Outsourcing

The late Clayton Christensen is someone I truly admire. He was a professor at Harvard Business School and has authored seven books. He has received the Mckinsey Award for Harvard Business Review’s best article five times. In 2011 he was named the world’s most influential business thinker. In this article I have added my two cents to one of Mr. Christensen’s deliberations.

Outsourcing is a very popular route taken by corporate bodies and individuals alike. Whatever we find difficult to do we can always outsource. Whether it is engaging a labour contractor by a company or a private tutor by busy parents for their child’s education, outsourcing is a  tempting panacea to so many of our everyday problems. What we often times do not realize or do not wish to accept is that outsourcing can be a very dangerous and debilitating decision.

Dell was at one time a darling of Silicon Valley and Wall Street. In the early days of  the PCs, Dell was a disruptor. It sold entry level computers at very low costs because they were sold mostly by mail and therefore the high cost of expensive retailing was saved. It also had the unique characteristic that its products were modular allowing the users to customize their computers choosing what components they wanted in their machines. But a lesser known fact is that Dell had a tie up with a company in Taiwan by the name of Asus. Asus was contracted by Dell to produce and deliver the motherboard which Asus could do for a 20 percent lower cost. Dell was very happy with this decision because not only did it save money on the motherboard which is a very important component of the PC but additionally, Dell could sell off its motherboard manufacturing unit which reduced its asset value in its balance sheet thereby showing a better “Return on Net Asset” (RONA). RONA is  a metric closely monitored by the investors of Wall Street. A company can improve on this metric by either increasing the numerator or reducing the denominator. The numerator is the income which is much harder to raise but the denominator can be reduced easily by selling off assets. Dell seemed to have the eureka moment. Reduce the capital assets and get a much better return on the capital deployed.

The association with Asus was truly a win win formula which was applauded by all the pundits of the time. Buoyed by the success, Dell and Asus decided to extend their relationship. Why not let Asus assemble the whole computer at their Taiwanese facility? By then Taiwan had reached a reasonably high level of technical capability and assembling a computer could be done by Asus in Taiwan very efficiently. This would also significantly reduce the cost of production for Dell and it could also sell off its assembly plant and thus further improve its RONA. This simple formula became addictive. Next Dell outsourced the management of its supply chain and finally the designing was also outsourced to Asus. This left Dell with nothing except its brand. Business was thriving as Wall Street cheered the creativity of Dell’s management.

Then in 2005, Asus announced the launch of its own brand of computers. Asus had learned everything from Dell and then used it for its own benefit. Dell had outsourced everything and by so doing also relinquished its position as a star of the PC world. Dell was left with no activity. It did not design the computers; It did not make the computers; it did not service the computers. Everything was outsourced to contractors who only put the “Dell” logo on the machines.

The dangers of outsourcing were also narrated  six centuries ago by Niccolo Machiavelli in his masterpiece titled The Prince. Written in the fifteenth century, it is widely recognized as the most famous book on politics ever written.  Machiavelli advises  the Prince that he must have his own army and not rely on mercenary or auxiliary armies. History bears witness that almost every ruler who has depended on outsourced mercenaries has lost his domain to invaders.

We could overlook the follies of large corporations like Dell which may be forced into taking some decisions in order to satisfy the insatiable hunger of the shareholders for higher returns on their investment. But what about our personal lives? Don’t most of the reasonably affluent families  make the same mistake? We outsource the upbringing of our children. With private tutors and other extra- curricular activities assigned to coaches and external mentors, how much is our contribution to the development of our children?  I see children go to school in the morning crouched with a ton of load on their backs. After school they go for private coaching and finally when they come home, the scourge of the social media consumes them. For most families, the timing of dinner is also not synchronized where different members of the family eat at different times due to their individual agendas. This means that the child has dinner while watching a streaming channel or chatting on social media. The day comes to a closure without much meaningful interaction with the parents and other family members. So what is the role of the parents in their children’s upbringing apart from the financing? If there is no significant parental role, then like the PCs which were completely made in Taiwan but just carried the Dell logo, our children just carry our surname. We have very little in common; we do not have any meaningful relationship and we also do not have any shared values. To have shared values, a lot of time has to be spent together. We have to be able to share fond memories of doing things together. Facing the ups and downs of life together. Nobody likes to be told what to do or be lectured in morality. Our children are no exception. But they are also very keen observers. When we spend time together, they quietly observe our actions and our behaviours. What they see in us is what moulds their character and personality. This is also a good thing for us because it helps us to try to be the best we can be; to be good examples for our children.

The essence is to spend time together as a family. It does not have to be just for special occasions like Eid or family outings. Menial tasks done together such as cleaning the room, making the bed, ironing clothes and washing the dishes are also great for building bonds. They enhance the children’s motor skills and are also a great pressure release valve because unlike the more significant objective of education, where examination results are shown at the end of the year, menial tasks give us an immediate sense of achievement. A room can be cleaned in an hour and the success of the effort is very obvious when an unkempt room is transformed into a tidy space. This sense of accomplishment is therapeutic for dealing with our day to day stress and anxiety. The negative quarters of the society pose a danger to our children. Parents have to be a counter influence to the toxic influence of these quarters. Whether the child is an infant, an adolescent or a full grown adult, the role of a parent never ends. It just gets extended to the grandchildren.

Like so much wisdom left to us by the Greeks of old, the author Plutarch has left us with a conundrum known as the Ship of Theseus. In honour of the mythical founder of their city famed for slaying the Minotaur, the Athenians committed to keeping Theseus’s ship seaworthy in the harbour of Athens. Over the years as parts of the ship decayed, they were replaced until eventually, every part of the boat had been changed. The conundrum is this: if every part of the ship has been changed, is it still Theseus’s ship?

In a similar vein: if our children get their education from others and their shared experiences are with their friends and their values are learned from the social media, are they still our children?

Comments (7)
  • Dear Arshi Bhai,
    Explaining the different Dynamics of Outsourcing, then it flows into a completely another dimension of life with a logical sequence that ends up with a thought provoking matter of growing our children in our family life, a wonderful way of coaching or mentoring the younger generation. Truly amazing imaginative writing, your two cents become worth a full Dollar.
    Keep writing ✍️ keep mentoring.

    Best Regards,
    Nehal Ahmed

    • Thank you so much sir for this wonderful article. I have learnt so many meaningful things from this article .

  • Thought provoking and spot on!

    Outsourcing by iself is not evil, it is the extent that is to be questioned!

    Keep the crown jewels of your business, and let others do what is “commodity” business.

    As a side note, the world is the beneficiary of western outsourcing to China by way of cheaper goods and services. On the “dark” side, like the rise of ASUS, China, today, is a formidable force on the global stage, challenging the very benefactors who have contributed to its rise. The meteoric advances of this country is testament to what singular determination, focused goals, and command and control structure, can achieve,

    Christensen was an occasional guest speaker during my IBM-Harvard management training days in the 80s.

    A good write-up. Looking forward to more.

  • Excellent writing.

  • Excellent piece of examples what is around us today by the name so called progress and technology. You have rightly pointed out things that are never taken care of by our parents. Good to see there are still some golden hearted person are here in our society. May Allah bless you.

  • Well-written, thought-provoking essay. Watch out for that outsourcing.

    Incidentally, the cells in our body undergo constant replacement of old with new. It takes six (?) years for all the cells to be replaced.

  • Outsourcing is an effort to obtaining a product or a service from outside own organization/ enterprise. This phenomenon is being increasingly undertaken by businesses, a popular approach to meet up deficiency. Business people do it as a cost-cutting measure mostly when they are in financial distress or economic downturns. In this article the author has elaborated the issue with vivid example of business/ manufacturing outsourcing and outsourcing at individual’s level citing the instance of children’s upbringing and the role of parents.

    Dell’s merciless outsourcing to ASUS turned itself to almost Zero and on the contrary brought ASUS to a position of Hero. Author has made a dazzling connection of Dell- ASUS equation to Parents- Parenting functions of our contemporary society in upbringing the children. The topic points us to be considerate and thoughtful of outcome before making outsourcing decisions.

    Caretaking of the children in many affluent families or so-called advanced societies are left to the Baby Sitter, Day Care Centers, Home Tutors, Coaching Centers, etc. in the plea of busyness of the parents. Many parents don’t have time to sit, eat and pass time with their children for days even months as they are very busy! Unthoughtful outsourcing of children’s upbringing in some segments our societies have resulted terrible consequences in recent days. These children suffer from sadness, allured to illegal drug, committing crimes, and even attempting to suicide owing to deprived feelings of parental affection.

    Author gave us a signal to be aware of the situation and resume our responsibilities as caring parents to our beloved children before it’s late.

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