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Susan Underhill's Blog on Human Capital Management

Outsourcing & Automation

Published 06 February 2006, 09:39 AM

“Outsourcing,” “offshoring,” and “globalization”: All are terms used to describe moving work to regions of the world where labor and operational costs are cheaper. I've talked to business leaders and IT professionals all over the world and I know this topic stirs great emotions. People in first world areas like North America and the European Union are fearful of losing their jobs. People in developing nations like India, China and Thailand are excited about the new opportunities within their own countries. There's no doubt that this global shifting of work impacts us all.

Recently I was talking to one of our HP employees in India. He was sensitive to the fact that Western jobs had been lost as the work moved to India. He gave a perspective on this "work shift" that I want to share with you:

The way we see it, workers in the western world have always been very innovative. As workers in India take on some of the data analysis and other services, it frees up our western counterparts to focus on advancing technology even further. At the same time, workers in India have a bigger role in the world economy. We all win if we work together.

I think he is incredibly insightful. Rather than taking an "us" versus "them" mentality, he articulated a scenario that is a win for all involved. I'm very gratified that the people of India and China are taking advantage of the opportunities to raise their quality of life. That’s good for all of us.

But this brings me to the point I want to make. Despite the increasing offshoring trend, many executives believe it is only a short term cost-cutting strategy. Eventually the cost of doing business in an offshore hub will increase to where the difference is no longer significant. In the competitive world labor market, the advantage will go to those countries with the highest productivity – those with the workers who can produce the most per dollar of cost. We have all heard the imperative, “Do more with less!”

Therefore, a more sustainable strategy for reducing costs is to increase productivity. The key is to take out elements of the work -- and this means automation. If we automate many of the repetitive tasks, we can permanently remove the cost of doing the work, rather than simply lowering the cost temporarily by shifting it from one country to another. This in turn frees up the professional worker to concentrate on areas with higher business value – in other words, more innovative work. This is the key concept behind technologies like the Adaptive Enterprise.

But it also means new skills. IT skills to apply new automation techniques and skills to drive the rate of innovation higher. That’s why I believe so strongly in training and certification. The HP Certified Professional Program is focused on driving the skill sets to increase IT automation and innovation which can help people reach higher levels of proficiency and productivity. It's good for the individuals. It's good for their employers. And it's good for this increasingly connected world of ours.

Posted By Susan Underhill | 5 Comments | Trackbacks | Permalink


Comments

Hi Susan, Really like your Blog entry on “Outsourcing and Automation” It sums up all we see and hear as we teach Partners and end users around EMEA. We are also sensing end users becoming more vocal about wanting/needing a local person to support them, on site, in local language The cost saving cycle of moving work around is getting even shorter and is getting close to balance out with the time needed to train in a new region. The partners that invest in their good people locally will maintain a competitive advantage. We will use your message in our communication to the Partners. Warm regards Tom Tom Burns Onsite Computer GmbH D-85399 Hallbergmoos www.onsite.de
# Wednesday, February 08, 2006 02:59 PM by 0049709287
Hi Susan, the problem I see with Outsourcing, is that there will be not many original representatives (players) anymore. The outsourced (players and Fans) all will wear your logo, but will turn away to another brand when you are not successful anymore. This might be a good automatic balancing between needed support & cost, but it will be allot more costly to win them back. Good training and a good personal relationship between HP and its Reseller/End User are a essential part for success, as well as well trained employees/partners with a face... Selling and buying from a certain $value is about personal relationships,preferences, active interaction and trust. We exsperience this in our daily work. George Schoening (Presales Support EMEA)
# Friday, February 24, 2006 08:20 AM by Schoeningsco
Tom and George, thanks for your comments. I couldn’t agree more with both of your points in respect to having knowledgeable professionals onsite to engage with the customer. Even in today’s connected world, it’s very difficult to present value without that personal relationship. I believe that if you are providing value for your customer, and if that value continues to scale as the market evolves, you won’t need to worry about the outsourcing trend. When a corporation is thinking about outsourcing there are at least two things that should be considered: 1. There is a cost associated with moving the work to a lower cost location. How long will the cost differential exist and will the investment outweigh the short-term advantage? As an alternative, is there better ROI by increasing productivity within the existing location via automation or skill development? In many cases, a combination of these approaches will provide optimal results. 2. The other item which I think receives much too little consideration is the institutional knowledge of the people who are performing the work today. This is best illustrated with an example: Within HP, much of our expertise lies within the groups who design and engineer our products and services. Our challenge is not only to get the product to market but to get the expertise (how to best leverage that solution) to the customer as well. We have several “channels” of knowledge and skill through our competency centers, to our field technical sales and services teams, to our partners and ultimately on to our customers. These communities are some of our best assets. Think about it; the most successful companies to work with are those where the expertise flows freely, quickly, and bi-directionally between the development teams and the customers. In fact, many customers highly value direct participation in that process. If outsourcing a call center, competency center, or other link in that chain significantly disrupts the flow, it may take a little while to recognize it but it can have a detrimental impact on the customer’s perception of value and on the corporation’s ability to innovate in the future. So the reduction in labor cost needs to be balanced against the ability to provide value – decisions need to be made with both the bottom line and top line in mind over the long term. The ideal situation is to have good account coverage with the high levels of skill that customers demand, and to have them ‘plugged-in’ to the sources of expertise in the back office. The whole idea behind the HP Certified Professional program is to connect the skills (expertise, institutional knowledge), the tools, and the HP resources directly to the person that does have the customer relationship.
# Monday, March 13, 2006 01:50 PM by Susan Underhill
Hi Susan, I am a programmer/analyst for a Fortune 500 company that is in the process of selecting a company for outsourcing, As someone who's job may be moved offshore (we are not getting details at this stage), I am concerned about having my skills become 'obsolete'. What advice do you have for those of us in this position. Thank, you, Lynn M
# Sunday, July 16, 2006 06:36 PM by clynnmaxwell

Thanks for writing, Lynn. First of all, let me say that I’m not a career advisor, so please take everything I say with a grain of salt. I wish I had the answers for everyone who faces changes in their careers, but unfortunately I don’t. With that disclaimer out of the way, my advice to you is to get closer to the business side of your company.

It’s true that many organizations have outsourced programming positions in order to cut expenses or to get out of non-core business processes. Programming is one of those jobs that – for good or bad – can be done regardless of location, and is thus ripe for outsourcing. Code can be written and assembled virtually anywhere in the world these days. On the plus side, there is a high need for talented programmers who keep their skills updated, no matter where you live.

Now, looking at the “analyst” side of your “programmer/analyst” position, this is probably where you hold more value for your company. I am assuming this means you know a good bit about the business side of your company’s operations – the processes that create value and generate revenue for your company. The more work you do in this area, the less susceptible you should be to having your job outsourced.

My recommendation – and this is totally my opinion – is that you should track your job closer to the business processes if possible. Spend more time getting to know the line of business owners and managers, and make sure they know who you are. IF there does come a time when applications development is outsourced, you could be in a good position to be your company’s liaison to the outsourcing firm because you know the business needs and rules, as well as how the applications should be developed.

As for your skills becoming obsolete, it’s up to you to prevent that. If your company doesn’t give you the opportunity to learn the new tools and techniques, try to spend some time to learn them on your own. If you need a project to practice on, try volunteering with a community non-profit organization that needs some applications developed. It will test your skills, give you some experience, and make you feel good all at the same time!

# Monday, July 31, 2006 03:18 PM by Susan Underhill

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