As we pass the middle of 2004, the wave of offshore outsourcing shows no serious signs of subsiding—nor should it, if you listen to certain experts. One of them is author, consultant and former MIT Sloan Professor Michael Treacy, who sees in offshoring just one in a recurring series of onshore/offshore waves. Time and again, U.S. business has overturned existing business models with new ones that favor consumers, Treacy maintains.
To oppose offshoring is to put the providers of a service, for example, computer programming, ahead of the consumers of that service. Thats not the American way, Treacy asserts. He doesnt deny that losing a job is painful, but throughout our history, he says, we have remained competitive in the world economy not by protecting ourselves from competition but by taking our lumps, moving on and finding new opportunities.
Even if you hate offshoring, you probably have to admit hes right this time, too. Although there is plenty of anti-outsourcing rhetoric and a plethora of pending anti-outsourcing legislation, corporations are not curbing their plans to send work abroad. In a report on Indian IT service providers published by Goldman Sachs last month, the financial services company found that "despite backlash concerns, mainstream adoption continues unabated."
The anti-offshoring bills, although many in number, are aimed all over the map. Some are designed to keep state government IT work within the state for which its being performed. Others, such as those that require offshore call center workers to identify their location, seem aimed at embarrassing call center operators rather than keeping jobs onshore or creating new ones here.
Do consumers care? Online lender E-Loan has been giving home equity consumers a choice as to where their loans will be processed. If handled in India, the loan would be processed two days faster than if handled in the United States. Faced with this trade-off, 86 percent of customers choose to have their loan turned around two days faster via India.
In this political year, Treacy is skeptical about politicians promises. Despite Sen. John Kerrys support for a bill requiring identification of call center locations, Treacy said, "Im certain Kerry wont do anything of substance. This is all wind."
Indeed, Kerry critics harp on the fact that the senator, a motorcycle enthusiast, has owned a British Triumph, an Italian Ducati and a German BMW. Only when it was clear that he would run for president did he purchase an American Harley-Davidson.
And lets be honest—Kerry is no different from most of us. As Treacy said, "Consumers tend not to be willing to pay a premium for an American-made product." Some of us might all the time; some of us might some of the time; but most of us, most of the time, will not. Maybe thats all you really need to know about the future of offshore outsourcing.
Out and about
Politicians moves to impede offshore call centers could benefit companies such as Willow CSN, in Miramar, Fla., which has some 2,000 U.S.-based call center contractors working out of their homes. Flexible hours are the main draw for the workers, who average $13.88 per hour, according to Willow CSN President and CEO Basil Bennett. Customers pay only when they send a call to Willow CSN; agents are paid only when they handle a call, said Bennett, whose company boasts such clients as General Electric and the American Automobile Association.
What happens when companies that are usually technology followers are told to get on the leading edge, or else? To get an idea, look no further than the 137 suppliers that have been told by Wal-Mart to implement RFID by the end of the year. Brett Kinsella, Sapients global director of RFID strategies, said that 80 percent will be ready by Jan. 1 but that it hasnt been smooth sailing. Kinsella said suppliers are finding the costs of implementation higher than anticipated, some are perturbed that changes will need to be made once the RFID 2 standard is out late this year and cultural barriers to early adoption at many companies have impeded progress.
Stan Gibsons e-mail address is email@example.com.