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Quote: Let's start with the value proposition. Offshoring should never been seen as only a cost savings exercise - the hidden costs associated with quality cont

Quote: Let's start with the value proposition. Offshoring should never been seen as only a cost savings exercise - the hidden costs associated with quality control, oversight, lack of grass roots innovation, lower standards of service based on service agreements, and exit costs need to be fully considered. If you don't consider all of these aspects, you have not properly understood the true value proposition and may be surprised when you do not see any real cost savings. So he's saying that the companies that offshore will lose value relative to the companies that don't? If that's the case, why is government intervention necessary?

pchristensen 17y ago
I think he's saying that the costs of offshoring aren't reflected in the price, and that when you buy for the low price you also get liabilities you didn't know were there. Kind of like the externalities of oil and gas exploration, drilling, pollution, habitat destruction, etc that happen when you buy gas but aren't included in the price. EDIT: I don't think this is true, just an attempt to explain the article. Companies that buy bad outsourcing packages will lose to ones that manage their business better (onshore or off)
- derobert 17y ago
  Those costs are not at all kind of like externalities because an externality is an impact on a not directly involved ("external") party. But these costs are all on the organization who decided to outsource, so — unlike with externalities — one shouldn't expect a market failure, and the article does not provide evidence of one, or even claim one.
- friism 17y ago
  That may be so, but the external costs of oil and gas exploration are borne by society (thereby meriting government intervention) whereas liabilities incurred by offshoring mostly affect only the company. Government shouldn't try to keep private companies from making mistakes, the free market does a much better job of that.

pchristensen 17y ago

I think he's saying that the costs of offshoring aren't reflected in the price, and that when you buy for the low price you also get liabilities you didn't know were there. Kind of like the externalities of oil and gas exploration, drilling, pollution, habitat destruction, etc that happen when you buy gas but aren't included in the price. EDIT: I don't think this is true, just an attempt to explain the article. Companies that buy bad outsourcing packages will lose to ones that manage their business better (onshore or off)

derobert 17y ago
Those costs are not at all kind of like externalities because an externality is an impact on a not directly involved ("external") party. But these costs are all on the organization who decided to outsource, so — unlike with externalities — one shouldn't expect a market failure, and the article does not provide evidence of one, or even claim one.
friism 17y ago
That may be so, but the external costs of oil and gas exploration are borne by society (thereby meriting government intervention) whereas liabilities incurred by offshoring mostly affect only the company. Government shouldn't try to keep private companies from making mistakes, the free market does a much better job of that.