Outsourcing started when the first person decided that they would let someone else do work they could do themselves but preferred not to. Outsourcing as we currently refer to it started in the 1990's and meant collateral damage, that is pople lost their jobs. However Outsourcing is really an efficiency, productivity model, with labor arbitrage being the component that most see and react too.Quite frankly everyone has a kitchen. Therefore everyone outsources, that is they choose to have someone else do work they could do themselves. You can outsource dinner, by going to McDonald's, or you can go to a five-star restaurant in your neighborhood. You still have the kitchen, you choose, low end or high end, to have someone else set up, serve and most importantly clean-up (speak to my wife about this one).

A lot of people get paid, something very important to them, from services like ADP, Paychex, or another outsourcing service, yet they don't think of it as outsourcing. The reason - they are happy with the results -a paycheck, they are confident it is correct, and as far as they know no one lost their job.

So why is the "O" word so bad. It is because there is high unemployment in this country and people confuse outsourcing with offshoring. Many outsourcers are now outsourcing to domestic US locations - Detroit, North Dakota, the Gulf Coast - that is not in and of itself bad.

It is when someone we know loses their job, or politicians find something to make noise about. Chuck Schumer appears to be a good politician (it is not our point to evaluate him here), but he has been talking about imposing a fee of $0.25 cents on every call outsourced to another country. His goals are noble, keeping jobs at home, his tactic won't work. First it would make service in this country cost prohibitive, second we don't have people who are trained to do this type of work, third the infrastructure doesn't exist, fourth how do we distinguish between domestic calls and long distance calls with technology like voice over ip? and fifth, most Americans would be bored silly doing this work. Nobody ever calls up and says 'It's a nice day, just thinking about you, have a great day" and hangs up. Rather it is "your blankety-blank is broken and it's your fault and you're already late in fixing it". This is a high stress, burn-out job that is low paying and needs to be performed in scale. Yes, there are breakthroughs in technology that will allow people to work from their homes, but managing virtual teams to service levels is NOT a well understood or readily available skill.

Every emerging third world nation now offers some form of offshoring. Not all of them are prepared to provide the proper level of service.

Outsourcing has emerged from the 1950's practice of Industrial Engineering with people with stop watches on production lines studying processes and saying we can do this better, more productively and at a lower cost. Outsourcing is not evil, however it can be. Outsourcing is not about offshoring, it is about finding the most efficient, most productive way, at a reasonable cost to get things done. Outsourcing today is one of the tools of Global Sourcing Organizations to find the proper balance of employees, consultants, offshore resources and tools to make or keep a company productive and competitive.

Outsourcing the "O" word, would probably be considered differently if it evolved to a new term - from Outsourcing to Offshoring to Global Sourcing to Global Business Services to ....

Everyone know or thinks they know the short term consequences of outsourcing; job lost, cost savings, productivity and efficiency gains. You can discuss/argue the pros and cons of outsourcing forever. It all resolves itself to Einstein's Theory of Relativity, that is, it depends on your point of view.

However, the long term consequences of outsourcing have not really been published or to my opinion thought about carefully. When outsourcing started it was a cost savings, efficiency model. It evolved to a displacement, collateral damage and political football.

Initially outsourcing took low paying jobs and moved them to cost advantageous locations. In the 90's McKinsey suggested to offshore locations, primarily Inida, that they move up the food chain and offer more than just labor arbitrage for low paying detail work. Today mid management to innovation and even re-structuring the business are part of the outsourcing. The consequence - American kids coming out of college are denied an apprentice program to learn how to perform the mid level and senior management jobs. For we contend that it is difficult with just an academic background and no practical experience to manage virtual global teams. Outsourcing is an experiential practice and American kids don't have an entre to the ground level opportunities to move up the management chain.

Along with disenfranchising our kids to pursue careers in math and technology, the falling performance reported in the educational arena by Americans, and the lack of apprentice ship programs for learning the fundamentals the long term, unattended, effect of outsourcing will be to shift the balance of technology support and innovation to offshore countries

What's happened to outsourcing? Has it matured? is no one interested?

Every emerging country, every currency, every government is trying to say they are the latest thing in outsourcing. "Give us a pilot and we will perform..." "Trust us"

That's not the way it works! You need to have something more than desires and labor savings. You need to have processes, a track record, knowledge. I've haven't met anyone who says they buy from the 'cheapest' source. Businesses, people, always want a fair deal and a competitive price, but they want quality with a service. The latest example is Hyundai, who came to this country and offered a cheap car, because they were told that was what Americans wanted. They were then told that while we want an inexpensive car, we also wanted quality. Thus was born the Hyundai Advantage, 10 years and 100,000 mile warranty at a reasonable price, and today Hyundai is a brand name.

So everyone offers a low cost, and economic considerations from their government, how do they differentiate themselves? Sales presentations, RFP responses, after having participated in over 400 vendor selections, I can't think of anything that stands out that differentiates any company from another. The results is boring presentations, non-differentiated discussions in dialects - I know the solution is to hire 'natives' to present the same information

We've gotten to the point that outsourcing is becoming boring ....

Outsourcing contracts are traditionally written as effort based contracts, that is per Full Time Equivalent or FTE. This model is easy to implement, as the buyer firm can count the number of FTE's they have doing the work and then pay the provider firm a lesser price through labor arbitrage for the equivalent effort. But the value in outsourcing is not in effort based outsourcing but rather in performance based outsourcing, where the buyer pays for outcomes rather than "butts in seats"