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Outsourcing and The Oval Office


US election for President of the United States is well under way. Every election can turn on a surprise issue. This time the issue just may be… Outsourcing! Did Mitt Romney's firm (Bain and Company) start the recent trend of outsourcing, or was it something that happened later, that Romney was unaware of? The thread of the public discussion so far is that outsourcing jobs out of the US would disqualify someone from running on a platform of creating jobs in the US. Maybe. Perhaps the problem is that the media is talking about the wrong issue. Instead of talking about outsourcing jobs OUT of the US, why isn’t someone talking about outsourcing jobs TO the US?

With all the talk and fear about outsourcing, one thing that has been forgotten is that outsourcing works both ways. While the names have changed, outsourcing has always been a two-way street. From the end of World War II until the 80’s, the US has benefited from work being outsourced from around the world. Partially because the war caused such extensive damage to factories and corporations, the relatively untouched United States was the only place left that had been working heavy equipment and working technology. It was US personnel and equipment that went around the world repairing the damage in Europe; building the oil fields of the Middle East; training every country in the world in how to fly commercial planes; building airports, power pants, and factories; designing most of the infrastructure of the modern world; and of course, training most of the professors and training experts who created today’s global universities.

Of course, after the rest of the world paid us to recreate our technology, training and “western thinking (as evidenced by all the MBS programs around the world today), other parts of the world are more independent in these areas. While the development of the most remote areas of the world, such as Mongolia’s vast coal fields, will probably still be outsourced to the US, our success in these areas is slowly making the need for our services unnecessary. However, that doesn’t mean that the US itself isn’t a great place to send outsourced work. Why? Because we are a less-expensive place to live in than a lot of other places in the world. When you look at the world's top cities , New York City will always be on the list. But when you rank them by cost, NYC is nowhere near the top. There are many sites that give tourists tips about the cost of visiting the world’s most expensive cities, but New York is usually # 8, or # 10 or even farther back on the list. And New York is just about the most expensive place in the US. When you look at a city like Minneapolis, the cost of living, there is 35% less than London.

There is enough of a difference in price to make the US very attractive to major corporations around the world. Add to that our education, and the high productivity of the American worker, and you have a very good reason to move very high end work here. That’s one of the reasons why all the world’s financial institutions have significant offices in New York, and are looking at other opportunities in knowledge outsourcing. Another reason why outsourcing to the US is gaining attention is that some of the most popular outsourcing sites in the world have become more expensive. These offshore sites still cost less than domestic locations, but with falling cost benefits executives in London or Milan may make a new decision and instead of sending work to India start to look at the US. At least some of these executives see a value in the greater similarity of culture, and in having individuals with experience in a knowledge service area, instead of creating a training program and hoping to build that expertise.

No tide runs in one direction forever. Outsourcing is like any other trend, and now there is even growing interest in India in setting up operations in the US. Maybe by the next election, whichever candidate can show the greatest expertise in outsourcing might be able to prove that he can be the best job creator!

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