Onshoring or Not?

So i’m on a plane to Singapore, which means… i have time to do a blog. 🙂

I had planned to write an article on something i saw in an issue of Money magazine awhile back, but i picked up the ol’ handy airplane magazine, and there is was: the perfect follow-up to my last article. 🙂

So this one comes courtesy of US Airways (“the magazine that connect you,” a member of the Star Alliance : ), p18, “The Gist: Business: IT service centers are relocating, Is this working?”

So the idea is, bring it home—we tried outsourcing to other countries; it didn’t work. The example this time is IT centers in Ireland:

A decade ago, global companies discovered that the well-trained IT work force in Ireland would accept lower pay than IT employees elsewhere in Western Europe, and many set up service centers there. As the industry grew, however, the economic advantage proved to be unsustainable: The newcomer companies exhausted the supply of skilled workers, and wages rose.

So we knew this from before: outsourcing doesn’t save money. (Or does it? : ) So what do we do? Bring ‘em home. 🙂

southern regions of the United States contain pools of highly skilled workers who are less expensive than those in big Western metropolitan areas, our research shows.

So this author is smart enough to hear you saying, “But wait, you just said! More companies will move in, increasing competition for the heretofore untapped pool of skilled workers, and then the ‘economic advantage’ will prove to be unsustainable.”

(Or was i the only one thinking that? : )

Ah ha! Says our author! I see your objection, and raise you the following “steps.” Step One: choose your location wisely! Look at the number of skilled workers be produced locally, will it continue to increase (are local colleges turning out skilled workers?) Step Two: make sure that you’re onshoring only work that is restricted to legacy systems. Step Three: minimize wage pressures over time by keeping employees fully engaged and growing professionally. (“A satisfied worker is less likely to leave.”)

Ok… terrible.

No way to be sure there will be an adequate supply of unemployed skilled workers. Local colleges can continue to crank them out, what’s to keep them from moving to the West coast? Well, you could pay them to stay. Fine, goodbye “economic incentive.” I’ll be honest: i don’t understand #2 at all. What? #3 keep them growing? What, without paying them more? Goodbye economic advantage…

Okay, so what the problem, and what’s the solution. Problem, we want to keep labor costs down? Why? To make more money.

Well, making more money involves being more generous. To everyone, including your employees. So why does offshoring work? Because you’re bringing economic prosperity to people that need it. Why does it stop working? Because you stop being generous.

The whole idea of keeping salaries low somehow creating economic gain is totally backwards. Giving brings prosperity. If your margins start getting low, look at how you can work harder to benefit more people. Your prosperity will go back up. Looking for the next surplus of cheap skilled labor is not the cause of being more successful. If it was everyone would do it. (Well, everyone tries, thus obliterating the “economic advantage” : )

Make your employees your karmic business partners. Help them be more successful. It’s the only way to be long-term successful yourself.

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