Sears CEO Alan Lacy: Outsourcing "Commodity Knowledge Work"

At a recent BearingPoint sponsored event, Sears CEO Alan Lacy spoke on outsourcing, in what may be the emerging conventional wisdom among US CEOS. As reported in ComputerWorld, Lacy said

"I think that we're still in the early days of this, and we had some outsourcing capabilities or functions that could be outsourced for quite a while," he said. "But I do think that we're early in the cusp of any celebration on this.

"I think that lots of companies are going to focus on cost structure, and I think, just particularly from an IT standpoint, every year we always have more IT projects than we can rationally afford to invest behind. And it's often the case that ... administrative functions fall to the bottom end of that prioritization scheme that you want to develop behind sales growth or margin expansion or customer data or what have you. And the administrative stuff kind of falls to the end.

"And I think that the fact that we now have potentially the ability to outsource to people who this is their business, they're going to have an incentive -- because it is their business to keep more state-of-the-art in terms of the quality of the financial systems, the HR systems and so on. I think that to some degree, just the nature of IT spending is that we have scarce resources in IT. Resources being scarce is going to lead to, I think, acceleration of outsourcing for some of the more administrative-like functions.

"But I think, beyond that, to me, a very interesting trend right now is the whole non-U.S. opportunity that's available, and ... if you think about personal intelligence and drive being randomly distributed by population -- you know, there are four or five times as many smart, driven people in China than there are in the U.S. And there's another four or five, three or four times as many people in India that are smarter or as smart or have more drive. And if technology is now going to basically reduce location as a barrier to competition, then essentially you've got something like whatever that was, seven or nine times, more smart, committed people that are now competing in this marketplace against certain activities.

"So, I think that the outsourcing potential -- particularly of some of the more commodity-like knowledge worker activities -- we're just beginning to see the first of that curve. I think that, just given the nature of technology and given the nature of those workforces, and given the fact that we've had a decrease in the supply, prices are going to fall.

"So we're going to see, I think, this huge incentive to shift some of these more commodity-like, knowledge worker jobs offshore." "

The question is:What is commodity knowledge work? We hold that most design-related activities are very difficult -- if not impossible -- to outsource, but even lower-level IT activities -- like programming -- turn out to be very hard to outsource in the absense of well-developed and articulated architecture.

Lacy's organization subsequently recanted much of what he said, and ven stated that Sears does not have outsourcing plans in the works. In the politically charged environment that currently surrounds IT outsourcing, however, it is hard to imagine getting the straight word from a US corporate board room, at least until the electiopns are over in November.

Comments

[Tina Nguyen]

No wonder in my mind why Sears is on the ropes. I've been trying to get them to fix my account for over 6 months. Maybe they need to outsource
some of their customer service people???? Not many here can handle it, that's for sure!!!!!!!
Tina

[David Woodcock]

I was going to start shopping at Sears versus Wal-Mart, however after reading this story I will find somewhere else to shop. Maybe I will become an importer of offshore products and sell them to the poor people of America.

[Kathy Dorsey]

I have been having a battle with Sears service. I will never shop at Sears again. I bought a Kenmore washing machine less than 2 years ago. Did not purchase extended warranty. Paid $1200.00 for Kenmore Elite (suppose to be top of line). If this is top of the line, I would hate to see the bottom. Service tech came to the house spent 5 minutes and told me that it would cost $1000.00 to fix my $1200.00 washer that is less than 2 years old. The service tech was very arrogant and the service manager was even worse . I was told when I placed the service call, that I could purchase a service contract for $189.99 and this would cover this call and anything that went wrong within a year. After the service tech looked at the washer, he said that I could get a $500.00 voucher to get another washer at Sears. Now let me ask you, if you bought a car that only lasted you 2 years, would you go to the same place to buy another one? I think not. I am very very dissapointed with Sears and I am driving around with signs in my car stating that Sears Kenmore washers are junk. I am letting everyone that I know not to purchase any Kenmore appliances. I will also put an ad in the local papers stating that Sears Kenmore washers are junk. I figure if you pay $1200.00 for a washing machine, you should get at least 6 years mininum out of it. I haven't had it for 2 years. Sears should pay me at least $800.00 pro rated credit. And Sears needs to evaluate their service dept, because they are rude people and dont care. I will never purchase a thing from Sears.

[Cheryl Leone]

I recently had a Sears wake-up call. After being a loyal Sears customer for some 40 years I ran into a failure to communicate between service, delivery, sales and installation. The only people who seemed to understand the problem were the front-liners who expressed great frustration. My willingness to spend my hard-earned dollars is now tied to customer service and satisfaction rather than price. When this fails, the product fails, and the company is no longer on my "must use" list. Calculating my cost per hour for my services, and the multiple failed visits from purchase to delivery to redelivery to reinstallation to service to redlivery again, the appliance I purchased cost me about $5000.00 in work hours. When is the American retailer going to wake up and realize the customer demographics have changed....we are interested in service and customer satisfaction...we want personal attention. We are not the huddled masses anymore!

[vindra james]

y experience with Sylvania TV is nurrve-wrecking, A sears reprepresentative told me that the sensor on the tv that works with the remote is probably may have not been working and that I have to pay $95. to have a tech come out to tell me what the problem was. I explained that there was not a problem with the picture tube, but the tv does not respond to the remote even though the batteries have been changed and i had at one time ordered a new remote from sears... Did you know that if the serial number on a sylvania Tv starts with SR, sylavnia will not fix that Tv,, SEARS does not tell you this at the time of purchase.

[Misty Arnold]

Back in May of 2006 I won a front loader washer and dryer. My washer worked for 2 weeks and I didn't have it fixed for 2 months because they said it had to be repaired until there was nothing left to be repaired. They came to my house 3 different times to replace the only 3 parts that could be replaced including the motor. Then in November the same thing started happening and I called and a representative told me that I was eligible for a replacement because they had been out to my house 3 times. All I had to do is call them with my sales check number and the model of the washer. She also informed me at that time that my model would probably no longer be available so I would get the sister model. When I called sears with all of the info they proceeded to tell me that I would have to pay $53.00 to have my washer replaced because it is an upgrade. I then told them they have a no lemon guarantee and they are suppose to replace no matter what model they have to give me since my model no longer exits. To make a very long story short one of the representatives I talked to told me that I was going to have to pay the $53 then fax the receipt to them and they would credit me the money. Now I call back today and they say that someone gave me the wrong info and they are not reimbursing me any money. This is a load of crap. I am writing the better business bureau and no one I know will go back to sears because of the problems I have had. I work with over 800 people and everyone knows.