Business Week hearts outsourcing

"The future of outsourcing" or the future of hype?

Published January 24, 2006 12:36AM (EST)

"The Future of Outsourcing: How it's transforming whole industries and changing the way we work," is the breathless title of the Jan. 30 Business Week cover story. But if you're looking for any hard-nosed, truly enlightening reporting on the topic, don't bother. Business Week's take is mostly anecdotal hype, interesting solely to those who want a primer on exactly how executives of U.S. and European companies are currently justifying moving vast sectors of their businesses offshore.

Business Week normally delivers better. But this time around, the hook includes some disappointing bait-and-switch. The key paragraph in the lead story declares "The new buzzword is 'transformational outsourcing.' Many executives are discovering offshoring is really about corporate growth, making better use of skilled U.S. staff, and even job creation [italics mine] in the U.S., not just cheap wages abroad. True, the labor savings from global sourcing can still be substantial. But it's peanuts compared to the enormous gains in efficiency, productivity, quality, and revenues that can be achieved by fully leveraging offshore talent."

Really? I would love to see some serious reporting about how outsourcing leads to job creation in the U.S. That's a pretty hot topic among economists, especially as regards the ever-popular debate between free traders and protectionists. But don't look for any actual numbers from Business Week (or, for that matter, any serious analysis from economists). The entire lead article mentions one company that managed to double U.S. employment, a California-based mortgage issuer named IndyMac Bancorp Inc. For the other dozen or so profiled companies signing up to have their businesses run by offshore contractors, it's remarkable how little data there is on "job creation."

But there is at least one sobering lesson to be learned from the package: Rolling back the transformations wrought by "transformational outsourcing" will be a gnarly job, should U.S. politicians actually generate the political will to do so. Judging by Business Week's reporting, some half a trillion dollars of global spending on various work processes (including human resources, finance, logistics, etc.) "can now be outsourced and managed to some degree offshore." As a result, the business of facilitating outsourcing has itself become a big business, with players like IBM and GE acting as offshoring handmaidens. There's money to be made in them there outsourcing hills!

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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