about that. Maybe how that’s changed over the last, I don’t know, three or five years. And then also, I’d love for you to project out, at least to the best of your knowledge, where you think that’s going.
Satyam Kantamneni [00:05:00] So the interesting thing that I would say we are starting to notice in the post pandemic, the labor markets are actually rationalizing very fast. And I say that because and I’ll give you an example. In Colombia, for example, people are directly hiring. In Colombia, they are willing to pay a premium for that. And especially with this whole remote working by mindset, people are like, If I was just going to hire somebody who’s going to work, you know? We are in terms of time that I’m gonna be like, um, I don’t, I just cross the border and then hire somebody in Mexico and Colombia. So that just a bit changing a lot and that so when we started the process with Colombia, the ratio between India and Colombia was only one is to 1.2 and it inflation eased because of this, because people are directly willing to care about somebody in Colombia and or in any of the negotiating facilities and bring people in. So that’s changing and I continue to see that happening. It looks like, you know, even in your team you have people and to the country and that’s what’s happening. People in the United States are relocating to other parts and then they are willing to take a little cut, but not too much because they’re still being paid for their impact. So I see five years from now, this will normalize a lot more If you’re looking for finding lottery talent. And that’s another differentiation I would make as lateral talent is going to get be more and more premium, you’ll still see a variance between hiding in the United States with other just because the cost of living is different. But for a good talent, you start not to start normalizing, but for entry level talent, it’s a totally different game store system. And then I think that is where the value is, where if you kind of have a good grooming system, if you have a good way to kind of onboard people, you can continue to keep those margins pretty high.
Greg Alexander [00:06:55] Yeah, it’s a great lead into my next question. I understand that your firm UCS Reactor has a fantastic way of hiring an entry level developer in them, grooming them over time. So please share that with the audience. How are you doing this?
Satyam Kantamneni [00:07:09] So I come from a military background. Right. And then and so. And one thing that the military and most professional military still really well, as they groom people, they select people on aptitude and attitude. They drill them well with techniques and then better what they are at the fighting force. They all have the same language and the same structure. The same applies to us. So irrespective whether somebody is in Colombia, somebody is in India, somebody is in the United States, they all have the same vocabulary, the same structure, the same process. There’s no inconsistency between how things are done. So that is the foundational, I would say, structure to make that happen. That means you have to kind of select people on the same variables of aptitude and attitude. You kind of run them for the same variables. You drill them, you coach them in the same aspects. And the best part of this also becomes the camaraderie because everyone’s gone through the same drill and because the back office model has always been structured around the high end work is done by someone else, the low end work is done by someone. So that’s a different mindset and I think that that works well. That’s how most of the offshoring has worked and it has its own, you know, a benefits being. You can run a 24 hour cycle, especially if you’re working at halfway around the world. But I can obviously knowledge working side that is is a big factor that’s continued to kind of allow us to thrive. So when you take and for that to happen, you need to have a good relationship with that in your intake processes like with the universities. But where we are bringing up talent and how do you select them, how do you groom them? So that’s what we’ve been doing really well. And once that system is in the rhythm, the supply side of talent keeps going on. And the good thing is, you know, three years down the line you will have people are three years and then you have four years of learning for years and tenure that the pyramid of people will start and yet that attrition happens. You’ll still treat in a good model of people coming in again, very much like the military. And then everybody is a mentor and everybody’s a mentee and it just continues to be a nurturing system.
Greg Alexander [00:09:11] Yeah. So let me ask you about the mentor mentee, and I’ll use myself as an example just because the people that are listening to this are members and they can resonate with that. So we we have partnerships with universities, two in particular, Baylor University and TCU here in Texas. We’re based in Dallas and those are schools around us and we’ve partnered with their career development office and we’re bringing young talent in and we’re screening for aptitude and attitude. It’s making me feel good to hear you say these things. And then we’re, you know, we’re growing these people over time. The strain that that does put on the system is that, you know, the quote unquote, senior people now have to, through the apprenticeship model, they’ll have to help groom the young people. And we run into some resistance there, not only inside of our firm, although that’s modest. But when I share this idea with others, the sometimes the founders of these firms say, no way, I don’t want to be running a daycare center. I just want to hire very senior people and not have to deal with all this. I think that’s a mistake. I think a talent supply chain is mission critical to scaling a boutique processor firm. But what would your response be to someone who might share that concern?
Satyam Kantamneni [00:10:19] It’s getting. If I had. The opportunity to hire everybody who’s lateral, everybody who’s motivated, everybody’s enthusiastic. Absolutely. But as we all know, as people get more tenure, there are different things that can motivate them. And, you know, they they’re happy coaching, but they’re not happy doing. And so when you start looking at doers and there’s a lot of that that’s needed and especially outside of work and people are excited about being a new client and so on and so forth, there is a benefit of having hyper enthusiastic folks. That’s why I read General is not coach and they know holding the gun right there. So there’s also everybody has a role there. Now, to your point, you know, it’s all coming. It comes down to having a system, a system that’s in rhythm. And the system here as it and we run something called a skill based system that means and given that we work in a construct of what we do as a profession, you know, it goes all the way from an entry level, you know, a designer to a chief design officer in a company. So it’s a profession all the way. And so the skills of Chief design officer has a very different set of skills and an entry level has a different set of skills, is we teach skills and teach. And that’s the thing where we don’t need a senior to teach someone how to work. Let’s say, for example, do a competitive analysis. There’s there’s methods there. There is watching videos, there’s artifacts there. So a lot of that is already out there for them to get to 0 to 80. And and again, with people the right attitude and attitude. This is a generation where you can sit on YouTube and learn coding over the weekend and then code something. I mean, if you have the aptitude and attitude, you can do a lot of things. You just enable that.
Greg Alexander [00:12:01] Yeah, I’ve been blown away by how capable this generation is, I think, and I might be getting this wrong, but I think they’re called Gen Z and they come after the millennials. Millennials who got a bad rap, maybe rightfully so in some cases. But the Gen Z, the the let’s call it the newly minted undergraduate up to maybe, I don’t know, 25, 26, 27 years old. It’s been miraculous of how capable they are. And for the things that you just said, I mean, they grew up, you know, this way, doing things this way, right? Instead of coming to you with every little question, their first thing is to go to YouTube and try to figure it out on their own. So and I share that with members just because I think maybe sometimes our members have a misconception as to what this really is. You’d be surprised at how self-reliant and how capable this group is. All right. Well, I’m sure we could talk about this forever. We try to keep these podcasts short. We will be having four members that are listening to this, a Friday role model session with Santa. Look for that meeting invite. This will give you an opportunity to double click into this and much greater detail and ask direct questions of Satya and he’ll share more and more of his knowledge with you on that. So that’s my call to action for members. Look for that invite. If you’re not a member, I would encourage you to become one and you can do so at collective Fifa.com fill out a form and one of our reps will call you as an inspiration to me. Just heard it’s three or 4 to 1, you know, in some of these countries. So if you’re a boutique processor firm and you’re not tapping into the global talent supply chain, that in and of itself is a reason to consider joining. And if you’re not ready to join, but you want to read more about the types of topics we discussed in addition to this one, I would point you to our book. It’s called The Boutique How to Start Scale and Sell the Professional Services Firm. You can find it on YouTube. Satyam, thank you for coming on the call today. I always enjoy our chats. Glad that they’re happening more frequently and thanks for contributing to our collective body of knowledge today.
Satyam Kantamneni [00:14:01] Absolutely. Thank you for doing that great stuff and collect it for people.
Greg Alexander [00:14:05] Okay, very good. Have a good day.