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FAX: (734) 764-7084

March 8, 2004

ADVISORY
Outsourcing experts available at the Michigan Business School

ANN ARBOR, Mich.—Globalization is transforming the way America does business as firms increasingly rely on an international work force for goods and services ranging from pharmaceuticals and electronics to telemarketing and financial analysis.

The following experts at the University of Michigan Business School are available to discuss the ramifications of outsourcing or offshoring:

Robert Kennedy, associate director of the William Davidson Institute and clinical professor of corporate strategy and international business, is an expert on business strategy and industrial dynamics in emerging economies.

Kennedy, whose current research focuses on the globalization of service activities, says that moving software activity or payment processing offshore offers a much greater cost advantage than moving manufacturing offshore.

"Typically, when you move auto parts offshore, you save 20 percent to 30 percent. When you move software development offshore, you save 60 percent to 80 percent," he said. "In the past, you would get somewhat lower productivity offshore, which was outweighed by the cost savings. Now, some suppliers are seeing productivity actually increase."

Kennedy can be reached at (734) 936-2772 or rekenned@umich.edu.

Donald Grimes, senior research associate at the Business School's Institute of Labor and Industrial Relations, is an expert on economic forecasting and the labor market.

Free trade, he says, causes economies to produce more of the goods they make relatively efficiently and leads to more production, jobs, rising wages and profits in comparative-advantage sectors. In turn, growth in these sectors leads to higher demand for goods and services, which creates new jobs.

"Conventional wisdom says that increased international trade, outsourcing, globalization and productivity growth are eliminating high-wage jobs and creating a nation of low-wage workers," Grimes said. "This is not true. Without free trade and productivity increases, the U.S. economy will stagnate. Outsourcing is part of the essential wealth-creating engine of growth."

Grimes can be reached at (941) 907-2228 or dgrimes@umich.edu.

Dennis Severance, professor of computer and information systems, has substantial industrial experience and is an expert on how information systems can support strategic change in manufacturing firms.

He says that work is going to India and China because transportation has become more reliable and communication costs have dropped. Also, the perceived risk is lower.

"Workers in India, China and other countries are doing the same jobs better, less expensively and more reliably than we can in the United States," he said. "We also have developed methods for and feel more comfortable about managing talent overseas."

He says that U.S. companies must invest in research and development and retraining to "lubricate the transition" to the next thing we are going to do.

Severance can be reached at (734) 763-2038 or severanc@umich.edu.

C.K. Prahalad, professor of corporate strategy and international business, is the co-chair of the Center for Global Resource Leverage: India. He is an authority on corporate strategy and the role and value added of top management in large, diversified multinational corporations.

Prahalad says that U.S. companies have promoted globalization and it's working, but unfortunately, it's hurting segments of our population.

"America's biggest advantage is its continuous capacity to innovate and create new businesses," he said. "The biggest mistake we have made is under-investing in research and development. You cannot protect jobs that can be done better somewhere else, but you can create fundamentally new jobs that no one else knows how to do."

Prahalad can be reached at (734) 763-5573 or ckp@umich.edu.

Izak Duenyas, professor of operations and management science and associate dean for faculty development and research, specializes in supply chain management and coordination, evaluation of investment decisions in flexible capacity, and in modeling and control of production systems.

Duenyas believes that companies can learn valuable lessons about outsourcing from the manufacturing sector.

"Firms that take into account quality, cost and responsiveness in their supply chain and value chain analysis gain a distinct advantage," he said. "In the manufacturing sector, companies have long asked what portion of their value chain can be outsourced. Services are now going through the same type of analysis and decision making."

Duenyas can be reached at (734) 763-5484 or duenyas@umich.edu.

More information on outsourcing can be found at the Business School's Web site: www.bus.umich.edu/newsroom/specialreports/outsourcing.htm.

 

Contact: Bernie DeGroat
Phone: (734) 936-1015 or 647-1847
E-mail: bernied@umich.edu