Remember the vintage 1960s slogan, “If you’re not part of the solution, you’re part of the problem?” Like all things retro suddenly hip, it’s an apt phrase for our times, particularly in regard to the obsession with global outsourcing and its negative implications for U.S. workers.

For most companies, international outsourcing is not part of the solution. In fact, it’s frequently a symptom of problems inside companies, and it creates even bigger problems for U.S. workers.

I’m referring to companies that are among the legions jumping on the international outsourcing bandwagon — beginning in the 1990s and continuing today — for all the wrong reasons: management fads, personal careers, desperate efforts to turn around dramatically dropping stock valuations. Whatever the reason, their outsourcing initiatives fail or are doomed to failure because they lack a sound underlying business rationale.

At its core, outsourcing is a good idea. It’s been going on since the Industrial Revolution and has helped many companies achieve profitability through increased efficiency. The controversy began, however, when U.S. companies started looking abroad (offshore) to reduce their labor costs.

The advent of the Internet and “e”-everything made globalization a reality. CEOs and “chief information officers” were eager to be part of the new world economy. It seemed reasonable that their companies, flush with boom-time profits, should compete for emerging markets. In this environment, many businesses became like lemmings, one following the other offshore.

Not surprisingly, the lack of rigorous upfront analysis resulted in a loud and painful “thud” when these metaphorical lemmings hit bottom. This was particularly evident when the stock market began its slide shortly after we celebrated the millennium.

This downward trend intensified competitive pressures. CEOs eagerly turned to international solutions - and less-expensive offshore labor — in their pursuit of better, faster and cheaper ways of doing business.

Flawed logic

Fast-forward to today. Many of the companies that were struggling to survive have faded from sight. Others are coming back, stronger for the struggle but still trying to regain their footing. Yet sadly, many still fail to make the connection between international outsourcing, management failures and their persistent remaining IT problems.

In a nutshell, international outsourcing is a flawed solution in three common business scenarios: when problems are not well defined or expectations are not articulated; when the “cheaper” solution has a negative impact on the “better” or “faster” components of a company’s value proposition; or when executives forget past business lessons. I’d like to explore the third scenario in depth, but let’s review scenarios one and two first.

Undefined problems lead to a frantic problem-solving approach that can, at best, be considered grasping at straws. CEOs who wish to look decisive without digging deep for root problems and tackling core management problems often look to offshoring as a silver bullet: A solution for all their problems, even the ones they don’t understand. Not surprisingly, what looks too good to be true usually turns out to be just that.

The second scenario — “going on the cheap” — also has led to problems. The best example is the often-offshored call-center function. Offshoring customer support might be cheaper, but it can be tremendously frustrating for customers. Challenges around language and culture frequently are compounded by a lack of understanding of the American buying experience. Since an expectation about good customer service was never established, no one measures the frequently negative impact this “cost-saving” measure is having on the relationship with the customer and eventually the bottom line.

Look homeward, CEO

Which brings us to scenario No. 3: lessons from the past. CEOs have successfully outsourced business functions for years. Unlike today’s CEOs, however, they began by looking for their solutions closer to their customers once they had defined the problem and articulated expectations about results. They learned that the best way to solve a problem was to go straight to the source of the problem. More often than not, those individuals will rise to the occasion and devise and implement an efficient and cost-effective solution.

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