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My rant for this week.

Discussion in 'The Lounge - Off Topic' started by ffreeloader, Mar 4, 2006.

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  1. ffreeloader

    ffreeloader Terabyte Poster

    One of my biggest pet peeves about current management practices is their love affair with outsourcing. From the start outsourcing has always looked to me like a lose-lose proposition for both corporations and their customers. I've also wondered why those responsible for making these decisions couldn't see what seems so obvious to me.

    To me there is a fundamental business "law" that states you must keep your customers happy or you will go out of business. If you ignore that law enough it will lead to your company's demise.

    Well, it seems businesses are now finding, through current research, that outsourcing violates the the above fundamental business law of keeping their customer's happy. This article from CNN's Money.com says that businesses are finding out that a full 80% of the companies that use outsourcing are failing to meet their cost savings and thus the expected financial rewards. Why? The web page title says it all, "A Penny Saved, a Customer Spurned".

    It seems all these CEO's, CIO's, CFO's etc... really are out of touch reality. They seem to have been so insulated in their ivory towers that they fail of understading even basic human psychology.

    My question is: How did they reach their positions in business in the first place when they are this obviously short-sighted? Are there no, or very few anyway, business leaders left who actually consider the fundamental laws of human nature and business when making their business strategies?
    Certifications: MCSE, MCDBA, CCNA, A+
    WIP: LPIC 1
  2. Bluerinse
    Honorary Member

    Bluerinse Exabyte Poster

    How they reached their positions has always baffled me to. From my experience, once someone has attained a director level in any corporation, they become less and less connected with the day to day running of the organisation. Their decisions are based on bean counting rather than feedback from their subordinates. Many of these people are so far removed from the realities of their customers expectations that it is not funny.

    You have made the point before that outsourcing removes the entry level jobs from the job hunting market. I agree totally with this logic. It may be cheaper for a company to employ people in countries where the average wage is extremely low but I think we all know that there is a price to pay. The cost to the company is inefficient service and poor service will lead to lost customers.

    HP have lost me as a future customer for precisely this reason.
    Certifications: C&G Electronics - MCSA (W2K) MCSE (W2K)
  3. unemployedstudent

    unemployedstudent Byte Poster

    When I was doing some business classes at University 3 years ago, this same question came up; why do we now outsource?

    The reasons that were presented to me (in a lecture) at the time stem from a book by a couple of American authors called Peters & Thompson (I think that was their names) who wrote a business best seller book back in the early 1980's.

    Industries everywhere relied on inhouse skilled people, people who learnt their skills during an apprentice type period with a company. The authors argued that these people could be cut inhouse, making savings on staff and management overheads in general thus flattening out the pyramid that businesses then comprised of.

    Now (I think) it's taken 25 years, but that trend is now biting the bums of the companies that profited from that original trend. Because outsourcig is no longer as profitable per se, because the outsourcing companies are themselves having to outsource to remain afloat. This outsourcing has now had to go global to stay profitable, hence banking, acounting, law and call centres are cheaper in a third world countries like India, Pakistan or Africa.

    Manufacturing has also changed due to cost efficiencies, that's why everyone buys from the Chinese & Tiawanese.

    Of course th next stage is more worrying, a head office in some third world country, that dictates pay and conditions to workers in the UK or Europe. :ohmy
    Certifications: BAISA(hons) Degree, ECDL.
    WIP: A+, CompTIA N+, CCNA
  4. Sandy

    Sandy Ex-Member

    No idea how they got there.

    What has human nature got to do with business strategies? Business is about making money, nothing more nothing less. The profit line in the profit and loss account is the driver. So if they can save 3% on overheads by outsourcing then they will.
  5. ffreeloader

    ffreeloader Terabyte Poster

    Is that a serious question, Sandy, or are you joshing me?
    Certifications: MCSE, MCDBA, CCNA, A+
    WIP: LPIC 1

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