Vanguard is outsourcing recordkeeping work, along with 1,300 of its workforce, to Infosys
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- Decision day for 1,300 Vanguard workers as their jobs head to India-based Infosys
- Joseph N. DiStefano
- Aug 17 2020
- Word count
- 841 words
this is what im worried about with the big move to remote work. why hire an American who wants high pay and expensive benefits when you can hire out of India or Eastern Europe for far cheaper?
What is the reason to keep it in the states even if there was no move toward more remote work? I.e. is remote work contributing in a significant way or is this shift just "the regular" cost cutting?
It's the latter by and large, hoisted and defended by the former. Vanguard in particular has always wanted to cut costs in any way possible, it's essentially the whole crux of their business model. If they can shave down costs to operate an index another .01%, that's a massive win for the company. They are an outlier because they probably have the smallest but most consistent margins of any company that isn't solely invested in corporate scale arbitrage.
The low expense ratios are largely due to massive scale, though. Their fixed costs are spread over a lot more investors than your average fund. This should mean they aren’t that concerned about the cost of labor. I guess we would have to look at the numbers.
But wasn't one reason for vanguard's creation because the founder (John Bogle) wanted to keep fees and such low? Now, how that gets achieved i believe is how noted about spread across more investors, etc.
Yes, Bogleheads are big on minimizing expense ratios. But they are now around 0.1% and many funds are lower. VFIAX (their S&P 500 fund) is at 0.04%.
If someone invests $100,000 then that is $40 a year compared to $5000 they would get if the stock market goes up 5%. The expense is going to be lost in the noise. There isn’t much more savings to be had.
It's surprising business hasn't gone more remote and we attribute it largely to generational inertia. This is just accelerating trends that would have happened over the long term naturally.
Stuff like record-keeping or any work that can be broken up into pieces and have highly structured and well defined standard processes for handling has almost no downsides to offshoring. More creative or collaborative work has trouble managing around the time-zone issues.
Vanguard Group is technically a private company owned by its customers, the shareholders of the funds it manages. This allows them to have very low expense ratios. In practice, I’m not sure how the corporate governance works. Does management get to do whatever it wants? I can’t see there being much pressure to get expense ratios even lower.
The website is pretty basic, but it does have what you need.
This is kind of bizarre:
So it's not just outsourcing the work - it's giving (selling?) the employees to Infosys. I've never heard anything good about Infosys. I'd probably opt for a different job if I were in their shoes.
I'm curious how frequently something like this happens? I've heard of spinning off a division into a separate company or selling a division to another company, but this seems different from both of those. (Or maybe it's a case of the latter?) It seems very odd to me. If I were an employee being moved, my assumptions would be that Vanguard's doing this to save money. Therefore, there's no way I'll make the same amount of money working this job as I used to.
I don't know what if any precedent this has in the private world, and it certainly seems odd that it's Vanguard employees being shifted to a contractor, but for government contracts it's completely the norm that contracts are regularly recompeted, and when a non-incumbent company wins the contract everyone below the program management level seamlessly transitions to the new contracting company.
When I was in the army I'd see the same contract maintenance guys wearing Northrop Grumman jumpsuits one month and BAE jumpsuits the next and it wasn't even worth mentioning. Now I'm a contractor on the civil side, and while I haven't had to go through a company switch yet, I know people who have been contractors at my facility for 20-30 years over at least 4 different companies. My contract was recently recompeted and while my current company won in the end, we were explicitly told that none of our jobs were at risk regardless of who won.
Fascinating! (And I learned a new word today - recompeted. Never heard of that before!) That's good to know. I don't do much enterprise stuff so haven't experienced too much of that. Thanks for the info.
Infosys is part of the infamous WITCH group; Wipro, Infosys, TCS, Cognizant and HCL. As you can probably tell from the ominous acronym, they are about as poor an employer as exists.