Why Do Offshore Outsourcing?

William Hackos, Jr., PhD
Vice President, Comtech Services, Inc.
www.comtech-serv.com

In our consulting practice, we have had the opportunity to discuss offshore outsourcing with many managers, as well as to read countless articles on the benefits and pitfalls of offshoring. Arguments for and against outsourcing range from technical to financial to moral. In our zeal to take a stand either to save American jobs or American corporations, we forget that not all offshoring is the same. I’d like to describe some of the variety of offshore outsourcing.

Note: We should also point out that the problem faced by American workers is also faced by high-paid western European workers. Western European corporations are outsourcing too, often to eastern European countries with lower paid workers.

Acquisitions. Most large corporations have been making a series of acquisitions in recent years. Most of the time, acquisitions bring new technology into the corporation. Sometimes they reduce competition. Sometimes they increase efficiency by merging management and support organizations within the company. Most of the time the acquired organizations are not moved. The result: remote locations and sometimes offshore locations. This is a valid reason for offshoring. No American jobs lost.

Cultural offshoring. Many global companies sell their products all over the world. For example, a company making construction equipment may make different models for different countries because construction methods vary widely worldwide. The same issue occurs with farming, fishing, highway construction, and other kinds of equipment. Companies in these industries find it is better to build and document these products near where they will be sold. Sometimes we complain that the Indian technical writers can’t do a good job because they don’t understand our culture. Conversely, non-American companies have this same complaint. How can we write about something for other parts of the world when we don’t know their culture? Offshore writers can do something we can’t do. Again, no American jobs lost.

Translation/localization offshoring. Translation and localization is best done by people who work in their native language and their native culture. Translation/localization is an excellent candidate for offshoring. No American jobs lost.

Expertise offshoring. Sometimes a particular cultural or technical expertise can only be found offshore. Financial, medical, and legal systems vary from country to country. Offshoring may be the right thing for building and documenting products in these areas. No American jobs lost.

Cost reduction offshoring. Offshoring can be used to reduce labor costs. Because of monetary differences and standard of living differences, American companies can save large amounts of money by building and/or documenting products in low-wage countries even if those products are destined for sale in the United States. Although quality may be an initial issue, it is sure to improve. Large numbers of Americans are losing jobs.

Foreign labor within the United States. Two legal mechanisms are in place to bring foreign labor into the United States. Another is being considered.

The L-1 visa program allows companies to bring in employees temporarily from other countries for managerial or executive work, or work requiring specialized knowledge that is not otherwise available. Hopefully, there will be no loss of American jobs.

The H-1B visa program allows companies to import highly skilled workers, such as engineers, programmers, and technical writers. There is a cap of 65,000 visas per year permitted by Congress, although no records are kept to ensure that this cap is not exceeded. Large numbers of American jobs lost.

An additional program is currently being considered by the administration. Although, the rules are not worked out yet, it seems to be similar to the H-1B program but with no cap and without being limited to highly skilled workers. The assumption is that imported workers under this program would only do jobs that Americans don’t want to do. However, employers can make any job unpalatable to American workers by substantially lowering wages for that job. Depending on the exact rules, this program is also a risk to the IT and technical writing communities. Potentially, large numbers of American jobs will be lost.

To quote President Bush: “Decent, hard-working people will now be protected by labor laws, with the right to change jobs, earn fair wages, and enjoy the same working conditions that the law requires for American workers.”

Companies argue that we live in a global economy and Americans must compete for jobs with others anywhere in the world. American workers are clearly more expensive. One reason for this is that American workers through our democracy and their taxes pay for important government services to American companies. Our companies enjoy copyright, trademark, and patent protections. They can ship products on roads and through airports paid for by American workers. Our legal system protects them from crime. Our military protects their infrastructures from foreign enemies. Many industries receive federal subsidies. We could go on and on. All of these services are important and expensive and are paid for by American workers.

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