Outsourcing: Why American companies do it, and why they shouldn’t (published in September of 2010 in the SB News Press)

Last weekend I decided to “upgrade” to Windows 7.  I had finished my work for the week by mid-day Sunday, so I thought I would be able to complete the upgrade Sunday night and be ready for work again by Monday morning.  I had actually upgraded to Windows 7 several months prior, but had compatibility issues with my printer, so I reversed back to Windows Vista.  Needless to say, things did not go smoothly or to plan, and I ended up spending the next few days sorting out the vast web of complications that so often seem to plague PC users these days.

I attempted to call Microsoft’s support team late Sunday night, realizing that they outsource their support to India, so I thought someone would be available.  They weren’t.  After fighting with the software all night and into Monday morning, I was finally able to get a support person (from India, of course) on the phone, after spending about fifteen minutes on hold.  This person was clueless, so I after several minutes of explaining my problems and what I had already tried, I could see that I knew more than they did.  I asked for their supervisor. 
After another ten minutes on hold, the “supervisor” got on the line.  I again explained the issues, only to have “Lea” (they have “Microsoft aliases” because their names are too complicated for most of us to pronounce) state that she could do nothing to help me, other than mail me a disc.  When I stated that I had my previous Windows discs, and asked if we couldn’t use those to get my computer working again, and then download a fresh copy of Windows 7, she stated that my product key that I had received when I downloaded the first version of Windows 7 would not work with a second download.  I asked: couldn’t we just get another product key?  She said that was “impossible.”  I said; what do you mean impossible; you work for Microsoft… can’t you just call someone and get a product key?  She said that was impossible because she could not get me a product key for software that I had not purchased.
After a few well-chosen words, “Lea” hung-up on me.
I went to OfficeMax, purchased another copy of Windows 7, reloaded it, and solved my problems myself.  I tried calling again several times to get help with Outlook, my (Microsoft) email program, but they stated that I did not have a support contract for that program.  When I countered with the fact that Windows 7 was causing the problem (it was working fine before I upgraded), they said that my case number was for Windows 7 and not for Outlook, so there was nothing they could do.
Why am I torturing you with my wonderful experiences with Microsoft you may ask?  This experience got me to thinking about outsourcing, and how it is a trend that seemed to make a lot of sense on paper, but like a lot of things, in practice, it just doesn’t quite work. 

Luckily there has been a resent reversal in many aspects of outsourcing, especially when it comes to smaller-scale manufacturing.  Due to the recession, many companies in the U.S. have excess capacity, lower operating costs as a result of newer technologies and layoffs, and are hungry for business.  As a result, they are much more willing to manufacture products for less, meaning that they are much more competitive with places like China, especially when you throw-in the cost of shipping, customs, duties, foreign consultants, etc.


Also, as my experience with Microsoft clearly demonstrates, the quality of the service that many companies are offering to their customers, as a result of outsourcing, is quite simply, unacceptable, and more and more, customers are voting with their pocket books, and going elsewhere.  Microsoft’s stock price clearly reflects the fact that they are completely out of touch with their customer-base.  Their stock trades at a 70% discount to their peers, and Apple is absolutely crushing them.  Every day, more and more PC customers are leaving for greener pastures at Apple.  If Apple offered a decent word processor and spreadsheet program that was widely accepted, I would have left Microsoft long ago. 
On August 28th, Paul Allen, Co-founder of Microsoft, launched a bunch of patent infringement lawsuits against Apple, Google, Facebook, and eBAY, among others, claiming that they built their businesses around “his” technology.  Ironic, considering that Bill Gates built Windows from technology he borrowed from Xerox, if I remember the story correctly, and a little more he borrowed from Apple.  If I could give Paul Allen and Bill Gates a little Advice, I would suggest that they worry a bit less about patents and a lot more about treating their customers well and provided half way decent tech support.
Outsourcing support is certainly not the only reason Microsoft is trailing far behind its competitors; especially Apple.  Apple has consistently introduced cutting edge products that are unmatched, by Microsoft or any other company.  When discussing Allen’s lawsuit, a Google spokesperson said it best; “This lawsuit against some of America’s most innovative companies reflects an unfortunate trend of people trying to compete in the courtroom instead of the marketplace.”  In fact, Microsoft’s revenues have been essentially flat over the past three fiscal years, while Apple’s revenues have nearly doubled.
So what is the future for outsourcing?  With many trends in business, it will take a long, painful time before most of the larger companies figure out that outsourcing, in a lot of instances, just doesn’t pay.  It might be cheaper from a direct expense perspective, but when you factor-in lost sales, irate customers, and unintended costs, such as higher returns, outsourcing makes less sense.
The positive side of these problems with outsourcing and the effects of the recession is that many U.S. companies may see growth in their businesses as more previously outsourced business comes back home.  This could help with unemployment as well, both directly in the form of new jobs created to meet demand for the work that comes back to the U.S., and indirectly, as companies that get the work demand more resources from other companies that in turn will need to hire more employees.
I think it is very early in this developing cycle, but I hope that companies will re-evaluate their outsourcing practices, especially when it comes to customer service and support, and especially in the case of Microsoft.  I have to say that, despite my horrid experience, I have been a lifelong customer of Microsoft, and I use their software every day, all day, and will continue to do so for the foreseeable future, at least until or unless Apple creates a viable alternative for Word and Excel.  Maybe Paul Allen and Bill Gates could take some of those tens of billions of dollars they have made from Microsoft and spend it on a little upgrading of their own, and upgrade their customer support, bringing it back home to the U.S.  I for one would certainly appreciate it, although “Lea” would have to find another U.S. company willing to frustrate their customers to save a few pennies.


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