Outsourcing transcends industries
November 30, 2009
It’s nobody’s case that outsourcing is an efficient, cost-saving market strategy that transcends industries, be it furniture-making reports that between 2000 to 2006, Chinese furniture imports to US have almost doubled from $17 to $30 billion, simply because they are 25% cheaper), lab testing , in-vitro fertilization (Against $80,000 in the US, surrogacy costs only $20,000 in India, according to Associated Press, December 30, 2007 report, outsourcing pregnancies to India.
So, if your need is for an editorial assistant, a blog writer, or a personal assistant who can book movie tickets for you for the weekend, call a cab, or pay your bills, you can outsource the job to a virtual assistant, who is charge you a fraction of what an equivalent service in the US would. AskSunday in New York for instance, charges $29 a month for 30 tasks, while GetFriday in Bangalore charges $15/hour for unlimited tasks.
These days, whether the need is for an agency who would handle all your pre-election campaigning or arranging a personal Maths tutor for your prodigal son, the service is just a phone calls away. TutorVista in India charges $40-50 for an in person session and $20-40 for a group session.
Fact is that the term outsourcing is now used in a more generic way for any kind of intelligent resourcing, collaboration and service exchange across borders. Cost and risk sharing are important drivers for all these outsourcing models, which is why they are of particular interest to SME’s. Done singularly, the service cost can be prohibitive, but when it is offered on a large scale to a large number of buyers, the benefit transfer can be huge.
To clearly understand the cost-benefit dynamics of outsourcing, log in to Daniel W. Drezner The Outsourcing Bogeyman, where the author reasons that although offshoring does imply changing management styles and some reshuffle of traditional workers’ roles, “If exaggerated alarmism succeeds in provoking protectionist responses from lawmakers (against offshoring), it will do far more harm than good, to the U.S. economy and to American workers.”
In this context, a McKinsey study cited by Lael Brainard & Robert E. Litan, “Offshoring” Service Jobs: Bane or Boon and What to Do?, THE BROOKINGS INSTITUTION estimates that for “every dollar of U.S. service activity that is offshored, there is a global gain of $1.47, suggesting a net gain of 47 cents. In their analysis, India captures 33 cents of the total, leaving the United States with the remaining $1.14…. ‘Reemployed’ workers get 47 cents (a substantial reduction), additional exports account for a relatively modest 5 cents, and shareholders and consumers of the firms doing the offshoring gain the other 62 cents. U.S. shareholders and consumers win while U.S. workers lose.”
In any case, there are very few jobs that can effectively be outsourced, according to Drezner. The author maintains that 90% of jobs in the United States require geographic proximity, which includes jobs in the retail, restaurant, marketing, and personal care industries, and these cannot ever be moves offshore.
Indeed the logic in offshoring is best summed in the words of Infosys’ Nandan Nilekani, who once said, “[e]verything you can send down a wire is up for grabs.” So there you have it!