Fighting offshore

Worries about offshore outsourcing aren’t just for IT people anymore.

Recently, a new anti-offshoring coalition rolled out its agenda — a group led by midsize manufacturers, along with labour unions, professional organizations and small retailers. The newly minted Jobs and Trade Network isn’t just concerned about sending away programming jobs, of course. Its members want to fight everything from manufacturing jobs going offshore to big-box retailers wiping out family stores. But they see offshoring as the root problem.

Can a bunch of manufacturers really do something about it?

At first glance, that’s hard to believe. True, the group hopes to get bills through Congress setting some limits on offshoring. One proposal would block sending federally funded work overseas. Another would require companies to give three months’ notice before laying off workers and sending their jobs offshore.

But that’s all pretty mild. And there are real limits to how much effect even tougher anti-offshoring laws could have. All laws have loopholes, and multinational corporations are good at slipping through them.

What else could the anti-offshoring forces do? Maybe they’ll try to marshal consumer buying power, reviving the old “Buy American” campaigns. It might work — but most Americans today aren’t big on buying American if they have to pay extra for the privilege.

Or the coalition might attempt to get socially conscious investors to put their money only into companies that don’t send jobs overseas. But that doesn’t sound likely to hold back a tidal wave of offshoring either.

Ultimately, there’s just one way anti-offshoring groups can be sure to win: by demonstrating a business model more profitable than offshoring.

That’s not as crazy as it sounds. New business models show up all the time. Sometimes they’re enabled by improved technology — that’s how help desk offshoring became possible. In other cases, they come from a radical rethinking of how businesses can work.

Is there actually a way to make more profits than by using cheap offshore labour? You wouldn’t think so. It just sounds wrong.

But then, it sounded all wrong nearly a century ago when Henry Ford first slashed the profit margin on his Model T by cutting the price — from US$850 in 1908 to $99 in 1914 — and then doubled what he paid the workers on his assembly line. The result: Profits doubled every two years, and Ford Motor Co.’s market share climbed to a whopping 48 per cent.

It didn’t sound possible to improve product quality by getting rid of quality inspectors, either — but that’s what W. Edwards Deming convinced Japanese manufacturers to do after World War II. U.S. companies are still trying to catch up to the Japanese.

Just as counterintuitive was the 1980s notion of getting rid of warehouses full of parts and finished products. Today it’s hard to find any manufacturer that doesn’t use some just-in-time approach.

Those radical business-model changes all came in the manufacturing world. So maybe manufacturers really do have a chance to make offshoring obsolete after all.

And for corporate IT people, there’s good reason to keep an eye on how well they do — and not just to cheer on alternatives to offshoring.

If there is a business model that’s more profitable than offshoring, you don’t want to be behind the curve. You’ll need to understand it — and fast — because your IT shop will have to help your company implement it while it still gives you an advantage.

Should anti-offshoring manufacturers find something that really is better than offshoring, you’ll want to be the first to know.

Frank Hayes, Computerworld’s senior news columnist, has covered IT for more than 20 years. Contact him at [email protected].

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