Telework, Out- and In-Sourcing

Fundamentally, the success of telework depends on the fact that, for some kinds of work, it is less expensive to move the work to the worker, via telecommunications and computer technology, than it is to move the worker to work. It's Economics 101, Rule 1: All other things being equal, if two "products" differ only in their shipping cost, then the product with the lowest shipping cost wins. Telework wins this contest when its "shipping" cost (mostly telecommunications charges) is less than the cost of physically getting the worker to and from the place where the work is delivered—the office.

The good news to information workers in developed countries is that great majority of today's teleworkers are telecommuters; their occasional trip to their employer's workplace is local, a few miles or kilometers. The bad news for these workers, who mostly believed that their job security was assured, is that the "commute" has jumped from local to global. Or has it?

Yes and no. Here's Rule 2: If a job is so routine that it can be done by someone with little training—or a machine—at a lower cost (all other things being equal) then the job will go to the lower cost alternative. for example, in the case of some routine data processing service and tech support jobs some employers have found that it is more effective to have the work done in India or another less developed country. This is because the workers in those countries are paid significantly less than their counterparts in the developed world and the shipping costs for that work are low or negligible. This is the sort of outsourcing that gets lots of press coverage.

The key to this situation lies in the phrase: all other things being equal. If you want your job to not be outsourced then you have to show that you provide a value that is higher than can be found at a comparable price elsewhere, so that your and your competitor's work products are not equal. Similarly, if you want to attract work that is now being done elsewhere, you have to show that you can do the same work at lower cost—or produce a superior product at the same cost. In either case not all other things are then equal. Ideally, you have changed from a possibility of outsourcing to one of insourcing; your superior work product causes others to clamor for your future remunerative attention.

In fact, the US has been a net insourcer of information jobs for some years and is well into that position at the moment. Although there are forecasts that the US will outsource some 220,000 jobs annually (not all of them via telework or information jobs) that's out of total employment of 130 million and at least comparable insourcing of as many jobs as are lost. In 2002 the US ran a surplus of US$64.8 billion in services.

Since technology has effectively reduced information transport costs to near-zero, competition in the information age primarily devolves on cost-quality criteria. So the winning long-term strategy for effective competition in this century requires teleworkers, wherever they reside, to constantly upgrade their skills. As Satchel Paige famously said: "Don't look back. Something might be gaining on you."

JALA, an international group of management consultants, has been working in other countries for years. But we're in the US so those other countries are outsourcing work to us. That is, we're insourcing work—so far.

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Last modified: Monday September 26, 2011.

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