Area business keeps its local work force

Jobs stay put: Custom Direct decides against risking language, currency and data security problems overseas.

Outsourcing

April 13, 2004|By Bill Atkinson | Bill Atkinson,SUN STAFF

John C. Browning presides over a business that might one day suffer the same fate as the horse and buggy, the typewriter and the record player.

Browning is president and chief executive of Custom Direct Inc., a Joppa-based company that designs and manufactures bank checks that it markets directly to consumers.

Last year, faced with fierce competition and a slowly shrinking market, Browning considered shaving costs by hiring workers in Canada and India for 25 customer service and data entry jobs that he couldn't fill at his plants in Maryland and Little Rock, Ark.

If the venture went well, Browning thought, he could hire more foreign workers and lay off customer service and data processing employees in the United States. "It could have eliminated 200 jobs," he said.

Browning eventually backed away from the idea because the savings didn't look that great and he had other concerns.

But across the nation, others are embracing the export of service jobs. They argue that they can reap substantial savings by laying off domestic employees and replacing them with inexpensive, educated workers in other countries.

Workers in sprawling call centers in India and elsewhere field questions from American consumers, balance financial statements, and handle computer problems and architectural drawings.

The trend has American workers worried, but concerns about jobs that have been moved offshore are founded more on fear than reality, some experts say.

The number of American jobs that have been shifted overseas is a tiny fraction of the nation's service work force. But the trend appears certain to gain momentum.

Nearly 600,000 U.S. service jobs will be sent overseas by next year, 1.6 million by 2010 and 3.3 million by 2015, predicts Forrester Research Inc., an independent technology research company based in Cambridge, Mass.

"I don't think it is large in terms of numbers, but I think it feeds into this sense of insecurity," said Gail Fosler, chief economist at the Conference Board, a New York-based research group that tracks consumer confidence. "Almost by definition it is going to pick up steam."

Ron Hira, assistant professor of public policy at the Rochester Institute of Technology, said, "What we do know is companies are increasingly moving offshore. ... We don't know what the scale and scope will be."

Not everyone thinks that sending jobs overseas will produce fatter margins and bigger profits.

After spending months reviewing potential benefits of the strategy, Custom Direct's Browning backed away because he calculated that total savings would be about 15 percent, a fraction of what he initially believed he would bank.

He worried that foreign employees might struggle with the English language and frustrate his customers. He expected to burn up money traveling overseas to make sure the job was done right. Currency exchange rates threatened to eat into savings, too.

Security was another concern with checking and credit-card account numbers held overseas.

"We are confident U.S. consumers wouldn't have been happy about that," said Browning, whose employees' backgrounds are checked and whose facilities are monitored by cameras and have secure doors. "The last thing we want is to alienate our customers."

Still, for Browning or anyone in business, looking for ways to operate more efficiently is a vital part of the job, especially in an industry that is shrinking as his is as banks move toward phasing out paper checks.

About 72 percent of bills are paid by check, down from 80 percent in 2001.

Despite the steady decline, the bank-check market is still huge, with about $4 billion in total annual sales. A smaller direct-to-consumer retail check segment in which Custom Direct competes has about $500 million in annual sales.

Instead of shipping the service jobs abroad, Custom Direct has invested millions of dollars in automating and improving its production, marketing and distribution systems.

In part because of those investments, Custom Direct, the second-largest check manufacturer selling directly to customers, can undercut the price of bank-issued checks by as much as 60 percent.

The company has gained market share, and its earnings are growing briskly despite strong competition from Shoreview, Minn.-based Deluxe Corp., the largest check maker in the country. Deluxe recently spun off its electronic payment unit, eFunds, which sent dozens of jobs to India.

Last year, Custom Direct invested about $2 million to improve its Internet software, making it easier for customers to order checks online and input data themselves.

Online orders have more than quadrupled since 2000 to about 26 percent of the company's revenue, $106 million in 2003.

The software investment also has freed up customer service representatives, who handle as many as 15,000 calls a day, and data entry workers, whose fingers fly over their keyboards with a clatter.

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