Who's outsourcing to who?

     If you've ever observed the former CNN commentator Lou Dobb's views on the offshore  outsourcing issue, you'd get the idea that the U.S. was going down the tubes because of offshore outsourcing.  He has even called business leaders who use offshore outsourcing "Benedict Arnold CEO's"
     I think there's a lot of emotion involved in discussions on offshore outsourcing that cloud the discussion. Instead of trying to gain a real understanding of the impact of global outsourcing and  focusing on a strategy to combat the real  threats,  there are calls for more tariffs, taxes and laws against the practice.
     Why is offshore outsourcing considered bad? On a macro scale, outsourcing is good for the economy. Customers and investors drive businesses, and customers demand lower prices and investors demand higher profits. In order to lower their costs, companies outsource non-core activities and tasks to places where they can get the most value for their money. That's the upside.  The downside is that factories that don't adapt advanced manufacturing techniques or outsource themselves will be less competitive, less profitable and may be more likely to fail, then people lose jobs.
     I think the question should be, How can the U.S maintain and increase it's global competitiveness and maintain a low unemployment rate while still outsourcing ? 
     The U.S. is the acknowledged leader in many ways.  In spite of the economic catastrophe that we are in the midst of, the U.S. is still the safest place to invest.  The U.S. is known for the quality of it's educational institutions and it's pace of Innovation.  It is also the acknowledged leader in Information Technology and Biotechnology.   The US is also a huge consumer of goods. This the framework that the U.S. must work within to maintain and increase it's presence in the world economy.
      To maximize a company's profitability, they should focus on their core competency's.  What do they do best?  Where is the most value added?  Keep those skills and activities at home, but outsource where it makes sense.   Companies in India are presently outsourcing to the US on a greater and greater scale following the same reasoning.  The Indian Plug-in EV company Reva is collaborating with the New York automotive parts company to build a plant in New York. The Indian IT company Wipro is finding a greater value added by having software written in the U.S. rather than in India.... Why?  If the contract is U.S. defense related it may be a requirement.  If it's a new concept or interface that's being developed and if it's being targeted for the U.S. market, it's more efficient to have it done in the U.S. than in India.
     I recently attended an MIT sponsored forum in Santa Barbara that discussed the issue of turning research and innovation into a greater economic advantage. I enjoyed and got the most out of a presentation by William Jeffrey, CEO of Hughes Research Lab.  He was the first speaker and set the stage for the rest of the speakers.  He had gathered data and presented charts to show the realities of the state of pure research vs commercial development in the US.  His summation essentially was that we need to have a shared vision in this country of the importance of spending money on pure research and then have the motivation to transfer the innovations resulting from this to products that we need.  He compared and contrasted the "old" serial method of development, publishing, then "casting it out"  to see if anyone liked it enough to commercialize it, to a more focused NRC "Tire Track Model" method where you try to match up applications while innovating and removing the time lags inherent in the "old" methodology.
     In summary,  I believe if we refine our method of turning research into products, focus on our strengths like education, innovation IT and biotechnology, and outsource where it makes sense, the U.S. can maintain and increase our economic advantage over the rest of the globe.