When is the last time anyone had anything good to say about the economic meltdown or the state of affairs of the affairs of state? What a mess. What if someone were to suggest that buried beneath all the manure there really is a pony waiting to be ridden–best to wipe the saddle first—and that the beneficiaries could be you?

Here’s what I’m thinking. What if one assumes that Mr. Obama winds up winning the election? Personal references aside; that appears to be what will happen. Let’s rewind to the beginning days of the new administration. Obama is promising to help fix the meltdown by increasing the number of employed among us–I was not comfortable suggesting his administration would be creating jobs as that is more difficult to accomplish when one is taxing the institutions which create those jobs—but this is not the proper venue for that topic. Okay, so the number of employed increases. How? Let’s see if there is an answer to that.

There has been a lot of negative discussion around the topics of BPO and ITO, Business Process Outsourcing and ITO, Information Technology Outsourcing. For purposes of this narrative, let’s make the terms outsourcing and off-shoring interchangeable. A simple way to view outsourcing is to assume there are three ways to do it;

1. Off-shoring
2. Near off-shoring
3. And On-shoring

Let’s define off-shoring to include places like India, China, and the Philippines. These countries lead the world in off-shoring because their supply of skilled, English speaking labor, can be purchased for less than what we can supply it. The large off-shoring firms have in some cases purchased off-shoring contracts at rates so low that no US firm can compete. These rates often mean that the off-shoring firms won’t begin to make money until the out years of their contracts. Next there are the near off-shorers; Mexico, and to a much lesser extent not that the dollar has melted, Canada. The On-shoring is us, the US.

So, here’s how I think this all starts to tie together. One way to add jobs is to not lose them—I didn’t say this was going to be taxing to understand. Another way to state that is that for those jobs that have been lost to off-shoring is to bring them home. How? Remember the comment about taxing the institutions that create the jobs? Well, this is simply a different type of tax, not on goods and services but one that is applied as a penalty. This type of tax penalizes a firm for behaving badly. What is their bad behavior? Giving jobs away. If the new administration, as expected, makes it painful to outsource, companies will have to look for other options. One option is Near Off-shoring. Now, Obama stated he is not a fan of NAFTA, the North American Free Trade Agreement. That will mean that it will not be a simple matter for companies to move the jobs closer to home, going from India to Mexico, or to source to Mexico rather than India.

Hence, the new off-shoring may be right in our own back yards. Welcome to the beach Iowa. How will this occur? The same way it happens when any municipality creates favorable economic conditions to attract any new business. We’ve seen it happen when communities do back-flips to get a new Toyota plant. Can’t you picture your local chamber of commerce pushing a slew of tax incentives to attract a national call center for Humana or all of the claims processing for Blue Cross?

So, what’s in it for me, you might ask yourselves? Well, the largest components of BPO are Finance and Accounting, HR, Procurement, and CRM, and the first three each have fairly significant call center components. While BPO will continue to grow-it’s project to triple between now and 2012, I think the market restrictions coupled with tax incentives will incent many firms to look more closely in their own back yards.

Should you off-shore or on-shore? If so, what portions of your business? To which supplier or suppliers? Instead, should you look at a shared services model? Those are difficult questions and should be treated as such. Outsourcing advisory an area where having expertise helps. It’s also an area where we’ve established a pretty good track record.

Most large hospitals have multiple occurrences of a handful of functions.  Most of those could go away and in doing so would improve the provider’s operations.