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Opinion Editorial by Tom Salonek, Intertech CEO, appears in Star Tribune
Press Release: Opinion Editorial by Tom Salonek, Intertech CEO, appears in Star Tribune
Printed in the Star Tribune, March 22, 2004
Don't ban outsourcing; create jobs
Tom Salonek
March 22, 2004
It must be an election year. How else to account for all the recently
introduced legislation, in Minnesota and elsewhere, designed to keep
U.S. jobs from being outsourced to companies overseas that can do the
work for considerably less than their American counterparts?
With more than 3.3 million U.S. jobs projected to leave the country
during the next decade, this is an issue affecting many worried
voters. The temptation to offer seemingly simple legislative solutions
must be overwhelming to politicians -- particularly those trying to
hold onto their own jobs.
There's only one problem with legislative solutions: They won't work.
As the owner of two technology-related companies in Minnesota, I can
tell you first-hand that the pressure to outsource work overseas is
strong and growing. I wish it weren't the case. As a card-carrying
American, I'd just as soon hire people in the United States to meet
all of my clients' needs.
And, frankly, it's simpler to manage employees in the next cubicle or
down the hall. It's more efficient to gather everyone into the same
conference room for a quick daily meeting to check the status of
projects. And it's infinitely easier to communicate with someone who
speaks English and lives in the same time zone.
But as my father used to remind me, no honest man ever said that life
-- or business -- is easy.
The much-ballyhooed global village is alive and well today. From your
electronic equipment to the food you eat and the car you drive, many
people from other countries have had a large hand in getting those
goods to your home cheaply and in record time.
As much as Americans bemoan the jobs lost to outsourcing, most love
shopping for bargains at Wal-Mart. It's no wonder that Fortune
magazine just named Wal-Mart the "most admired company in America." It
has created five of the 10 richest people in the world.
On the business side of the equation, it's no different. Stockholders
want companies to keep earning higher profits every single quarter.
That's tough to do without finding ways to cut costs. Outsourcing
offers a way to significantly lower business costs, from writing
software code to answering call center phones. Something's got to give
to keep our economic system humming.
I'm well aware that the legislation being suggested by Gov. Pawlenty
and others around the country is aimed at protecting jobs being
outsourced by government agencies. No self-respecting politician wants
to say that government contracts help employ non-Americans overseas on
his or her watch. But, as a nation that worships cost-cutting
Wal-Mart, do we really buy into these initiatives?
Competitive advantage
Unlike many, I don't believe that outsourcing is the scourge on the
economic landscape that politicians are making it out to be in this
election year. As a business owner, I'm committed to finding out what
works for customers and doing right by my employees.
My company has experimented with outsourcing certain software
projects. Our goal was to find a way to work with people who shared
our work ethic, client philosophy and commitment to doing great work
on time and within budget. We wanted to combine our employees in Eagan
with workers in another country by linking them over the Internet into
one lean, software-development machine capable of developing software
24 hours a day, five days a week, thanks to differences in the time
zones.
It didn't quite work out that way. Cultural differences and
communications challenges made it tough to manage the team and keep
things moving smoothly. We've decided to put that initiative on hold,
for now, while we work out the bugs. Competitive pressures leave us no
choice but to try again.
As Robin Vasan, managing director of Mayfield Fund, a venture-capital
firm based in Menlo Park, Calif., notes in a recent issue of Time
magazine: "Any start-up today, particularly a software company, that
does not have an outsourcing strategy is at a competitive
disadvantage."
It's the same story for small companies and big companies, too. The
larger companies, such as Dell, are blazing the trail to find ways to
make outsourcing work. They have developed different levels of
support, based on the size of their customers. Higher-end customers --
those that spend in the thousands, not the hundreds -- automatically
receive access to customer support centers based in the United States.
Those customers pay more and must keep their operations running
smoothly. Conversely, smaller customers enjoy lower costs on computers
but must make do with offshore customer support.
Instead of turning outsourcing into a lose-lose political football,
our leaders should get out of the way and let the market sort out the
pros and cons. Instead of pointing fingers at the North American Free
Trade Agreement (NAFTA), which the Labor Department estimates was
responsible for the loss of more than 500,000 U.S. jobs between 1994
and 2002, we should be looking for ways to expand new businesses and
encourage innovation at home.
For good or ill, we live in a global village. Pretending otherwise is
an exercise in futility. Forcing businesses, or government agencies
for that matter, to ignore competitive pressures and pay higher costs
of doing business will only further hobble our economy.
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