top of page

From Hobgoblin to Hero: What if Outsourcing Stepped out of the Shadows?

It’s All Hallows’ Eve, 2020, and we’re haunted by Covid19’s effects on our health and economy. As jobs are lost amid businesses’ ongoing fight for survival, some media, politicians, and newly assertive unions are once again taking the opportunity to point accusingly at the hobgoblins of outsourcing, especially the offshore variety.

But it seems to me outsourcing is a misunderstood force, throwing off distorted shadows under the media's glare, shadows that are a poor representation of the thing itself.

The term “outsourcing” always felt like a bit of a misnomer to me, suggesting something that’s being sent away or set aside, when in reality it’s designed to be an additive process. At its core, outsourcing represents a strategic partnership in the pursuit of improved business performance. I’ve long felt it’s a term fated to fade away over time. Yet still it persists (perhaps it's taking a long goodbye).

Either way, providers of customer experience management possess deep expertise in managing the customer – it’s all they think about and it’s all they do. And their expertise has become particularly important as the speed of technological change continues to accelerate. Even before the Covid crisis we were talking about what the World Economic Forum at Davos calls our “Fourth Industrial Revolution” (ie, technology and data embedding itself into just about every aspect of our lives, helping spur a process of exponential technological change that is fundamentally changing industries).

Now, with Covid, it feels as if we’re experiencing the Fourth Industrial Revolution Squared – the process of digital transformation seems to have sped up considerably.

The best outsourcing providers are thinking hard about transformation, integrating capabilities such as AI and data analytics into process flow. According to a recent study by Genpact, 39% of senior executives from the banking and capital markets industry say that their respective organizations invest more than $10 million annually in AI-related technologies, much of it in support of the CX. One example is represented by banks embedding natural language understanding (NLU) capabilities into their interactive voice response systems, giving them the ability to listen for signs of financial distress from customers and then responding with greater empathy.

And as we well know, business process outsourcers (BPOs) have turned to the work-from-home outsourcing model in a big way, which now features technology that’s fundamentally changing the CX game. I published a lengthy profile of Teleperformance in September that develops this idea. Also consider LiveXchange, which touts the benefits of cloud-based software that generates a virtual contact center staffed by at-home agents, the concept of “Gig CX” featured in a new book by Mark Hillary.

I’ve written too about ThinScale’s Secure Remote Worker (SRW), a software-defined thin client specifically designed to help enable the BYOD model for homeshoring programs. And I recently learned about an AI-enabled solution from Krisp that’s able to block out background noise – not only in the agent environment, but the customer environment as well. Such solutions will become more important over time, as the homeshoring model becomes normalized over the long-term globally.

Some providers have been leveraging such technologies and pursuing such strategies for a good amount of time and have made all the mistakes and learned all the lessons. It's why outsourcing looks increasingly compelling in light of the rate of technological change.

Another Possible Future

But there might be something bigger at play that’s also worth considering, and it has everything to do with our political economy. It might just be that the outsourcing of CX and other processes will not only become increasingly important but may well end up being the only game in town.

What if, instead of new legislation and taxes that impact the outsourcing industry writ large, a potential fundamental restructuring of the economy I wrote about in July, things take a different course?

Consider that outsourcing is part and parcel of a larger system and economic structure (call it shareholder capitalism) and a wider dynamic (call it the financialization of the economy). It may be that there’s no going back on this model of capitalism. In fact, one might argue that the stock market has become a political utility in the United States, and that the United States government is determined to spend as much money as it needs in its continuing effort to keep that market relatively buoyant. Asset insurance through the Federal Reserve seems to be the way of the world now.

Still, few deny this current system also seems to have intensified a destabilizing inequality. In fact, one might also argue that at least some of what the Black Lives Matter (BLM) movement is about is lack of access to prosperity. Take data gathered from the Federal Reserve Bank of Boston in the middle of the past decade as an example. You can’t have a median net worth of $247,500 for Boston’s white households versus $8 for Boston’s non-immigrant black households and not expect a backlash at some point. It’s a shocking contrast in fortunes. Somehow institutions have helped perpetuate this gulf for a long time (eg, through limited access to credit and the financial system, redlining in property, certain aspects of policing, etc.).

One might also then argue that the decade of the 2000s that featured costly American overseas invasions and wars (in terms of both blood and treasure) and a massive financial crisis followed by an extended Great Recession, helped shatter the social contract here in the United States. A considerable amount of self-dealing by elites of both political parties has only added to the anger pulsing through society.

With the breakdown of social cohesion, significant changes in our political economy seem inevitable. But what if we eventually see a response from governments (I’m thinking about the United States and the United Kingdom specifically) that we don’t expect? What if policymakers choose to double-down on the shareholder capitalism model, but do it in a way that benefits more citizens? What if we could rejig the system such that all citizens are able to participate in the gains rather than being left behind with the losses the current system seems to inevitably generate?

One possible solution is articulated in the new book Angrynomics, by hedge fund manager Eric Lonergan and professor of international political economy Mark Blyth. They propose an equity-based answer to inequality in the form of national citizen wealth funds.

The concept is fairly simple. Stocks yield an average premium of about 6% a year over the long run. Financial crises have been increasing in frequency and magnitude for decades, and the scale of government spending to bail out asset holders has been immense. A cyclical effect on the government’s cost of capital is part of that dynamic; every time there’s a financial crisis, the government’s cost of capital goes negative as people want to buy government-issued bonds and as they dump equities, which then fall in value substantially.

Rather than seeing the Fed rushing to a financial collapse in such a way that sees private equity eventually hoovering up all the assets, making concentration and inequality worse, Lonergan and Blyth suggest buying those assets with our own negative yielding bonds. The government could then lock the assets up in highly diversified, passive wealth funds.

Those funds would be run by an independent board walled off from politicians and electoral cycles, mandated to disperse in certain ways. Blyth notes that if we did that with 20% of GDP, we could end up with a multi-trillion dollar wealth fund that could be used to fund everything from college to healthcare. It’s a “pro capitalist” solution. And it’s hard to see how such a move would not garner bipartisan support.

It also would give people a greater stake in society and harken back to a United States energized by citizenship and not just consumerism. As Edward Luce of The Financial Times explained in a book review of Angrynomics in June:

Focusing on our economic choices, and, specifically, on inequality, offers a road map out of the morass: keep it simple, make a difference and cut across political lines. Their biggest idea is to create a national wealth fund. Real negative interest rates are the equivalent of discovering oil. When the cost of borrowing is lower than GDP growth, governments should issue bonds and invest in diverse assets, much as sovereign wealth funds do. The gains over time should be distributed to people as investment trusts that can be used for education and health.

And as Luce notes, there are precedents: “In 1998, Hong Kong’s monetary authority put $15 billion into the Hang Seng to prop up equity prices. It was initially pilloried for interfering in the markets but won eventual praise after earning huge returns.”

After all, reliance on the market paradigm seems entrenched here in the United States. Consider one small example from this summer – the entry of private equity into retirement savings. In a July blog, I noted the fact that the U.S. Labor Department has paved the way for 401(k) plans to invest in private equity firms, a move that could be worth as much as $400 billion to the industry.

Intriguingly, Lonergan and Blyth also note the possibility of a “data dividend,” yet another asset-based response to inequality. The concept is similarly simple. Big Tech dominates the stock market in large part by accessing all the data generated from our activities online – every keystroke, every Google search, Facebook like, or purchase on Amazon, etc. Why are we giving our data up to these entities for free? Don’t citizens deserve their data dividend? After all, we’re supplying the fuel for those massive profit engines.

Why not license our data assets, assets these firms are using for their own investment anyway, and gain a stake in these firms that’s equivalent to an equity stake? It’s yet another asset-based response to the inequality giant firms help generate, and citizens would join-in on the upside these companies generate in the market.

Lots of Candy for Outsourcers?

Imagine then, a scenario where the accelerated digital transformation catalyzed by the terrible Covid crisis someday actually results in an even more efficient and dynamic economy, one fired by technology as well as smart policy. A future where a universe of firms and their strategic outsourcing partners prosper along with citizens benefitting from national wealth funds and data dividends.

Of course, there’s an ironic twist here. The path back to a reinvigorated, more prosperous citizenship might also serve to further invigorate our ever-growing techno-consumerism, and vice versa. If such is indeed the course certain large economies do choose to pursue (in effect doubling down on an “Anglo-Saxon” brand of shareholder capitalism featuring policies that help citizens participate in more of the upsides of innovation), one might speculate that the outsourcing of customer experience management will only increase, perhaps significantly.

What combination of offshoring and automation might work best for countless firms in the economy would be anyone’s guess.

Either way, forging a New Normal is going to take imagination. Carl Jung once said that "People don’t have ideas, ideas have people.” We are all more captive to our mental models of what constitutes our possible futures than we realize. Just think how many enterprises and outsourcing providers were caught off guard by a global pandemic earlier this year.

Maybe outsourcing doesn’t have to be a scary media bogeyman, hiding in the shadows. Perhaps it could finally step into the economic glow, take off the mask, and be celebrated for its role in supporting strategic partners and building wider prosperity.

Talk about rebranding.

Image: from website

59 views0 comments


bottom of page