What You May Not Know About Outsourcing

Here’s the question for the day. If you managed a business and needed to hire people you could depend on to help make you successful, would you prefer someone with a poor education who demanded a high salary, or would you prefer someone with a better education who would work for a lower wage? A question similar to this was posed to me (as part of a group discussion) by John Sculley, past CEO of PepsiCo and Apple Computer.

We were sailing on the same ship together with a final destination of Bombay, India. From Bombay, my wife and I were flying back to the U.S., and Sculley was going on to Bangalore to have a firsthand look at the outsource-phone-center capital of the world. He explained that there were five reasons why American companies should outsource to India, and low wages was down at the bottom on that list. Here’s Sculley’s five reasons to outsource.

1. A better educated pool of people from which to hire. This is especially true for engineering and technical jobs since five of the six best scientific schools on earth are in India.

2. Eliminates office politics. There seems to be something in the culture of India, probably related to Hinduism, that inhibits people from the backstabbing ploys like credit stealing and rumor mongering which you see so often in the American workplace.

3. Outsourcing breaks the tyranny of the Human Resource department. (I loved this reason in particular. You’d need to have firsthand experience in an American corporation to fully appreciate this).

4. Prevents union and other organized labor problems.

5. Low wages. Scully said that this advantage is only temporary. With American wages declining and Indian wages rising rapidly, wage parity will be achieved, probably within ten years.

John Sculley was of the opinion that outsourcing to India is so beneficial to the productivity of an American company that any CEO would be remiss for not, at least, considering this option. And in his book, “The Earth is Flat,” writer and thinker, Thomas Friedman, claimed that the Intel Corporation has positioned itself to thrive for another 50 years without hiring any American workers. That’s not to say that Intel won’t hire Americans if they have the education and work ethic, but Intel is not willing to tie itself down to an all-American workforce. I know that other major corporations have a similar mind-set, even though they want to stay under the radar for PR reasons.

American patriots want you to believe that all of this is driven by the rise of China and India as economic powers. What nobody talks about is the fact that— for the first time in modern world history— the next generation of Americans will NOT be better educated than the generation previous to them. Within the developed world, the unbroken record of each generation improving on what they inherited— that record has now been broken in the United States of America. Corporation heads are not stupid. They know this and acknowledge it even if the politicians avoid it.

It’s another election year. Here’s a tip for evaluating candidates. If a politician tells us that they will keep American jobs from going overseas, he or she is delusional. And if a politician says that they will bring outsourced jobs back from overseas, they are telling you an outright lie.