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Outsourcing – Facts, Myths, Realities
by Bill Gaffney, Executive Recruiter & Career Coach
I grew up in Dayton, Ohio in the 50’s and 60’s. When I was growing up NCR employed close to 30,000 people and Frigidaire 25,000. Everyone knew people that worked for both. Both had their world headquarters here. Besides that Delco (originally Dayton Engineering Laboratories Company) was based here as well as several other GM plants. Dayton was known as little Detroit. Between GM (which owned Frigidaire back in those days) and NCR (known as National Cash Register, or the Cash) they employed between seventy and eighty thousand people. Then there were all the ancillary industries around those two behemoths. Dayton was the second largest center of tool and die manufacturing in the world.So what has happened since the late 70’s? White Consolidated (now part of Electrolux) purchased Frigidaire. Today you can’t find a Frigidaire employee in the area. NCR has moved all their manufacturing out of Dayton and recently announced that the executive offices will be moving to NY. Delco, Delco Electronics and Delco Products are now part of two companies, Delphi and Raytheon. There is a small manufacturing presence in Dayton. All told those seventy to eighty thousand jobs are down to less than twenty thousand, heading quickly for ten thousand.
Why do I tell you all of this when I am going to talk about outsourcing? I tell you this because Dayton could almost be a poster child for the change in the American business environment, of which outsourcing is a part. The American economy has changed from manufacturing to service. I want to remind everyone of a quote from that movie classic “The Right Stuff”. Glennis Yeager is talking with her husband Chuck Yeager. He mentions something about the good old days and she says something to the effect that it is time to move on. So let us move on.
Outsourcing as a term has come into use in the last 20 years or so. But the concept behind outsourcing probably goes back long before that. After all large companies could have had their own fleet of trucks to ship products. But in general they have always used trucking companies, railroads, etc. Following are some facts, myths, etc about outsourcing.
Outsourcing is synonymous with off shoring and that entire work going overseas. That is a nice political argument but not reality. There is much outsourcing that is done here in the US.
We can’t hope to compete on a world basis because of the extremely low cost overseas. While this has validity there are way too many things to consider to make this statement totally true.
First of all there is a huge cost component to managing an off shore process which can quickly eat into savings. For a lot of smaller applications it just isn’t economically practical. Several years back I went to visit a potential client in the banking industry. He was talking about off shoring a 12-15 person customer service operation. He never got very far once he started considering the costs to administer it.
Next there are the cultural issues. Just ask Dell and AT&T (nee SBC). Over the last couple of years they have brought certain critical customer service functions back to the US. They were both tired of low customer service ratings and irate customers. While people in India (as well as other countries) who work these jobs are typically well educated and speak English they don’t culturally relate to how we do things (something that can’t be taught in a year or two). Anyone who has called AT&T in the past about a DSL problem or Dell about a computer problem will know what I am talking about.
Finally there is the little part of, “We forgot to include those costs or if you want that the charge will be higher.” You would be surprised at how often this occurs for everyone except the largest 500 companies or so.
Outsourcing has led to a lack of jobs in this country. This is one of the biggest myths of all. Today the majority of outsourcing is at the “blue collar” level, customer service, manufacturing, etc. Those jobs in this country would primarily be in the $7-$12 range, not exactly a living wage (which is another discussion). As I have said in the past the demographics alone show we have a manpower shortage in this country. A couple of years back I read an interview with Jeff Immelt, Chairman and CEO of GE. In the interview he said the biggest problem we face in corporate America is not outsourcing but the lack of qualified engineers and like fields. He went on to say the only way to fix this is to encourage people at a young age to look at those professions. They may not be sexy but they pay well and pretty much guarantee long-term employment.
I have mentioned only a few of the realities of outsourcing. There are many more. My point is it is not the two-ton gorilla it is made out to be. All this is nice and dandy but how does it affect you, the professional and job seeker. Here are some suggestions.
- As I said earlier move on.
Remember, if I am not the problem there is no solution.