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Leaders and outsourcing (2): execubooks blog sample

Export jobs or import people? Clustering and the Ideopolis

Domestic outsourcing is part of the basic ‘make or buy’ equation that faces every business – Do I ‘make’ in-house a particular function or do I stop doing it myself and buy it in from a supplier instead. As such, it’s old news. I can’t get that worked up about it myself to be honest.

Where it suddenly becomes interesting, though, is when the outsourced function goes…abroad. Then the whole debate turns into how western employees are being undercut by highly educated (there is a call center in India staffed entirely by graduates, for example) but low-cost foreign workers.

Despite arguments to the contrary, you can’t legislate against jobs going abroad. The whole offshoring debate, it seems to me, looks down the wrong end of the telescope.

As The Economist magazine put it recently, the choice, in the ageing societies of the West (Europe in particular) is to export jobs or import people. The antidote to the fear of losing American jobs (and European jobs) to offshoring is to create ‘hotspots’ or clusters that attract capital, skilled people, ideas and other wealth generators to cluster around your particular area.

What am I talking about? Silicon Valley is the perfect example. 73% of people working in Silicon Valley weren’t born in the US. They moved there. They are a foreign legion. They are among the best in the world at what they do and they came to California to do it because Silicon Valley is where the best IT entrepreneurs are clustered.

We need to reframe the debate away from the narrow ‘all our jobs are going abroad’ kneejerk reaction to focus on how to take advantage of geographical clustering (Michael Porter has done a lot of work on this recently). Kjell Nordstrom, the economist and author of Funky Business, says “There are thousands of valleys around the world – the financial valley of Wall Street or London, the fashion valley of Emliano Romagna in Italy.”

A guy called Professor Tom Cannon has been helping cities from Boston to Liverpool develop into a new kind of city-state (economically and job-creationally speaking) termed an Ideopolis. This involves developing your own power of attraction as a region by stimulating the growth of ‘valley’-type clusters of activity in your area, centring on high value knowledge, ideas and creativity-based jobs.

Not much consolation to a call centre worker in Nebraska who has just lost her job to someone in New Delhi, though, I’ll grant you.

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