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Business Technology: Offshore Outsourcing: A Means To An End

Offshore outsourcing is today perhaps the most emotional and least-understood business practice in the world. To be sure, in a lot of cases it is and will continue to be wrenching and deeply disruptive for not only many individuals but also large groups of professionals caught on the wrong side of this trend.
Offshore outsourcing is today perhaps the most emotional and least-understood business practice in the world. To be sure, in a lot of cases it is and will continue to be wrenching and deeply disruptive for not only many individuals but also large groups of professionals caught on the wrong side of this trend. An example of free-market capitalism at its most coldly impersonal and even merciless, offshore outsourcing is today touching not just some anonymous groups of people in some far-off locale in some obscure industry; rather, it has hit many of us increasingly closer to home: relatives, friends, and colleagues whose jobs have been transferred to other people in other countries.

But beyond the understandable emotional reactions to these displaced jobs, there's still a lot of fog and myth shrouding the true nature of offshore outsourcing. Lots of people still believe it's nothing more than paying lower wages for lower-quality work. No offense to those who believe this, but that theory is, in today's extremely competitive business climate, preposterous. Then there are those who believe that the sole value proposition of offshore outsourcing here in 2003 is to pay lower wages in return for the same quality. But that view, while perhaps at least somewhat accurate in the recent past, is outdated and simply not true.

The truth--as galling and bitter as it might be for many in this country to accept--is that companies are turning today to offshore outsourcers because in return they can get better quality in shorter times at lower cost. Hell, there are lots of ways to pay less and get less in return--nobody has to go halfway around the world for that. And any company relying on such a strategy would soon be out of business. So that myth needs to be tossed in the trash where it belongs.

No, there's something much more significant being sought here, and the relentless search for it has gone offshore because, simply, it's too hard to find here in this country. And the object of that hunt is twofold: new sources of reasonably priced innovation and new sources of reasonably priced quality. Here's an example: A prestigious hospital in Boston is swamped with unhappy patients who have to wait inordinate amounts of time to have their X-rays analyzed, so the hospital finds new sources of high-quality health-care expertise in another country. As soon as the X-rays are taken, the hospital sends digital images to a partner hospital in India, where teams of fully qualified physicians read and interpret the X-rays and send their analyses back to the Boston hospital overnight. The patients are happy, the hospital is happy, and the doctors in Boston who for whatever reason could not find or make the time to read the X-rays are probably happy, too--clearly, that was not a high-priority task for them.

As economic, political, and technological forces continue to shape a more truly global economy, such anecdotes will become not the exception but rather the norm. But we all need to remember that the goal is not offshore outsourcing; that, rather, is a means to a very different end, and that end is reasonably priced new sources of innovation and quality. When companies in the United States--and our universities and high schools, as well as our sprawling free-market system--catch up with this thought and realign their priorities, we'll find lots of new ways to compete effectively in new businesses and new markets. But that edge won't come because of an accident of birth--that is, that we happen to live in the United States and are therefore endowed with some right of preeminence. Rather, it will come because we have refocused our thinking and our behavior and our reward systems on creating value and innovation and opportunity, and NOT on protecting it and legislating to protect it and erecting barriers to keep us and what we have in, and to keep outsiders and what they want out.

Not only has Mr. Silverstein proved singularly resistant to the notion of any kind of responsibility beyond his commercial interests--a blindness to human and moral values that defies comprehension in these circumstances--he has also pursued those interests relentlessly."

-- Wall Street Journal architecture critic Ada Louise Huxtable, July 24, on developer Larry Silverstein and his involvement in plans to develop the World Trade Center site ( la/?id=110003787)

Let me offer an example: Dell Computer. The company largely eschews outsourcing of any type--offshore, onshore, near-shore, far-shore, for sure--NOT because it has ingrained philosophical clashes with outsourcing but rather for the very practical reason that the company believes that its best chance of gaining and constantly enhancing its competitive advantage is by doing all those things internally better and faster and cheaper than anyone else--here, there, or anywhere--can do them. But despite the different approach it takes, Dell has the same objective as do many of the thousands of companies that have chosen to pursue those objectives offshore at the same time Dell pursues them in-house: relentless innovation, higher quality, greater customer intimacy, real-time responsiveness--and all at reasonable and highly competitive costs.

So I have to conclude that I really don't understand the hand-wringing in which some companies are engaging as they try to hide their relationships with offshore outsourcers or even try to pretend to the outside world that those very relationships don't exist. Who can forget the classic scene in The Wizard Of Oz when Toto pulls aside the screen hiding the all-too-human "wizard," causing the big and scary and imaginary projection of The Wizard to shout, "Pay no attention to the man behind the screen!"

The fly in the ointment, though, is that there was indeed a man behind the screen, just as there are lots and lots of U.S.-based companies that are employing offshore outsourcing companies. I think those companies should step forward and say something like, "We're doing this because it helps us give our customers what they want, it helps us be more competitive, it helps us meet our numbers, it helps us provide a good return to stockholders, and it helps ensure that this company will not just survive but will also thrive in coming years. And we promise that if alternative sources of such powerful creativity and quality and innovation arise within the United States at competitive prices, we'll give them every opportunity to become a part of our global web of customer-focused excellence and relentless business-process improvement."

And I think there are lots of reasons to say something like that, and one of those is that some of our elected lawmakers will no doubt soon get the idea to craft legislation mandating that all U.S.-based companies must publicly disclose offshore relationships. Sound crazy? Maybe it is. But notice how prominent your company's Regulatory Compliance Department has become? But that's another story.

As for this story, it's about over. The point is, offshore outsourcing is a powerful means to a more-powerful end. The goal, as always, is to identify and drive business-process improvements through the application of new sources of innovation, quality, and speed, all at reasonable prices. And whether you choose to do that in the United States or in India or China or Ireland or Israel, it should be a source of pride, not shame. Because remember, too, what the man behind the screen said when Dorothy called him "a very bad man": "Oh no, my darling," he replied. "I'm a very good man; I'm just a very bad wizard."

Bob Evans
Editor in Chief
[email protected]

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