Outsourcing: An overview Monday, December 22, 2003 This morning The New York Times published a helpful article on outsourcing. The article notes, "The (outsourcing) trend is real, irreversible and another step in the globalization of the American economy. It does present a challenge to industry, government and individual workers. But the shifting of some technology jobs abroad fits into a well-worn historical pattern of economic change and adjustment in the United States." Read more. (Free registration required.) The article does not touch on other important considerations. For example: 1. Outsourcing works best when companies have relatively large labor pools performing stable business processes. That's why we are seeing most articles talk about IBM, American Express and so on. It does not make sense (now) for most smaller companies with smaller labor pools that perform more variable or "mission critical" functions. 2. Outsourcing does not work well when the business process is variable and the communications costs are high. Product design, product enhancements are more difficult to outsource. 3. Outsourcing will continue to make inroads in business areas where skilled labor in this country is hard to find. Outsourcing vendors will become more sophisticated in packaging their offerings into more complete solutions. We are starting to see this trend in nursing, for example. 4. Companies are increasingly concerned about security and identity theft. Hospitals, for example, are concerned about patient records. U.S. users of outsourcing (such as hospitals) to will address these problems with sophisticated approaches that break apart the problem with solutions that enable them to outsource work while maintaining control of confidential information. Security is a more difficult issue. Companies that send computer code abroad risk getting worms. (This risk is inherent with any software outsourcing. The only solution is reliable business partners.) 5. Outsourcing is still a tricky business. Performing due diligence checks on foreign suppliers is critically important, but relatively difficult to do. Enforcing offshore contracts is very tough and expensive. 6. We have probably overestimated the impact of outsourcing in the short run, but we are probably underestimating its impact over the long term. (My thanks to Jim Cookingham at NEOSA for organizing a recent panel discussion at Weatherhead on the "downside" of outsourcing.) posted by Ed Morrison |		This work is licensed under a Creative Commons License. links Some Background on EDPro Weblog The purpose of this weblog is to help economic development professionals -- EDPros -- keep up with the changes sweeping our profession. Strap on your goggles. It's a whole new game. There are no experts any more. The only place to learn about economic development is from other EDPros who are doing it. One other point: the prevaling approach (paradigm, if you like) in economic development is shifting from competition to collaboration. There are a lot of reaasons underlying this shift, but here's the important insight: You, your community, and your region will do better by collaborating and sharing information. So, spread the word...Share the knowledge. Tell a friend about EDPro Weblog. If you are using a news reader, here is the link to syndicate this site: Here's the link if you are a bloglines subscriber: Speaking and workshops on Open Source Economic Development As the idea of Open Source Economic Development starts spreading, more people are asking about it. Visit the I-Open web site to learn more. My colleagues and I are happy to explain the basic concepts in a talk or a workshop. E-mail Susan Alshuler if you'd like to learn more about workshops and speaking. Background on Ed Morrison Download some background information on me here.

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