Why Hillary could be the biggest friend of offshore and nearshore outsourcing

July 14, 2015 | Phil Fersht

The Uber HaterLike many of you out there, I was floored last night to see Presidential candidate Hillary Clinton openly attack the Sharing Economy in a speech outlining her economic theory.

Clearly taking a swipe at the likes of Uber and Airbnb Mrs Clinton states, “This on-demand or so-called gig economy is creating exciting opportunities and unleashing innovation. But it’s also raising hard questions about workplace protections and what a good job will look like in the future”. Clinton “Vows to crack down on employers who misclassify workers as independent contractors”, which she says is “wage theft”.  Along with globalization and automation, Clinton describes the "Sharing Economy" as “conspiring against sustainable wage growth”. The report says “she will argue that policy choices have contributed to the problem, and that she can fix it.”

So why does added protectionism of US workers help offshore and nearshore outsourcing?

While the open attack on innovative business models is in itself mind-boggling, the less obvious impact of her focus here is to discourage service providers and enterprises from hiring US talent to provide business support services. As service delivery becomes increasingly focused on higher value needs, such as organizational design, analytics modeling and supporting complex apps development across multiple environments, the opportunity for local US talent to be leveraged is huge.

In addition, the way in which new generation As-a-Service providers want to engage with talent needs to be more "As-a-Service" to be competitive. Virtual support models are becoming critical for BPaaS support functions where clients need quick, on-tap support, and - in many cases - the new generation of service provider isn't simply looking to stock up hoards of full time employees in a call center somewhere in the Midwest  - they are also seeking to engage talent which prefer a flexi-model and do not demand entitlements such as healthcare, 401K etc.  Isn't that what things like ObamaCare are for? Just look at how the new class of Workday service providers, such as Collaborative Solutions, Meterorix, and OneSource Virtual, all of whom are upending the old guard of "Was-a-Service" providers, clinging to costly legacy models that have already been disrupted. These firms are all employers of local US talent in support of innovative As-a-Service delivery. Does Hillary really want to discourage these firms from flexing up with more staff locally as they grow, or would she prefer them to invest more in India, South America etc where talent is more fungible and flexible to manage? Because that is what will happen if more protectionist employment laws are put through.

Why not make it easy and fluid to hire local talent to scale up - as and when needed?  Why not support our service-driven businesses to be more agile and cost-effective with their delivery? Because if services firms and enterprises are being strong-armed into hiring fulltime employees (many of whom don't even want to be fulltime employees), they are going to evaluate alternative talent models to deliver their services, such as hiring more local people part-time, or outsourcing to service providers which can provide talent from across the globe.

Bottom-line:  The US is an increasingly unattractive place to do business. Let's not make it even worse

For starters, the US has stayed at the lead of the global economy ever since Winston Churchill stuck two fingers in the air because their leadership has embraced innovation in technology and life sciences - and supported their leading firms and academia in the process.  Now, rather than staying ahead of the curve and realizing the future of work doesn't look anything like the past, we are seeing the leading Presidential candidate come down heavily in support of protectionism in order to win a few cheap votes from taxi drivers who overcharge us.  Aren't our wage costs, payroll taxes, healthcare contributions etc already off the scale?  Why not give our innovative employers a chance to be successful so they can create new jobs for the future, as opposed to discouraging them from hiring in this country at all?  It's not as if there is a huge unemployment problem in the US these days...

Uber is an easy target for Hillary as it has to rely on local contract workers to be effective and the government can step in to interfere. However, what about all the tech start-ups, As-a-Service providers, major enterprises which can leverage fungible labor from anywhere across the globe to fulfil their needs? Don't bite off your nose to spite your face Mrs Clinton - protecting a few taxi drivers who overcharge us would have much broader impacts on the attractiveness of US talent at large.  Let's just hope this is a minor aberration as she realizes the consequences of this bewildering campaigning and quickly corrects course to avoid being seen as a dated, legacy politician.

Posted in: Business Process Outsourcing (BPO)HfSResearch.com HomepageHR Strategy

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1 Comments

11 Comments

  1. Jim Leary
    Posted Jul 14, 2015 04:45 AM | Permalink Reply

    Excellent blog, Phil. It's depressing how she is revering back to the traditional employer-employee system as her vision for growth. Why she isn't linking economic growth to job growth is crazy. As you rightly point out, the US has becoming what it is by embracing innovation and not stifling it,

    Jim

  2. Warren
    Posted Jul 14, 2015 05:34 AM | Permalink Reply

    Spot on observation Phil. Am surprised HC is taking this viewpoint, especially when you look at how Obama opened up the healthcare insurance markets by "sharing" the business out.

  3. JB
    Posted Jul 14, 2015 07:08 AM | Permalink Reply

    Couldn't agree more - this type of approach will drive more jobs outside the country. Promotion of successful new business models is key, not protecting legacy ones...

    JB

  4. Eric
    Posted Jul 14, 2015 09:59 PM | Permalink Reply

    Hillary is legacy - this could nail her.

  5. Anon
    Posted Jul 14, 2015 11:50 PM | Permalink Reply

    Phil,

    Excellent piece. She will lose more than she gains if she wages a war against Uber! People can identify with that service as a symbol of the gig economy. Attacking it makes her look like a caricature of the 1950s. Also, a smart link between how attacking the contractor model is driving more companies to outsource than hire employees.

  6. Aaron McKeehan
    Posted Jul 15, 2015 12:29 AM | Permalink Reply

    Thanks Phil!

    I couldn't shake the feeling that I was reading a page out of Atlas Shrugged when I read about her thoughts concerning the "Sharing Economy"....

  7. Pratap Tambe
    Posted Jul 16, 2015 04:34 PM | Permalink Reply

    Just like tax-experts keep finding ways of circumventing tax laws to pay less tax, IT/BPO experts are finding new and big ways of circumventing HR laws by re-designing business models. But I think that automation will eliminate more western jobs than offshoring did and I doubt it will be simple for Governments to prevent bad social outcomes. I hope humanity recognizes the gravity of the situation soon and finds a way of preventing bad social outcomes.

  8. Forget the sharing economy, we’re in the uncaring economy - Enterprise Irregulars
    Posted Jul 21, 2015 09:25 AM | Permalink Reply

    […] the nub of the argument, while people like Hillary Clinton want to turn back the clock and protect the legacy job-for-life, the vast majority of people really do not care that labor forces are being disrupted, along with […]

  9. Barry
    Posted Jul 26, 2015 10:08 AM | Permalink Reply

    If software companies are physically located in the United States because they need a legal system that protects their intellectual property rights. Why won't these companies relocate to India after the TPP has passed?

  10. brian
    Posted Aug 18, 2015 02:05 AM | Permalink Reply

    I am classified as an "independent contractor" by my employer (and we are in the manufacturing outsourcing consultation business). The reason is they are a small start-up that is cash flow sensitive & do want to pay less taxes, have me pay my own social security contribution 100% (through self employment taxes), no health care benefits, & no 401k contribution. I have to fund all that myself & it's a huge personal expense as a percentage of my gross pay. My tax advisor certainly tells me that the company is misclassifying its employees. Would I like to have benefits, certainly. But I can understand my companies cash flow position as well. But take it from me, it's very difficult to self fund these things & there is no job security. And when it comes time to try to get loans, etc. that is also somewhat difficult. Those of you criticizing HC looking into companies skirting current law, are you classified as "independent contractors" & have to self fund all these things? The job market is better, but not all that great where I can easily find something else. I think it's a worthwhile political discussion to have as there are two sides to the coin.

  11. Phil Fersht
    Posted Aug 18, 2015 02:19 AM | Permalink Reply

    @Brian - I for one sympathize, especially as an employer who pays a lot of benefits trimmings and payroll taxes for my staff. End of the day it's all about talent - if you need to pay the benefits to get the talent, you will. What's more, it's law to pay fulltime staff as employees in most countries (US and UK for example). Now if you are great at what you do, your "employer" should pay you what you are worth / market rate, or you can just walk to another who can... If you feel under appreciated financially, I would let them know and try to fix it. The problem here is if your skill set is not in short supply - then it is highly possible your employer can source the work from a low cost location. Governments need to make it as attractive as possible for their employers to hire locally, not encourage them to go outside of the country where labor is more fungible and often cheaper.

    PF

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