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Oursourcing/Automation

November 30, 2005

repman.jpgThis afternoon I had an interesting call from a gentlemen who said he was against outsourcing if 10,000 people lost their job (1 or 2 at a time was fine).  I explained to him that the U.S. was the destination of most global outsourcing (European outsource 4:1 more jobs to the U.S. than we outsource).  So outsourcing was a good thing.  He did not agree.

I ran across this article about a new way to replace U.S. jobs with technology.  The PayTeck Smart Box puts repo-men out of business.  Basically car buyers with poor credit can buy cars equiped with the device and each month they get a new code that enables them to turn on the car.  If they don’t make their payment the car won’t start.  Neat idea, but what about the repo guy?  Is it right to outsource his job?

Written by Alexander Muse · Filed Under Uncategorized 

Comments

6 Responses to “Oursourcing/Automation”

  1. frederic tubale Says:
    December 1st, 2005 at 4:05 am

    I’m 50/50 into this PayTeck Smart Box. On one side it makes the business better and on the other side it is stumping on the dignity of your customer. Which is more important depends on the person. And how about the gentleman who has a family of four and knows nothing of technology but to be a repo man? The guy is doing his best to be a decent member of the society and not to be a member of the crime groups. I believe that this technology has to be polished still something that will give more benefits on both ends.

  2. Todd Barnard Says:
    December 1st, 2005 at 10:08 am

    Is it right to outsource his job?

    Absolutely.

    There are no limits to outsourcing, up to and including venture capitalists. But how could anyone outsource a VC, you ask?

    First, the costs of starting a software company, especially one that intends to offer a Web 2.0 product, are plummeting:

    “…The investment logic for VCs and entrepreneurs is that because there is no development cost, the business can be built on a MUCH smaller investment and the support revenue stream can be substantial after several years. Further, the cost of providing support is very low.”

    http://dondodge.typepad.com/the_next_big_thing/2005/11/open_source_the.html

    “…Sun has added a new part to its motto “The network is the computer” with the corollary “Zero barrier to entry.” Sun reiterated that it is making its entire stack open source over time, and announced that its complete software stack will be free. The Java Enterprise System, Sun N1 Management software and array of Sun developer tools will be available for both development and deployment at no cost.â€?

    http://blogs.zdnet.com/BTL/?p=2214

    “In the next few years, venture capital funds will find themselves squeezed from four directions. They’re already stuck with a seller’s market, because of the huge amounts they raised at the end of the Bubble and still haven’t invested. This by itself is not the end of the world. In fact, it’s just a more extreme version of the norm in the VC business: too much money chasing too few deals…”

    “Unfortunately, those few deals now want less and less money, because it’s getting so cheap to start a startup. The four causes: open source, which makes software free; Moore’s law, which makes hardware geometrically closer to free; the Web, which makes promotion free if you’re good; and better languages, which make development a lot cheaper.”

    http://www.paulgraham.com/vcsqueeze.html

    Then, factor in the “Walmartization� of venture capitol:

    “Yahoo and Google, with loads of cash on hand and in constant competition for the latest Internet breakthroughs, are finding themselves brushing up against the interests of venture capitalists more and more.”

    “…The tension between big companies [ Yahoo and Google ]and VCs emerged again this week during a technology panel discussion in London. Simon Levene, managing director of corporate development at Yahoo, told VCs: “Folks like Yahoo will be competing with you for deals. Later, Levene told search engine expert John Battelle that Google had set up a fund to compete with VCs for early stage company financing.”"

    http://www.mercurynews.com/mld/mercurynews/business/13240416.htm

    Note that Yahoo and Google’s investments have vastly lower return requirements, through high volume, than the traditional VC.

    So it’s easy to extrapolate that together, open source “Zero barrier to entryâ€? and the “Walmartizationâ€? of venture capitol, will lead to the realization of Peter Drucker’s prophetic statement:

    “… the real, controlling resource and the absolutely decisive “factor of productionâ€? is now neither capital nor land nor labor. It is knowledge.“

    – Peter Drucker, 1993
    Post-Capitalist Society
    http://elfURL.com/99s

    Yes, Outsourcing / Automation are great!

    Todd

  3. Alexander Muse Says:
    December 1st, 2005 at 10:15 am

    I agree. Google is actually disintermediating (is that how you spell it?) the vc community. Startups are skipping the trek down to Sandhill Road and going straight to Google…

  4. Alex Leverington Says:
    December 1st, 2005 at 3:09 pm

    I disagree with outsourcing when it replaces bulk employees with a subcontract. Outsourcing of subcontractors, service providers, and others makes sense.

    With the SmartBox, the repo-man is out of work, but now you have a guy that has to install the device and other personnel to monitor it. Replacement of employees maybe as inevitable as the CD player replacing the cassette, but outsourcing them in bulk is very questionable in my book. A company has a certain synergy to it and jumping up and ripping out a part of that and replacing it with something synthetic has a great impact: long-term, short-term, revenue, overhead, etc - if the process is not executed just right, then it’s a lose/lose situation. This takes into account the motivation as to why a company would outsource in the first place. Outsourcing will either reduce expenses, or increase revenue. Either way, it frees up money - the company can either distribute the profit or use part of it as capital for a greater return. Who better to invest that capital than the existing employees of the company? I wouldn’t keep them all, but surely if the employees got you to where you are at in the first place, and you aren’t mistreating them, they’ll take you where you are headed. Sure, you can outsource and subcontract every facet of the business, but then when a small group of people (probably your previous employees) begins to compete with you, you’ll struggle to keep up.

    There is always the possibility that the employees shouldn’t be there in the first place, but that is bad and outsourcing would be least of the company’s concerns.

    It maybe contradicting but I look at foreign offices differently. If a company opens a location in another country and it costs less for employees there to achieve the results of the local employees than I see that as a casualty of the original employees’ location. If you are a coal miner or drill oil wells and the mine runs out of coal or the county runs out of oil, you’re going to be out of a job unless you move or pick a different job.

    I guess when it comes down to it, there are many ways of outsourcing. I am simply against replacing bulk employees with a subcontract. My reasoning is primarily because of the lack of control and knowledge that is lost and not the ethical reasons that some follow.

  5. Charles Says:
    December 1st, 2005 at 4:41 pm

    I reckon the real question to ask is do we want to live in a world with free and open communication, open borders, liberal democratic political systems, and free market economies in which we are free to make a living how we see fit?

    If the answer is no, then that’s one thing, but if the answer is yes then we have to accept that outsourcing is an evolution of our society, and the free market economy we live in. I might be conflating outsourcing and offshoring there but I don’t think that matters.

    And the example of the repo man losing his job to the Smart Box, well that’s unfotunate for him…but it is an unavoidable consequence of technological progress and capitalism. Even the communists know that these days. I used to have a job as a kid sorting bathroom tiles in the factory that made them, but I doubt that job exists anymore thanks to technology…and I doubt the company could afford to pay someone to do it and stay in business.

  6. Alexander Muse Says:
    December 1st, 2005 at 7:40 pm

    Nice comments, thanks guys!

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