Job Creation and Onshore Outsourcing: An Interview with Anil Budha

On December 9, I posted “Offshore outsourcing: can it be reversed?” as the result of an interview I conducted with West Chester resident and businessman Anil Budha, founder of GBP Financial Solutions, LLC, located at 109 E. Evans St., in downtown West Chester PA.

The more I think about it, the more important this issue becomes. All of us, whatever our political persuasion, ought to be able to agree that a society can’t survive with enough jobs. As the graph I posted on December 9 showed, outsourced jobs pretty well mirror, in recent years, jobs lost in the US. And that just isn’t working for our society, and it isn’t working all that well any more for some businesses either.

With that preamble, here is the actual interview, including some references to further info that Anil kindly supplied. This is a technical area and naturally any errors are my own.

What is the purpose of your company?

I founded Global Banking Process (GBP) to enter the niche market of risk mitigation systems. Here’s how that works. When a broker books a trade, there are various stages through to settlement: the buyer confirms the purchase, then the computer goes to stock records and margin calls or the seller needs to borrow shares, etc. All this happens in a few seconds. But during that time, the price can change slightly, say 2 cents per share, and that can add up on a lot of shares.

My company implements systems to take out the variation, to be sure the client pays and the bank receives the exact amounts they expected.

My white paper that offers businesses help on “straight through processing” explains it this way:

Get professional, thorough automated reconciliation software implementation, optimization, and maintenance from people who understand your business

Discover which automated reconciliation software is right for your firm or get the most out of the program you already own.

Save time and stress by having your recon software selected, implemented, and maintained by GBP Financial Solutions….

That’s where we started, though we do a lot more.

How did you come to found the company?

When I started this company, there were just a few competitors, including Lehman. At the time, Lehman was outsourcing some functions from Wall Street to its Hudson office in New York State and to Pennsylvania. I thought that was a good idea.

Outsourcing from a company has often flowed abroad (that’s known as offshoring), but there can be advantages to outsourcing in the home country (onshore outsourcing) as well.

Here’s an article that explains outsourcing, offshoring, and more: Tim Crawford, “IT Outsourcing for SMEs,” IT’s Evolutionary Transition, July 20, 2012.

Who are your employees?

GBP hires young individuals, trains them, and sends them out to perform specialized work with banks in the US. We have about 85 employees in the Northeast.

Some banks outsource at a fixed rate, and our employees work for them on that basis. We’ve been partnering with Citi, JPMorganChase, and Barclays, among others.,

Why can foreign companies often do work more cheaply?

Offshoring is all about costs. Yes, work can often be done more cheaply abroad.

We are competing against hundreds of thousands of workers in India, whose employers of course don’t pay US unemployment tax, Social Security tax, medical insurance, and other costs. And they aren’t unionized, but they aren’t here either in this field.

To show you what we have to compete with, there is also the issue of so-called “black money”: companies in India hold back a part of the salaries, and employees don’t pay taxes on that income. Many employees receive more black money than regular salary. This is a socio-cultural issue. “Black Money” is a very accepted practice among the Indian community; it is as old as the caste system.

There’s a recent article on this if you want to learn more: “India probes Swiss ‘black money’ charges,” Daily News, Nov 10, 2012

Although India used to offer lower costs, costs there now are similar to those in Pennsylvania, because the rising level of skills in India has generated a demand for higher wages. The average worker in this field there earns $30-40,000, about twice the past level. The same thing happened in Ireland, incidentally (see “How to Make Onshoring Work” by Aditya Pande, Harvard Business Review, March 2011).

Partly because of the hot competition in India, companies are also exposed to the problem described in another article, “How bogus resumes raise questions about Indian outsourcing skills” by Saritha Rai, TechRepublic, Sept. 11, 2012.

Other countries are also competing in this market. See “Outsourcing: A Passage Out of India” by John Helyar, BloombergBusinessweek, March 15, 2012, about outsourcing of skilled jobs from western Europe and the United States to locations like Latin America and eastern Europe.

Why did you come to West Chester?

I had been going to athletic events at Villanova, so I knew this area. West Chester looked good as my new location.

I started the business at my home in the Borough, with four others. Labor here costs less than in New York City, and here we get good talent with lots of colleges and universities around us.

I was born in Brooklyn and majored in finance, with minors in math and computer science. I taught for a semester, but that didn’t work out. Then I worked in the back office of an online brokerage in Edison NJ, then as a trader for Solomon Brothers, then at Smith Barney when they merged with Citi, then at SEI financial company. I used some of those contacts when I came here.

How does your company create jobs?

Here’s my basic outreach to businesses on the GBP web site:

Outsource one position (or an entire department) to people living and working in the United States.

If you’re feeling the effects of the economy, we’re pretty sure you’re looking to decrease costs. Traditionally, that means cutting payroll by outsourcing. It’s not wonderful. But it’s better than closing up shop.

On a positive note, maybe you’re ready to increase your market share and you need more staff to get it done. But you’ve got limited space – so moving more desks into your offices is not an option.

Here’s the real problem: You need people – and going overseas to get them means less work for Americans.

My company has created almost 100 jobs in West Chester and in Hudson NY, south of Albany, and I have an office in New York City. The principle is to bring Wall Street to Main Street. Then people in the financial industries can work where they live, in less expensive places. Some of my Wall Street contacts work in St. Louis.

Lehman Brothers was very gung ho about outsourcing to Pennsylvania, and they would have created 100 jobs here if they hadn’t gone down because of they rivalry with Goldman Sachs, which was much better connected in Washington.

Americans aren’t so non-technical as it’s claimed; they learn well on the job. And they don’t jump from job to job as much as workers in India. A company in India is lucky to have an employee stay for 4 or 5 months; they don’t come with experience and once they are trained they defect to other employers.

I have helped some employees to move to New York City, where entry salaries are $50-60,000. Here in West Chester, it’s more like $30-35,000. And in central PA, more like $25-30,000; they need jobs badly, and I have a trip there planned soon to check it out. There could be pockets of outsourced jobs within the state.

What are the prospects for expanding jobs in the US?

My company is moving slowly into health care and we also work with a couple of boards of education. We provide developers to build software systems for them; it keeps jobs in the US.

I’m in talks with a global telecommunications company in Paris, trying to get them to outsource jobs here. The US could guide development throughout the world, if we can get the jobs back. But so far, the banks and Wall Street have not been hiring entry-level people here, so they are losing the knowledge base. When the US sent its production abroad, the innovation moved there too.

During the nine years I’ve been doing this, US wages have come down and productivity has gone up. Meanwhile, in India, wages in this field were $175 a day, but are now $275. The time is right to get jobs back.

We’ve actually been trying to get a foothold in India, and hired four highly qualified employees there at around $60,000, and they accepted, but then they got better offers elsewhere in India.

Non-Americans working for US companies are not the issue. It’s about where the work is done. My job is to pitch the costs and benefits for US employers to outsource here.

How does this country create jobs?

See the Facebook page I created, “High Skilled Jobs Also Get Outsourced and Offshored.” Jobs outsourced abroad are jobs lost here, it’s that clear.

I also put up a petition at the White House site, that said:

We petition the Obama administration: To give job creators an even playing ground when it comes to the offshoring of jobs.

When it comes to outsourcing and offshoring, American service companies that provide outsourcing onshore do not have the same advantages as their competitors overseas. For example, in India, there is the business practice of “Black Money.” “Black Money” is a term used for money used in trade where neither parties pays taxes on them. Because of “Black Money,” the Indian outsource companies regularly pay their employees with “Black Money” and use “Black Money” to conduct bribes to people in the United States or other country’s outsourcing jobs and it is perfectly legal in India.

It will be helpful to US job creators if a tax credit were given to our clients for the jobs they help create in low cost areas of the United States.

So the government can help?

Yes. Look at the auto industry. The US raised tariffs, making it cheaper for foreign companies to build cars here, so they created jobs in states like Kentucky and Tennessee.

As president Obama noted in his 2012 State of the Union message, saving the US auto industry also saved and created a lot of jobs here, and some companies have been bringing jobs back from abroad. He wanted to help business get back here; he challenged Congress to cut out tax rewards for companies sending jobs abroad and increase rewards for companies bringing jobs back. And he wanted to offer financing to companies that open up and train workers in communities that have lost factories.

The government actually gains by giving a tax credit. If a company pays around 35% in federal corporate income tax, a 20% credit on that for job creation would cost the US Treasury only 7%, whereas the individuals newly employed would pay a much higher percentage in personal taxes as well as not costing the government unemployment benefits.

CitiGroup has 12,000 employees in India; if some of those worked here, that would represent a lot of individual income tax. But Citi can still grow in India, a country with a growing middle class.

Encouraging onshore outsourcing is not at all the same thing as protectionism (raising tariffs and other measures to reduce imports).

Do you have advice for the president and Congress?

Yes: adopting the 20% tax credit would create millions of jobs. It should be the same 20% rate for all states. Then the US could attain a lower production cost and build up factory towns, thus stimulating construction. And we’d be innovating again.

There is too much partisanship in Washington.

I met the CEO of a Chinese bank; I’m trying to get them to outsource here. Global workers want the rights we have in the US; those demands will raise costs abroad, while those rights are already built into our costs at home.

So yes, the president and Congress need to know that government can help.