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Has Outsourcing Gone Too Far?


How many queues must we sit through before we finally get a human voice on the phone...?


Many years ago, when our economy began its slow and humble transformation from a manufacturing economy to a service economy, we started by 'outsourcing' much of our work. Instead of the familiar 'made in America' sticker, they were replaced ultimately with 'made in China,' 'made in Japan,' or some other far off land. And this was before foreigners owned the majority of our Government bonds and notes, untold equities and corporate, and Agency securities (they bought north of $60 billion alone last month). .

'Outsourcing'-as defined by American Heritage Dictionary, is the procuring of services and parts, such as those used in manufacturing motor vehicles, in an attempt to cut costs.

The original idea of outsourcing made sense as foreigners were able manufacture and supply goods and services necessary for Americans to complete the construction of our motor vehicles in particular. Later, you could see outsourcing in light bulbs, Barbie Dolls, Ping Drivers and just about anything else we consume (or what goes into it).

In effect, we have transformed ourselves into a debt-ridden society that can't supply the parts necessary to effectively put together a competitive automobile. Our automotive companies and their distributors are one-by-one falling by the wayside and are either bankrupt or effectively bankrupt (if you made General Motors (GM) and Ford (F) 'pay up' they would be too). Why is this important? Is this really what we set out to do when we began outsourcing our work? It is, sadly, a result of 'legacy' health care costs in the automotive industry, and what could be (I hope not) in other sectors in years to come.

But what is my real point here? Now that have we handed over the reins of manufacturing to other countries, we have also handed over the service oriented parts of our world to 'nontraditional' service centers, both here and abroad. So if we don't manufacture, and we outsource some service, like call centers, what exactly do we do?

Let me give you a few instances that I have encountered lately, and the frustration that goes along with them. We subscribe to Bloomberg, as we have since 1988 or so, and they now have 24 hour call service, or worldwide service centers. Well, by the time I get home and have a technical issue after work, the folks in New York (their headquarters) have left for the day. So I end up trying to solve a problem with someone in an Asian land (no slight, just time zones here) and all we get are two frustrated professionals accomplishing absolutely nothing. So, while Bloomberg truly had good thoughts in mind, I believe that in practice, the project is for the most part a waste of time. The frustration levels build and I am not sure what anyone gets out of it, except more profits at Bloomberg LP.

Have you called to try to make a plane reservation lately? How many queues must we sit through before we finally get a human voice on the phone, only to get disconnected, or find ourselves in the wrong area needing to get transferred elsewhere? And this is in an industry that is, was, or will be entirely bankrupt at one point or another. I could repeat this exercise, ad nauseum, going from industry to industry.

Why do companies REALLY do this? Is it for that 'little extra' customer service that we are all seeking? I should think not. I have always liked to talk to a polite, intelligent customer service rep. It is a better use of everyone's time, in my opinion. If a firm my size left an important client on HOLD for that long, I would be out of business, and fast. My clients, in addition to good performance, expect excellent and prompt service. My suspicion, and it does not take an MBA from Harvard to know this, is that this is one of the last ways to cut corners in industry in our country. It helps to cover up obscene levels of compensation 'at the top' (which is at an all-time high relative to the average worker), and to cover up the obscene issuance of stock options that are eventually covered up by stock buybacks.

So there are two real problems at work here as I see it. First, we have become uncompetitive as a nation (just look at what the world thinks of our currency) and that we need, like a drug addict, others to finance our debt. No, I am not blind to see our assets are going up; like real estate and stocks, though this too is financed by foreigners. THEY HAVE TO. Secondly, the level of service in this country, via telephone, has become so pitiful that properly placed Internet based companies will rule the consumer part of the world. I can purchase a book, a plane ticket, pay my phone bill and buy a box of cigars (well, I was told to quit, so let's replace that with a dozen golf balls) faster than I can get a human being on the phone from a major corporation to buy one of their products.

What did Mr. Buffet say when he first learned of the Internet? "What is that gigantic sucking sound?" Eventually, it could mean the potential survival of many companies. It could also be the eventual sound of deflation. I just don't think that when the concept of outsourcing started here, it was meant to turn into the three headed monster it has become. I am acutely aware this is a highly volatile and debatable area, but I think, eventually, corporate behavior in this country has to change for us to thrive as we are used to thriving.

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