Posted on 12/31/2004 6:17:47 AM PST by snowsislander
More and more we read about companies firing their American employees and moving jobs overseas in an effort to save a few bucks an hour. Early on, offshore outsourcing was focused largely in the manufacturing sector. However, it has since been embraced by the growing Information Technology industry. PBS’s Frontline World reported last year that over half of Fortune 500 companies have moved jobs offshore, including famous names from many industries: Oracle, Dell, HSBC, Delta Air Lines, Novartis, J.P. Morgan Chase, Hewlett-Packard, American Express, and British Airways*. General Electric, IBM and MCI are examples of companies who have just recently announced plans to move even more operations offshore.
This past election, offshore outsourcing was a huge issue in the presidential campaign — with calls for and against "protectionism," and Senator Kerry’s constant use of the term "Benedict Arnold corporations," referring to companies that send American jobs overseas. Most of the major media outlets dedicate entire “special reports” to outsourcing now and have ongoing coverage of the issue. Lou Dobbs of CNN’s Lou Dobbs Tonight** is perhaps the most outspoken critic of this trend, and several media groups covering IT issues have covered the subject intensively (Computerworld and CNET to name a few).
Private IT research firm Forrester estimates that some 400,000 jobs have been displaced in favor of overseas outsourcing since 2000, and predicts the number of U.S. jobs outsourced will reach 3.3 million by 2015. According to a recent study by the META Group, the offshore outsourcing market will continue to grow nearly 20% annually through 2008, and by next year, most IT organizations will have an "offshore" strategy***.
I personally receive calls at least twice a week from companies offering to both save Go Daddy money and improve our company through overseas outsourcing.
I have done my homework on this issue, and have come to the conclusion that although we might save a few bucks in wages, ultimately offshore outsourcing would be a disaster for our company.
I can tell you right now, Go Daddy is simply not interested in moving its operations offshore.
Our Success is Rooted in Our Organization, Culture and Customers
My reasons are rooted in staying true to what made us successful – staying in touch with our customers. Our operation simply wouldn’t work if we outsourced. We’ve been successful because we keep our product development (e.g. software engineering) operations and our customer support operations very closely intertwined.
You may not know this but Go Daddy is one of a very few companies anywhere that develops everything that it sells. That’s right, each and every product we sell has been designed and developed by our own software engineers. We even build most of our internal systems ourselves to ensure that we have the very best. At some point, almost every one of our 616 full time employees (as of this posting) is involved somewhere in the process of creating, testing, using, and contributing to our products.
Product Development
It Takes Discipline
We have a very special rule we follow with regard to product development. The rule is simple, and it is something I learned long ago from Bill Gates. Once a development team creates a new product, the team never leaves the product to work on something else; they continue to work on that product for as long as we sell it. Application of this rule takes a lot of discipline (the temptation is big to move development teams from project to project to save money) but it has a big payback: all of our products evolve and improve quickly and customer satisfaction improves with every product release.
Never Forget Who Signs Your Check
I mentioned earlier that staying in touch with our customers and remembering that it is customers who pay our salary is our single guiding principle. To this end, all of our development teams receive a quarterly bonus, of which a significant factor in determining their bonus is directly tied to problems (really the lack of problems) that customers experience with our products. To make sure we deliver, our development teams all work closely with customer service; directly answering customer support calls on our Help Desk and in many cases taking the time to personally call or email a customer who may need assistance. All our development team leaders call customers every week to get a feel for what our customers are thinking and to learn firsthand what they are experiencing with their particular product.
As you can imagine, when our development teams learn of usability problems, downright bugs, or even minor feature suggestions, they are quick to engineer the problems away. Most of our development teams push hard and release an update every 6 to 8 weeks and quite often even more frequently. I cannot imagine that an outsourced development operation would be able to respond as quickly to our customers needs as our own “in house” engineers.
Customer Service
The customer service side of things is an interesting story in itself and is perhaps the main reason why outsourcing is not a viable option for Go Daddy.
Living “Customer Centric”
We take pride in the fact that we provide the very best customer service in our industry. Because all of the products we sell are developed by us, our customers only have one phone number they need to call to get all the answers they need regardless of the product they have questions about. There is also something very unusual about our customer service operation. What I’m about to tell you is very rare in the industry and you won’t see it often; Go Daddy doesn’t charge for its customer support but our support department delivers a small profit each and every month. That’s right, our customer service department (with over 375 employees) not only doesn’t cost the company anything, it turns a profit each and every month.
Hire The Best
You might wonder how in the world that would be possible. The way we do it is simple. First we employ high-caliber individuals with experience, expertise, and a customer centric attitude. In the Phoenix metro area where our call center is located, the typical call center representative earns around $6 to $8 an hour. In contrast, Go Daddy representatives earn on average somewhere between $14 to $18 an hour – with our top performers making significantly more than that.
Reward Results
In addition we have motivational contests on a daily and monthly basis. In the past we’ve given away things like Harley Davidson motorcycles and small cars. This month the big prize for two of our top service reps is one year of rent or mortgage payments. That’s right, Go Daddy will pay rent or mortgage, and the associated tax liability, for one year to two of our top performers. We’ve sent our customer service representatives on cruises, trips to Las Vegas, bought them home furnishings, large HD televisions, and any number of prizes for their hard work. As a result, our customer service representatives are among the brightest and most motivated in the industry.
There’s also another benefit. Call center turnover everywhere is typically very high. Often it’s over 100% a year, and I’m told the average in our part of the country is about 94%. The turnover in Go Daddy’s call center is about 20%.
A Winning Business Model
You’ve got to be thinking: Wow! Sounds like a fun place to work but how in the world does that support group turn a profit. Actually it’s simple.
When a customer calls our customer service center, our reps know that they have to deliver a positive experience to the customer. They also know that they need to answer whatever question the customer needs answered properly and accurately. If there is a problem with an account or a product, it has to be solved in spades – first and foremost. Once the problem is solved, and our customer knows that they are dealing with an honest, positive and motivated professional, we go to work to see what else the customer might need to further enable or improve their Internet experience. Because our product range is so large and wide, if there is something else the customer needs or wants (something that will help them do what they want to accomplish with their Web presence), chances are we’re going to have just the right solution for them. And not only are we going to have it, we’re going to be able to provide it to the customer at an incredible price, and save the customer quite a bit of money in the process.
How it Works
Here’s an example of how it sometimes works. Quite often we find that customers using one of our eCommerce solutions also need to purchase or renew a Secure SSL Certificate to assist in processing credit card transactions and securing personal data over the Internet. Go Daddy is one of eight Certificate Authorities worldwide. Our competitors sell “quick set-up” SSL certificates anywhere from $149 to $159. We developed our own SSL certificates and can issue the exact same product right on the spot. Our Turbo SSL offering, which is issued just as fast as any competitor product, has the very same browser recognition and provides the same level of data security (in essence does everything that the other SSL certificates do but comes with better customer support) is only $29.95. This represents a huge savings to the customer. Most of our other products compare to competitive offerings in the same way. Because we sell only our own products, we can sell them for as low a price as we feel is necessary. We could not do this with licensed products.
So at the end of the day, because of the way Go Daddy provides support to its customers - everybody wins.
• Our customers win - they get great service, outstanding products and save a bundle of money.
• Our customer service representatives win - they earn a good living and have a great time at work.
• The company wins - Go Daddy provides its customers with world-class service, makes a profit and is successful as a result.
An added benefit of having a customer service department that pays for itself is that we are always willing to increase staff and invest in the latest tools and technology to meet the needs of our ever growing customer base. This next month alone, we’re scheduled to hire 35 new employees. This also means that the Phoenix metro area, which gains all these new taxpayers, wins as well.
An Argument For Offshore Outsourcing
As fate would have it, my son Sean Parsons is the Director of Business Development for a firm called Arrange Technologies. See http://www.arrange.com. Arrange specializes in providing premier solutions to development projects using offshore resources primarily located in Bangalore India. For the record, I am not (and Go Daddy is not) involved in Arrange Technologies in any way.
After reading a draft of this Blog entry, Sean said to me, “Dad, what we do really isn’t called offshore outsourcing anymore. What we do is called bestshore outsourcing.” Best shore outsourcing as he defines it, is finding the very best location to develop whatever project is at hand, taking into consideration cost and available expertise. I have to admit that some of Sean’s arguments did make sense to me, and to be fair I agreed to mention a specific example where the solution he offers makes for a win-win situation.
Recently I was approached by a friend who has an interesting business idea he is trying to get off the ground. While he has a solid business idea, my friend also has a big obstacle he has to overcome. He does not know a thing about the internet, to say nothing of coding the sophisticated website and database driven application he believes he needs to start his business. He also doesn’t have the technical knowledge necessary to stand a chance of hiring the right staff to engineer his application. In his particular situation my son’s company provides a very appealing solution. Arrange will not only provide him with the proper expertise, they’ll also get the job done right and save him a bundle in the process. At this delicate phase in my friend’s new business every penny counts. So an offshore (ahem, bestshore) approach makes a lot of sense to him.
I find this example to be quite different from the classic case of job displacement we typically see and worry about as a result of off shoring. In this case, no talented American workers are being displaced by less expensive workers located overseas. It will be interesting to hear back what you think about Sean’s alternative.
Go Daddy’s Success Goes Beyond Cheap Labor
No doubt about it, going offshore would initially save us more than a few bucks in labor costs. But those savings would come with many hidden costs. We would lose the synergy that exists between our product development and customer support operations. We would also lose all our highly skilled and motivated employees. These employees would be replaced with people who more than likely have never been to the USA and don’t have any idea what it’s like to be an American. They certainly wouldn’t know what it means to be a Go Daddy employee or how the company got to where it is today. Finally, that would result in the biggest cost of all. Our customers would not receive the same quality products and good customer support. We all know what the consequences of that would be.
The principle upon which we have built Go Daddy is based upon staying in touch with our customer base, which is largely in the United States and Canada. I am convinced that we couldn’t do the same job with offshore outsourced resources.
Our business model works because we are located in the good ole USA. It certainly wouldn’t be possible if we outsourced our product development or customer service departments. And it most certainly wouldn’t be possible if we sent the jobs overseas.
Footnotes
* http://www.pbs.org/now/politics/outsource.html
** http://www.cnn.com/CNN/Programs/lou.dobbs.tonight/
***http://www.metagroup.com
Interesting professional ping!
You may be interested in this blog item.
Good for them. This slave labor wages needs to stop as does the hiring of illegals.
It is good for them, and for their employees -- and for their customers.
It sounds like Mr. Parsons has hit upon a good way to run this kind of business, and I think some other firms could take away some valuable lessons. Perhaps the most interesting thing about all of this is that Go Daddy also tries to be a price leader as well as a customer service leader.
Just goes to show good old American Capitalism can be done without illegals and foreigners.
Cool! I have a Go Daddy account :)
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