Outsource everything! A panel looks to the limits of outsourcing

No local work for engineers except in DOD is already a reality in Australia. Except Australia tends to outsource to US who in turn go somewhere else.

It seems almost everybody here has better idea to teach CEOs, COOs how to run the business. But probably none of them actually own (or woned) a bisiness. Bringing in the H1Bs for the work efficiency, you guys were complaining. Ok, outsourcing the designs for cost reduction, you guys now are crying.

"Once you outsource a skill, it is very hard to get it back" Quinn said. How true and how sad. Once you outsource you are no longer the master of your own destiny, but a partner in your own demise. Look at Dell. They are nothing more than the house brand for the Taiwanese computer design firms.

Why stop at outsourcing consumers? Why not just outsource your life and be done with it?

Cool it ! Outsourcing to lower cost will not continue indefinitely. I will go on until cost in these areas will catch up, and they will due to demand-supply dynamics of talent. I have already seen a saturation in the tech job mkt in India. Note this will also happen faster than if was the previous decade. Secondly, I think it is time to adopt "world" attitude than "my country" attitude. If the 'world' was becoming smaller due to techological advances, how can we continue to look at it dividedly? So there will be a parity / equillibrium at some point. Perhaps 15-20y later?

This all started many years ago and unfortunately, engineers were often at the forefront. Remember when tv's were domestically made? RCA, Zenith, Curtis-Mathes? Then the "smart" people started buying the sony's and the sharps etc because they were better. Remember when people bought american cars? But then smart engineers started buying the better japanese cars. It is just alot more painful when it is our job going abroad. "More Bangalore" got it right. Our standard of living is headed straight down, and likely alot faster than anyone dreams. Once the dollar is no longer the global reserve currency, we will be lucky to buy essentials like oil and minerals. Just be glad we grow alot of food. Although I've heard we net import food now too.

Excellent article! It lays out the brutal logic and inherent contradictions of offshore outsourcing g that is purely driven by financial considerations (ROI, ROA, etc). The quote from Neterion?s CEO provides the key: ?It?s all about competitiveness, not just about shrinking.? Incidentally, Neterion (a solutions provider for Virtualized Data Centers) was acquired a few days later by Exar Corporation. But, yes, success criteria should be broader than just cost reduction. This then raises the question: How does one measure improved competitiveness? And what is required to sustain competitive advantages? As we know from research on the sources of competitiveness, the key requirement are skills, both engineering skills and innovation management skills. The article demonstrates that, if offshore outsourcing is pushed to the limit (?Outsource everything!?), then long-term negative impacts on competitiveness are likely to exceed short-term improvements of cost advantages. As stated by the 3Leaf Systems chairman: ?Once you outsource a skill, it is very hard to get it back.?

Oh please guys.... you expect a job for life. Ask your manufacturing guys how that worked out for them. In India many don't have big screen TVs, etc. Just to eat is a pleasure. You are used to a good life & too scared to give it up. But you can't stop India & china from taking over. We are learning from the jobs you give us, and we will take over. Stop crying and try to accept it. Your management already understands.

The folly of outsourcing seems to escape the panel: "And Koeter agreed. 'During evaluation you should qualify your vendor's processes. But even then you only really learn about a vendor at the crisis points. So it's indispensable to talk to others who've worked with this vendor before.' Who will be doing the evaluation? Only someone experienced with manufacturing that product, and who has continued, vested interest in product's success would be able to evaluate. Will those persons be outsourced? Are they likely to give adequate evaluation if they're going to be laid off? Then there's this: "The panel emphasized the commitment and expertise required to make outsourcing work. Not only must you wisely choose what tasks to outsource, select a vendor carefully, and retain enough expertise to control the project, but you must think about the future. Outsourcing is a one-way street. 'Once you outsource a skill, it is very hard to get it back' Quinn said." That last statement is the poison management NEVER understands. At best, they just don't GET IT. At worse, they just don't care - they think they're going to sell out and take their money before the company (and economy) cavitates.

If a government no longer serves its citizens but only corporations, it is right of the people to make the necessary changes. As the US has a bistable party system that serves corporations at the expense of citizens, it is time for such change. (And by the way, screw those Teabagger fools.) Corporate management makes decisions like outsourcing because they have no fear of reprisal. Some well directed violence that instills fear in these Aholes is a quite appropriate, if unfortunate approach. If they will not abide their community, let them fear it.

I forgot to mention that this magazine should be outsourced as well.

Outsource everyone -- including Employees, Executives, Board members, Stockholders, all the goods and services that everyone pays for, government regulators, buyers, sellers, middle men ... we still have plenty of room to include more.

Live by the sword.. ( buying at Walmart?, A company's sole purpose to make money?, rate of change in society is limitless?) Die by the sword...

Well, This is interesting. My job is moving to China in July 2010. Our site will close & only 17% of the jobs will remain in North America, the rest are going to China. I trained my Chinese replacements in the fall of 2009, all while being assured that they were NOT my replacements. So far the SW produced by the Chinese office has been markedly inferior, despite the fact that they have received between 2 and 5 times the normal amount of training for new American engineers. They are all experienced engineers (not new grads) but cost from 1/2 to 1/3 as much as an American engineer. Several of the points raised in this article seem to have been missed by my company. They are not retaining enough product expertise in America, and upper management does not see this as a problem. Lower level managers (directors) can see that down the road they may need a 'stash' of engineers, but their attempts to keep a knowledge pool have been thwarted. We still routinely have to send engineers out to sites and unsnarl problems that field services cannot handle, but there seems to be no provision for the future . . it goes without saying that flying Chinese engineers to those sites will not work - the language barrier alone renders it unworkable. Not to mention the expense of ticket prices for China. Finally the time difference between the offices in the US and Beijing have made integration and troubleshooting a mess. But again, senior management acts as if this problem is non-existent. All in all I think that I am going to be somewhat happy to be shut of the whole pile of crap come July. Right now it looks as if there is no future for SW developers on the US. In 10 years I am guessing only DOD and similarly 'sensitive' work will still exist here. Hope I am wrong.

Bitter at ......... said: "Wake up folks, if we all get outsourced, there will be no more consumer spending." When that time comes, it is the consumers' turn to be outsourced: the products will be sold to consumers outside the country, who are prospering from all the outsourcing jobs they receive.

What we need is TAX REFORM...make US corporations that operate within the US (MFG and ENG and MGMT) have their tax rate go to Zero to 8%. The GOV still wins because of the payroll taxes it collects. Companies who import their products are under the current corporate tax structure (~35~45%)

it's every where the same, do not spend any expense but you should do as usual and place pressure in your subcontractors. short term profit will kill profit at term.

I dont understand relengineer's point - 'input' VAT is offset against 'output' VAT - it has no effect on the economics of outsourcing.

Most the comments I see are addressing the bigger issues that come with outsourcing... a) National economic security, b) job security, c) moral issues (greed vs common good) I don't think the panel discussion was trying to address these issues.. it's scope was much smaller. I think their assuming: - engineers will just work for the contractors involved.. (no job reductions for society) - the jobs may/may not be relocated (no impact on a given country is assumed). basically .. they are ignoring reality. Even with a reduced scope for their discussion, I wonder how any business will: a) differentiate it's self with only feature sets of products.. quality? who made it for them? will the consumers start to look at the CM / engineering design center for an indication of the product's quality? (good idea .. but may not follow the brand name of the product). b) handle IP theft in China or the 3rd world (what's in it for them? be honest, do you think will play by our rules?)... c)if you hand over nearly all of your operations to other parties... what keeps them from taking your product?. If you do as suggested .... ""In the future, we will be looking for vendors who will take a position in the product. We would like to outsource funding and risk, too." If this happens ... You have taken on a partner. (at minimum) And this has an entirely different dynamic than just "outsourcing"

Sadly, I am compelled to direct my kids away from a career in engineering. Sure, there will always be engineering jobs. But, in increasingly smaller and smaller numbers.

There are two completely different issues being discussed here: 1. Whether outsourcing - whether domestically or internationally - can help create opportunities and profits. 2. Whether outsourcing internationally can have bad - and possibly permanent - effects on domestic industry. My answers are 1. yes, sometimes and 2. yes, sometimes. Incidentally, a lot of those USA engineering schools HAVE closed down, or at best transformed to software schools.

Engineering has its own value, Manufacture has its own value, We don't necessary measure everything by the short term return. In fact, they are pillar to the society that continue evolved and sustain people living. In these outsourcing folk's arguments, we better close all our engineer school. Otherwise, these poor kids will never find any job when they graduate?

This just goes to show you that you can't expect people to be smart - just greedy. Our company (management) is jumping on the outsource bandwagon and can't or won't see the implications of their actions. One thought is that just don't care the other though is they can't care - they just don't have the capability - kind of like a retard, he'll never be able to do calculus so don't ever expect it. I wish all these CEOs & CFOs would take a walk in some of these outsourced peoples shoes and then hit them with a big freaking truck!

I feel like a bunch of CEO and COO who want to piece the jig-saw puzzle together to make a Rembrandt painting. working technology, manufacture, risk, and even funding like a component of jig, we don't need these CEO and COO. A program manager or a fresh grad of MBA can do it. Let things flush down toilet is also a one way street. Russian sent Sponik up to space once, why not out source our space program from them?

Outsourcing is increasing profit by increasing risk. It is like increasing your income by canceling your insurance. What you outsource, you no longer control and can no longer be part of your sustainable competitive advantage. You always do some of this. You buy nuts, bolts etc. from outside vendors. But you must be careful in these trade-offs. The poor guys that outsource their business (eventually) either do not see the risk or because they intend to grab the money and run. Those who do not see the risk do not see the value in what is being outsourced. They may know about the function (design, manufacturing, ...) which is not the same as knowing the function from hands-on experience. The problem with all of this is that you get down to a few people running the business and everything else completely leveraged by outsourcing. If someone as smart as you are (or knows more about how the market has changed) comes along, they can kill your business in an instant. They can use the same outsource method, which gives them speed. Or thy come up with a better manufacturing, etc. method that they own and you cannot get - at least not soon enough, or at all. The same thing happened in the recent market crash. Mortgages were combined, sliced and diced into investments without understanding the risks involved. But mortgage risks are not like other risks, and the securities eventually blew up. Investors got a high return on their investments, until they lost it all. Keep paying your car and medical insurance, and carefully understand what you are outsourcing, lest you lose your business in the process.

Sure, outsourcing has its place but I'm concerned we as a country are outsourcing everything! It doesn't take a genius to realize the implications these actions will have on the longterm stability and security of our nation. But, that doesn't matter because what matters is the short term $$$ gain by outsourcing. The US is the largest economy in the world but for how much longer? If the only jobs available are working for McDonalds or Dairy Queen who will buy the products the companies are making by outsourcing? It is a catch-22. We are shooting ourselves in the foot for short term profits at the risk of long term viability. How will our society look in 20, 40, 80 years from now? Taken to the extreme and we will have a small group of wealthy individuals who are CEOs, VPs and other high level managers with everyone else working at McDonalds or Dairy Queen (if not unemployed). Don't the heads of companies today see this?

Outsource innovation and the rest of it is just cost of goods sold (COGS) development labor, that Wall Street and the tea baggers want done by slaves, minions and most of all non-union workers who have no protection from free market monopolies, robber barons and the Bernie Madoff graduate school of finance.

When I read about outsourcing, one thought keeps popping up in my mind - what happens to all of this if and when we go to a VAT or national sales tax? Does this whole structure fall apart when every transfer of product/work effort for the supplier to the company gets taxed? If the "Fair Tax" folks are successful, every company that outsources will be in trouble.

Our (former) COO was a big fan of outsourcing everything. He came in to the company, then outsourced instrument builds only to have our supplier bollix up the works! They oversold their tech bandwidth. We brought most of the instrument build back in, forced to quickly re-staff, and the COO was then fired.

CEO and CFO outsourcing is a brillant idea. No one should be able to make decisions and not have to live with all the consequences of their decsions. This applies to all management, at all levels, corporate AND especially governmental.

There is an end to every trend. . . the trend to outsourcing by US corporate America will also go through a local maximum and then decline. If your economy is driven by energy it is questionable to outsource energy supply to foreign regimes that are largely indifferent to democracy and personal fredoms. If your economic and military strength ultimately depends on the capability to manufacture it is not wise to outsource and offshore the manufacture of larger and larger portions your most advanced high tech technologies to emerging foreign industrial superpowers.

I am still amazed that in a country that bases its successes on consumer spending, these practices are allowed to happen. Wake up folks, if we all get outsourced, there will be no more consumer spending. The lone exeception will be what is spend on welfare. HOWEVER, who is going to pay taxes if we've all been replaced by cheap foreign labor? The big greedy corporations, think again, many have sheltered themselves against that all too well. Take America back. Put you elected officials on notice that we will not take this anymore.

Outsourcing: it makes sense to outsource to a company in one's own country, it does not make sense to outsource to another country. Manufacturing is an integral part of every economy. An economy without manufacturing is out of balance, manufacturing cannot be replaced by service industries. The cost of outsourcing is much higher than lower labor costs. The profits do not increase from outsourcing, they may be lower. The US lost over 30% of its manufacturing plants leaving behind workers who had to accept lower paying jobs. Consequently, the living standard of the US today is much lower than it was 20 years ago. Industries of the US have forgotten their responsibility toward workers and communities, to society. There is more to life than profit.

Outsourcing: it makes sense to outsource to a company in one's own country, it does not make sense to outsource to another country. Manufacturing is an integral part of every economy. An economy without manufacturing is out of balance, manufacturing cannot be replaced by service industries. The cost of outsourcing is much higher than lower labor costs. The profits do not increase from outsourcing, they may be lower. The US lost over 30% of its manufacturing plants leaving behind workers who had to accept lower paying jobs. Consequently, the living standard of the US today is much lower than it was 20 years ago. Industries of the US have forgotten their responsibility toward workers and communities, to society. There is more to life than profit.

Outsourcing: it makes sense to outsource to a company in one's own country, it does not make sense to outsource to another country. Manufacturing is an integral part of every economy. An economy without manufacturing is out of balance, manufacturing cannot be replaced by service industries. The cost of outsourcing is much higher than lower labor costs. The profits do not increase from outsourcing, they may be lower. The US lost over 30% of its manufacturing plants leaving behind workers who had to accept lower paying jobs. Consequently, the living standard of the US today is much lower than it was 20 years ago. Industries of the US have forgotten their responsibility toward workers and communities, to society. There is more to life than profit.

Outsourcing: it makes sense to outsource to a company in one's own country, it does not make sense to outsource to another country. Manufacturing is an integral part of every economy. An economy without manufacturing is out of balance, manufacturing cannot be replaced by service industries. The cost of outsourcing is much higher than lower labor costs. The profits do not increase from outsourcing, they may be lower. The US lost over 30% of its manufacturing plants leaving behind workers who had to accept lower paying jobs. Consequently, the living standard of the US today is much lower than it was 20 years ago. Industries of the US have forgotten their responsibility toward workers and communities, to society. There is more to life than profit.

Outsourcing: it makes sense to outsource to a company in one's own country, it does not make sense to outsource to another country. Manufacturing is an integral part of every economy. An economy without manufacturing is out of balance, manufacturing cannot be replaced by service industries. The cost of outsourcing is much higher than lower labor costs. The profits do not increase from outsourcing, they may be lower. The US lost over 30% of its manufacturing plants leaving behind workers who had to accept lower paying jobs. Consequently, the living standard of the US today is much lower than it was 20 years ago. Industries of the US have forgotten their responsibility toward workers and communities, to society. There is more to life than profit.

Absolutely AGREE with Chris

Maybe it's time to outsource CEO's?

Has anyone looked at the possibilty of outsourcing CEO's job.

How about abandoning all reasoning and just thinking about one: how low can we go and will USA become a Third World country , with half of population without jobs. It's not outsourcing that needs limits. It's GREED that needs them. Looks like Great Britain knows how to regulate it.They allow outsourcing and then impose 60% import tax on it. They managed to keep a huge part of their industrial power within GB borders.

The last line says it all. This whole article reads like a Dilbert cartoon to the extent that one wonders where in the company you are that you know so much about our company.

Too little to late.