Prabhakar, How should a company decide what its "key strengths" are and, thence, what to keep in-house and what to outsource? We have discussed here the social implications of outsourcing and, as crucial as that is, the reason company outsource is purely for profit reasons. Is it possible, however, for a company to outsource away its "key strengths?" Malcolm Penn, chairman and CEO of research firm Future Horizon believes this is already happening.
How can a company strike that delicate balance of outsourcing just enough and not "over-outsourcing? It is quite possible to give away the core of your operation in the race for higher margins and efficiencies. It is also possible that management may not really realize fully the link between manufacturing, for instance, and design. These two may feed off of each other and once one part is sent outside the company the other may not operate at full efficiency.
Most of those who are anti-outsourcing in the west,do so for the simple reason that they have gotten used to the phenomenon of getting something for nothing-Like 99 week unemployment checks in America.... This is a Union (especially Public Sector)Speciality everywhere.
I speak with a lot of global Outsourcing companies regularly and what they seem to say is that they don't mind hiring in the West(in fact most Indian Companies are hiring like crazy in America today);its just that the Talent pool is'nt deep enough[Not many Native Born America Citizens want to study Software Devt. today ,especially at the Graduate level] as for the Immigrants who take up these courses,increasingly more and more of them are getting frustrated with the Never ending Process of Getting an America Passport-It takes anywhere between 10 and 15 years for an Indian/chinese citizen to become an America Passport holder.
Instead they are choosing to return home in droves where there are plenty of quality oppurtunities opening up for them today.
The issue of Cost (what it costs to hire and retain employees) is secondary for those High-end Jobs.There just are'nt people ready to work according to an outsourcers schedule.
In the case of Call centers ,costs are more important but even there we see a lot of Call center companies hiring massively in America(as they are getting professionals at competitive wages today for these jobs).
Anyways,great hearing of a good and successful implentation from your side.
Ashish, Prabhakar, let me summarize a successful event; several years ago large contract required H24/day high IT skills and availability to support a customer on his manufacturing processes, one of the most steelworks corporations across the globe. We did the decision to start outsourcing activities in the sense of "following the sun". Good people from Asia and India provided services when in the West region was night. As consequence of very serious knowledge transfer phase, we were in condition to provide H24 services for the fact several teams with similar skills were available in different time zone. It was a success for our customer and for the process in general, especially for the fact our partners were well evaluated not for low cost of the labour, but for strong experience and competencies achieved. In fact right now they are doing strong business there, they are making new job positions for people there and in reverse way, they are asking us to support them in organization and so on.
No I am still a very much Indian Citizen. In 1982 I consciously decided to return to India as even at that time US was going thru a recession and I saw about 80 people getting pink-slips and just a 4 hours notice in the US company where I was working on the outsourced work. I felt gulity at that time that those people must have lost jobs because of contractors like us.
But the working style of contract work Vs regular employess is ame here in India also. That is why many Indian companies also are relying more on outsourcing work rather than having permenant employees with their unions backing them for every sneeze.
So outsourcing is good if it is well managed and the activities of the company's key stregth areas are not outsourced.
I am assuming you are now a US Citizen.But to hear you say you are still very positive on the outsourcing phenomenon is very encouraging news.
There is no disputing the fact that outsourcing companies have employees who are more Goal-oriented and focussed on the task at hand(compared to in-house/more secure employees).
In America today I am seeing a similar strain in the debate on how best to reform Bankrupt State Governments today.
CBS News/Meredith Whitney came out with a really good report,explaining how Over-paid Union Employees with Gold plated Pension and education plans(who do hardly any work) are destroying State Government budgets all over America.
Most of the cribbing for the outsourcing has come from the Western countries where there are many job losses . For countries like India it has created a whole new world of job opportunities. But why first of all the idea of outsourcing came to the minds of US businessmen? I will sight my own experience back in 1982. I was an engineer then and my company in India ( a very small company having just 15 programmers ) got a contract for software development from a US telecom company. I alongwith my two teammates was deputed to US to work for 4 months and finish the project. When I arrived in US and started working in the US company I observed that the engineers there had a very leisurely working style. Thier week was of just 4 days ( Friday afternoon used to be spent on discusiing weekend plans and Monday morning used to be spent in describing how the weekend was spent) Most of the engineers used to stick to a strict 9-to-5 working schedule. So the project schedules were made taking only those many man-hours per week into account. In the contrast we the representatives of the outsourced company in India were there to finsih work as fast as possible and return to India. We were ready to work 12 hours everyday including Sundays if required. I Think this contrast in the working styles of the in-house Vs outsourced workforce must have tipped the balance in favour of outsourcing in the minds of the top management as it made a better business sense.
"right now companies are so narrowly focused on immediate profit they don't see the cauldron boiling over beneath them"
I fully agree with. Really often outsourcing decisions are not supported by medium-long term strategy; TPI has reported past November large outsourcing contracts are plunging by 20% across the globe. Are we convinced it is only a matter of financial crisis? Then another risk comes: funds from Governments to corporations have started outsourcing process are not in condition to assure a good roi back. And people are losing jobs because of "off-shore" or outsourcing actions outside the country, are not requalified anyway due to restriction of public funds; in fact a % of them didn’t achieve any roi back. Maybe Governments involvement has to be not limited to funds but it includes also advisory support in preparing adequate plans for the process or in creating spin-off as results of outsource decisions. And shareholders are a mix of private and public investors.
Ariella raised the same point. Can governments globally inject themselves into this discourse and help find a middle ground? We may end up in a situation where if the industry fails to act governments in embattled Western nations might be forced to take steps that could force solutions companies don't want down their throats. That would not be the best solution but right now companies are so narrowly focused on immediate profit they don't see the cauldron boiling over beneath them.
I share your concern. I was wondering if you were aware of any steps the government might consider to reverse the trend without overstepping its usual bounds with respect to business operations.
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Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
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Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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