Outsourcing Work - Importing Products and Importing Problems

And here I thought companies didn't like remote work. Hypocrites.

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The economy of the world certainly isn't what it was a century ago. Sure, there was some form of international trade (heck, there was "international" trade going back hundreds of years), but for the most part, what you had in your proverbial backyard was what you had to work with. To have something from another part of the world was extremely uncommon and only very recently has that shifted the complete opposite direction. Nowadays, services like Amazon pretty much ensure that you get something within a week regardless of if it's coming from the other side of the planet. The same product would have been on the road for months if you turn the clock back a century or two.

Truthfully, the idea of interconnectivity came about strong with the introduction of the internet and people never really looked back. A boat clogging up the Nile River was enough to cripple the global supply chain. A hundred years ago, many places would not have even known or cared. Is goes to show just how much of a "world economy" the world has become.

With economy comes work and with work comes the workers. Companies have footholds on multiple continents these days and, for those businesses that get large enough, the sun never sets on the empire. For all the normalization and growth we see in many industries, so much still remains unbalanced. While a brand and a company can strive to be the same at all locations, certain parts of the world just operate differently from one another. Your experience in a fast-food place in North America versus in Asia will be inherently different despite best efforts to keep it the same.

All these differences translate to not just the experience but also to the employees. Fact of the matter is that there are certain places in the world where work conditions and expectations are different. Money and profit are bigger factors than ever before, and with shipping at an all-time affordable state, the drawbacks of outsourcing work are insignificant and shrinking fast. It's good for businesses, but not as great for everyone else. Outsourcing is somewhat of a dirty word and comes with a lot of negative association... but is it still deserving of that association?

What does outsourcing look like? Why do people hate outsourcing but businesses love it? And will we see more of it in the future?

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Creating jobs... I guess...

When you hear the word "outsourcing", what comes to mind? I'm sure that all the stereotypes come up...

The Call Center

The Factory (with workers of questionable ages in some cases)

The IT guy calling in from 8 time zones away

You would be absolutely correct to think of these as outsourcing because... well... they are! Companies don't like referring to operations as outsourcing because of how "dirty" the word has become, but people usually intuitively know it when they see it. It's simply the act of taking jobs that would typically be done locally and moving the operation to a more remote location.

And as I said, these stereotypes do apply here. Telus has remote call centers (but it gets all sensitive when you try to say it's outsourced). We've all in some way, shape, or form heard of the "Nike Factory" being the staple example of moving work oversees. And IT people being from other countries has become normalized to the point where it's pretty much a running joke at this point. The common thread running through all of these avenues is cost. Other areas of the world are simply cheaper to run labour operations out of. More on that later...

Those examples above fit, but they don't tell the whole story and they certainly don't cover every instance of outsourced work out there. Yes, large scale manufacturing occurs overseas, but it must actively be in replacement of or in lieu of keeping jobs around in order to be outsourcing. A car factory in South Korea for example would have been constructed regardless of the North American market. That's not outsourcing, that's just foreign goods or services. Something like Amazon fulfillment centers are also examples of just having a foreign footprint for the sake of service (and I will freely bash Amazon if they deserve it, but this isn't the time or place).

Something more along the lines of automating customer service at a fast-food place with a screen showing someone from another continent... yeah that's outsourcing. Extreme example? Probably. Rare occurrence? Likely to be increasingly less so the way things are headed.

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The margins... oh the margins...

So why do people intuitively wrinkle their nose at outsourcing? Because deep down, as much as the sense of community may appear to have gone out the window, there is still a sense of community in many places. People want to know that what they buy and sell is coming from someone they can consider their neighbor in some way. It's a personal pride people take in supporting local (or whatever is close to local). Outsourcing is the direct opposite of that mentality. It takes the pride of knowing someone nearby did something or made something and it tosses it out.

It's not just the goods and services either, but the jobs themselves. All over the place in workplace-based areas of the internet (of industry hubs in general), we see the mantra echoed of "No one wants to work". In reality, it means "No one wants to work... for the prices we want to pay". It's a major part of the reason we see that attitude alongside... at the same time... one of the tightest hiring markets of recorded history in many places. Getting hired in the 2020s is basically impossible unless you get lucky, gouge your own salary, or have like 30 years of experience. That's a major symptom of what outsourcing has done, and it's why many people dislike it.

On the flip side, businesses can't be happier with the outsourcing trend. It has become normalized that the blow to the company reputation is barely even notable anymore, and it certainly doesn't have the impact it once did. Outsourcing represents cheaper production and less labour controls. Why pay someone in North America $20 when you can pay someone $2, get an extra 4 hours out of them, not pay breaks or benefits, and work them 6 days a week under threat of being fired. So what the goods need to be shipped across the ocean (assuming there are material goods at play), the labour savings more than pay for itself.

And yes, it's easy to see how the lines get brought out that it creates jobs in these communities. That's a good thing! But is it really a positive when it comes at a cost of the jobs in communities close to home? Consider that and it comes off more as a pull-at-your-heartstrings excuse for why it was done. No company goes out and does something on that much of a mass scale without substantial money backing the actions.

So outsourcing for companies nets lower costs, more labour hours, less controls, and a nice piece of marketing to spin. What's there not to like if you're a business?

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A growing trend or a dying one?

Outsourcing opens the door to tons of risks that could take hold at any time. Supply chain issues and shipping lane problems can hinder products getting where they need to go. Delays abroad due to things like political unrest, material shortages, and natural disasters (as silly as that sounds, but magnitude 8 earthquakes or category 4 hurricanes are not great for production) can lead to issues on the customer end. De-centralized companies can become difficult to control in the long term. All this risk (and companies hate risk)... but the trend is seemingly growing.

It's calculated risk that is letting outsourcing grow. The world is becoming increasingly connected, and it's leading to similarities being adopted across the globe. More often than ever, countries can be considered "WEIRD", and this underlying thread boosts confidence in businesses that operations will run as usual.

On the flip side, we have companies that pride themselves and build a brand identity around being "Home Grown". Some companies will proudly boast that their products are "Made in America" or "Made in Canada" because it signals that they are doing business locally. It hits on a portion of the consumer base that feels that the sense of community was lost as the world became more connected.

So now we find two increasingly polar opposite camps of companies. On one side, we have companies that outsource and put profit up on the pedestal. On the other, we have companies that actively shun outsourcing and boast that they are willing to drop profits in return for a better community life for those living locally. It's accurate to say it's both growing and dying in a sense, as both sides pull further towards the "One or the other" side of the spectrum.

Business has been run locally without outsourcing for a long time and is relatively new in the grand scheme of things. Should it be left to die? Consider all of the risks and issues that come with it. The supply shortages, the delays, the quality control, the resource drain, the decrease in local quality and availability of work, and anything else that I've mentioned above. Now consider this... will large companies that are reliant on moving that needle further forward in terms of profit ever see a return to the ways of old as an option? I think not... outsourcing may be here to stay, problems and all.

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Bring it in

Business is a game of give-and-take. How a company functions, how a customer base reacts, and how a team of employees operates can be seen as reactive, and outsourcing is no exception. Is turning away people with money and losing them to a competitor worth it if you are spending less and still turning a profit? Where does it leave growth for your company? What happens when places you've outsourced to begin to represent the places you actively avoided by outsourcing? What happens when those who buy in no longer buy in?

Outsourcing exists today because there is a substantial divide on the earth between places that "Have" and places that "Have Not". Places that are "Have Not" may not be in that position forever, and they will eventually catch up to the rest of the world. With hybrid and remote work being increasingly popular (and doable), will we see outsourcing evolve further? There will always be small businesses to support that will never go down this path, but for those with larger pocket books, this will eventually be the choice that needs to be made. I won't pretend to know what the right choice is for any given business, but I so have the capacity to warn of the fact that you may be getting exactly what you pay for.

~IR

Do you work for a company that outsources parts of its operation? What has been your experience with companies that outsource work? Or maybe you just have a comment to add? Check out the Facebook, Twitter, Instagram, or LinkedIn page and let everyone know. Don't forget to follow or like the page for updates! And share this article if you feel others should give it a read!

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