Offshoring—The Ugly
Truth
In my last blog
posting I introduced the idea that offshoring and outsourcing are in fact two
different things. This is not a common notion. The more I read, the more I find
that there is an ever so subtle difference. It seems as if offshoring is the
placement of work overseas whereas outsourcing is contracting a domestically
located duty elsewhere for the sake of lower cost. For who find the two
synonymous, you are not alone. In fact, you share the same point of view as
President Barack Obama.
On June 25,
2012, President Obama made a campaign speech in Massachusetts where he
practically mocked Mitt Romney’s advising team for saying they are in fact
different. Since Governor Romney is a businessman, President Obama felt it
necessary to point out his ignorance (for a lack of better words) to assume
that the two are different. Finally, Romney’s adviser, Eric Fehrnstrom
clarified that outsourcing occurs all the time; it simply means that a vendor
is upholding a certain set of duties, while “’offshoring is the shipment of
American jobs overseas’” (Stein 2012). With that said, I am going to have to
kindly disagree with the President.
Offshoring has
its advantages, generally that of lower wages, lower cost of production, global
expansion, and maybe global power if a business is mainstream enough. Through
offshoring, many companies reach these goals, all morals and ethics aside. Nike
is a popular one that most people have at least heard of. As a worldwide leader
in athletic wear, Nike continues to maintain a huge profit margin despite all
the human rights obstacles it encounters as well as the labor laws that it
infringes upon. In this case, Nike seems invincible because of its
stature—essentially it’s too powerful to destroy at this point. Not all
businesses have this luxury, if you will. Authors Ravi Aron and Jitendra Singh
write on the realities of offshoring and how those goals previously mentioned
are not always reached, in fact, offshoring can get ugly sometimes.
Once
a company offshores elsewhere, yes it saves them money for a time being, but sometimes
offshoring ends up being a temporary solution to an ongoing responsibility. If
the working force of the country being offshored to is smart enough, they will
catch on to the ways that they have learned from the “home” country of the
business. Long story short, it is a gamble for big businesses. There is always
a risk that the newly hired labor force will use those skills for their own
benefit, eventually reaching the point of competition amongst the company they
once worked for.
Additionally,
companies that offshore to a “provider” as Aron and Singh would put it, use
very simplified methods of analysis when deciding on such a venture. Some would
call this a “cost-benefit analysis”. Rather than conducting in depth research
about the culture, labor laws, and policies of the nation to foresee future
implications of this decision, it seems that the research centers on the
betterment of the company. Little do they know that the providers have the
advantage once they are given an important enough responsibility. The authors
continue to write that those providers can hold companies “ransom” by upholding
outrageous demands and needs (Aron & Singh 2005). These kinds of repercussions
do not cross one’s mind when saving money is on top of the agenda. In such
cases businesses learn the hard way, but hopefully with more literature on past
offshoring failures can prevent future companies from falling into the same
pattern.
In
conclusion, I am not condoning nor condemning offshoring. I simply seek to
inform readers on this trend by showing the good, bad, and the ugly in hopes of
encouraging them to form their own opinion. In all honesty I still do not know
where I stand on the issue. I am on the same journey as the rest of you guys.
See you next Tuesday!
Works Cited
Aron,
R., & Singh, J. V. (2005). Getting Offshoring Right. Harvard Business
Review, 83(12), 135-143.
Stein,
S. (2012, June 25). Obama mocks romney aides for outsourcing v. offshoring
defense. The Huffington Post. Retrieved from
http://www.huffingtonpost.com/2012/06/25/obama-outsourcing-offshoring-romney_n_1625287.html