Canadian Companies Providing a Mission Critical, Cost-Effective Resource
One unleveraged source of value that American companies can explore is in outsourcing labor to Canadian contractors.
For startups and cash-crunched companies, this is a significant and vital part of saving funds to stay competitive. And competing against large companies will be more difficult in 2024. Extra funds will be needed. It’s wise to investigate this opportunity to cut costs and leverage new talent and skill.
IDC Survey Shows Companies wait until they can get a 50% Price Cut
An IDC survey of US companies showed that when cost reduction reached 50%, executives see a more favorable value proposition in outsourcing to a Canadian provider compared to another offshore provider. 50% savings is a very high bar to achieve.
Jim Westcott, Senior Analyst for IDC Canada, says Canada’s close geographic proximity, political stability, and similar language and business culture help create its appeal. “Canadians understand the business process and expectations of US business.” — report from Outsourcing-center.com.
The IDC survey found that 80% of respondents are considering or plan to use external providers while only 47% have ever done so. That suggests an outsourcing trend that will rise.
The IDC survey also found that experience and expertise are now the key drivers of deciding to outsource to Canada.
However, cost still remains a key part of the value proposition. And it’s one that could lead to poor results — underinvestment.
That money is important, given the cost of tools, training, subscriptions, inflation and other resource needs rise. It goes without saying that without funds, any business or contractor cannot compete well.
Toronto Metropolitan University Poll of Tech Workers
A recent poll found that Canadian tech workers earn 46% less than American tech workers. Money is expensive, so for a cash-strapped startup, that 40% is very inviting. Labor is the most significant cost component, and savings can then be piped into marketing programs or product development.
A new study from Toronto Metropolitan University says Canadian tech workers are paid 46% cent less than their U.S. counterparts. The research from the university’s Dias public policy institute found a typical tech employee in Canada makes $83,700 per year compared with $122,600 for workers in the U.S. sector — BNNBloomberg report.
That report showed that when comparing full-time tech workers, the difference per year was only $34,800 or 10%. The story here might be that US companies are outsourcing to Canada, but only for part-time roles. That’s the tech sector.
For all USA companies, the average wage is not $122,000 per year, nor is it Canada. For some sectors, wages are low and this becomes a real challenge to future productivity. One issue with Canadian providers is less investment made in them, and this can erode productivity. If the provider is seen as an outsourced, low-cost foreign connection, then less investment in them occurs. This not only creates lower returns, but also creates financial friction due to high inflation. Without investing in the foreign provider, the value proposition begins to fail, leading to a return to much higher labor costs.
As the US reshores more business back home, wage demands will rise and companies will need to look at less expensive labor options and skilled talent.
If you intend to outsource to Canada for IT or marketing services, view it as relationship that you will proactively nurture and improve. You create your business’s future.
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