A look at the impact of outsourcing — Part 1

Outsourcing is a subject that often creates strong emotions and, perhaps, justifiably so. For many people, the word conjures mental images of U.S. companies closing their doors, and lost jobs as company operations have been moved overseas. But outsourcing can also be a positive concept that aids American companies and workers.

World events and technology have combined to change business forever by dramatically increasing international competition. Many administrative, marketing, financial and technical tasks can now be performed easily by people in other parts of the country and around the world. Like it or not, we all have to adjust if we want to remain competitive.

Several years ago, we read the book 4-Hour Workweek, by Timothy Ferriss. The author described his campaign to outsource his life and do as little as possible himself. We were intrigued and wanted to learn how this trend could affect our clients’ businesses and our own, so we launched our “Thousand Dollar Experiment.” We budgeted that amount and made a list of projects in our office that we hadn’t found time to do or were on our “someday” list.

Using a website called Elance.com, we put our projects out for bid. Our goal was to learn what was possible and how much could be accomplished within our budget. Our projects included research, graphic design, Excel spreadsheets, transcription, and other administrative tasks. We deliberately chose the lowest bids, no matter who or where, to gauge the product quality. Here’s what we learned:

First, you don’t have to outsource overseas and can tap into an abundance of talent in the U.S. Scores of competent and experienced retirees, stay-at-home moms, and laid-off professionals would love to take some work off your hands. Using websites like Elance.com for projects, you can receive competitive bids, see their locations and qualifications, and sometimes view work samples. The upside is the work stays in the U.S. but the downside is that companies in some industries are now competing with the entire country.

We learned you can save a lot of money. Because outsourcers bid competitively, their rates are often unbelievably low. Our favorite example is a research project we assigned to a professional researcher in Maryland. She charged one hundred fifty dollars, spent fifteen hours working on it, and returned a well written report with over five hundred pages of supporting documentation. You do the math.

We learned overseas workers do good work too. We hired a graphic designer in Eastern Europe for one of our projects and liked his work so much that we used him to do other designs for us after our experiment was finished. Communication was a bit challenging at times because it was hard describe in writing exactly what we wanted, but we solved that by recording our instructions and emailing them to him along with written directions.

We realized certain industries might need to reinvent themselves. If you’re a web designer, for example, it’s important to understand what’s happening with outsourcing so that you can remain competitive. You may not be able to compete on an hourly basis with someone overseas so you have to be able to add additional value to your work — hopefully, something that’s not easily outsourced.

Reinvention may also be necessary if your competitors are outsourcing. A Singaporean statesman named Lee Kuan Yew said, “If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business.” Let’s say you own a marketing firm and all work is done in-house. If your competitor cuts costs significantly by outsourcing, you may be in trouble unless you find other ways to stay competitive.

We also learned price doesn’t necessarily equate to quality. When Laddie taught an outsourcing program last year, a woman remarked, “Well, you get what you pay for.” But is that really true? Laddie earned his MBA from Northwestern University. Someone from another country also earns his MBA from Northwestern and then returns home. The cost of living in his country is very low so he’s able to charge a pittance by U.S. standards. Is he any less qualified?

Lastly, we learned that outsourcing is here to stay. We can use it in our companies to save money and get more done. Or, if we choose not to outsource, we can use our knowledge of it to create strategies for remaining competitive. At the very least, we need to understand how it could impact our businesses — because it eventually will.

Laddie and Judy Blaskowski are partners in several businesses, including BusinessTruths Consulting. They are authors of The Step Dynamic: A Powerful Strategy for Successfully Growing Your Business. Judy@BusinessTruths.com.