Trx, Inc.: The Offshoring Decision

Abstract

This case examines a pending offshoring decision by TRX, Inc., a transaction-services provider to the global travel industry. The COO is considering shifting all nonmanagerial workers to a facility to be operated by Siemens Shared Services. Although many of the costs can be quantified, the COO worries about the unquantifiable challenges and the impact on the company's fundamental business strategy. Excerpt UVA-OM-1296 Rev. Mar. 11, 2013 TRX, Inc.: The Offshoring Decision Vic Pynn, COO of TRX, Inc., relaxed as the wheels of the 747 touched down at Hartsfield International Airport in Atlanta, Georgia, on March 23, 2006. Pynn had just returned from another successful trip to Bangalore, India, where he had met with the management of Siemens Shared Services, a subsidiary of Siemens AG, which provided call center, transaction processing, and data mining operations for Siemens and other, external clients. TRX was three months into the process of evaluating the feasibility of shifting a significant portion of its transaction-processing labor force from U.S.- and U.K.-based locations to Bangalore. The shift would be part of a lease-to-own agreement with Siemens, in which TRX would pay Siemens on a per-employee basis for services rendered on its behalf. At the end of the lease agreement, TRX would have the option to purchase the assets of the Siemens Shared Services facility and operate the center independently. As the analysis and process unfolded, Pynn was continuously challenging his managers to capture and quantify the costs and benefits associated with the transition in order to ensure that TRX was making the best decision. While many of the costs and benefits (e.g., cost savings on labor and overhead) were clear to Pynn, others were less explicit and thus difficult to quantify. Pynn wondered how the company would be affected by the challenge of managing a labor force that stretched across three continents and several time zones, operated in distinctly different cultures and economies, and communicated in three languages. Pynn was confident that he and his team could identify the traditional costs and benefits, but would they be creative enough to consider and analyze the more abstract costs and benefits? Company History . . .