Entrepreneur Beginners Guide

“Outsourcing Makes Sense”

If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business.

—Lee Kaun Yew, former prime minister, Singapore

In at least two episodes of Shark Tank, the popular ABC show in which entrepreneurs get a chance to pitch their business idea to and receive funding from investors, some stubborn business owners refused to manufacture their products where costs were lowest for the desired quality. Each entrepreneur had a solid business with customers and significant revenues, but neither company was profitable, largely because production costs were so high. The sharks, who immediately realized the problem, suggested that the entrepreneurs produce their goods in China, where costs would be much cheaper and thus profits much higher. However, both owners were adamant about continuing to manufacture in the United States and creating jobs at home, an admirable but naïve decision that would likely shut them down altogether. Ironically, while trying to create more jobs in the country they love, they would likely add to the high unemployment rate. The investors, who were originally excited about the businesses, ultimately lost interest because of the owners’ reluctance to outsource.

The episodes were quite emotional. In fact, one of the owners was on the verge of tears because he so strongly believed in what he was doing for his country. His conviction prevented him from taking the sharks’ advice. In a final attempt to make a deal, a shark tried to get one of the owners to understand that he could have more of an impact on his community plagued by high unemployment if his business were successful. The shark’s efforts were futile. Though rattled, the owner stood pat realizing that he could be making the biggest mistake of his life. As a frustrated television viewer and business owner, I certainly thought he was.

Since our economy has taken a turn for the worse, “outsourcing” has become a dirty word, tantamount to “traitor” or “anti-American.” What true American wouldn’t want to create jobs here at home, right? The United States, where outsourcing was once a popular trend and great for business, suddenly threw globalism by the wayside and adopted an ideology of isolationism. Television sitcoms like Outsourced, in which an American corporation out-sources its call center to India, don’t help the matter. In an uncommon display of political harmony, the Republican and Democratic Parties agree that keeping jobs in America is a top priority to grow our economy and to get it back to more prosperous times. However, ignoring politics and using common sense, the campaign against outsourcing does more harm than good when it comes to economic development.

Quite simply, the benefits of outsourcing outweigh any negatives as its opponents describe them. Besides, you must do what’s best for your business. Whether you’re sending work to a contractor in Singapore or a vendor in South Carolina, outsourcing is good for business. Any functionality that is not core to your business should be outsourced at the best cost and quality. In the majority of cases, trying on your own to produce everything that your business needs is unrealistic and highly inefficient. If you have believed the negative hype about outsourcing, quickly disabuse yourself of it and implement the process into your business strategy. If you’re subscribing to the propaganda and refusing to even consider out-sourcing, your competitors are meanwhile outsourcing and working hard to put you out of business. You don’t need to be a high-profile shark to understand this reality.