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Harris Sherline: Outsourcing Is Simply a Part of Doing Business
“Outsourcing” is generally thought of as the process of shipping jobs outside the United States to contractors in other countries where costs are much lower than ours. But the term actually means any contracting with “another company to provide services that might otherwise be performed by in-house employees — inside the U.S. as well as in other countries. Many large companies now outsource jobs such as call center services, email services and payroll” that are not necessarily outside the United States, according to WiseGeek.com.
In fact, outsourcing is not new. It has always been a part of the process of successfully operating a company — by concentrating on doing what it does best. Two well-known examples illustrate the point:
Ross Perot built a very large enterprise processing data for a variety of major clients, including General Motors and the federal government, among others. His business grew to the point where GM acquired the company in 1984 in a $2.4 billion stock deal. And the automobile manufacturing industry has always made extensive use of outside contractors for a wide range of parts and assemblies it couldn’t produce at less cost for itself, such as wheels, tires, engines, etc.
The idea that outsourcing is bad gained currency after the North American Free Trade Agreement was adopted, which was and continues to be strongly opposed by unions. It has become a political issue that critics claim has accelerated the loss of U.S. manufacturing and led to the outsourcing of many jobs that were once considered secure, such as backroom call centers and software programming.
Just about everyone has a story about calling for a computer-related problem or a product that didn’t work as advertised, such as a small appliance, and finally hanging up the phone in a fit of pique because they weren’t able to communicate with someone in India who, despite the fact they may have spoken perfectly acceptable English, simply could not communicate effectively enough to answer customers’ questions or resolve their problems.
One of my sons is a senior executive with a large textbook publishing firm in New York that contracted with a firm in India to handle certain aspects of its product development. However, he found that the process of trying to communicate effectively with the Indian employees eventually became too difficult. Although they spoke English quite well, he concluded that they could not think in English, especially American English, which caused too many problems.
Many foreign manufacturers, such as auto companies, have now established manufacturing facilities in the United States to be close to our market. Even India is now exporting jobs. For example, Infosys, the Indian technology giant, has back offices in America — staffed by Americans who are trained in India.
For those who argue that outsourcing causes entire factories to be shipped south of the border or elsewhere around the world, displacing American workers in the process, the unfortunate reality is that it is here to stay.
However, in the long run it is a good thing. The classic example is the demise of the buggy-whip manufacturing industry, which went out of existence with the development of the automobile. It’s a simple fact of life in today’s commercial environment, and there’s no going back to the “good old days.” No one really wants or expects to go back to the good old horse and buggy just to preserve buggy-whip manufacturing jobs.
We live in an ever increasingly interdependent world, in which using suppliers and subcontractors outside the United States helps keep costs down and benefits everyone.
— Harris R. Sherline is a retired CPA and former chairman and CEO of Santa Ynez Valley Hospital who as lived in Santa Barbara County for more than 30 years. He stays active writing opinion columns and his blog, Opinionfest.com.
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» on 01.23.12 @ 12:02 PM
Outsourcing is a part of doing business. However the kind of outsourcing a business does is heavily reliant on our trade and labor laws and how we regulate businesses. Much of the damage to our economy has been done by law makers and regulators. How in the world can it be cheaper to make crap in China and ship it around the world with today’s energy costs? Over regulating at home, that’s how. Allowing foreign competitors an advantage in trade law, that’s how.
Every country in the world covets its wealth generating industrial sectors but the US. Maybe that’s why we owe the world 3 times our worth, huh Harris?
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» on 01.23.12 @ 03:51 PM
Mr. Sherline is right.
Out-sourcing is a two-edged sword. Sometimes, replacing American workers with “cheaper” foreign counterparts ends up costing companies more than the benefit of wage-benefit “savings”.
On the other hand, how would Sherline react if his weekly Noozhawk space were
suddenly given to a Young Americans Foundation student leader in the progressive state of South Carolina?
And suppose he relied on the psychic income his column provides him to keep a
roof over his family’s head, or his great mind sane? Would he still be so blithely
sanguine about maximum latitude for free markets?
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