The Outsourcing Rush: Is It In The 'Manic' Phase?
Published March 12, 2006
Most of the hype is centred around India, but on closer analysis, one has to seriously question the validity of the outsourcing model as a long-term strategy. India's infrastructure is not just second-rate; it's practically non-existent. One-third of the population is illiterate (half of those women), the transport systems are a nightmare, and the national power grid is one of the worst in the world. To this kind of criticism Indian politicians reply flatly: "We're a democracy. We can only grow so fast." That may be all well and true (though it sounds more like a statement to appeal to Western organizations) but with these massive infrastructural faults in place, is there really room for the mass-development of an entire quality industry?
In the dotcom boom it was the corporate finance departments of major investment banks who were making a killing branding traditional and new businesses with the tech logo and taking them public, which ultimately led to a series of lawsuits and subsequent penalties. In this instance, it seems the Consultants are at fault. Consultants love outsourcing for an obvious reason: it enables them to point to a clear cost-saving solution that looks original and dynamic and implement it with minimal hassle.
And at first they may have had a point. I'm not denying that outsourcing was not a smart idea and that it has a sustainable future, just that the current rate of quality implementation is unsustainable. The danger is that consultants will become the investment bankers of the turn of the millennium, and end up paying high penalties for poor advice. After all, if a consultant has an existing relationship with an outsourcer in India, for example, and feeds client business that way, where's the difference in an investment banker giving chunks of what they think is a 'hot IPO' to their favourite clients?
Most people by now have spoken to an 'outsourced' department in one capacity or another. Ask yourself: was it always great quality? My experience has been that the quality of these outsourced call centres has declined dramatically in the last few years. Outsourcing is undoubtedly a smart concept, and right for some: it's just that the current hype in the marketplace is not sustainable given the infrastructure in the outsourcing countries.
- The Outsourcing Rush: Is It In The 'Manic' Phase?
- Published: March 12, 2006
- Type: News
- Section: Culture
- Filed Under: Culture: Society, Culture: Business and Economics, Politics: U.S., Politics: International
- Part of a feature: Biz Tech Watch
- Writer: Daniel M. Harrison
- Daniel M. Harrison's BC Writer page
- Daniel M. Harrison's personal site
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Daniel,
Fascinating piece. (Minor nit: you say at stages 4 & 5, psychological weirdness starts to creep in. Shouldn't that be 3, 4, and maybe 5?)
More important, I'm still considering your comparison of the irrational exuberance that periodically distorts fiancial markets with the outsourcing craze going on. No one could disagree that the quality of customer and technical support has gone down, but I'd would like to hear a more detailed explanation of how the two are similar.
In the case of investors, it's a relatively simple case of too much money chasing over-valued commodities. The outsourcing case seems much more complex and yet, in the long run, easier for companies to handle and less financially disasterous. There's something compelling about your comparison, but I may be missing a point.
FYI, if you haven't read them, I'd recommend doing a Google search on Daniel Kahneman, psychologist at Princeton and Vernon Smith, an economist at George Mason, the co-winners of the 2002 Nobel Prize in Economis. Their fundamental thesis is standing economics on its head--that the notion of the rational investor is a myth.
They also address your question about why people tend to forget past disasters. According to them and a number of other scientists, we actually distort memories to fit our current needs. As Kahneman says, our memory is a fickle friend.
All in all, excellent and thought-provoking piece. Thanks.
In Jamesons Veritas