Outsourcing Has Outside Costs

Sustainable

Due in part to hasty deadlines as well as intellectual apathy we are often unaware of the ramifications of our actions. Capitalism has fueled disruption in the name of efficiency. Outsourcing work to lower cost alternatives is standard practice throughout many of our industries.

After an enlightening conversation with a local construction worker I have come to understand there are deeper issues than cost savings when entire business sectors are locally disrupted. People require time and passion to become experts in their disciplines. As human beings we are likely to have strong social and financial ties to our homes. Consider for a moment the impact of choosing a remote company to handle a local construction job. In a tight economy many local workers are struggling to stay employed. They may have spent the majority of their lives supporting local businesses and infrastructure (higher property taxes for schools, higher cost of living). And this higher cost of living is built into their businesses bottom line.

In fact by continually choosing lower cost remote services we are moving to an unsustainable local economy. Some have mentioned this concept extends to our national reliance on external but less expensive business. While in many cases I agree with choosing what’s efficient, there have to be a balance on how much service and products are incoming versus outgoing. Without a counter force of exporting great value, any entity faces financial collapse.

My simple perspective is that of compassion. Disruptive agents interested in improving overall efficiency are required to perform due diligance impact studies on the effect large shifts will have on local economies. There needs to be community support for those who have had their livelihoods displaced. This support can come in many forms, education, training, and realigning of existing skill sets to more efficient local businesses.

We should take nature as an example to model our economic decisions upon. A harmony must be created, without a sustaining core value, we are doomed to annhilate local social structures and communities. This in turn effects the whole, eroding national financial/social strength and the larger global economy. While nature judges survival of the fittest, each species is an analog to a business sector. Less efficient or effective species die out, their biomass and energy is maintained in a sustained ecosystem. In a similar manner we should conserve our skilled workers, business leaders, and philanthropists. This may be achieved by evolving a socio-economic system that has deep enough vision to redeploy and protect our local community resources, it’s people.

In closing, instead of viewing inefficient existing businesses as an impediment to productivity, let us plan to respect individual expertise by incorporating valuable human resources into sustainable redesigned economies.

 

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  • http://www.kidmercuryblog.com kidmercury

    hey mark,

    i agree with a lot of what you are saying. in fact one of the things i think is exciting about our current times is that we are reaching a point where technology can automate so much that we are free to be more creative and compassionate, while machines can do more and more of the tasks that don't require human creativity. i know in my business, we try to automate as much as we can — but the one thing we still cannot automate is human creativity and compassion, which are becoming increasingly important in cultivating, in my opinion. as a result i think we'll see more and more businesses invest in developing the creative and compassionate capabilities of their workforce.

    perhaps that's a bit too idealistic — although i can't deny that that's my nature! :)

  • http://www.victusspiritus.com/ Mark Essel

    Thanks for stopping in kidmercury, glad you enjoyed my 2cents on the merging of capitalism with compassion. Why limit ourselves to a future devoid of caring, relentlessly bent on optimization? As you stated creativity and compassion can't be automated and we both agree have great value within any organization. Our optimal socio-economic system will have to incorporate this value.

  • http://twitter.com/Vukicevic Vladimir Vukicevic

    I like this a lot. It reminds me that there are people out there who are trying to prevent our reality from becoming that of the movie “Brazil” – where automation and bureaucracy choke humanity.

    I'm hopeful that technology in the end might foster more compassion and creativity by truly removing the economic friction that causes local areas to shrivel.

  • http://twitter.com/Vukicevic Vladimir Vukicevic

    If you don't mind me asking – what business are you in Kidmercury?

  • http://www.kidmercuryblog.com kidmercury

    hey vladimir,

    no problem, always happy to discuss my business :) i run a niche community for traders of financial markets. here is the web site.

  • http://twitter.com/Vukicevic Vladimir Vukicevic

    Very cool – thank you. Now I see where your confirmation of automation comes from.

  • Eli

    Begin Rant:

    First, I must take issue with, “This may be achieved by evolving a socio-economic system that has deep enough vision to redeploy and protect our local community resources, it’s people.”

    I think the best way of viewing evolution is that it does not have a vision, deep or shallow. You don't really evolve things (except maybe computer programs), they do it on their own. All you can provide is environmental selection preferences.

    Ok, now for outsourcing, what kind of thing are you suggesting? Tariff wars? Voluntary restriction of selection of services, which, by the way, can serve to stifle innovation (by artificially selecting local businesses, we can actually fight against a kind of social evolution of businesses).

    The idea that we should promote local businesses because money is not the only cost or value involved in the transaction may be a worthy idea, and I can understand similar ideas at least, if not this particular one, but it is not out of compassion or mercy or whatever that we act. It is out of long term rational self-interest.

    When I read something against outsourcing, I immediately think, “so these local humans deserve our consideration, but not those other guys across the sea?” and also, “I wonder how crappy American cars would be today if people had listened to the 'Buy American' talk.”

    Don't get me wrong, I think local people do matter more, in a selfish way: we have more dealing with them, they effect us more, etc. But let's not think of this as compassion or mercy. Let's call it rational.

  • Eli

    Ok, more calm response :)

    I guess I had issues with some of the words used, rather than really agreeing or disagreeing with your post.

    I think the issue is really a complex problem, morally. Looking at the long term, it's difficult to tell what the best methods are. Globalization can disrupt things a lot for locals in various areas, and I think we in the US are a bit insulated from the consequences of these radical changes.

    I read horror stories of children working in sweat shops, producing our cheap goods, and I read horror stories of what happens to those children when the sweat shops close. Is globalization good in the long term? Who are the victims in the short term? If people around the world are viewed as the same, if travel and free trade roam free, will this ultimately lead to fairer conditions for all? And in the short term?

    And how about our local conditions? To me, the idea of paying local people to do jobs at higher cost sounds similar to the argument against automation of those jobs. Either way, the job is done more (cash-wise) cheaply, and local people don't get paid to do those jobs. Otoh, we're not going to sit in the stone ages, so piss off, eh?

    The nature of humans require that we use our minds to achieve prosperity. If your job becomes obsolete for whatever reasons, you have to expand beyond it. This has been the way throughout history, and those who try to stifle technology (including the logistical tech of transportation and finding cheaper labor) get lost. Only by embracing change can we hope to prosper.

  • http://www.accurate-africa.com accurateafrica

    The best thing that a company can do in this time of recession is give back to its clients the time and financial resources that would normally be spent in recruitment, training and retaining professionals by outsourcing non-core items.

  • http://www.victusspiritus.com/ Mark Essel

    It's up to us to set the framework for a compassionate capitalistic future so the next generation can have some thing fun to tear apart ;) . I have a feeling there are already many businesses that choose to have a culture with this type of priority system. I only wish I could do more to help them “win out” in the struggle for success.

  • http://www.victusspiritus.com/ Mark Essel

    Great comments (both of them Loid). Although I strive to imagine a pseudo-optimally efficient business infrastructure, I think it is dangerous to allow purely financial benefits to control one's decisions. Cash itself is a limited measure of value. There are social costs for completely uprooting local business infrastructures.

    I was trying to imagine a society that outsources EVERYTHING, and wondered what that would do to a community. Sustainable cultures require a solid balance between incoming and outgoing effort/value.

    If due to efficiency and capitalism we eradicate a local industry, we should be careful to aid those displaced into finding (or training for) new more stable/valued employment. Ignoring them is akin to making ourselves ignorant of the ramifications of change. I want our society/culture to be fluid and adaptable.

  • http://www.victusspiritus.com/ Mark Essel

    The recession has created a force that draws our focus to efficiency. It provides us with motivation to review our businesses and bottom lines. While doing so we can discover great value for both our customers and our employees. If outsourcing allows a business to survive and prosper, there isn't much of a decision to be made. We should be aware of the local impacts that our business decisions cause, and collectively find a solution to displaced families (alternate career finding assistance, training, relocation, etc.).

  • Eli

    Ok, more calm response :)

    I guess I had issues with some of the words used, rather than really agreeing or disagreeing with your post.

    I think the issue is really a complex problem, morally. Looking at the long term, it's difficult to tell what the best methods are. Globalization can disrupt things a lot for locals in various areas, and I think we in the US are a bit insulated from the consequences of these radical changes.

    I read horror stories of children working in sweat shops, producing our cheap goods, and I read horror stories of what happens to those children when the sweat shops close. Is globalization good in the long term? Who are the victims in the short term? If people around the world are viewed as the same, if travel and free trade roam free, will this ultimately lead to fairer conditions for all? And in the short term?

    And how about our local conditions? To me, the idea of paying local people to do jobs at higher cost sounds similar to the argument against automation of those jobs. Either way, the job is done more (cash-wise) cheaply, and local people don't get paid to do those jobs. Otoh, we're not going to sit in the stone ages, so piss off, eh?

    The nature of humans require that we use our minds to achieve prosperity. If your job becomes obsolete for whatever reasons, you have to expand beyond it. This has been the way throughout history, and those who try to stifle technology (including the logistical tech of transportation and finding cheaper labor) get lost. Only by embracing change can we hope to prosper.

  • http://www.accurate-africa.com/ Mark Walusimbi

    The best thing that a company can do in this time of recession is give back to its clients the time and financial resources that would normally be spent in recruitment, training and retaining professionals by outsourcing non-core items.

  • http://www.victusspiritus.com/ Mark Essel

    It's up to us to set the framework for a compassionate capitalistic future so the next generation can have some thing fun to tear apart ;) . I have a feeling there are already many businesses that choose to have a culture with this type of priority system. I only wish I could do more to help them “win out” in the struggle for success.

  • http://www.victusspiritus.com/ Mark Essel

    Great comments (both of them Loid). Although I strive to imagine a pseudo-optimally efficient business infrastructure, I think it is dangerous to allow purely financial benefits to control one's decisions. Cash itself is a limited measure of value. There are social costs for completely uprooting local business infrastructures.

    I was trying to imagine a society that outsources EVERYTHING, and wondered what that would do to a community. Sustainable cultures require a solid balance between incoming and outgoing effort/value.

    If due to efficiency and capitalism we eradicate a local industry, we should be careful to aid those displaced into finding (or training for) new more stable/valued employment. Ignoring them is akin to making ourselves ignorant of the ramifications of change. I want our society/culture to be fluid and adaptable.

  • http://www.victusspiritus.com/ Mark Essel

    The recession has created a force that draws our focus to efficiency. It provides us with motivation to review our businesses and bottom lines. While doing so we can discover great value for both our customers and our employees. If outsourcing allows a business to survive and prosper, there isn't much of a decision to be made. We should be aware of the local impacts that our business decisions cause, and collectively find a solution to aid displaced families (alternate career finding assistance, training, relocation, etc.).