Monday, March 15, 2004

Off-shoring, yet again

Knowledge@Wharton has an article on off-shoring that presents some interesting points of view:

"There is operational risk the likelihood that a process will break down when you move it abroad. There is strategic risk when you transfer a process to a third party, it can behave in ways that are opportunistic. It might cut costs at your expense, for example. And then there is what I call composite risk if you outsource too many jobs, you erode the capabilities within your firm. For these reasons, Aron has found that companies typically will limit their outsourcing to about 8% to 10% of their total positions."

"Maybe what we are seeing is fundamental transformation, but so what? asks Paul Tiffany, a business historian and Wharton adjunct professor. In the late 19th century, we saw the same kind of change when the U.S. textile industry migrated from the Northeast to the South. Southern workers got lower wages and were non-union and that was perceived as more conducive to business."

I noted the same thing as Paul Tiffany back in January -- the offshoring process in inevitable. Andrew Grove might call this an overwhelmingly big inflection point for businesses in general.

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