“I am outsourcing to win, not to save money,” Seidman answered. “Go to our Web site. I currently have over thirty job openings, and these are knowledge jobs. We're expanding. We're hiring. I am adding people and creating new processes.”
Seidman's experience is what most outsourcing is actually about– companies outsourcing to acquire knowledge talent to grow their business faster, not simply to cut costs and cut back. Seidman's company is a leader in one of those completely new industries that just appeared in the flat world-helping multinationals foster an ethical corporate culture around an employee base spread all over the world. Although LRN is a BE company-founded ten years before Enron exploded-demand for its services surged in the PE era-post-Enron. In the wake of the collapse of Enron and other corporate governance scandals, a lot more companies became interested in what LRN was offering-online programs for companies to forge common expectations and understandings of their legal and ethical responsibilities, from the boardroom to the factory floor. When companies sign up with LRN, their employees are given an online education, including tests that cover everything from your company's code of conduct to when you are allowed to accept a gift to what you need to think about before hitting Send on an e-mail to what constitutes a bribe of a foreign official.
As the whole issue of corporate governance began to mushroom in the early 2000s, Seidman realized that his customers, much like E*Trade, would need a more integrated platform. While it was great that he was educating their employees with one online curriculum and advising boards on ethics issues with another, he knew that company executives would want a one-stop Web-based interface where they could get a handle on all the governance and ethics issues facing their organizations– whether it was employee education, the reporting of any anomalous behavior, stewardship of a hard-earned corporate reputation, or government compliance-and where they could get immediate visibility into where their company stood.
So Seidman faced a double challenge. He needed to do two things at once: keep growing his market share in the online compliance education industry, and design a whole new integrated platform for the companies he was already working with, one that would require a real technological leap. It was when faced with this challenge that he decided to enlist MindTree, the Indian consulting firm, in an outsourced relationship that offered him about five well-qualified software engineers for the price of one in America.
“Look,” said Seidman, “when things are on sale, you tend to buy more. MindTree offered a sale not on last season's closeout, but on top-notch software engineering talent that I would have been hard-pressed to find elsewhere. I needed to spend a lot of money defending and extending my core business and continue to take care of my customers, who were working off my current programs. And at the same time, I had to make a giant leap to offer my customers what they were asking for next, which was a much more robust and total online solution to all their ethics, governance, and compliance questions. If I don't meet their needs, someone else will. Partnering with MindTree allows me to basically have two teams-one team [mostly Americans] that is focused on defending and extending our core business, and the other team, including our Indian consultants, focused on making our next strategic leap to grow our business.”
Since ethics is at the core of Seidman's Los Angeles-headquartered business, how he went about outsourcing was as important as the ultimate results of the relationship. Rather than announcing the MindTree partnership as a done deal, Seidman conducted an all-hands town hall meeting of his 170 or so employees to discuss the outsourcing he had in mind. He laid out all the economic arguments, let his staff weigh in, and gave everyone a picture of which jobs would be needed in the future and how people could prepare themselves to fit in. “I needed to show my company that this is what it would take to win,” he said.
Have no doubt, there are firms that do and will outsource good jobs just to save money and disperse it to shareholders or management. To think that is not happening or will not happen is beyond naive. But firms that are using outsourcing primarily as a tool to cut costs, not enhance innovation and speed growth, are the minority, not the majority-and I would not want to own stock in any of them. The best companies are finding ways to leverage the best of what is in India with the best of what is in North Dakota with the best of what is in Los Angeles. In that sense, the word “outsourcing” should really be retired. The applicable word is really “sourcing.” That is what the flat world both enables and demands, and the companies that do sourcing right end up with bigger market shares and more employees everywhere-not smaller and fewer.