Is outsourcing unwinding?

Thanks to the Deputy Headmistress for pointing out this article that says the trend towards outsourcing everyday chores is now beginning to reverse. Most interesting to me was the fact that the writer, who I suppose represents conventional urban wisdom, is alarmed by this.

All of these consumers could praise themselves for their newfound frugality in the midst of an economic downturn. But every step they take toward self-reliance — each shrub they prune themselves, each cupcake they bake from scratch — hurts the people and small businesses that have long provided these services professionally.

These small, service-oriented businesses are run in storefronts on urban streets and in suburban strip malls, or sometimes just out of pickup trucks. Responsible for roughly 18 million jobs nationwide, according to 2006 Census Bureau data, these companies have long been seen as engines of America’s economic growth. Yet after years of explosive expansion, many beauty salons, dry cleaners, landscapers, dog walkers, nanny services and restaurants experienced slower sales growth or even decline in the final months of 2008.

Their services are suddenly, and painfully, being perceived as nonessential.

The question now for these businesses is whether demand will stabilize or, eventually, drop enough to force them to close. And the answer may depend on whether consumers’ new penchant for self-service is temporary or permanent.

Unless the writer is using a very different definition of long than the one I know, the phrases I emphasized above are just plain wrong. You don’t have to be very old—certainly forty, maybe younger—to remember a time when almost nobody paid someone else to change their oil or mow their lawn or bake their cupcakes or walk their dogs.

And it is ridiculous to call such service “companies” the engines of America’s economic growth; instead, they were basically there to catch the money that was spilling out of overstuffed pockets. It’s more accurate to say that the growth in the service economy helped mask the fact that for the past thirty years in America there has been increasingly less useful work for a growing population to do.

I don’t know if the trend towards thriftiness and self-sufficiency will turn out to be one more short-lived fad, but it has been developing far more quickly than I would have predicted. I thought we’d have to be much further down the road before I’d hear sentiments like this one:

Indeed, after decades of spendthrift subcontracting, many consumers now say they view such specialist services as indulgences rather than necessities.“A lot of the way we’d been living was all an illusion, a fantasy,” said Ms. Spada, who has also been cooking more and bathing the family dog instead of going to the groomer. “We’ve been asking ourselves: Can we replicate some of those specialized services, which normally we would outsource, ourselves?”

Or reports like this:

Faisal Akram, the owner of service stations in Irvington, Tarrytown and Cortlandt Manor, all in New York, said that for the first time in recent memory customers were bringing in waste oil from home.

Or questions like this:

“After doing it yourself, it’s like, ‘Why was I ever spending $200 to pay someone else to do it for me?’ ” said Ms. Zaidenweber, who recently dyed her hair for the first time from an $8 home coloring kit. “It was kind of fun, even if it didn’t turn out exactly as I expected, and even it took a couple tries to get it done right.”

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7 thoughts on “Is outsourcing unwinding?

  1. It is important to distinguish between outsourcing of service by consumers, like this article is referencing, from outsourcing of other work as practiced by corporations. While the former will decrease in times of economic difficulties, I expect the latter to increase. Corporations are looking any way possible to eliminate overhead (ie employees).

  2. Jeff,

    Possibly. But I can think of three other possibilities.

    • Companies could take an even cheaper route by dropping certain functions altogether, e.g. customer service.
    • Companies may simply heap the plates of their remaining employees ever higher.
    • In-house employees could agree to work so cheaply that outsourcing would be the more expensive option.
  3. I work for a large IT services company with onshore, nearshore and offshore. One thing I see with offshore is that we can ramp up quick if we need bodies and scale back quick also. I have no idea what that looks like to the folks working on the other side of the ocean. The experience is always unpredictable, the names on the emails seem to change all the time, and that is about my only relationship with them.

    I have gone from going into the office 3 or 4 days a week to only 1. I love it and I would honestly take half as much in order to stay home, but I would want to be in a home with some land and lower taxes. If I get laid off anytime soon we will do our best to secure property/home and I will work figuring out how to live on a lot less, which may mean competing with offshore resources. One advantage I would have is that I would be willing to work as needed, so a few hours here and there, where as an offshore resource requires larger commitments of consistent billing even if you are using a leveraged resource.

  4. Not much else to say on the matter in regards to the original post. I agree completely that those are not things that engine of the American economy and anyone who thinks that must sure be really young.

    In regards to corporate outsourcing, I think that a few companies are doing that. However, my limited world view is seeing a lot of companies just contracting into a smaller more streamlined unit. Doing more with less and for the most part it is all being done internally. The expense of going outside in some cases is apparently even to high in this economy, or at least too risky.

  5. When I am thinking of corporate outsourcing, I am not thinking of a customer service representative in India where the hourly wages are much lower. That is a miniscule part of corporate outsourcing in the U.S. The vast majority of outsourcing is domestic and it is simply a case of eliminating a function traditionally performed within the native organization, and contracting it outside. It can include accounting, design engineering, human resources, plant maintenance, etc. – all necessary functions. Domestic outsourcing of this nature is usually more expensive on an hourly cost basis and thus you pay much more per task. However, you only pay for when the work is required, and are not paying for “attendance” as you do with employees. This trend is quite widespread and will only be accelerated by the current conditions.

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