The business of offshoring and the "Long Tail of labor"
My earlier post on IT-Business/Domain Knowledge in an offshoring context generated a fair number of insightful comments. Chetan and Michael debate the nexus of IT-Business/Domain Knowledge and business agility. As I was reading these comments, I began reflecting on the other similar debate on the business of offshoring itself, more specifically in the context of Chris Anderson's bestseller “The Long Tail” that I got around to read recently. Taking off from Anderson's popular Wired Magazine article, the book expounds the idea that “some businesses, like Amazon and Google, can make money not just on big hits, but by eating the Long Tail. They can live like a blue whale, growing fat by eating millions of tiny shrimp.” [Tim Wu: The Wrong Tail How to turn a powerful idea into a dubious theory of everything.]
While the idea of finding a Long Tail patterns resonates with most intuitive thinking, Anderson perhaps stretches the argument when calling offshoring the "Long Tail of labor." My thoughts resonate with that of Theodore Kinni who wrote how “Anderson can stretch his long tail too far, declaring that offshoring is the long tail of labor, terrorists the long tail of warfare, and microbrews the long tail of beer--without expanding on those claims. But if you're selling anything that can be aggregated, such as books, music, film, software, and digital products that don't need distribution centers, The Long Tail could be your guide to becoming the next big dog.”
However, not everybody finds this idea of extending “Long tail” to offshoring a bit cursory. For instance Justin Brister blogs “One obvious solution is the use of Offshore organisations; by acheiving labour cost reductions, it is possible to do more with less budget. This makes it possible to develop solutions for markets that before-hand would have been uneconomic to service.”
Though I don’t really buy into the idea of offshoring as the "Long Tail of labor" there are Long Tail patterns in the business of offshoring itself, specifically Long Tail of large clients. Large companies (read fortune 500 or global firms) typically engage with large software service firms to source key projects. After engaging, however, a pattern of long-tail begins to emerge. For instance, if the company engaged with Infosys (or other large service firms) for a large SAP rollout, they typically realize that they can leverage our services for the System Integration or SOA definition….and while doing that, also realize that we have pockets of expertise in esoteric technologies, say tuning Google Mini for enterprise search.
Now, you can probably argue that this illustration is not really about the “long tail” of offshoring but more to do with up-selling or cross-selling . well, this is similar to Anderson trying to force-fit offshoring to the "Long Tail of labor," right?
Comments
The point I was making on my Blog was not that Off-shoring is the Long Tail of labour, but that one of the benefits of the current offshore model is that it presents opportunities to exploit the Long Tail, that would be uneconomic using a domestic labour force.
I do agree that Anderson has stretched his theory somewhat, an observation that I made again recently in my post on his comments regarding Google (Google and The Long Tail).
Posted by: Justin Brister | June 19, 2007 01:20 PM