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How did we arrive at the current outsourcing debate?

October 30, 2014

In an earlier blog, we talked about the re-emergence of “outsourcing” as one of the latest hot topics in the 2014 midterm election cycle. But how did it get to this point?

The issue as a magnet for political campaign consultants is, arguably, not that old as a talking point. Politicos would argue that it started with the political wars over passage of the North American Free Trade Agreement, or NAFTA, in the late 1980s. North Carolina State University Supply Chain Management professor Robert Handfield notes, “Outsourcing was not formally identified as a business strategy until 1989. In the 1990s, as organizations began to focus more on cost-saving measures, they started to outsource those functions necessary to run a company but not related specifically to the core business.”

Essentially, this isn’t a new issue. But the NAFTA debates, upon which then-President Bill Clinton staked enormous political capital and ran afoul of labor interests, were the moment when the term crystallized into a caustic national conversation. It evolved from a sourcing strategy known only to executives to suddenly becoming a part of the lawmaker and voter discourse (and blamed as the scourge of American job growth).

By Clinton’s re-election bid in 1996, NAFTA was viewed as more than just a trade treaty. It was also partly to blame for Democrats losing their 40-year congressional majority in 1994 as Republicans ushered in their ”Contract With America” movement built on middle-class angst. Outsourcing soon became a lightning rod for worker anxiety as well as a straw man for everything wrong with the employment market.

Interestingly enough, while campaign flacks use outsourcing as a way to undermine opponents, polling on the topic is a bit old. Still, if a poll were taken today pitting insourcing against outsourcing, insourcing would probably win. A 2012 Gallup poll showed 82 percent of Americans reject outsourcing to China. And, in a rare moment of partisan comity, Democrats and Republicans appeared pretty much on the same page about it.

Does that mean Americans understand insourcing? Probably not—but the whole notion of keeping jobs insourced domestically holds obvious appeal to a large portion of the public.

Outsourcing is a different story. In 2012 pundits were pointing to a frequently cited Alliance for American Manufacturing poll showing 83 percent of Americans opposing to outsourcing.  Outsourcing also found its way into a Gallup poll as well, with “less outsourcing of jobs” ranked 3rd on a list of 23 ideas to improve the economy. An older 2010 NBC / Wall Street Journal poll showed 86 percent of Americans felt outsourcing was damaging the economy.

What’s fascinating is that despite the use of outsourcing as a common modern organizational strategy, the public is still unclear about what it means. There is an enormous amount of distance between continued public misgivings about outsourcing and steady business acceptance of it as the organizational norm, especially in the technology sector. Former Forrester analyst Stephanie Moore addressed this gap in a 2012 examination of domestic outsourcing. “The movement to domestic outsourcing models continues to accelerate for a number of reasons,” writes Moore. “First, clients, who today depend on software to differentiate and grow their businesses, require contextually sophisticated developers who can communicate synchronously, interpret their fuzzy and constantly changing requirements, and build software solutions to meet those requirements.”

She then adds, “[P]oliticians and concerned citizens alike are shining a spotlight on the unemployment dilemma in the US, causing companies to think about creating jobs for college graduates in the US before creating jobs for similarly skilled foreign workers.”

And as we suggested in the previous blog about outsourcing, feelings against the topic are vay considerably according to geography. States like Virginia and Georgia (where the term has showed up prominently in heated Senate races) are still experiencing unemployment rates higher than the national average, with Virginia losing jobs in the wake of state budget cuts and the impact of federal sequestration on federal workers and contractors. But you’re probably not going to see this topic as a central argument in states like California, Washington or even New York since they house enormous technology innovation hubs where businesses enthusiastically embrace strategic outsourcing for growth. 

That’s both intriguing and a bit disconcerting for business leaders faced with strategic sourcing decisions. They may find themselves suddenly impacted by the noise of national debates, such as the immigration reform issue. It was just last year that companion bills in the House and Senate were introduced called the U.S. Call Center and Consumer Protection Act of 2013, which proposed banning federal grants and loans to corporations that rely on foreign call centers. That doesn’t mean leaders should put their business models and growth on the line for that debate. 

Charles Ellison is a senior analyst relations strategist for TEKsystems. He keeps close tabs on changes and public policy shaping the innovation space. He is also a former congressional staffer, senior aide to state and local elected officials and an expert advocacy strategist. You can reach him with questions and comments @twoARguys via Twitter.

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