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logo    The Perils of Outsourcing

Ah, offshore outsourcing--while enraging its opponents, it's all the rage among it's proponents. And because the arguments are all simplistic, let me point some things that are either unrecognized or deliberately avoided.

Successful offshore outsourcing requires at least two necessary conditions which are rarely found in the under developed countries such outsourcing goes to--political stability and reliable legal systems. So short term success based on recent historical circumstances can not be used as assurance for continued success. Consider what would have happened if American companies had outsourced production and services to Yugoslavia during the period of stability caused by the dictatorial rule of Marshall Tito? And if an x-ray is misread by some Asian practitioner and an American dies or is seriously impaired as a result, what legal system does the injured party turn to for redress?

But there is something else. When an American purchases a product manufactured in some underdeveloped country and has trouble with it, he returns it to the store from which it was purchased. He is not required to deal directly with the people in the country in which the product was manufactured. However when services are outsourced offshore, the American using the service must deal directly with the foreigners involved. This direct communication complicates the issue considerable.

Communication can be difficult, because even if the foreigners speak English, they do not speak American dialects, and anyone who watches the English programming often broadcast on PBS or the History channel knows how difficult understanding foreign dialects can be. Then there is the deep-rooted disdain that Americans have had for foreigners. Rarely are they considered our equals. Couple that with the fact that Americans are not widely loved throughout the world, as anyone who watches the news should now be aware of, and a circumstance emerges which is potentially rife with conflict. Can we really rely on people who don't really like us to provide the kinds of services we are used to when those people also know that we look at them with disdain? And when an American becomes incensed at the poor service s/he receives in such circumstances, the only resort is to take it out on the company which has outsourced the service. What impact will that have on customer relations and the ultimate bottom-line? No one has any idea!

So those businesses that think that just because manufacturing outsourced offshore has not had negative effects on the companies that engaged in the outsourcing, it by no means follows that companies outsourcing services offshore will fare just as well. The circumstances are entirely different, and such outsourcing could very well be a disaster in the making. (DMN 5/23/2004)