North America

Outsourcing a threat to Canadian businesses?

A very poignant statement – Aggressive outsourcing will hollow out Canadian business; prolonged economic recovery will have left people without jobs and jobs without skilled people; and immigration will sputter in response to the country’s lackluster global brand.”

I am however quite disappointed that “outsourcing” has been stated as the reason for hollowing out in Canada. This view is quite limiting and not representative of the actual study conducted by the HRPA and Deloitte in the first place.

The report clearly articulates the issues surrounding Canadian demographics and the trends going into 2025 (where 40% of the population will have to support and feed the rest 60% in an age where life spans are increasing significantly) and the lack of readiness with current systems concerning education, skills and economic contributions.

Suggestions around enhancing education systems, creating a flexible workforce, establishing phased retirement policies, creating self-paced work environments, modernizing education through improved access to technology; investments in teacher performance, and by matching post-secondary course offerings to employment market demand; reforming immigration to more effectively leverage the contributions of new Canadians; and making calculated investments in industry and infrastructure are well recommended strategies for Canada. How has this got anything to do with outsourcing one may ask?

I think the report does address this question but in an oblique manner – presumably more populist than factual? I think there are two fundamental issues with Canada today (a) the absence of employable skills for modern-day industries (an issue most nations are facing today; Canada is no exception though one could argue that their issues are perhaps more acute than other fast-developing nations given demographic disadvantages), and (b) lack of a strategic spread with industry sectors in the first place (Canada’s industries aren’t as widespread or present across multiple sectors as in the US or Western Europe).

Perhaps an issue where the latter has resulted in the former? Consequently these two issues are pushing existing organizations to focus on cost-cutting just to sustain and remain relevant. I would like to think that this is where outsourcing comes to play. The need to provide for retirement funds and the current pressure on wages (owing to increasing costs of living) are demanding cost-oriented initiatives from employers more so than ever. Having said that, no one ever won the argument that outsourcing was only good for cost cutting. I like what Bill Greenhalgh (CEO, HRPA) says, "We can't just cost-cut our way to prosperity; there has to be investment in the future." Is this fully understood by the larger community of policy makers and the citizens in Canada? Immigration was pursued selectively with emphasis on high-end skills alone, thereby allowing Canada to avoid the pitfalls of rampant migration of all and sundry. That seems to have been insufficient. Did the illusion of the positive effects of immigration create complacence enough to postpone the inevitable?

I think the issue here is not about outsourcing but about the relevance of today’s industries – are they geared up for the future demands from the Canadian citizenry in the context of a wired and globalized marketplace? The issues dealt with in the report cut across a host of sectors – infrastructure and education to workforce policies, retirement and consumption patterns. Will outsourcing put a spanner in the works here? I surely do not think so. Will it be in a position to contribute positively to the current woes?

I surely think so. This would require the private sector in Canada to focus on what Bill argues – invest in their future. Outsourcing providers can surely contribute to such investments in return for continuity and entrenchment into Canada’s development. New sectors will need to be created, new policies will have to be instituted, and at the end of the day, the “lost decade” as termed in the report will have to be gained back with a clear yet firm handle on the unsustainable prosperity Canada (and its citizens) have pursued.

The choice between living in the “most livable nation on the planet” vs. “sustaining depleting savings/ reserves” doesn’t exist anymore since it is no more a function of prosperity. Rather it is a function of a concerted choice on “what to give up” for the future. I am quite sanguine about the recommendations that Canada should pursue modern technologies and industry sectors (green technology etc) alone to get out the rut it seems to be in. Surely they are necessary but not sufficient.

Shifting from resource-intensive industries is much-needed, only then will policies like tele-working, skills-enhancement on the back of demand for such skills etc shall make sense. Don’t blame outsourcing. Such statements reek of tunnel-vision and lack of understanding of what sourcing can do.

Collaborative relationships need to be established to ensure that sustainability (and attendant prosperity as the Canadians know it) is achieved. Sourcing (not just outsourcing) will actually play a key role in enabling and enhancing such collaboration for the collective good of both the ageing citizens on the one end, and the new generation of Canadians coming into the workforce on the other end.

Bobby Varanasi is CEO of Matryzel Consulting, and is one of the top 25 Global Powerhouse leaders in the sourcing space. He is also Global Ambassador and Strategic Advisory Board member of IAOP.