14 October 2010

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?

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.

15 thoughts on “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?
  1. 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,

  2. 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.

  3. 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.

  4. 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.

  5. I agree. Let’s the business people to decide whether they like to invest in foreign countries or not.

  6. 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

  7. 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.

  8. 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.

  9. The answer to that is predicated upon how much we truly want a global economy!

  10. Government should be neutral. This is a matter left to the people, not to the nanny state.

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  12. Everything is very open with a very clear explanation of the issues.
    It was truly informative. Your website is very helpful.
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