Creative Clerical Solutions: Service Firms Open Up Satellite Global Offices
When John Foy looked at U.S. population projections for the 1990s, he saw two lines on a graph. One showed steady growth of new jobs; the other showed the number of young people entering the workforce going down. "It spelled trouble," he says. He began to wonder what would happen at New York Life Insurance Co., where he is a vice-president, if there was a shortage of qualified high school graduates to analyze medical claims submitted by policyholders.
Foy, former director of group claims processing, arranged for the company to train and hire 100 claims analysts in Ireland, where unemployment is high and the population of high school graduates is expected to grow. This past August, the New York City-based insurer opened an office with 55 employees in the small town of Castleisland, near the region where Foy was born.
In March, Cigna Corp. followed suit. The Hartford-based insurer announced plans to train and employ about 100 medical claims analysts in Loughrea, Ireland, for an office scheduled to open next spring, and to add another 100 analysts by 1993.
The move to Ireland was made possible by improvements in satellite communications and fiber optic cables that now allow office work and computer programming to be performed in real time, or with just minor delays, thousands of miles from a company's headquarters. The Castleisland facility, for instance, is linked to the corporate mainframe in New Jersey by a leased trans-Atlantic line.
The two firms are among the first insurance companies to shift skilled office tasks overseas. But companies involved in software design--a white-collar labor-intensive field requiring even more training--have opened computer programming centers in countries like India, where there is a large pool of computer science students.
Even without advanced telecommunication, many companies have been exporting low-level back-office chores such as data entry to the Caribbean and Far East for several years. Cartons of paper or microfilmed documents are shipped to an offshore facility, where workers type the information onto computer tapes and disks that are flown back to the U.S.
Lower wages, a large unemployed labor pool and lower employee turnover are a large part of the reason service industries turn to economically depressed nations for clerical services. Avoiding U.S. regulations, such as the number of hours a worker can spend in front of a video display terminal, is another attraction, some executives say. Similar reasons spurred a shift of U.S. manufacturing jobs to the Third World during the past 20 years or so.
Other firms believe the global office can serve as a foothold in regions where protectionism may become a problem in the...