Outsourcing = Economic Transformation

Outsourcing and Management

Outsourcing has implications beyond the obvious tranfer of jobs to other countries, or the use of metrics to manage external providers. We are in the middle of an economic transformation that has no precedent for a hundred years.

Interesting new book by Thomas Tunstall – I have not yet read it – but the sentence above made me think about outsourcing in a different way. In fact we do have a precedent for what is happening with outsourcing. The first half of the industrial revolution saw the rise of great, vertically integrated industrial companies (Ford, Standard Oil, DuPont, Kodak) and the second half saw these companies gradually dis-integrate.

Ford no longer manufactures steel, Kodak no longer has it’s own power generating plant, etc.

Outsourcing of services (offshore or not) is simply further division and specialization of work. Division and specialization always yields economic growth.

This trend cannot be ignored because the economics are real. Individual companies can pretend to ignore service outsourcing – but at some point this will put them at a competitive disadvantage to their competitors.

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