When ChatGPT opened its doors to public access in November 2022, machine-human collaboration experienced a paradigm shift. The effects of AI on employment sectors such as human resources are predicted to cause the loss of 300,000,000 jobs globally. That is some serious outsourcing.
Companies have used outsourcing to control the growth/cost ratio long before AI. Internalizing staff can become expensive. Massive infrastructure, equipment, and material needs are rarely sourced in the same location. A global offshore company is considering;
- Finding skills, engineering, or niche expertise in foreign talent pools. Visa and work permit difficulty and cost can be prohibitive in hiring foreign workers domestically. Positioning divisions close to the labour market can reduce associated expenses.
- Ending dealing with regulations that prevent growth. Crushing environmental regulations can stop production before your factory is built. Reasonable restrictions respecting the world around us are appreciated. Stunting red tape and bureaucracy is more than off-putting.
- Reducing tax obligations or increase incentives from host nations. Vietnam offers some nice incentives for foreign businesses to relocate there. The US codes fluctuate every two years and can lead to stagnation via outright confusion.
- Relocating to incentivize foreign investors to become long-standing investors.
- Utilizing a global value chain with proximity to resources. We discussed labour proximity for efficiency. The cost of shipping materials is increasing by magnitudes. Have you seen the container and ore vessels piling up at ports internationally? UNLIKEY to return to previous values, transportation expenses will motivate companies to relocate sections of their production.
- Diversifying infrastructure investments against national security issues. Each country has a different economy and leadership. The leadership can fail in diplomacy causing an end to your company and the beginning of war. Economies have failed with equal terrible effects.
- Creating “Arms Length” projects. These silos will operate nearly independently with minimal management and supervision of the parent company. They operate on vested interest and are impervious to pressure.
Of course, there are challenges with offshoring. The United Nations has a policy regarding offshoring for protection. You do not want to be blindsided by any of these roadblocks. Be sure to have a plan to address all of them, in the event they arise.
- Time differences. Your headquarters in Zurich is closing the office as the factory in New Zealand is starting. Video calls will require someone working very early or late. Lunch or out-of-office times cause delays. Technology provides 24-hour access, but people have lives to live and families to love.
- Quality concerns are real. You can not transfer all your skilled knowledge from R&D into the workforce. Training takes time and management has to be more involved.
- Language barriers are a challenge I have dealt with. Differences in language encompass culture, body language, facial expression, and incompatible vocabulary. Language barriers can affect quality, communication, relationships, and cause friction.
- Technology security from industrial espionage is important for product and market positioning control.
- Home country taxes on foreign income or tariffs on foreign products. Stay profitable.
Utilizing a blend of AI, outsourcing, and offshoring done correctly can increase your market share, profitability, and revenue. It will increase your size and reach. Control the risks through knowledge and courageous communication.
