We've heard a lot of desperate talk from Mitt Romney about how outsourcing is different than offshoring and not as harmful to average American workers as everyone knows it is. Of course it's nonsense, but let's take a look at Bain to better understand how Romney is misrepresenting his record.
Here's what the Romney camp is trying to say about the issue (so far it's been a disaster for them):
"There’s a very simple difference between outsourcing and offshoring,” Fehrnstrom said on CBS' "Face the Nation." "[Outsourcing] is done by companies every day. They take functions and they allow vendors to do it rather than handling it in-house. Offshoring is the shipment of American jobs overseas."I'll get back to this later, but only 3 of the 8 specialists at Bain dedicated to finding these "vendors" for clients are located here in America. The rest are overseas.
Of course Romney's camp is trying to confuse people about outsourcing by misleading them regarding how ambiguous "functions" become outsourced to ambiguous "vendors." It's really not so ambiguous at Bain. These functions are "in-house" products and/or services that are outsourced to other companies who can do it cheaper. Often, that's an overseas company, because their labor and material costs are lower. At these companies, much of the outsourcing IS offshoring, and especially if Bain did their consulting. The outsourcing Romney is being criticized for is Bain's practice of recommending outsourcing to foreign vendors. How do I know this? Let's look at Bain's website for a hint as to how they view the concept of "outsourcing."
Here's a graphic from the Bain website illustrating their outsourcing recommendations for a company called TechCo. The title of this case study filed under their "Client results" section is:
Outsourcing helps tech company focus on its core
See the 4 bubbles that are going to stay in-house? That's their core. See the 6 bubbles that are going to be outsourced? That's everything else. So that's the scale of outsourcing we're talking about. That's the first important thing to understand. Bain is recommending enormous levels of outsourcing.
Now here's another graphic from the Bain website. You see the arrow from Insourced to Outsourced? You see the two headings at the far right that correspond to "Outsourced?" If Americans want insourcing (which is what Obama is saying we need to be doing), then outsourcing and offshoring are at the opposite end of that possible spectrum:
So in the spectrum of possibilities, outsourcing and offshoring are neighbors at the far end of the spectrum, but they still make up the vast majority of Bain's focus.
But how does Bain arrive at these decisions? How does Bain decide whether a company should outsource a department or work to make it more efficient? Let's look at another case study, this time of a manufacturer called HomeCorp.
The answer it turns out, is fundamentally tied to its global competitiveness. See the graphic below. There are only two questions that are asked by Bain before a department is outsourced. Is it needed? Is it competitive at a world-class level? If it's not, it's outsourced, immediately. Where? To a place that is competitive at a global level, ie most likely overseas. We're not just talking about offshoring, we're talking about how Bain views outsourcing, and it is fundamentally about whether it is cost competitive at a global scale. Outsourcing is implicitly tied to the concept of offshoring at Bain. That's not the way it has to be, but that's the way Romney and Bain truly view it as they make clear on their website. It's not enough for the outsourcing to be competitive at an American scale, it has to be cost competitive with China and India. Where do we think that outsourcing is going? Yeah, uh huh.
To illustrate this point, only 3 of the 8 specialists dedicated to procurement (VENDORS) at Bain are located here in America. The others are in places like Mumbai, Toronto, Munich, and Shanghai.
Bain is so fundamentalist and focused on outsourcing in the form of offshoring in fact, that questioning whether the department can be made more efficient by merging it with another department here at home doesn't even come into the picture until the very end of the decision tree, and then only if the department must be physically located at corporate headquarters and then only if it is truly "unique." Keeping departments here at home is VERY low on the list in terms of priorities at Bain, something to be avoided at all costs and only done if all other options have been exhausted.
And finally, here's a graphic from the same case study, the only graphic under the heading "results." It illustrates what outsourcing really means to Bain and where their focus really lies:
Under the heading "Employees," we see the following labels:
31% eliminated. Further downsizing with divisions. Eliminate if feasible. Remaining corporate 31%.
Outsourcing is terrible. Offshoring is terrible. There are some companies out there where a meaningful distinction between the two words might matter to some corporate honchos. The distinction never matters to Americans who will lose their jobs, but at the same time it is fundamentally important to point out that Romney and Bain's concept of outsourcing is implicitly linked to global competitiveness and therefore is highly connected to if not synonymous with the term "offshoring."
Romney and Bain shouldn't be allowed to pretend their version of outsourcing is anything vastly different from offshoring. Semantically, the definitions of the terms can be pointed out, but in terms of Bain's record, it's disingenuous of Romney to misrepresent their own policies. They make it clear to their clients after all, on their own website.
4:52 PM PT: It's clear Romney is trapped in his own corrupt business practices. But don't forget, while offshoring is the type of outsourcing Bain focuses on, even domestic outsourcing is extremely bad for American workers, as explained in the link at the beginning of this diary:
"Outsourcing isn't a great thing, either," said Candice Johnson, a CWA spokeswoman. "It often means jobs get sent somewhere else in the U.S., where the workers get less pay and no benefits, and maybe they're even classified as an independent contractor so they don't get labor protections. It's another industry trend that might help companies and CEO's, but it doesn't help workers."