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Outsourcing makes a strange election year debut

October 13, 2014

Somehow, somewhere deep in the damp, dark recesses of a smoky campaign war room, a political strategist figured that outsourcing would be a good issue for a worried midterm-election candidate to campaign on. 

As a result, it’s happening: Suddenly, campaigns are aggressively revisiting the outsourcing of U.S. jobs. While the issue never truly went away, it’s recent heavy use in campaign ads—such as this one where Sen. Mark Warner (D-VA) actually makes a distinction between outsourcing and insourcing—shows its return as a potent topic of contention in the election cycle. When candidates are willing to spend scarce ad money to highlight outsourcing, that means the issue is turning up as a major candidate talking point in key battleground states.

It’s no secret caustic midterm elections are right around the corner. But what is astonishing is the revival of an issue that did not see as much light in electoral politics since before the recession. It was plucked on during the 2012 battle between President Obama and Mitt Romney, but it wasn’t as fierce a controversy in 2010 midterm races or 2012 Congressional bouts. The re-emergence of outsourcing as a Congressional candidate’s issue du jour more than likely has everything to do with that—the economic boom times before recession helped most American voters grapple with the reality of an interconnected, globalized marketplace.

Years of high unemployment and economic uncertainty, however, have reverted attention back on outsourcing.  Hotly contested U.S. Senate campaigns in key states such as Georgia, Virginia and West Virginia are already bringing the issue up. In Georgia Democratic Senate nominee Michelle Nunn pounces on Republican nominee David Perdue about his outsourcing days as if they were a scandal in the making. In Virginia and West Virginia, candidates are sparring over who supported outsourcing or “offshoring” the most, with West Virginia Secretary of State and Democratic Senate nominee Natalie Tennant announcing opposition to it as a centerpiece of her jobs growth agenda.

It’s worth noting that the outsourcing debates appear hotter in primarily Southern states than it does in Western or Northeastern states that house large multinational corporations that rely heavily on outsourcing. Southeastern and Southwestern states also rank as the most small business-friendly, which means candidates sensitive to the outsourcing issue are more than likely experiencing pressure from locals who rely on small business hiring.

Interestingly enough, Purdue responded unapologetically to Nunn’s attack on the question: “I spent most of my career doing that." But Purdue, describing the work he did for corporation Sara Lee in Singapore and Hong Kong as sourcing, outlined “the significant advantages in costs of goods there compared to what Sara Lee was doing domestically.” Purdue’s response, in some respect, offers thoughts on how society’s acceptance of outsourcing as an economic reality has evolved, even if everyone doesn’t like it.

What’s interesting about this latest tale in election cycles is how much distance there is between the electorate’s rather negative perceptions about outsourcing and an increasingly digital business environment’s need for it.  As Gartner’s Ian Marriott explains it, “globalization is the new normal.”

“Whether or not your company is multinational, no company or country exists in isolation,” Marriott writes. “Outsourcing as we know it has changed, and the growth of globalization will play a major role in supply/demand and competitive dynamics of companies—regardless of location, industry or size. Certainly, people will always be crucial to the success of an organization, but a labor-intensive approach to service delivery is no longer sustainable.”

The problem is that based on the current political climate, you would never think that outsourcing is an economic ‘normal.’ Clashes between candidates give the impression that it’s still an unresolved debate, and even as everyone—from voting citizens to corporations—are all involved in outsourcing on some level due to the sophisticated and digitized business environment shaping commerce.

Outsourcing is quite commonplace in the technology sector, with 63 percent of technology firms outsourcing in 2013, according to a BDO survey. A February Univerisity of California at Berkeley and Massachusetts Institute of Technology (MIT) study found “that a near majority of employers in the United States outsource work to contractors and suppliers within the country, and about a quarter of U.S. companies offshore work to other countries.”

The issue of outsourcing is not black and white as the campaign talking points paint it. “The portrait that emerges is of two economies – an entirely domestic one made up of small firms and public organizations, and another one consisting of large firms with much deeper global engagement,” said MIT’s Tim Sturgeon.

Still, these shifts in public attitude alongside disruptions in the electoral space could present challenges for end-user firms in the future as they decide on their sourcing strategies. It could also become problematic for vendors as they try to optimize the offerings they bring to market. Business organizations and service providers should keep a close eye on those developments, particularly as they continue to engage a myriad of sourcing strategies and delivery models.

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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