What Trump and Brexit mean for outsourcing and globalization

Is this what if feels like to be “made great”? If so, most of us are getting a head ache.

In February 2016, Donald Trump decreed that the US had been “ripped off” by India (and others). This was followed by an election campaign which was characterized by an unhinged, destructive tirade against globalization, non-natives and free trade.

Thus far, he has proposed the raising of the H1B (the visa for temporary foreign workers) minimum salary to $100,000 per year (from $60K) making the use of “landed” staff e.g. for Transitions, highly precarious. In addition, in the last 48 hours, Senator Chuck Schumer, an outspoken opponent of outsourcing, has been made Senate Minority Leader and the most influential Democrat in Washington.

We are a long way from understanding what Trump and Brexit will look like in practice, but everything points to a few bumpy years, and further outpourings of frustrated populism across the world as the political forces that have driven us here are most certainly alive elsewhere.

Outsourcing’s crisis of identity has been exposed

Global delivery models have long had an ambiguity of purpose between extracting value from existing operations and creating it through modernized new ones. Whereas there have been great successes in one of these objectives, it would be fair to call accomplishments in the other, “modest”.

To varying degrees, both clients and outsourcers (and indeed the business and financial system that support them) have been trapped by: a focus on risk reduction, a lack of confidence, short termism, a hostility to openness, a zeal to blame and a lack of trust in innovation and delivery.

The Trump / Brexit zeitgeist now forces us to acknowledge two things. First, the undoubted success of globalization in creating competitiveness has created pain and disenchantment for many resigned to lay offs or wage attrition and cynical at the perceived pay inequality between Board members (the decision makers) and the rest of the workforce. Second, the great promise of digital and technological advance has under-delivered, as the entrepreneur Peter Thiel famously said “we wanted flying cars, instead we got 140 characters.” Above all, this points to a crisis of ideas, or of delivery mechanisms, or both.

However, the future for outsourcing surely remains bright, so long as it is focused

Copyright Ed Tann November 2016

Despite the protestations several things remain true. Firstly, globalization has a key role in keeping companies competitive. High input costs will have only have one calamitous result. Second, innovation is the transcendent driver of growth with digitization / automation being about as dramatic an invention as steam power was in the 1700s. Third, human beings have an infinite capacity to create new “wants”. Although current events demand we examine the journey globalization and outsourcing have taken, these three principles dictate that such questions are about focus rather than direction of travel.

The future of global operating models will assume that low cost operations are a given. Anything else is absurd. This will however require a more flexible approach to the way work is performed and will require outsourcers to think and act globally as opposed to being rooted in any single geography. The biggest issue is that value creation is complex and deserves a set of complex answers. This demands an adjustment in the way most global relationships currently work.

Five actions for Outsourcers and their Clients post Trump / Brexit1. Engage in creative conversation about building better companies by harnessing the

digital revolution2. Invest in cloud and intelligent automation3. Manage risk, and enhance delivery through building long-term, multi-party, broad-

based relationships 4. Consider and manage obligations to society 5. Build global capability and deliver multi-jurisdiction, flexible sourcing models

Copyright Ed Tann November 2016