Erik Reuter wrote: > > On Wed, Mar 24, 2004 at 08:52:02AM -0800, Gautam Mukunda wrote: > > > > http://www.foreignaffairs.org/20040501faessay83301/daniel-w-drezner/the-outsourcing-bogeyman.html > > Excellent article! Thanks for posting the link. > > Here it is in a more easily clickable form: > > http://tinyurl.com/2wg84 >
>From the article: > The standard case for free trade holds that countries are > best off when they focus on sectors in which they have a > comparative advantage -- that is, sectors that have the > lowest opportunity costs of production. Allowing countries > to specialize accordingly increases productivity across all > countries. This specialization translates into cheaper goods, > and a greater variety of them, for all consumers. The article then goes on to say that "comparative advantage" is one of the best reasons to outsource and offshore. That's where, IMHO, they've got it totally wrong. Much of the problem with outsourcing today, and the cause of most outsourcing disasters, is that the fundamental rule of "what to keep in-house" vs "what to outsource" has changed in the minds of executives in the last few years. The rule used to be: Keep your business' core competency and the critical functions that you can't trust in anyone else's hands (such as email, document management for long term strategies, etc.; things that would kill your company if they wound up in the wrong hands) in-house. Anything else should be up for grabs to outsourcing efforts, as long as the outsourcing does the job competently and can be shown to save money. The article, and present-day executives, say that only the 2nd half of that rule should be considered. Most of the disaster stories involve companies outsourcing core/critical competencies (customer service should be considered a core competency by EVERY company) when they really shouldn't. Also, the outsourcing companies often cut costs themselves, providing a lower quality of service than would have been allowed if those functions were kept in-house. For example, the INS has contractors process the documents for citizenship, which (in theory) frees the INS agents to review more cases than if they had to process the docs in-house. There was a story last year about one of the contractors who had gotten so far behind in processing these docs that the penalty clause of the contract was starting to kick in. Their solution: shred thousands of documents -- original and difficult to replace paperwork, such as passports, supplied by applicants -- so that the backlog of work stayed below the penalty level. I would argue that processing and reviewing immigration documents is a core competency of the INS, and that they should keep all such functions in-house. Janitorial services, on the other hand, would not be a core competency, and should be (and probably are) considered for outsourcing. The uproar about tech jobs being outsourced is, IMO, justified on a more high level analagy: If USA were a company, one of its core competencies would be high-tech services. Why should any company risk allowing its core competencies to atrophy, while at the same time paying for potential competitors to build their skills? -- Matt _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
