While there are few good outcomes from a strained economy, one outcome worth considering is the reconsidering of outsourcing. Outsourcing in reality has meant offshoring or in the words of those outsourced, “Hey, I’m outta work because they shipped my job to India (or China, or Russia, take your pick). But something has changed and I think the time is right to rethink outsourcing and introduce onshoring. First, my take on the current situation.
The idea behind outsourcing was based largely on economics. A company could cut staff starting with the call center and help desk in exchange for contracting those positions to a low wage country. The economics were brutal and in many ways productive for a company’s balance sheet. The only question was how rapidly the outsourcers such as Infosys and WiPro and lots of Chinese hard goods manufacturers could move up the supply chain.
Several studies suggested those companies could move way up the supply chain to the land of the white collar jobs of investment banking (hah!, now there is a safe haven), product development and design and high content, high value products and services. A recent Harvard Business School study estimated 57 million or 42 percent of the jobs in the U.S. ranging all the way to microbiologist could be offshored. The only truly “safe” jobs were those that required hands on activities such as a plumber or child care worker. Of course if Japan continues with its robotic advancements, even those jobs are suspect.
But lately, some cracks have appeared in the rush to offshore. In an article in the Financial Times calling into question the benefits of offshoring call centers , longer call lengths to resolves problems, difficulties in communicating with contractors and the rising cost of call center contracts all raised into question the value of offshoring.
I’ll add a couple of other questions. In what can only be charitably called an uncertain economy, the wisdom of striking contracts with companies half way round the world is truly suspect. For CIOs this is especially true. If you are really going to pare down your technology projects to those that are absolutely vital to your company, you probably don’t want to hand those projects off to the lowest bidder. If you are going to embark on some cost saving project based on hosted software or extra tight security, you might want to keep those under close watch. If your company is going to be either acquired or go out acquiring, you need to know where your costs are. If your remaining customers are the only barrier between you and the unemployment line, you want to make sure those customers are being treated with the utmost care. These add up to keeping your resources close at hand.
Two other points. One, with costs going up in other parts of the world and costs going down in the U.S. (add to our economic woes, deflation), the gap between onshore and offshore is even less.
And one other big point. Recently I had breakfast with Arthur Langer, the senior director for the center for technology, innovation and community engagement at Columbia University in New York. He has been instrumental in developing a mentor program which pairs high school students from inner city schools who are intent on succeeding in the business and technology environment with CIOs willing to spend the time to guide the students. The full description of this program would take a much longer article, but just let me say, Langer’s success is remarkable. Maybe the best argument for onshoring is that it is the right strategy not for economic reasons, but is instrumental in building a better society.