After years of outsourcing much of their work, more and more American companies now appear to be insourcing it.
The latest exhibit is the new Atlanta Innovation Center of General Motors, which, according to The Wall Street Journal, is hiring 1,000 employees, including “software developers, project managers, database experts, business analysts and other computer professionals.” The company intends to bring 90% of its IT work back in-house. GM Chief Executive Dan Akerson made clear in an interview that this marks a change in mindset: “I think one of the worst things this company did in its post World War II era was outsourcing and letting others manage all of our IT.”
GM’s story is just one more example of a trend toward bringing more operations back home—either in-house or in-country or both. A recent article by Charles Fishman in The Atlantic told of a “boom” in insourcing, noting the reopening by General Electric of appliance assembly lines in Kentucky. “Just five years ago, not to mention 10 or 20 years ago, the unchallenged logic of the global economy was that you couldn’t manufacture much besides a fast-food hamburger in the United States,” Fishman declared. “Now the CEO of America’s leading industrial manufacturing company says it’s not Appliance Park that’s obsolete—it’s offshoring that is.”
Maybe. In any case, something seems to be changing. And it’s taking people by surprise. Perhaps it even would have taken Peter Drucker by surprise, albeit slightly.
That’s because when Drucker was starting as a management consultant, the bias was toward bigness. If you could perform a piece of work under your own roof, you did so.
Drucker, for his part, always encouraged businesses to consider the opposite. “Outsourcing is necessary not just because of the economics involved,” he explained in Post-Capitalist Society. “It is necessary because it provides opportunities, income and dignity for service workers.” After all, many service workers, whether programmers or floor sweepers, will be relegated to the low-ranking fringes of a big company. But if you’re a cleaner in a cleaning company, you have a career ladder.
That said, Drucker wrote time and again that there was “no one right” approach to most things—in business or in life. And, as we’ve noted elsewhere, he would be the first to take issue with any assertion of one right approach to outsourcing.
Instead, said Drucker, the key is to ask yourself where any given function belongs and come up with the right mix. Drucker cited, for instance, an Irish company that found profitability in reversing the common model of outsourcing parts and insourcing assembly. “The company is insourcing the basic compounds to achieve quality control, but it is outsourcing the final” production Drucker wrote. “It is looking at the entire value chain and deciding where to place various activities.”
What do you think: Are we seeing a real pendulum swing away from outsourcing—or is this just a blip? Why?