Outsourcing gets a lot of press these days. Business make headlines every time they do it and politicians try to get elected by promising to oppose it. But outsourcing gets a bad rap. Global Sourcing is the idea that there is a best place in the world to make something. For example, Nike has decided that the best place to design shoes is in the US and the best place to manufacture them is in China. The designers are close to the ultimate market and the manufacturing is done in a place with a good supply of raw materials and low labor costs. The transportation overhead doesn’t ruin the economics of the model so it works. Another term for this is Outsourcing. The idea of Global Sourcing is based on a solid economic model. Business have been doing it for years.
Silicon Valley is where it is because the leading expert on chip technology lived there. Manufacturing is big in the Midwest because that’s where the steel mills are. In business you create a supply chain and then work hard to take as much of the cost out of it as possible. That is what a business does. To disparage someone because they found that that they could make more money by moving a job from one state to another or from one country to another is just wrong. Businessmen and women have an obligation to their shareholders to maximize the return on their investment and generate a decent profit to drive additional investment. Companies who do that poorly fail and everyone loses money and everyone loses their job. Companies who do that well are rewarded. Unless they outsource. Then they are vilified. As if they have personally taken it upon themselves to line their pockets with the blood of their countrymen.
And, if that isn’t enough of an argument, the most common arguments against outsourcing aren’t actually valid. Everyone knows that we have outsourced manufacturing to the point that we have become a service economy and that we have damaged our security as a country by sending all our manufacturing jobs overseas. Except that isn’t true. According to “The World Is Flat”, we have more manufacturing jobs now than we ever had before. Amazingly, we have outsourced manufacturing jobs and grown manufacturing employment at the same time. Apparently, there are still some things that are better to make in America than anywhere else. Apparently, there are a lot of them.
Take IT as another example. Study after study has shown that job growth in IT continues pretty steadily upward despite the growth of jobs in India. It isn’t us vs. them like politicians would have you believe. We are just shifting the heavy lifting to India where we can concentrate more resources on the task and we are moving our focus to innovation, new technologies, new applications, and so on. It is more of a win-win type scenario. It might mean that if your skills are mediocre or your motivation level is low, you might be better off in some other industry. But outsourcing doesn’t mean that programming is dead as a career. As is the case in manufacturing, there will be more jobs in IT a decade from now than there are today. They will be different and they might require different skills but they will still be here.
Global sourcing is economically beneficial to the country and the companies in it. There will be some issues as the country transitions to more of a global sourcing model. But it certainly isn’t something that should be stopped at all costs. The best interests of the country are served by getting through the transition as quickly as possible, getting people retrained for the new jobs, and promoting the investment in new technologies that drive job creation in America. To try to stop the short term discomfort will end up bringing long term damage to the nation.