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.
Recent Comments