MikeStanton

Exactly. People who complain about outsourcing are the new Luddites.

One point I would add to your post is that the first/second generation outsourcers may, in tun, outsource to other countries. Eg India is now looking to outsource some of its work (originally sourced from the West) to other countries, eg China.

MikeStanton

Teacher, you're wrong : go to the bottom of the class. Many products and business processes can be outsourced.

Outsourcing is not a recent phenomenon (don't confuse modern jargon with age-old actions). It is competition that drives the use of outsourcing - whether for products or services.

~100+ years ago Birmingham-made guns (Birmingham Small Arms - BSA) were assembled from parts that were prepared by hundreds of self-employed artisans. It was cheaper and more flexible (the supply could be adjusted to meet demand) Overall it made the company far more competitive and more profitable in the long term. It's exactly the same logic that drives today's companies - getting the best overall balance between cost, flexibility and innovation. Outsourcing is not the issue for most people - after all, if the outsourcing companies were, say, in UK or Oz it would be less of an issue.

No, it's because the outsourcing companies are in India, Russia etc. And I detect the whiff of an air of superiority among some of the posters.

Contrary to what you say, there is no 'penalty for being the first industrialised nation' : there is only a penalty for being uncompetitive. A penalty that will continue to be paid by many companies in the West.

To use a cliche, you ain't seen nothing yet.

OzTennis

(Just picked this up which is the reason I haven't bitten back sooner)

Son, (or girlie if you are hiding behind a male persona) you are not paying attention! You have school rules to write and you are being moved to the front of the room (from the far right):

I did not say that outsourcing can't be used for goods and services (N.B. a product can be a good or a service, we don't tend to speak of products and services and also note that businesses tend to outsource inputs (labour, materials etc), true, an output of one industry may become the input of another if it doesn't go to the final consumer.

What I did say was that the decline of the basic, traditional industries in the UK was not due to outsourcing but to other reasons, nothing more, nothing less. I also implied that a business getting part of its labour input (but not all) from another country is a modern phenomena and I stand by that - the internet and global communications has made this possible.

Your example of the Birmingham munitions production is an early example of division of labour, specialisation and later mass production being facilitated by standardised parts (Henry Ford must have been impressed). It was probably also a forerunner of what the Nike's of this world do in having their goods produced in sweatshops for peanuts under appalling conditions which would not be permitted by the laws of the country of Head Office! Makes them plenty of profit though so that's all that counts, yeah!

Welders, engineers etc working on the Clyde lost their jobs because yards in other countries could produce ships more cheaply and so they started to win orders from their British competitors. These yards paid their workers less and starting later in the game, they could use more modern machinery and methods and enjoy the economies of scale as supertankers and larger vessels were being built. The British yards, geared up for smaller vessels didn't stand a chance. South Korea, China etc are now doing to Japan what Japan did to the UK.

Just as Japan and Germany appeared to 'win the war' economically compared to Britain because they had to start all over again with more modern industries, we are now 50 years down the road and these economies are toiling because of the new upstarts (plus the effects of unification in Germany's case). South Korea and China will eventually go the same way, they won't be able to sustain growth, new 'tigers' will come along to undercut them and I suppose their employers will outsource too.

Now, a highly profitable successful business (such as RBS Group, profits approaching £10 bill p.a.) sending jobs overseas which can be done via the internet or over the telephone network is not the same scenario as the decline of the basic industries in the UK; nor is the accountants jobs going to Sri Lanka (or wherever).

There are certainly no racial overtones intended (on my part anyway) - the countries which have lower labour costs and speak English tend to be the India's etc of this world. I personally stereotype with India because my insurance company (NU), my telephone provider (One Tel) and my bank (RBS) all have Indian operators - fact, no slur or supposed feelings of superiority intended.

Finally to your 'you aint seen nothing yet' all I can say is that reminds me of Bachman Turner Overdrive bbbbbbbaby.

Thankfully a lot of modern businesses have objectives other than mere profit maximisation. Some are customer driven, some take account of stakeholders other than their shareholders or owners (such as their employees), some have social responsibility, others give ethical trading high priority. As someone else said there is evidence that some businesses which have outsourced have taken note of their customer complaints and have brought the jobs back. One bank even spends millions advertising that you can speak to someone at your local branch which is a jibe at the others who have outsourced. Other businesses are learning that customers don't like the press 1 for this, press 2 for this etc automated response (cheaper but customers don't like it and the NatWest ad is a dig at this also).

I suspect we'll just have to agree to disagree but I for one feel better for patronising you in return.

OzTennis

Jimbo9

Did anyone read this?

http://news.ft.com/cms/s/f16a4694-3c...00e2511c8.html

The Deputy govenor of the of the People's Bank of China suggested to the US that they should give up textiles, shoe-making and even agriculture probably.

“They should concentrate on sectors like aerospace and then sell those things to us and we would spend billions on this. We could easily balance the trade.�

MikeStanton

2 errors here. You claimed that outsourcing is a modern phenomenon; it isn't. Firstly, you're confusing the process ('outsourcing') with the overseas location ('offshoring'). Secondly, labour is but one component. The issue is about adding a unit of value for the lowest possible cost; however it's done - by slow, low-paid humans or a fast, expensive robot. What has changed, due mainly to the growth of the internet etc, is that more higher-value, information-intensive tasks can be carried out overseas. So, outsourcing has increased, but it existed before. It just didn't affect white-collar workers to the extent it has and will.


And, contrary to your opinion, it is an example of 'outsourcing' in days gone by. Now, if you have a problem with this, take it up with one of the acknowledged UK experts on outsourcing who uses it as an example in his excellent book. Don't take it personally, but he's the expert and you're not.


Only partly true - the impact of unions in UK and Oz has limited the rate of change. The stability provided by, eg Germany's unions, after the war provided a big contribution to their economic success.

And the very actions of many unions - supposedly to protect their members' jobs - are doing the very opposite (unless they are in the public sector or monopolies).


The fundamental drivers are exactly the same. Today there are companies that will not take advantage of lower cost outsourced or offshored components or services - if they cannot make up for the lost value in other ways they will also go to the wall.


Yes, yes. Very PC. But in the main, the reality doesn't accord with the rhetoric. People are only willing to pay so much to protect the environment. For all their concern re:the environment, most people have environmentally-unfriendly cars etc.

Many businesses have to answer to their shareholders first; which means they have to maximise profit while trying to juggle other objectives. For some organisations (eg 'The Body Shop') the ethical bias has helped them be successful. And more companies see value in doing so - up to a point.


Indeed they have. But at the end of the day most of us work in competitive markets. The market will assume that companies optimise the cost of their inputs. The research indicates that the maximum people will pay for a more ethical service is ~+10%. So, in the longer term, being virtuous and saying 'Hey, we have brought jobs back here. Oh, but we now charge 50% more than our nearest competitor" may not attract too many clients.

Give too much money away and your shareholders* will get rid of you (*by the way, that includes you, say, if you invest in standard pension funds).

5/10 Could do better...

SprintST1

1. Apparently, offshoring is now even affecting jobs like dentistry & hairdressing.

You have your teeth/hair removed/cut off entirely in a local "factory", it's then sent to Bangalore, where they fill the teeth/wash cut & style your hair, which is sent back in a box for you to superglue back in place.
Astoundingly, the offshore pay rates are so low it's still much cheaper than having your teeth/hair done at home!
This is so common now that hairdressers may soon be removed from the MODL!
:scared:
Apparently Chefs face a similar threat. Now you can book your table & meal at an Indian restaurant in Brisbane 24hrs in advance. From the online order, your curry is instantly cooked by expert chefs in Bangalore & the meals are couriered back (in volume), only to be microwaved & served to your table when you sit down the following evening. The cost savings are enormous, because the restaurant no longer requires a proper kitchen or any skilled chefs. Just a shelf of microwave ovens!


2. Incidentally, most Banks now have a mandatory policy, whereby all FUNCTIONS and PROJECTS which the bank pursues MUST be reviewed for potential offshoring. Interestingly, there is now potential for Australian companies to monopolise on weaknesses in offshoring to the Phillippines/India etc., because most bank projects can only save about 30% overall by offshoring. The quality of the product/service is often a problem though. Because of GMT-Oz time differences & exchange rates, Australian companies can compete with those in Asia and make it worthwhile because a higher quality product/service can often be produced.

Interesting eh?
Mike

TheAncientGeek

For those that haven't seen this before...

http://tinyurl.com/52g5q

bondipom

What is different today is the communications technology that enables a range of new business to be outsourced where costs would have been a holdup in the past. Call centres, document imaging, accounts processing, medical imaging would have been too expensive in the past to outsource.

Something also of note is what comes around goes around. As China 's and India's economies pick up pace so will their currencies values which will wipe out some of the price competitive advantage they have.

Japan, Hong Kong, South Korea and Singapore are no longer low wage base sweatshop economies however they used to be.

anya4oz

Oh, BRILL!! Grand idea!

You can just imagine it:

'Press 1 to hear Mike whinging about Sydney'

'Press 2 to hear Mike whinging about Aussie IT companies'

'Press 3 to hear Mike telling you how much better the UK is than Oz'

'Press 4 to hear a running update on how much better off Mike is now he's back living in the UK'

YESSSSSSSS!

Sorry, Mike, I couldn't resist: it was just *too* tempting. And anyway, you know I love you really.......!

Anya.

renth

Then the management jobs go to India and what's left, a country that doesn't make any stuff or grow any food.

What is everone supposed to do then?

MikeStanton

An extremely important question.

The theory (not necessarily practice) is that we move on and make and prepare goods and services where we have a comparative advantage. For example, Dyson (he of the cleaner fame) used to bemoan the state of UK manufacturing; and has now sent manufacturing offshore (Malaysia, I think). So, Dyson now adds the value by designing the new appliances, marketing and distribution.

But, shifting large numbers of people to new jobs is much more easily said than done. Over the next 10 years, the rate of loss of current jobs in Western service industries will far outsrip gains in new areas. Part of the problem is that countries like India, China, Czech etc can do what we do - even in those areas requiring specialist training, doctorates etc, at a far lower cost. So what are we to do? There are no easy answers. The usual comment is something like 'Get involved in occupations that require a lot of human interaction or need you to be on-site' - eg become a hairdresser, a gardener, a GP. But, we can't all cut hair and care for gardens etc. Even parts of these jobs are already being outsourced. Eg X-ray assessment carried out in India for Western hospitals.

What is clear is that skills, education, flexibility and mobility will be key to surviving in the 21st century. For many, the concept of a career (except a career of change) will no longer exist.

OzTennis

Geez, I'm so proud of getting 5 out of 10 from you Mike, I couldn't possible do any better than that!

From your above post you seem to be developing an inkling of a social conscience and seem to have thought about the implications of businesses just seeking lower cost alternatives.

A few other thoughts. Due to the population timebomb and the pensions crisis, more short term contracts, more part time work, less chance of a career, more women seeking employment, people being forced to work longer, retire at 65 not 55 (there is the irony, the 'labour saving devices' which we thought would mean shorter working week and shorter working life have indirectly or directly led to the opposite), many tertiary jobs (where 7 out of 10 are currently employed) being outsourced overseas - I reckon the 'proverbial bowel fodder is going to hit the rotating blades in a big way' in the future (and I thank Bryce Courtenay for that quote).

I guess I'm looking at the bigger picture impact of some/most business leaders just looking at the bottom line and ways to improve that. The collective impact of all these business decisions is going to have an enormous effect. Whither the UK (and Australia) later in the 21st century? I'm not denying outsourcing is irresistible and makes commercial sense to a business, I just worry at the consequences of so many actions. What career advice do we give our children? At the moment it's go into the trades because many kids seem to be led like lemmings into careers which can be outsourced! Soon there will be a glut of plumbers, electricians, builders etc as more people move in to take up the higher paid jobs.

5 out of 10 from Mike, I just can't get over that still! I think I'll print it out and make it a 'bums wipe worthy certificate' (Bryce Courtenay thanks again)

OzTennis

bondipom

The company my wife works for is making a fortune in China. Even with the blatant abuse of IP they still make money selling products there. The only way forward for the west is look for opportunities now in the markets. There is little other choice.

Innyjim

Don't listen to the opinionated tw@t Stanton ! I'm with ya sister ! Viva la revolution comrade !!!

lostkiwi

In my job i provide proffessional services for one of the worlds largest legal firms. They now have a specific and highly successful divison that specialises in assisting firms with their offshoring contracts. This is a growing trend in business - however it is primarily large multinationals that get invoved - for simple economics. To the directors of these companies the equation is simple - do we have any job roles which can be completed else where at a significantly cheaper value? Yes - ok then do it.

I agree that this is short sited and not advisable in the long term. The reason India is so popular is because of its low cost of labour, and relatively speaking, similar culture and low language barrier (compared with Eastern Europe for example).

For the above reason it does not make great economic sense for Australian companies to offshore - the Australian labour cost is relatively low. However - if it is the Aust branch of a multinational - i.e. HSBC then it can be cost effective. So you do see SOME Aussie jobs going offshore. (With the rising Aussie dollar this could potentially increase).

My client has, not surprisingly undertaken a good deal of research in this area. For those interested - here are a few nuggets:

Of the sample (all company directors involved in offshoring) - 0% (thats nobody) admitted that it was a move to improve performance or staff morale. Despite what they may say publicly.
100% agree that the single largest motivating factor was reduced costs.
And that Finance and Accounting seem to be the next areas to be offshored - following basic It/Programming and call centres.

Hope it helps!
Cheers