The Best Way To Avoid Outsourcing

Larry Price
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Wednesday - January 27, 2010
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It’s interesting that KaiserPermanente employees staged an informational strike last week to show their opposition to the corporation’s decision to outsource services.

According to the American Heritage Dictionary of English Language, outsourcing is “The procuring of services or products, such as the parts used in manufacturing a motor vehicle, from an outside supplier or manufacturer in order to cut cost.”

Cutting costs is just one of the benefits of outsourcing. The practice is now considered to be a strategic management option for businesses in the United States with a goal to achieve their business objectives through operational excellence. Financially, outsourcing allows businesses to focus on their core competencies by releasing operational maintenance-related jobs to a service provider.


When a business uses a U.S. service-provider company in the states, the practice is known as “onshore outsourcing.”

Outsourcing to Canada, Mexico and the Caribbean is known as “near-shore outsourcing.” Business can choose to have “business process outsourcing,” which is defined as transferring services such as human resources, transaction processing or call centers to an external provider either in North America or elsewhere in the world.

“Offshoring” refers to a business taking advantage of lower-cost labor found in other countries for primarily information technology-related services or back-office services - India or the Philippines.

What’s the point?

Well, not all offshoring involves outsourcing. Businesses can choose to build dedicated development centers off shore in foreign countries and employ local labor at lower cost. Although a dedicated center is located off shore the jobs are not outsourced, as in the case of General Electric, which employees 112,000 IT contractors in India and around the world. The contractors are employees of General Electric, not employees of an independent service provider.

The hard reality is that the U.S. has been outsourcing manufacturing functions for decades. Prominent U.S. garment manufacturers are sewing their labels on clothing that was actually made outside the country. A simple cotton T-shirt may not be manufactured in the U.S., but in Mexico, Turkey or even El Salvador. U.S.-branded household items such as coffeemakers are made in China, while high-grade pots and pans for cooking are made in Indonesia. For the last two decades, businesses have been outsourcing software application development and maintenance. The latest wave of outsourcing is moving business processes offshore.

All employees, not just Kaiser’s, have to realize that the motivation for outsourcing comes directly from customers who expect better quality at lower prices. Businesses that can’t meet their customers’ demands will soon disappear when competitors successfully find ways to offer goods and services to meet these demands. Also, technology has made the world a smaller place because distance is no longer a factor.


 

Competition also drives businesses to outsourcing because they can take advantage of freed-up resources to concentrate on their core business. Many employees complain about outsourcing, but what they should consider is that we are no longer as smart as we thought we were. Additional emphasis on educational competence is a priority, rather than more complaining about jobs lost.

Take note: India has the largest offshore outsourcing pool. Why? The country has the largest English-speaking population in the world, with more than 6 million people enrolled in the country’s universities, colleges and secondary schools. While walking on an informational picket line, workers might want to consider that most of our highest-paying jobs can be exported. These jobs include doctors and surgeons, mathematicians, accountants, financial analysts, engineers, computer programmers, architects, physicists, chemists and biologists.

The point: Education is key.

I’m not suggesting here that walking an informational picket line is wrong, but you also may want to read a book or take a class that will help you get to the next level of skill in your profession.

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