Schadenfreude: Outsourcing Your Life

‘Schadenfreude’- This German loanword best describes the dilemma outsourcing presents itself with; 'pleasure taken from someone else's misfortune'. We live in a flat world where distance, measured physically, linguistically, and culturally, doesn't isolate our jobs from competition from far-away workers. In a post-industrial paradigm where sub-contracting all non-core activities is at the heart of what new economies do, the outsourcing of intermediate goods and business services is one of the most rapidly growing components in international trade.

However, outsourcing has moved on from being the purchase of inexpensive raw materials and standardized intermediate goods. Today concentrating growth in the company's core competencies, effectively utilizing internal intellectual leadership capabilities, maximizing market preeminence, lowering innovation infrastructural costs, optimizing corporate performance and enabling ‘guanxi’ is the strategic mission of the globalization and outsourcing agenda. (Grossman and Helpman, 2005; James Brian Quinn and Frederick G Hilmer, 1995)

Avant-garde corporatists with networked satellite or pod-like structured companies require nimble leadership that facilitate partnerships, collaboration, and sharing of time, personnel, resources, and credit with other units and organizations. Small business entrepreneurs want in on these cost-advantaged relationships that their corporate brethren have benefited from through outsourcing. The notion that - work gets done where it can be done most effectively and most efficiently is the guiding principle. Outsourcing has created a new economic reality where every person, just as every corporation, must tend to his or her own economic destiny as manifested within the global marketplace. (Arun Jacob, 2006; Edward E. Leamer, 2007)

In this era of outsourcing where every economic transaction is contested globally, intellectual work is readily commoditized and sold in global markets. New electronic technologies (e.g. personal computers, internet access, wireless information services) has greatly increased the productivity of those with natural intellectual talents but it has left the those with less talents with less to do and at a lower pay. Helpers are not required as individuals can source, create and produce their work independently. Educational and infrastructural investments are needed to keep the high-paying noncontestable creative jobs here at home and let the rest of the world knock themselves silly competing for the footloose mundane contestable jobs. Technology seems therefore to be taking us into a future where there are a few very talented, very well-paid people and the rest of us are doing the mundane computer-assisted tasks which don’t require us to read, write, or even think very much. (Edward E. Leamer, 2007)

Thomas L. Friedman in his book 'The World is Flat' speaks of a new global economic order which has come about from ten ‘‘flatteners’’ (three that connect individuals, six that facilitate collaboration, and a final one that enhances the first nine) and the "triple convergence" (Technological complementarities, Global business and communications networks, democratization of economic opportunity). Friedman surmises with the desirable characteristics for the workforce of the 21st century:

1. ‘‘specialization’’ (i.e., customizing products and services to specific demands),
2. ‘‘anchoring’’ (i.e., providing a geographically-dependent, inter-personal, or relational service) or,
3. ‘‘adaptability’’ (i.e., creating a market position as a low-cost or value-added provider relative to competitors).

Through the fragmentation of production into discrete activities which are then allocated across countries outsourcing and globalization poses a fundamental question about how companies respond to import competition and how their responses shape the domestic labour market. (Feenstra and Hanson, 1996). To successfully capture value from outsourcing, companies need to leverage their market knowledge, intellectual property, system integration and cost management skills. Most importantly a brand name whose value reflects its reputation for quality, innovation, and customer service will ensure maximum return on investment. (Linden et al., 2007)

"Following the customer" has shipped and packaged both the rust belt jobs (offshore manufacturing) and the high-tech jobs (outsourcing technology). Large and small companies alike are reducing engineering staff in higher-cost regions as they are no longer economically feasible. Unlike manufacturing jobs, which require significant investments in infrastructure, logistics, and facilities, white-collar service jobs require little more than a computer, software, and an uplink to the Internet. Without any differentiating skills, wages will migrate toward the global average. There’s bad, industrial-era outsourcing, where work is increasingly changing into a short-term contract culture, with long hours, adversely affecting employee loyalty, morale, motivation and perceived job security. Then there’s good, collaborative-era outsourcing., with the broad benefits of being able to connect into a rich, collaborative network of varied 'flat world' resources. Global companies create outsourcing value by transforming the innovations of others into products that consumers find useful and usable.(Byrant, 2006; Cooper, 1999)

Let us all remember what John Ruskin wrote in 1871: ``In order that people may be happy in their work, these three things are needed: they must be fit for it; they must not do too much of it; and they must have a sense of success in it''.

References

Robert C. Feenstra; Gordon H. Hanson, (1996) “Globalization, Outsourcing, and Wage Inequality” The American Economic Review, Vol. 86, No. 2, Papers and Proceedings of the Hundredth and Eighth Annual Meeting of the American Economic Association San Francisco, CA, January 5-7, 1996. (May, 1996), pp. 240-245.

James Brian Quinn, Frederick G Hilmer (1995) “Strategic Outsourcing”, The McKinsey Quarterly, 1995, Number 1

Arun Jacob, (2006) “Implementing an Effective Leadership Development Program for Community College Students”, Communiqué - Volume 7, Issue 1, ERIC #:ED492857

Grossman, Gene M. and Elhanan Helpman, (2005) “Outsourcing in a Global Economy”, Review of Economic Studies (2005) 72, 135–159

Leamer, Edward E. (2007) “A Flat World, a Level Playing Field, a Small World After All, or None of the Above? A Review of Thomas L. Friedman’s The World is Flat. ” Journal of Economic Literature 45 (March): 83-126.

Greg Linden, Kenneth L. Kraemer, Jason Dedrick, (2007) "Who Captures Value in a Global Innovation System? The case of Apple's iPod", Personal Computing Industry Center (PCIC), An Alfred P. Sloan Foundation Industry Center, The Paul Merage School of Business, University of California, Irvine

Cary L. Cooper, (1999) 'Can we live with the changing nature of work?', Journal of Managerial Psychology, Volume: 14 Issue: 7/8 Page: 569 - 572

Paul T. Bryant, P.E.,(2006) 'Decline of the Engineering Class: Effects of Global Outsourcing of Engineering Services', Leadership and Management in Engineering, Volume 6, Issue 2, pp. 59-71 (April 2006) doi:10.1061/(ASCE)1532-6748(2006)6:2(59)

Article

Ellen Gamerman (2007) "Outsourcing Your Life" Wall Street Journal, June 2 2007