Offshoring: should governments embrace or fight it?Offshoring: moeten overheden er voor gaan of er tegen vechten?Offshoring: should governments embrace or fight it?Offshoring: should governments embrace or fight it?
Every time a big company announces to open an offshore/nearshore center or fire people, the media and many other people protest. HP announced 2 things at the same time: they will fire 1300 people in the UK + they open a sixth ‘best shore’ center in Malaysia. They already have offshore offices in the Phillipines, India, China, Bulgaria and Costa Rica. Immediately after the announcement, people start complaining about the decision and point a finger at HP, who supposedly acts against certain laws in the UK (source:http://www.telegraph.co.uk/finance/jobs/8059709/Hewlett-Packard-denies-hiring-overseas-staff-in-Britain.html).
At the same time, discussions are going on about further allowances to Indian IT people to enter the UK in exchange for more access to the Indian domestic market for UK companies (source: http://www.computerweekly.com/blogs/inside-outsourcing/2010/10/european-commission-set-to-open-the-uks-door-to-indian-it-workers.html).
What is sound policy?
In my opinion, governments all over the world should accept the unavoidable fact that in the next decades, jobs will move overseas in all directions accross the globe. The pace at which this happens now is slow compared to what will happen in the years to come. Policies should be developed to give people the freedom to move and for labor to move and offshoring should be embraced.
Elke keer dat een groot bedrijf bekend maakt dat ze een offshore/nearshore centrum gaan openen of mensen gaan ontslaan leidt dat tot protest van de media en vele anderen. HP maakte twee dingen tegelijk bekend: ze zullen 1300 mensen in het Verenigd Koninkrijk ontslaan en een zesde ‘best shore’ centrum openen in Maleisië. Ze hebben al offshore offices in de Filippijnen, India, China, Bulgarije en Costa Rica. Direct na de bekendmaking beginnen mensen te klagen over de beslissing en wijzen HP aan als een bedrijf dat zich schuldig maakt aan het negeren van bepaalde wetten in het Verenigd Koninkrijk (bron: http://www.telegraph.co.uk/finance/jobs/8059709/Hewlett-Packard-denies-hiring-overseas-staff-in-Britain.html).
Tegelijkertijd zijn er discussies gaande over het verder toelaten van Indiase IT mensen in het Verenigd Koninkrijk in ruil voor meer toegang tot de Indiase binnenlandse markt voor Engelse bedrijven (bron: http://www.computerweekly.com/blogs/inside-outsourcing/2010/10/european-commission-set-to-open-the-uks-door-to-indian-it-workers.html).
Wat is een goed beleid?
Every time a big company announces to open an offshore/nearshore center or fire people, the media and many other people protest. HP announced 2 things at the same time: they will fire 1300 people in the UK + they open a sixth ‘best shore’ center in Malaysia. They already have offshore offices in the Phillipines, India, China, Bulgaria and Costa Rica. Immediately after the announcement, people start complaining about the decision and point a finger at HP, who supposedly acts against certain laws in the UK (source:http://www.telegraph.co.uk/finance/jobs/8059709/Hewlett-Packard-denies-hiring-overseas-staff-in-Britain.html).
At the same time, discussions are going on about further allowances to Indian IT people to enter the UK in exchange for more access to the Indian domestic market for UK companies (source: http://www.computerweekly.com/blogs/inside-outsourcing/2010/10/european-commission-set-to-open-the-uks-door-to-indian-it-workers.html).
What is sound policy?
In my opinion, governments all over the world should accept the unavoidable fact that in the next decades, jobs will move overseas in all directions accross the globe. The pace at which this happens now is slow compared to what will happen in the years to come. Policies should be developed to give people the freedom to move and for labor to move and offshoring should be embraced.
Every time a big company announces to open an offshore/nearshore center or fire people, the media and many other people protest. HP announced 2 things at the same time: they will fire 1300 people in the UK + they open a sixth ‘best shore’ center in Malaysia. They already have offshore offices in the Phillipines, India, China, Bulgaria and Costa Rica. Immediately after the announcement, people start complaining about the decision and point a finger at HP, who supposedly acts against certain laws in the UK (source:http://www.telegraph.co.uk/finance/jobs/8059709/Hewlett-Packard-denies-hiring-overseas-staff-in-Britain.html).
At the same time, discussions are going on about further allowances to Indian IT people to enter the UK in exchange for more access to the Indian domestic market for UK companies (source: http://www.computerweekly.com/blogs/inside-outsourcing/2010/10/european-commission-set-to-open-the-uks-door-to-indian-it-workers.html).
What is sound policy?
In my opinion, governments all over the world should accept the unavoidable fact that in the next decades, jobs will move overseas in all directions accross the globe. The pace at which this happens now is slow compared to what will happen in the years to come. Policies should be developed to give people the freedom to move and for labor to move and offshoring should be embraced.
All big developments in the last century, like automation, movement of production to China, have met big resistance. People don’t like change and have a fear that they will loose what they have today and won’t get it back. But each time, history proves that economies keep on growing, wealth increases and unemployment rates go down. Maybe governments should take an active role in the mindset of people (because that’s what the resistance is all about). Governments should develop a vision about the impact of offshoring on their local economy, supported by research data and then educate people about the future + adjust regulation accordingly.
Naar mijn mening moeten overheden over de hele wereld het onvermijdbare accepteren, namelijk dat in de komende tientallen jaren werk zich zal verplaatsen naar de andere kant van de wereld. De snelheid waarmee dit nu gebeurt is traag vergeleken met wat in de komende jaren zal gebeuren. Er moet een beleid ontwikkelt worden waarin mensen de vrijheid wordt gegeven om te verhuizen. Ook moet het werk vrij zijn om te verhuizen en offshoring moet gebruikt worden.
Alle grote ontwikkelingen in de laatste eeuw zoals automatisering en het verplaatsen van productie naar China hebben allemaal veel tegengas gekregen. Mensen houden niet van verandering en zijn bang dat ze kwijt raken wat ze hebben en het niet terug krijgen. Maar iedere keer bewijst de geschiedenis dat economieën blijven groeien, mensen rijker worden en werkloosheidscijfers omlaag gaan. Misschien moeten overheden een actievere rol innemen in de manier waarop mensen denken (want daarom is er zoveel tegengas). Overheden moeten een visie ontwikkelen over de impact die offshoring heeft op hun lokale economie, ondersteund door gegevens uit onderzoek en dan mensen leren over de toekomst + voorschriften dienovereenkomstig aanpassen.
All big developments in the last century, like automation, movement of production to China, have met big resistance. People don’t like change and have a fear that they will loose what they have today and won’t get it back. But each time, history proves that economies keep on growing, wealth increases and unemployment rates go down. Maybe governments should take an active role in the mindset of people (because that’s what the resistance is all about). Governments should develop a vision about the impact of offshoring on their local economy, supported by research data and then educate people about the future + adjust regulation accordingly.
All big developments in the last century, like automation, movement of production to China, have met big resistance. People don’t like change and have a fear that they will loose what they have today and won’t get it back. But each time, history proves that economies keep on growing, wealth increases and unemployment rates go down. Maybe governments should take an active role in the mindset of people (because that’s what the resistance is all about). Governments should develop a vision about the impact of offshoring on their local economy, supported by research data and then educate people about the future + adjust regulation accordingly.
About Hugo Messer
Hugo Messer is a Dutch entrepreneur, distributed agile team specialist, and author. He is the founder and owner of Bridge Global, a software services provider, and ekipa.co., an agile coaching agency. He has been building and managing teams around the world for the past several years. His passion is to enable people that are spread across cultures, geography and time zones to cooperate. Whether it’s offshoring or nearshoring, he knows what it takes to make global cooperation work.
View all posts by Hugo Messer →
Hi Hugo,
Read your post, excellent story and of course I agree wholeheartedly with your conclusion. In today’s world, globalization in all its forms and shapes is a given. It is an unavoidable result of technological advancement (i.e. the internet and all of its applications, but also easy and affordable travel) combined with the fundamental laws of economics, and it is bringing us many good things. Offshore outsourcing is just one dimension of a much more fundamental thing happening in the world. Consequently, people, especially in the “West” (whatever that means), should stop pondering over the question whether this is a good thing or a bad thing. Like water which, as we know, always finds the lowest place, globalization is there and it is simply a fact of life: deal with it or ….. well, die (in the end). But does this mean that governments, or the people in general, have nothing to say in the matter? Not entirely. Offshore outsourcing takes advantage of lower cost of labour and this is natural. In return it provides jobs and economic development. This is a good thing, as long as this cost advantage is not simply based on turning a blind eye on the most appalling work conditions or otherwise unacceptable social circumstances exploited by suppliers. Customers and suppliers (and brokers, for that matter) must behave responsibly and they must be held accountable if they don’t. This requires transparency, to name one thing, and probably an internationally accepted regulatory framework. That’s where governments, and all of us good citizens of the world, could and should come in.
Of course this also opens up a whole new discussion on the sustainability of “flat outsourcing” (looking for the lowest cost alone), which I personally don’t find very interesting. Which is why I focus on global partnerships to maximize flexibility and innovation power, creating long-term business value. But that’s another story (see http://www.globalcircles.com).
Keep well, my friend. I do hope to hear from you soon,
Frank
Thanks for sharing this vital information.
In a democracy if Governments put too many restrictions people vote with their feet. Businesses have to be competitive else they cannot survive and will be replaced by their competitors which can create more unemployment. In a forest plants and trees thrive wherever there is moisture and they support an entire food chain and ecosystem. The same is true of business. Businesses thrive in an arena of low taxation, judicious controls, open competition, level playing field, encouragement of the spirit of entrepreneurship and innovation, reward for hard work and sufficient availability of skilled labor and capital. Businesses have to have the freedom to determine what to produce where and in what quantity. The open market economy and the laws of supply and demand if allowed to operate freely can optimize production at the least cost with maximum efficiency and productivity. Outsourcing enables businesses to focus on core competencies and do non core functions in an efficient manner. Offshore outsourcing can have additional benefits in driving down costs by outsourcing to a lower cost economy. If a Government puts restrictions on the free movement of labor by immigration restrictions it will slowly but surely drive its businesses offshore or render them non competitive in the world market due to lack of access to sources of innovation and intellectual capital.
Politicians think of business in terms of regulation and taxes. No politician has ever gone on to start or run a successful business. Businessmen who get in to politics are ruined. Tariffs are not the way to go, tariffs waste more letters, saying taxes.. Get rid of union entitlements and pay workers for what they do, not what the union goons dictate. Hold the workers accountable and fire them when they are nonproductive. Government should never presume that they are a productive part of society. Government is an expense. not an asset.
I agree with you.
We are on new ground, never experienced before in terms of being “Wired” as a world – economically, socially, environmentally and scientifically.
Conflicting ideas, if managed constructively, can yield a hybrid solution to a challenge that is a better product or service than either side of the initial equation.
The key to managing international relations constructively is fostering an environment respectful of all points of view but led by individuals who are driving to fulfilling peaceful, progressive objectives as a first priority and who blend differences of opinion decisively.
I agree. Let’s the business people to decide whether they like to invest in foreign countries or not.
Governments should not dictate to businesses where they can operate their businesses. It is up to consumers and other businesses to decide whether they want to do business with companies that outsource labor/operations and/or place facilities in other countries.
Some businesses need to pursue low cost alternatives in order to remain price competitive on a global scale. Would those opposed to outsourcing prefer to have businesses go bankrupt or shrink (layoffs) because their competition can sell the same product for less money?
Or, conversely, would you pay double the price for a product (television, etc.) that is produced locally due to higher labor rates? Or a higher price for a product produced overseas because the government collects tariffs?
It’s simple economics – tariffs result in higher prices – higher prices reduces demand – a reduction in demand leads to less sales – less sales leads to less production – less production leads to layoffs – layoffs lead to people with less disposable incomes – which results in less spending – which leads to reduced sales in other sectors and, as a result, more layoffs. And the cycle continues.
The World is Flat – Thomas Friedman
Offshoring is very similar to the import of goods. It is the import of services.
The world has more or less come to a consensus in favor of free trade and against protectionism. The same logic that resulted in that consensus holds good for offshoring. For instance, by setting up barriers to offshoring, a government makes its citizens pay the consequent higher prices of services rendered locally, thus imposing a tax on those citizens.
The answer of let the market decide is easy on the brain of the executive engaged in outsourcing and still remaining on the right side of it but is overly simplistic. For example, one of the earliest global markets was in literal slave labor. When does swapping domestic middle class labor for sweatshop foreign labor become a moral issue of national significance? The concepts of government, nation, borders arose for fundamental reasons as declared in documents such as the US Constitution to bring order to chaos. I think that along with the endpoints of globalization we need to be sensitive to the effect of rate of changes relative to typical human life spans including promises made. Example, is it morally sound for a young soldier to go to war in the defense of his nation including both its citizens and businesses threatened by enemy forces, only to find upon return that he cannot return to his recently outsourced skilled job and is left to the whims of the unregulated forces of global competition with no one defending him? The executive getting a bigger bonus and flying the nations flag outside his reception hall would hopefully have some trouble sleeping at night in such a scenario.
The answer to that is predicated upon how much we truly want a global economy!
Government should be neutral. This is a matter left to the people, not to the nanny state.
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