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Views from the Prairie

March 13

Where is Outsourcing Headed?

American businesses have done quite well by outsourcing production. We have moved production from our cities to the rural areas, then to nearby countries, then to Asia. However, there are signs that we are not just reaching the rational limit, but going past it. Outsourcing always has risks and as we reach further and further, the risks increase.

Back in the early days of industrialization, the leaders had lived through the breakup of the Spanish Empire and could see the British Empire fading. They were very aware of how geopolitical forces could affect their operations. Thus, companies like Ford tried to bring the full supply chain under their control and owned not just the automotive factories, but coal mines, steel mills, trains, tire factories, and a rubber plantation. They wanted control so that no outside force could shut them down.

Today, many companies operate as if the world is a safe place. Today, we have "virtual companies" that only operate the headquarters and every thing else is outsourced. The attitude seems to be "any time there is a problem, outsource further." The supply chain can run through hundreds of companies in many different countries. Every time we stretch out the supply chain, we add risk to the system.

What are the risks to the current outsourcing? There are major risks to outsourcing: health, ethical, intellectual, and political.

Every major new disease, Plague, Flu, HIV, etc. has followed trade routes. The supply chain is bringing in invasive species. The CDC is tracking a number of human, crop, and animal diseases that could be spread by the global supply chain.

Every time we add another layer of outsourcing, we increase the risk that someone criminal is in that chain. For example, when a fire killed a number of garment factory workers in Bangladesh, several major retailers were surprised to find out that their garments were being made at that factory. People "up the chain" had lied about where they were getting stuff made.

The history of intellectual advances shows that it is almost impossible to keep intellectual property. People will come and work for a place, learn all they can, and then leave to start a competitor. This practice has been going on since the Bronze Age. Countries give encouragement to this practice in order to change trading patterns. England did it to Spain. The US did it to England. Now, other countries are trying to do it to us. Outsourcing accelerates the process.

Political risks are often the most damaging to individual companies. Political risks include corruption, the pressure to invest for political reasons, politically motivated inflation, and nationalization of assets. Politics and wars have cut supply chains in the past and are likely to do so in the future.

The world is not the safe place that many managers want it to be. It will be interesting to watch as the risks fail.

Who do we really need?

A recent newspaper article bemoaned how long companies were taking to hire new employees. Candidates were being put through interview after interview and yet, not hired. The article talked about companies looking for the "purple squirrel" - something that does not exist.

When we are looking for the "perfect candidate", we have lost sight of what a good employee is. We do not need someone who perfectly matches today's requirements; we need people who can become the right people for tomorrow.

Business plans change. It isn't the company and people that are best adapted to today's climate that will survive, but those that are best able to learn tomorrow's situation. If we hire only specialists, we wind up with groups of people who can not work together and learn new ways of coping and learn those on the fly. This can be easily seen in any football team that spends a lot of money to get the best individual players, but winds up without a functioning team.

For a while now, companies have been looking for very detailed specialists - especially in the technology field. Yet, when conditions are changing rapidly and new technologies appear almost overnight, the "generalist" often does far better than the specialist. Education that emphasizes "learning to the test" fails when the test no longer matches what people will be doing after school.

Over the next few years, we are going to see a lot of unexpected changes. Both the rise of new robots, new biological advances, as well as changes in energy prices will impact how we do business. Keeping flexible will be more important than getting the perfect person for today's situation.

Risky World

The laws regarding data in "the cloud" are very murky. Do not assume that data backed up on a cloud server is private. Providers can and many do look at what people are storing in the cloud. Law enforcement has taking down a cloud provider when they thought that one user is storing illegal content on that provider and have arrested people based on what was backed up to the cloud.

I have always wished for my computer to be as easy to use as my telephone;

my wish has come true because I can no longer figure out how to use my

telephone. Bjarne Stroustrup


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