Outsourcing: You Get What You Pay For

The whole off-shore outsourcing thing is very baffling. It helps the economy, it hurts the economy. Steve Jobs likes it, Lou Dobbs is apoplectic. Don't we have enough conflicting information to sort through without trying to decide about outsourcing? We're still trying to figure out chocolate: It creates zits and fat cells, it helps prevent heart attacks. Bewildering.

Like so many things in life, outsourcing depends on where you sit. If it's in a boardroom and your company's stock price is high, outsourcing sounds okay. If you're sitting at home all day watching Law and Order re-runs because your paycheck is now being sent to a worker in India, you're upset.

Like it our not, the outsourcing debate is back. In our mortgage-defaulting, $60 gas-tanking, unemployment-rising recession-imitating election season, candidates will be pro-ing and con-ing about sending jobs overseas. McCain gives it a thumbs up, Obama a thumbs down. Bush2 was for it. Kerry against. It's a partisan thing.

Truth be told, it's a continuing trend that started taking off in the 1980s. Telecommunications, healthcare, airlines, banks, computers, software makers, toys, and pharmaceutical companies -- you name it -- are all farming out call centers, payroll, accounting, legal services, and manufacturing to off-shore companies paying some workers .94 an hour. You may have heard abut the Pasadena City Council news coverage being outsourced via audio hook-up to a reporter in India, who is writing it for a newspaper in Pasadena.

Pro-outsourcers say it's about global competition, lower labor costs, profitable revenues and no healthcare benefits to pay. Good for the economy because it's good for business outsourcers. And very good for the outsourcees. India booked $22 billion in business answering phones, managing networks, processing invoices, and writing software for multinationals from around the globe.

Nay-outsourcers are fierce in their opposition. They point to Michigan, Ohio and other states where whole towns have been decimated because the plant moved off-shore. When a business transfers important control to someone else's hands on the other side of the planet, bad things happen, they say -- like compliance and fraud issues. How do you think that new Nikon camera you didn't buy in Tierra del Fuego showed up on your charge card?

You see why the whole outsourcing debate is baffling. Each side has it's irrefutable experts. Who to believe?

The answer is -- us. Consumers. We're the experts. Sure, we like bargains but is it a bargain when the service or product we buy is not worth the savings -- like outsourced pet food that kills dogs, dolls covered with poisoning lead, and critical medication that isn't quite what it's supposed to be?

Or how about the frantic customer service call you make when the computer system crashes? The first thing you notice is the long-distance line-hiss that says you're no longer in Kansas. Then, an accented man, or woman, asks a series of mandatory questions that sometimes includes reciting your mother's maiden name which translates to She-Who-Passes-Gas in their language. The people on the other side of the line-hiss are extremely polite. They must go through brutal training to simulate the abuse we dish out when we can't explain something we don't understand in the first place.

The line-hissing people do speak proper English. Unfortunately, when you've lost all your emails, customer orders, and your bank account is not accessible for reasons unknown, you are not speaking proper English which leads to mis-communication which propels your frustration into a severe meltdown zone. But remember, you are paying less for this non-service because the company you bought it from is paying less for this non-service. This is not an effective business model for anyone. The first rule in business: lousy product = lost customers.

If politicians are stuck about what to do about this outsourcing dilemma, here's a practical consumer suggestion. On your next state's ballot referendum, what about creating a Mandatory Service Disclosure on all product and service labels? Just below the "Made in China" line, companies must insert where service is performed as in, "Service in India." And if it's a company like Netflix, they can proudly say, "Service in America," like "Made in America." This way, consumers can make enlightened decisions about the whole benefit-to-risk, savings-to-service thing.

The second rule of business -- and life: you get what you pay for.

Comments

[bgregs]

The worst part about outsourcing is that all too often the consumers DON'T see a savings. The CORPORATION sees a savings, and then they charge the same amount to the consumer as before. Case in point: Nike. How much are Jordans costing now?? How much did they cost when they were made in the States? I'm not even considering inflation, just using current dollars......

This is why we need to limit (not necessarily stop) outsourcing by using tariffs. Thus, if it costs you $10 to make a pair of shoes in the States (including environmental protections), and it costs $1.50 in China, you have to pay $8.5 to bring those shoes into the States. You also need to meet current USA environmental standards (or the host country, whichever has tougher standards!) before you can sell here.

And one more thing. When you move your "headquarters" to a P.O. Box in the Caribbean, and they aren't charging you any taxes, then you need to pay AMERICAN taxes if you wish to do business here!!!!

[WASanford]

If I remember correctly, Nike shoes were never made here in the states, but New Balance makes them here. To prove your point, New Balance shoes are often sold for less than comparable Nke shoes.

I also agree with you on tariffs but I think they should be indexed to unemployment. This would provide a disencentive to manufactures to move their shops overseas while throwing their American employees under the bus. Then if the corporations want to pay us to sit and watch Law and Order reruns while they pay their foriegn workers to make the product well, where do I sign up?

A corporation doing business here, should be required to have at least a branch office in this country and the profits made here should be fully taxed.

[bgregs]

Nike's used to be made in Oregon, where their headquarters is. They were one of the earliest to move overseas, and have steadily increased prices since then. And you are right, New Balance are cheaper, but I'm not sure where they are made at....