Outsourcing: a symptom of a failing education system?

For a business even to consider outsourcing its operations, is a resigned acceptance that it’s not running them very well and it may as well source to a provider that can try and do a better job at it.  At the very least, outsourcing will reduce costs and they’ll continue to plod along with more of the same.

Most people still claim they really outsource to save money – of course that’s an immediate benefit, but you wouldn’t even be considering it, if you had operations in place that were really good.

For example, this company wouldn’t have to do a lot of outsourcing:

  • “We have world-class HR, where we attract and keep top talent to run our business”
  • “We have superior finance, where we close the books in a week and our management can make rapid, informed business decisions”
  • “We have great customer support which upsells our products and makes our customers love us”
  • “And we have great IT brains that works with our business units to develop the applications our departments need, while automating processes to enable the business to be run efficiently.”

If your business is at the point where you view your IT support, HR, finance, procurement, customer service etc. as largely low-value administrative functions, then your functional heads and their supporting teams have failed you.  I’m sorry, but if your business operations were run in a manner that could add significant value to your organization, you wouldn’t consider outsourcing them for a minute.  I’ve been covering outsourcing for more than a decade, and I still believe in the value that great finance, HR, procurement and IT can give to a business, and it’s a crying shame that so many businesses today are giving up the ghost of finding this value within themselves – they know their business  and their institutional processes the best, and looking to ship them off to a third-party is the final admission that their people have failed them. Here’s the hard evidence:

This recent HfS Research study of 209 US and European enterprises found that six-out-of-ten large enterprises are considering outsourcing to achieve more effective global operations.  Yes, 90% are looking to save money, which is a clear short-term motivation, but the simple fact that over half of all business are also looking to re-engineer their processes, and achieve greater effectiveness into the bargain, is one major admission that their own operations are not good enough.

Why are so many business seeking to improve their operations?

I blame our education system – and this is endemic across many first-world countries.  Why are we not producing enough graduates who are schooled in the value of developing great human resources functions, passionate about providing great talent management to business?  Why are we not producing enough finance people, trained to develop a deep understanding of the complex global business needs in todays’ environment?  Why are we not producing customer service leaders who believe the customer is still king?  Why are we not producing enough IT grads who can apply real business logic to application workflows?  The list goes on…

In India, we’re now starting to see several of their leading service providers hire kids straight from high-school at 18, bypassing a university system that clearly isn’t giving them the right training that most businesses today require.  Conversely, in China, their education system is tightly interwoven with their economic development.  But what about the US, the UK and other countries, where everyone is supposed to go to college and and get some some of degree, before graduating to face a genuine relevance gap between whatever they studied, and those skills employers actually need today?

In the olden days, graduates would start at the bottom, processing invoices, answering the phones etc. and work their way up the company.  In today’s environment, if those staff are readily available in other global locations with more relevant training, a more willing attitude – and prepared to work for less (and not have a crippling student loan to repay), that’s where you’ll take your operations.

These are some of the core issues that are really failing today’s businesses, and outsourcing is merely a symptom of these core issues – not the cause! Preventing outsourcing to overseas locations is only going to punish our businesses which are crying out for a support infrastructure that can keep them competitive in today’s markets.  The key is to serve up onshore talent that is primed, trained and ready for the needs of todays’ businesses.

Side-note to readers to clarify some points: There is no hard answer to my thoughts outlined in this post, and this is a complex, sensitive topic with many nuances. I am observing long-term macro trends that are shaping corporate behavior.  The irrelevance of many college degrees to suit today’s business needs, combined with the financial impact on graduates’ early-stage career behavior, is having a major indirect impact on many businesses’ ultimate decisions to outsource.  What is clear, is that there needs to be a complete overhaul of how young talent is developed in our educational system, if government leaders want to fight this ongoing trend of its leading enterprises looking overseas, not only to save money, but to access talent that is ready and willing to be plugged into their operational support functions. It’ll take a long time to reverse this trend, and you do start to wonder if it’s already too late…

Bookmark the permalink | Leave a trackback: Trackback URL

18 Comments

  1. krishna vishwanath
    Posted April 28, 2011 at 6:23 am | Permalink

    Phil – sorry, I disagree with you. Your argument runs counter to the whole trade-is-good-for-all view of the world. I might be making steel domestically, but for whatever reason if someone else makes steel at half the cost (environmental costs included) due to a nifty new process or lower capex (due to efficiently built plant) or lower interest or whatever, I would want to source steel from that other source. Similarly I may be doing a phenomenal back office job doing fund accounting in New York. Now someone comes up with a way of automating it so that they can do the same job and take half the FTEs away or get equivalent FTEs to work for half the price – from a business perspective, I think the prudent thing to do is to go to the new vendor.

    I dont see what this decision has to do either with the quality of the US education system or with the quality/importance a company attaches to the said process. We need to view the IT/BPO outsourcing phenomenon as simply an extension of more-trade-helps-the-world-overall paradigm.

    thanks
    krishna

  2. Posted April 28, 2011 at 8:29 am | Permalink

    @Krishna – thanks for your comments, and I had your argument in the back of my mind when I wrote this piece. There is no hard answer to my thoughts here and this is a complex, sensitive topic with many nuances. I am observing long-term macro trends that are shaping corporate behaviour, and the irrelevance of many college degrees to today’s business needs, combined with the financial impact on graduates’ early-stage career behaviour, is having a major indirect impact on many businesses’ ultimate decisions to outsource.

    Firstly, companies don’t make conscious outsourcing decisions because they are dissatisfied with the lack of appropriate, affordable talent they can hire directly to improve their operations at lower cost. They make them because they are constantly seeking to run their businesses more cost effectively while not taking risks to their business. If cost-reduction opportunities are to be found where operations are poor, and a provider proves it can help them at minimal risk, the decision to outsource is a “green light”. View any consultant’s PowerPoint evaluation and you will know exactly what I am talking about ;)

    Secondly, as the data points out, 60% of enterprises see outsourcing as an opportunity to improve the effectiveness of their operations – they stated this is a very important driver. So 40% are probably looking to chop cost and care little about business effectiveness (yes, many decisions are unfortunately made to meet short term measures in today’s Wall St driven economy).

    Thirdly, if companies need additional skills and expertise to help them, they don’t outsource entire functions, they look to draft in staff augmentation or consulting help. And they may even make layoffs as a trade-off to purchase the staff augmentation/consulting, but that is not outsourcing. Outsourcing is transitioning the management of entire processes/functions to a third-party. To resort to such dramatic measures is something most companies consider carefully over many years. I have been advising the same clients, over multiple workshops and several years, before they finally pull the trigger. In most cases, you’re having the same conversation over, and over, again, until they have finally decided that outsourcing is the right lever for their organization to pull. Outsourcing, for many, is the final admission that they do not have the capability to achieve anything like the cost-savings they can make as their operational management do not have the talent, know-how to drive efficients and improve quality. These are intimate business processes, in most cases, the decision to outsource them is a major shift in culture and direction for them.

    Fourthly, you work for a service provider, and probably get to talk to prospects / clients after they have gone through many years of evaluation and self-analysis, before moving down the outsourcing path for some of their operations. I can assure you that most of them took a long, long time to take the O path.

    Fifthly, each operational area is being impacted at a different pace, due to the availability and maturity of outsourcing options. Routine IT work is the most readily adopted, and much of this is because businesses can experiment with staff augmentation projects for many years, so they can see the benefits of outsourcing close-up. Many still do lots of staff-aug and probably never will actually outsource. With business processes, it’s not as straightforward – you don’t contract to large numbers of offshore accounts payable staff, or GL accountants for “projects”. It’s a much longer decision-cycle, as there are few interim measures to take them there. But the underlying issue is consistent – the client doesn’t have the availability of affordable, onshore talent to do it themselves, and ultimately took the decision that outsourcing provided the answer to their problems.

    There needs to be a complete overhaul of how young talent is developed in our educational system, if government leaders want to fight this ongoing trend of its leading enterprises looking overseas, not only to save money, but to access talent that is ready and willing to plug into their operational support functions. It’ll take a long time to reverse this trend, and you do start to wonder if it’s already too late…

    PF

  3. Posted April 28, 2011 at 11:39 am | Permalink

    Phil, this is a great topic. Like you said, there isn’t a single root cause.

    In my opinion, organizations do not require the right behaviors from their staff, principally a) striving for continuous improvement and b) building their professional networks and taking part in organizations that advance their professions.

    Whether you’re running a call center, managing corporate real estate, closing quarterly books, or processing backoffice transactions, you have to ask your team to drive their business processes forward. The number of stagnant, underdeveloped business processes in the corporate world is staggering. And it’s completely due to organizations who don’t ask their teams to innovate, who don’t fund the improvements, and retain “shushin koyo” (the Japanese term for permanent employment).

    Part of the reason for the stagnation is that most people do not actively participate in professional development and networking. These venues offer opportunities for individuals to discuss best practices and solutions to their vexing challenges. While some of these organizations seem to be focused more on making money by allowing vendors to sponsor presentations, it is extremely helpful to open our eyes to new ideas. I know we’re all busy, but it makes substantial sense to invest the time in our professions so that we can advance the work in our environment, have an informal network of professionals we can consult with, and contribute to others who are in need of help, too.

    T

  4. Shiwani
    Posted April 28, 2011 at 11:54 am | Permalink

    The argument / theory you have put forth would be true from a North American standpoint, if this article was about “offshoring”. But it is not.

    It is about “outsourcing”. And the jobs can be outsourced to whoever can do the job best. Now if that talent is available onshore – then it has to deliver value. And so long as that talent delivers value, I don’t think any organization will mind paying a few dollars more if the ROI on that spend is much better.

  5. Posted April 28, 2011 at 1:14 pm | Permalink

    @Shiwani – I am definitely talking about outsourcing here. When a company makes the outsourcing decision, they are “giving up” on providing the delivery of that work themselves. Most outsourcing in the general ops area is offshore (FAO is 90% offshore, ADM similar), or nearshore (i.e. payroll from Brazil / Costa Rica) so much of the comparison here is moot. A lot of “straight offshoring” is simply staff aug in a captive operation, or could be a KPO assignment for some analytics support.

    I agree with you that if onshore talent delivers value, there is rarely an ROI to displace it via an outsource.

    PF

  6. Posted April 28, 2011 at 5:46 pm | Permalink

    Hmm, this is hitting a nerve with the HfS staff! I agree with you that a lot of education is fundamentally broken, and I agree that the vast majority of larger companies can’t seem to get out of their own way when it comes to the back office. I’ve always believed that this is driven by human nature more so than by a failure of education, but I will be the first to admit that even in this “jobless recovery” in the US, quality people are very, very hard to find and retain.

    I do not agree, however, (am I allowed to do that?) that companies should endeavor to be excellent at anything in the back office. It is the back office, and while it provides value, it rarely differentiates (the exception I will readily admit to is customer service) by actually making shareholders wealthier. I’ve always bought into the power of specialization: if someone can do “it” better, they should be doing whatever “it” is. Every dollar a company spends on improving the back office is a dollar not spent on improving their product or service. This seems true at any company of any size. So if I am an oil company, I should get really good at sucking the stuff out of the ground and moving it to where it can be useful to my customers. If I sell packaging, every available resource should be devoted to making better packaging that sells more profitably, not becoming a world class accounting shop. If indeed I am a world class accounting shop but my main business is packaging and I am not world-class at that, then I have a simple, big problem: I’m in the wrong business!

    If I am a stockholder of, say, Coca-Cola, and I go to their annual meeting and the message I hear is, “yeah Pepsi-Co is kicking our ass, but we have fantastic IT!” I am not likely to remain a stockholder for very long. Likewise, I do not expect to go to an outsourcer’s annual meeting and be told “we’re not very good at service delivery, but boy can we make beverages fly off the shelf!

    Do what you are very good at and people pay you money for. Outsource the rest.

  7. Posted April 28, 2011 at 7:15 pm | Permalink

    @Herrera – If a firm has made the decision to outsourcing something, the chances are they are not getting any value from owning it, and are essentially “giving up” on it. so might as well offload it, if they can save money and have some form of marginal improvement.

    However, if a firm is getting good business value from a function (i.e. the ability to close the ledger in a timely fashion is a desperately sought-after competency by most CFOs), then I don’t believe they’ll get a great ROI from moving something that is working well, to a third-party. The fact that 60% of buyers aggressively pursue outsourcing to improve effectiveness, tells me that they are not happy with the performance of their back office functions, regardless of the cost of running it. So forget the core/non-core argument here, the motivation to outsource is to have a provider try and improve it – oh, and shave a good 30% off the bottom-line in the process.

    I don’t buy the argument that all the “back office” should always be outsourced because it’s “non-core”. Companies know their messy operational processes and issues the best, and if they had some decent talent on staff, they should be able to implement some competent process re-engineering and streamline some automated workflow to drive out enough cost. This is particularly the case with many finance and procurement processes. Sadly, there is a dearth of talent coming out of colleges today which is trained, inclined, or can afford, to do this work. So might as well look to an outsourcer to provide the help. Conversely, for some processes that do not give any competitive advantage at all, and simply need standardizing on a decent platform, such as payroll and benefits admin, I see very little point in anyone retaining these, and buy your POV 100%.

    As a lead governance exec of a major global BPO operation said the other day “we deal with four providers, but now we also seriously consider a fifth – OURSELVES”.

    PF.

  8. Lawrence Mills
    Posted April 29, 2011 at 8:59 am | Permalink

    Excellent article and discussion. As you pointed out, there isn’t a hard-and-fast solution to this problem, but it’s clear that today’s college system is failing to prepare young talent adequately for today’s work environment. While it worked 20 years’ ago, the spiraling costs of repaying student loans and the (often) unrealistic early-career expectations of graduates today, is creating a situation where it’s just far easier for many business to outsource any function that isn’t core the to the business. It makes business sense to outsource many functions today based on the availability of appropriate talent, as opposed to developing these competencies themselves.

    What worries me is the irreversibility of this corporate behavior. Once a function is outsourced, it’s highly unlikely that corporation will ever develop it again inhouse, and it will be locked in to whatever their supplier can do for years to come,

    Lawrence Mills

  9. Paul Jarvis
    Posted April 29, 2011 at 11:39 am | Permalink

    Phil,

    Kudos for getting this sticky topic in the discussion table. HFS should be commended for flagging these issues that have been swept under the carpet for a very ling time.

    I agree with your comments that this “core versus non-core” discussion should always dictate what companies should outsource. Too many businesses end up with entire functions being classified by consultants as “non-core”, as opposed to evaluating *why* they have become non-core.

    As you have so diligently explained, many business functions have been classified as “non-core” because they suffered from a lack of talent to make them valuable to the business. However, if you strip out all the “non-core” processes from Finance, HR etc., where can today’s graduates find entry-level positioned where they can be trained to be future managers? In days gone by, all accountants started off doing routine, administrative tasks, such as accounts payable, payroll processing etc as they learned their trade, while adding value to their firm. They were also being schooled in their companies’ processes, data repositories and business infrastructure.

    Remove these learning programs for entry-level talent and you are removing the building-blocks for developing future management talent. This is an endemic problem which is driving companies to look to outsourcers for providing their talent in so many important corporate functions, as opposed to developing it themselves.

    Esteban seems to have accepted the reality of todays corporate mindset and he’s giving the right advice. Until society can service up a culture for develop young talent within corporations, we’ll continue to observe more and more potential onshore positions moving to outsourcers.

    Paul

  10. Shawn Fields
    Posted April 29, 2011 at 1:32 pm | Permalink

    Phil – sorry. I fundamentally disagree. Not with your assertion that our education system is broken, but your point that if a function was adding value to the business, the business would never think of outsourcing it and that outsourcing provides only “short term” cost savings.

    We all drive automobiles, right? Most of us can’t live without ‘em – they add value to our lives by getting us to where we want/need to go for our jobs/lives, right? Does that mean that we should all strive to become an excellent mechanic because our car adds so much value to our lives that we can’t trust it to anyone else? No. We’re aren’t DRIVERS/MECHANICS, we are business people/IT people/doctors/lawyers – the car is only a means to an end.

    Similiarly, it’s no shame for a business to focus on its CORE function(s), using it’s best talent (a point made even more relevant by your education argument that our colleges are not turning out as many talented people as we need) to focus on what actually makes the company money.

    Additionally, I’ve been IN outsourcing for 25 years – including working for sourcing advisors – and I have YET to see a circumstance where a well done sourcing contract did not save a company money LONG term. The failure to do that is not a failure of the “ability” of sourcing, but a failure in the structure of the sourcing agreement.

    Thanks for a very thought-provoking paper!

  11. Posted April 29, 2011 at 1:46 pm | Permalink

    @Shawn – good comments. I just don’t like painting outsourcing strategy with a “one size fits all” brush here. What works for some companies, may not work for others – some horses run better on certain courses. Some companies, like Cisco, have phenomenal HR development, for example, and view HR as a core/high-value competency, whereas many others do not, and simply want it run as cheaply as possible, with it performing an adequate job. It’s the same for other enterprises with other functions – value can be sourced in many areas that are not DIRECTLY attributed to revenue. It’s up to our enterprises themselves to decide what brings value to their business, their culture, their DNA – not hard-nosed consultants or providers, who have a biased view.

    And I have only been in outsourcing for 15 years, but have observed, close-up, several engagements that wound up costing their firms money (or certainly didn’t save them any) in the long term. Most have saved money, but there have been a minority few that were structured poorly and proven a disaster, and continue to do so. Let’s not sugar-coat it.

    PF

  12. Posted April 29, 2011 at 2:11 pm | Permalink

    I can’t help but jump back in here. There’s a lot of common ground. Education stinks. We haven’t even gotten started on the motivations of the newest generations hitting the workforce. There’s lots of reasons why companies underperform in some areas, and education is one of them. One-size-fits all sourcing strategy is just plain dumb–the characteristics and strategies of each company play a huge role on deciding if and when to outsource and the answer can and should be different in different companies. Outsourcing can be and occasionally is quite the disaster.

    But I think several mis-interperted my comments as being equal to the core/non-core argument. I am actually not that big a fan of core/non-core because it tends to paint with a broad brush and leave somethings out that should have been in and vice-versa. I especially don’t like that it has been used and abused by so-called strategy consultants who end up suggesting unrealizable savings to their gullible executive clients. What I do like about it is that it forces companies to think about what they get paid to do and how they make a profit.

    My argument all along is about scarcity of resources and opportunity costs. Every company has limited resources, and good management invests those resources in the highest return for their shareholders. 9 times out of 10, the highest return won’t come from the back office. Again, it is what you forego, and the recognition that being excellent at anything has a cost. If I have perfected my product (and how many have?) and I have extra money lying around, should I get awesome at accounting? Or should I give the money it would take me to get awesome at accounting back to my shareholders and hire somebody who already is awesome at accounting to do it for me at a likely lower cost?

    How will your customers and shareholders reward you for homegrown excellence in the back office? If you can connect those dots, then you’ve swayed me.

  13. Posted April 29, 2011 at 3:12 pm | Permalink

    Any organization has to consider how much capability it needs based on its own objectives and whether it wants to invest in building it vs. purchase/outsource it.

    There is a reason for the stark difference between some outsourcing providers best-in-class [insert process here] and a potential client’s process.

    Is it lack of investment/investment priority? Lack of vision and experience?

    Before business process outsourcing existed, it was a build/buy vs. don’t build/buy decision. Some folks didn’t know better, and their lack of experience fell into the “don’t” category.

    Meanwhile, an enterprising outsourcing provider has realized that it can run a business process like a business and be a profit center. Maybe they get some economies of scale to improve their margins, but the reason these outsourcing providers are sometimes so starkly better than internally run operations is because their business focuses on only one thing: the business process. Their strategy, investments, and operations management is solely focused on that business process.

    There are some very, very strong corporate leaders who have done this themselves, and the difference is less stark – and, often, the outsourcing provider has a few lessons to learn from these savvy functional leaders.

    However, I think those types of leaders are rare, and their operating paradigms require a certain type of corporate culture to be internal entrepreneurs.

    So, most senior executives, who have functions led by average leaders, act like a kid in a candy store once they understand what an experienced, high quality provider can do for them – and their shopping list gets longer and longer with exposure to more potential outsourcing opportunities.

    Of course, when these average leaders end up managing their state-of-the-art providers at the request of a CxO, maybe some value eludes capture? :)

  14. Shawn Fields
    Posted April 29, 2011 at 4:05 pm | Permalink

    Phil – I agree that each situation is separate – and needs to be considered individually.

    Your last paragraph makes my point, I think – I know there have been outsourcing failures, of course, but your point is that they’re structured poorly. Structured correctly, the vast majority of them are successful.

    And I get your point – my view may be a bit biased!

    :-)

  15. Ajay
    Posted April 30, 2011 at 12:52 pm | Permalink

    Great discussion here. I think the argument about poor quality back office processes driving the outsourcing decision is becoming very strong today. Basically, with the availability of mature outsourcing offerings, the decision to offload functions that are being run badly is getting much easier. If there was availability of talent onshore that could be hired at lower cost to improve services, that would be an option, but as your pointed out here, college graduates are not being developed onshore to offer this option to businesses.

    We’re really seeing a downsizing of the US office worker, being replaced by offshore employees working at outsourcers,

    Ajay

  16. Posted May 1, 2011 at 9:34 am | Permalink

    @Ajay – this has been a trend that really has been 20-30 years in the making, and the real cause has been the onset of globalization, the development of the Internet as a communications tool, combined with the demise of value being provided from the “back office”. Outsourcing simply provides a structured vehicle for enabling enterprises to reap the benefits of affordable global talent. As far at the enterprise is concerned, it’s unlikely many business will revert course over the next decade, but my fear is for the future of the onshore white collar worker. The development of outsourcing services for the mid-market is key, in my opinion, as it’s a very different ball-game to provide services in this sector. If the future of work lies more with the burgeoning SMB sector, than enterprises, then that is where education needs to focus: preparing graduates to support and flourish in entrepreneurial and (sometimes) virtual, work environments,

    PF

  17. Federico
    Posted May 2, 2011 at 5:17 pm | Permalink

    I think outsourcing has been done so many times for the wrong reasons, that it’s natural to associate bad performance with outsourcing, then bad outsourcing with outsourcing. The real question is: what should I do and what should someone else do. Here, we are under the premise that many things shouldn’t be outsourced, and that outsourcing things that you shouldn’t is bad policy, and leads nowhere.

    If one looks at what people do after they graduate, one will see that 70% do something else. And those doing something else, will typically feature salaries well below those that did manage to get to a position aligned with their studies. So one can conclude that education and private enterprises aren’t communicating effectively. Or that students have wrong, unrealistic expectations of their real chances of success.

    Next, one sees India being a huge success, with dozens of centers hosting 15,000 employees or more, and even having their on private universities. Education, it seems, has been taken over by employers.

    Now, we put all that together.
    - Work specialization has increased dramatically over the past 20 years, and current curriculum includes a wealth of valuable skills, 85% (my ballpark) of which will never be used by a single employer.
    - Education supply is not linked to demand, but by students aspirations shaped by marketing, and without a clear position they expect to fill just as they graduate (except for nurses).
    - The private sector can’t do much about it. They hire when people graduate, and they are expected to pay back that education. When there’s no alignment, they hire *someplace* else at a cost that will repay.
    - The government, parents and students pay for education, spend 5, 7 or more years, with some students even working part time (in related things in a few cases and mostly unrelated things) to gain 85% of skills their never use. But they need a paper to set them apart from the rest, as opportunities are ever more limited. The next best thing to having no credentials is to have ones that partially work. Look at a recruitment ad and that’s obvious.

    So what’s wrong?

    I’d make a comparison. What’s wrong with waterfall development? Why is the cloud (in spite of Amazon’s bad press) working? Why is consumerization of IT progressing fast? What are industrial IT services much appreciated? All those benefit from agile development practices. The premises are different. It’s thought as “less-mature” or “more risky” than traditional systems. yet, that’s what made the google’s, facebooks and the most successful ventures of today.

    We need formal education “on demand”. We need to start working at 18 years old. We need every bit of knowledge to be useful in some applicable way. We need to learn more from experience. We need to stop spending 7 or 10 years of taxpayer money, parent’s money and our young talents in a way not suited to today’s competitive environment, fast changing world. Competition is not against the person sitting next to you in college. It’s helping a company accomplish a goal in better, more innovative ways with measurable outcomes. It’s about building skill-sets as you go, based on what you learn, want and are capable of. It’s about teaming up early on, more as apprentice than as a licensed-profession, with a humbler attitude from educators, students, parents and employers.

    When we change from a “waterfall” education to an “agile” education, we’ll see what difference it makes. The funding? Think about it. Today, a huge amount of people work on unrelated things. So most of the investment in education leads nowhere. Governments and parents pony up dozens of thousands of dollars per child, and students are advised to focus on studying and not working, which has a hige opportunity cost. Shift all those resources to “agile programs” that use only the resources that are needed, build progressively a differentiated skill set, and provide continuous education for every employee: from those at factories, call centers, in design, engineering, etc.

    I did the math for Mexico at one point. Goverment pays $20,000 per graduate (5 years), and around $80,000 per graduate that works in the same field of their studies (75% do not). What if they spared 20% of that, and gave companies an $16000 to train someone in the job, half-time, for about two years? Give most freshers a chance. have them polish basic skills, a starting point that will make them extremely relevant as they gain experience.

    We need to rethink education completely. As it stands, some vendors, based on sound margins from labor arbitrage found a way to retrain massively people from any career into relevant careers. The high margins and economies of scale help, but that’s in spite of today’s (global) educational inefficiencies.

  18. Titus Sequeira
    Posted May 16, 2011 at 4:31 pm | Permalink

    This is a great discussion thread and congratulations to all for some excellent arguements and counter arguements and agree with most of the points addressed!

    While the traditional definition of the word “Outsourcing” would continue to survive, barely, if I have to take the concept of “Outsourcing” over the next 5-year horizon, starting now, here are some of my thoughts:

    (a) “Outsourcing” as a trend will be more about “collaboration” than a “sourcing” mechanism – for example: AT&T and IBM agreement of swapping the global networks and infrastructure support respectively. This is an example of “co-existence” and “building effeciencies”, AND,

    (b) Thus, “outsourcing” would be more about “sourcing from out” things that one is not capable of making it happen internally. This is an example of “market development” and “reaching out”

    Thus, to achieve the above two scenerios, I see that “Education” will once again be in the limelight. However, it is very much possible that “Education” too would become more focused and siloed so that one makes “experts” in an industry.

    Hope the above makes sense and provides a different perspective to the discussion.

3 Trackbacks

  1. [...] (Cross-posted @ Horses for Sources) [...]

  2. [...] (Cross-posted @ Horses for Sources) [...]

  3. [...] Outsourcing: a symptom of a failing education system? [...]

Post a Comment

Your email is never published nor shared.