Avon: Offshore Twist

Avon Products is joining the trend to hire programming talent in foreign countries, where wages are lower. But it has added a twist to the offshore bandwagon—by insourcing, rather than outsourcing, the work.

The cosmetics giant is calling its pursuit “offshore insourcing,” according to Harriet Edelman, Avon’s chief information officer. Instead of using programmers on the payroll of a services firm aboard, Avon has decided to hire staffers there directly.

The move is interesting because it’s a deft handling of the latest industry pile-on: offshore outsourcing. In the past, Avon has fumbled with emerging trends: At the height of the hype around the Internet, the company weighed the benefits and costs of selling directly over the Web and doing away with the Avon ladies. LINK(“The Ultimate CRM Machine,” Case 001, October 2001.)

Edelman acknowledges her offshore strategy isn’t for every company. If your company doesn’t manage its own global operations it probably makes more sense to go with an offshore-outsourcing firm.

Avon says it has beefed up its technology department in countries such as Hungary, Brazil and other low-cost centers. “With our distributed model of I.T. we can use our capabilities in low-wage areas,” Edelman says. “The principles of outsourcing can be adopted anywhere.”

Avon still makes the big decisions—picking software and hardware, vendors and architecture—at its Rye, N.Y., offices. But development of Web sites linking Avon to both suppliers and its famous “lady” sales force is done in Russia.

While content for those sites is locally controlled, the sites themselves are hosted at data centers in the United States and United Kingdom. Data entry, cleansing and maintenance takes place in Hungary. In all cases, the workers are Avon employees.

Edelman says Avon’s approach makes it easier to transfer knowledge around the company. A manager in the United Kingdom may mentor an employee in Hungary. Then that employee can simply walk downstairs to examine a warehouse system in his East European facility firsthand.

Could any offshore firm deliver for Avon? Probably not, says Edelman. “The ability to have your own management abroad is not a small factor,” she says.