Post Pandemic, Local Governments must Outsource to Cut Costs (instead of hiking Taxes)

Most people still define outsourcing as "shipping out" services (hence, American jobs) to highly specialized companies in other countries, especially to the front-runners like China, India, and Mexico. But that's only half the story. The other half of the story is that many great American companies provide very similar services at very competitive rates.

Post pandemic, as local governments (counties, cities, towns, etc.) re-open, they will do themselves a big favor if they start outsourcing some-to-most of their "non-essential" services to a host of great American companies. Since these companies tend to have much better systems in place than the local governments can ever envision and implement, the outsourcing will immensely improve data privacy and handling of sensitive records.

It will be a win-win, meaning those government services would be more efficient while lessening the taxpayers' financial burden. Today, given the dire straights most local governments are faced with, labor unions and civil service commissions will be a lot more amenable to outsourcing non-essential services than ever before. 

While many 62+ employees (62 is the first qualifying age for social security benefits) with medical conditions would naturally take early retirement, government agencies can also offer early retirement incentives to all 50+ employees to lessen the jolt from outsourcing. No denying that it won't be pretty or perfect to start with, but as employees get used to outsourcing, they will be more accepting. 

Now, let's differentiate between essential and non-essential services. The vital services include law enforcement, public health, public schools, public transportations, public works, corrections officers, firefighters, social services, sanitation, office management, budget, etc. The non-essential services comprise property assessment, assessment review, tax collection, information technology, DMV, parks and recreation, public housing and rental processing, youth and elderly services, hospital billing, building maintenance (government office buildings, school, hospitals, public libraries, public parking, etc.), women's and homeless shelters, etc. Here are some non-essential services that would make good outsourcing candidates:

1. Employee Benefits, Payroll, and Time Processing –- These are some of the most commonly outsourced functions in the private sector. While some small and mid-size local governments have already been outsourcing these functions, the large cities and counties are still far behind. These functions generally return the best bang for the buck when bundled across essential and non-essential services; for instance, there is hardly any difference between the processing of payrolls for law enforcement and the assessment office. 

2. Tax Collection and Processing -– Local sales taxes, local income taxes, commercial rent taxes, sanitation taxes, water district taxes, tolls, etc. may be bundled and outsourced to companies specializing in this domain. In many local governments, these taxes are often managed and collected by separate units under different verticals, thus wasting significant taxpayer dollars on redundant or inefficient services that could easily be grouped or combined. 

3. Property Data, Assessment, and Tax Collection –- This is the local juggernaut that needs serious considerations. If the counties need to single out one function to begin the "outsourcing" experimentation, this is the one – no two ways about it! This juggernaut has two separate umbrellas: (a) Property Data, Mapping and Assessment, and (b) Assessment Review and Settlements. Both services can be outsourced to the same company, creating a centrally responsible authority. The leading consulting firms like Accenture, Boston Consulting, Deloitte, EY, KPMG, McKinsey, PwC, etc. could quickly provide such outsourcing services. 

4. Information Technology (IT) and Help-Desk Services –- IT service is the most common service in the private sector that gets outsourced to specialized global players like Accenture, IBM, Capgemini, TCS, Infosys, etc. Likewise, local governments should also consider outsourcing these services to such well-known companies. Even within the same local government, IT services are heavily duplicated among various agencies, so outsourcing will help minimize redundancy and duplications and help achieve higher efficiency, cost improvement, and scalability.

5. Public Parking Maintenance and Traffic Ticket Processing –- Private operators like Laz are already managing numerous public garages and surface lots for government agencies. Similarly, many private companies help the government process parking and traffic tickets. Because these companies use cutting-edge technologies, they also continually upgrade them to remain competitive. Some of them also provide general (parking) building and lot maintenance services and arrange for renovation and reconstruction services. 

One of the most critical areas is the out-of-control property taxes that heavily favor the rich at the poor and middle-class expense. The minorities and seniors suffer the most, often to the extent that they are ousted from their roots. Therefore, the umbrella of property assessment and taxes should be the mother of all local governments' outsourcing. 

Now is the time to emancipate the maxed-out taxpayers. Any tax hike to save non-essential services and their employees could be the kiss of death for the current administration.

Finally, Congress should bail out State and Local governments if -- and only if -- they pledge to outsource at least 80% of all "non-essential" services to the American companies.

Stay safe!

-Sid Som

homequant@gmail.com

Post Pandemic, Local Governments must Cut Costs by Outsourcing Non-essential Services instead of Hiking Taxes

Most people still define outsourcing as "shipping out" services (hence, American jobs) to highly specialized companies in other countries, especially to the front-runners like China, India, and Mexico. But that's only half the story. The other half of the story is that many great American companies provide very similar services at very competitive rates.

Post pandemic, as local governments (counties, cities, towns, etc.) re-open, they will do themselves a big favor if they start outsourcing some-to-most of their "non-essential" services to a host of great American companies. Since these companies tend to have much better systems in place than the local governments can ever envision and implement, the outsourcing will immensely improve data privacy and handling of sensitive records.

It will be a win-win, meaning those government services would be more efficient while lessening the taxpayers' financial burden. Today, given the dire straights most local governments are faced with, labor unions and civil service commissions will be a lot more amenable to outsourcing non-essential services than ever before. 

While many 62+ employees (62 is the first qualifying age for social security benefits) with medical conditions would naturally take early retirement, government agencies can also offer early retirement incentives to all 50+ employees to lessen the jolt from outsourcing. No denying that it won't be pretty or perfect to start with, but as employees get used to outsourcing, they will be more accepting. 

Now, let's differentiate between essential and non-essential services. The vital services include law enforcement, public health, public schools, public transportations, public works, corrections officers, firefighters, social services, sanitation, office management, budget, etc. The non-essential services comprise property assessment, assessment review, tax collection, information technology, DMV, parks and recreation, public housing and rental processing, youth and elderly services, hospital billing, building maintenance (government office buildings, school, hospitals, public libraries, public parking, etc.), women's and homeless shelters, etc. Here are some non-essential services that would make good outsourcing candidates:

1. Employee Benefits, Payroll, and Time Processing –- These are some of the most commonly outsourced functions in the private sector. While some small and mid-size local governments have already been outsourcing these functions, the large cities and counties are still far behind. These functions generally return the best bang for the buck when bundled across essential and non-essential services; for instance, there is hardly any difference between the processing of payrolls for law enforcement and the assessment office. 

2. Tax Collection and Processing -– Local sales taxes, local income taxes, commercial rent taxes, sanitation taxes, water district taxes, tolls, etc. may be bundled and outsourced to companies specializing in this domain. In many local governments, these taxes are often managed and collected by separate units under different verticals, thus wasting significant taxpayer dollars on redundant or inefficient services that could easily be grouped or combined. 

3. Property Data, Assessment, and Tax Collection –- This is the local juggernaut that needs serious considerations. If the counties need to single out one function to begin the "outsourcing" experimentation, this is the one – no two ways about it! This juggernaut has two separate umbrellas: (a) Property Data, Mapping and Assessment, and (b) Assessment Review and Settlements. Both services can be outsourced to the same company, creating a centrally responsible authority. The leading consulting firms like Accenture, Boston Consulting, Deloitte, EY, KPMG, McKinsey, PwC, etc. could quickly provide such outsourcing services. 

4. Information Technology (IT) and Help-Desk Services –- IT service is the most common service in the private sector that gets outsourced to specialized global players like Accenture, IBM, Capgemini, TCS, Infosys, etc. Likewise, local governments should also consider outsourcing these services to such well-known companies. Even within the same local government, IT services are heavily duplicated among various agencies, so outsourcing will help minimize redundancy and duplications and help achieve higher efficiency, cost improvement, and scalability.

5. Public Parking Maintenance and Traffic Ticket Processing –- Private operators like Laz are already managing numerous public garages and surface lots for government agencies. Similarly, many private companies help the government process parking and traffic tickets. Because these companies use cutting-edge technologies, they also continually upgrade them to remain competitive. Some of them also provide general (parking) building and lot maintenance services and arrange for renovation and reconstruction services. 

One of the most critical areas is the out-of-control property taxes that heavily favor the rich at the poor and middle-class expense. The minorities and seniors suffer the most, often to the extent that they are ousted from their roots. Therefore, the umbrella of property assessment and taxes should be the mother of all local governments' outsourcing. 

Now is the time to emancipate the maxed-out taxpayers. Any tax hike to save non-essential services and their employees could be the kiss of death for the current administration.

Finally, Congress should bail out State and Local governments if -- and only if -- they pledge to outsource at least 80% of all "non-essential" services to the American companies.

Stay safe!

-Sid Som

homequant@gmail.com

Protecting Small Businesses from Unscrupulous Foreign IT Vendors

You are a small business owner ("you" "owner"). You have successfully used the web in marketing your services, but the cost of your IT services keeps growing 30-40% each year, despite the much-needed switch to a Cloud platform.

You keep hearing how others have been saving a ton by off-shoring web development/maintenance services, leading to all of their IT services. Yes, even smaller outfits have been outsourcing to vendors in emerging countries ("vendor") for a while. And one can anecdotally confirm that a well-researched exercise could save owners some decent money as well. But, as an owner, what you may not necessarily hear is the negative ("dark" is more appropriate) side of off-shoring IT services. Here are some of the negative issues, usually unreported, you must be aware of:

1 . Quality – When dealing with a small vendor, you are practically dealing with engineers and other technical graduates from 2nd and 3rd-tier (mushrooming and mostly export-oriented) schools. Given this axiom, you are getting significantly lower quality products and services from the get-go. By the time you figure this difference out, it might be a day too late, meaning you might be stuck with them for a while. Have you ever seen a Harvard MBA working for a local butcher? If you ever see one working for the butcher, he is probably developing a global franchise. The point is, do not expect to work with superstars there. Of course, the crooks may use a superstar to close the sale, but nothing more! 

2. Communication – Though they are all English-speaking, you will be lucky to understand every third word (over the phone), if not every third sentence. And, with their inferior telecommunication system, you are faced with the proverbial unintended consequences. Your primary business quickly turns into pleasing ("begging" is more appropriate) to get them to do something, however substandard the quality might be. The stress will continue to mount, but you will be in denial that things would get better.

3. Time Difference – It's a huge issue, particularly if you are planning to outsource to Asia. For example, after returning from lunch with a prospective client, you are ready to place a call to your Asian vendor to discuss a few changes to the existing client profile. As you are prepared to speed-dial, you realize that its midnight there. Now you have to wait 12 hours to make the call. And, if you happen to hook up with a crooked vendor, you are now unimportant to them. Email communication (you'll receive replies once in a while) is the only way out. Though you got an excellent deal while signing up with them, it now costs you an arm and a leg for every simple change you ask for. That's how the crooks operate. If you ever question them about the skyrocketing pricing, you will get tons of mambo jumbo – all structured talks from different sites where thieves of the world unite.

4. Due Diligence – It's challenging to conduct any meaningful due diligence of small vendors in emerging countries. While there are many ways to check the standing of a small vendor in the US - from D&B to BBB to Licensing boards to Trade organizations to local Chamber of Commerce, etc. - there is hardly any such reliable source there, making it almost impossible to separate the honest from the crooks. It may so happen that due to change in ownership, the honest ones are not-so-honest anymore. Moreover, the vast majority of thieves maintain fake references (and fake/shared sites) in the US. Clients may not stand by old recommendations either.

5. Hidden Cost of Apps – To identify and separate the real ones from the crooks, you must try to zero in on the accurate pricing. If the first project entails developing a website, you must ask if the site would be mobile-friendly. Nowadays, most small business sites, including e-commerce sites, are mobile-friendly without developing a set of separate iOS and Android Apps. When a vendor insists on keeping them separate, you must be a bit careful. The crooked vendors often offer very attractive pricing on the initial website, followed by exorbitant pricing on the Apps. However, if the separation makes business sense, you must ask for the vertical pricing (site + apps), in writing, and upfront (must be valid for at least twelve months), to be in the know before signing any contract. 

6. Update Capability – All other factors remaining constant, you must also insist on having the full capability and flexibility to update and upload news, data, video, etc. on to your new site. "Send us the changes, and we'll take care of it" is a serious red flag. There are no free lunches, so you must not walk into this trap. The cooked vendors use this trap to churn owners, and it gets exponentially worse over time. Even if the vendor is honest, owners must realize that it's not a workable solution, as no business is all-proactive; they need to promptly and intelligently react to momentum situations as well (and this is where the trouble starts, generally resulting from the time difference, frequency of updates, immediate availability of right personnel, etc.).

7. Employee leasing – And this goes hand in hand with #6 above. Unlike here in the US, most emerging markets do not have clear-cut laws regarding temporary staffing and employee leasing. To create a round-the-year income stream, the crooked vendors try to own/retain the update capability. Later, citing frequent and volume updates, they try to promote employee leasing. They package and market the very ordinary kind at the prevailing rate (with fake resumes, etc.) and simultaneously lease them to multiple clients. Therefore, it is critically important that the owners retain the full update/upload right from the get-go, without which it could pose serious trouble, just a matter of time!

8. Local Legal System – It is not easy to fight the crooks in their territory; they know all the tricks to play the legal system. When I played soccer, I did believe in 'it ain't over till it's over,' but this concept does not necessarily work for a small business. Sometimes when the writing on the wall is abundantly clear, it's better to cut the losses short and call it a day. It could be a defeat emotionally, but a real victory intellectually. Smart business owners understand there is a better use of the R & D capital than wasting it on fighting some crooks overseas. Alternatively, this could be a boon or a silver lining to bring the business back home and try out a real engineer who is smarter and inherently more ethical.

9. Tip of the Iceberg – You must strictly keep the relationship at the business level, meaning the vendor should be treated as a professional services vendor; anything more personal than that will cause trouble down the road. Suppose the relationship becomes friendlier than that, one sunny morning, you may get a call or email (one of those rare occasions!) from the principal of the vendor firm indicating (actual email quote follows), "I have got a personal medical emergency in my family, and looking to arrange [$$] ... If you could help me in providing [$$], I can arrange (to pay it) back before 10th of the next month." This event could be the tip of the iceberg. If you become emotional and fall for this type of ploy, it will be the end of your business relationship with them. Forget about the loan; they will walk away from all unfinished projects, leaving you in a real lurch. It's not all that green on the other side!

-Sid Som, MBA, MIM

homequant@gmail.com

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