The Politics of IT Outsourcing

Fifteen years ago the idea of outsourcing would not have raised a single eyebrow in the world of business.  Dedicated employees worked hard for their company and the company sought to satisfy the quality employee’s needs.  A bond of trust, security, and mutual satisfaction existed between the company and the employee. Outsourcing was certainly established, but there were no major human resource, customer relation, or public image issues.  In contrast, the political problems surrounding today’s outsourcing industry are ripe with angst.  What has changed over the past fifteen years?  The technological revolution spread across the globe creating an incredible amount of new industries and jobs.  These jobs started off as highly sought-after, well paying specialties.  The commodity positions throughout Information Technology that we see today are the prime candidates for outsourcing and the underlying problem driving the political issues surrounding outsourcing that exists in Corporate America.  Additionally, executives making outsourcing decisions often see IT as a black box that they don’t fully understand.  If they don’t understand how it works or what its strategy is, it may be looked at as a commodity that someone else can perform cheaper.  However, when a company makes a decision to outsource part of its labor it is facing risks well beyond the obvious.   The employer should be looking at the potential risks related to the performance of the contracted work or the potential lack of cost savings along with the somewhat hidden risks.  How will the current employees react?  What about shareholders?  Has the possibility of a customer reaction even been considered?  We live in an unusual world today where doing the right thing means more than just doing what is right, but also doing what is socially acceptable.  The political issues surrounding the outsourcing decision can be greater than a company may initially be prepared for.

Existing employees are a prime example – they will feel that their job is not as secure as it was on the day before they learned about an outsourcing initiative.  It is the regular employee that has to train and manage the work of the contracted labor.  The regular employee is usually left with a more complex job or more accountability due to the once-removed contracted worker taking on the less risky workload.  This may be acceptable to some workers, but not for all. A promotion or raise associated with additional work is not necessarily part of the bargain, either.  Whether the contracted work is done in house or off-site, the regular employees will know it is happening and the same political problems can arise.  Dissatisfaction on the part of “real” company employees can lead to larger problems such as higher turnover and lower morale.

There is a much different and more serious set of political consequences when dealing with outsourcing work to overseas companies.  Globalization and competition is forcing companies to move chunks of labor to countries such as India and Russia in order to save costs and continue to compete.  This has a major impact on the comfort level of the peer employees left on the job as commodity tasks ship overseas to be performed by cheaper labor. With international outsourcing, the Information Technology Industry plays an even bigger role.  Couple the commoditization of key Industry jobs with the ability to send work product instantaneously over communication networks and you have an ideal situation for outsourcing.  Add to that American companies jumping on board to save cost by shipping jobs overseas and you have a hornet’s nest of political arguments.  Opponents argue that international outsourcing is hurting the American worker by moving jobs out of the country.  They argue this causes lower wages for low skilled workers and quality suffers.  Proponents will argue that America must remain competitive and in order for it to do so, its companies must compete on a global scale.  From this perspective, in the macro view, outsourcing is helping America by increasing its competitiveness in the global economy and in the end creating more jobs through growth. 

The decision to outsource takes on a much larger role in today’s environment of globalization and other political hot buttons.  A company must see the entire picture before making outsourcing decisions, particularly if overseas commitments are on the table.

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