Magazine article Business Credit

Outsourcing Has No Easy Answers

Magazine article Business Credit

Outsourcing Has No Easy Answers

Article excerpt

In a world of global competition, not only is outsourcing inevitable, but it requires very complex solutions. There is 110 silver-bullet solution. However, competitiveness is the key weapon against social inequality and unemployment associated with outsourcing. In the words of Carl Guardino, executive director of the Silicon Valley Manufacturing Group, "We have to make sure that we have a climate where we can compete and where we will win." Guardino was the keynote speaker at a conference organized by the World Affairs Council and co-sponsored by the Stanford University Business School's Sloan Master's Program.

The first step in any discussion about outsourcing is to "replace dogma with data" and understand that this phenomenon is part of a bigger trend related to global markets and competition. "It is no wonder then that we place facilities and people around the globe as we deal with the logistics, supply chains, material resources, local customs, and local talent pools to serve those markets and to stay competitive," said Guardino.

"We need to have the best education system in the world," he continued. Supporting schools and universities is essential for the future, he said, but also in the short-term, because good and accessible education attracts and maintains today's workforce.

"If the research and the innovation happen here, then the seeds of that innovation are going to be planted here, and at least some of those jobs are going to grow and blossom and stay here," Guardino said. While a significant number of American workers have seen their jobs outsourced, others have benefited from the inverse process--in-sourcing. "In California alone," he added, "nearly three quarters of a million workers work for foreign companies with subsidiaries or facilities here in the U.S. That is a huge benefit to our economy."

"The United States gains as much as we lose from outsourcing(' agreed Business School professor Paul Oyer. "We are gaining jobs where proximity to U.S. innovation is important; we're losing jobs where that proximity is not important." He also agreed with Guardino that improving education and infrastructure requires government investment.

Ontsourcing "is not any different from all other trade issues," said Oyer. A key issue for him is to help people through this transition because outsourcing intensifies social differences. "The hourglass will become more pronounced," he said, producing the greatest growth in the higher and lower social strata. In the long term, however, he thinks that the aggregate social distribution "is moving in the right direction. …

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