Consumer-driven offshore outsourcing

A common meme from those who blast offshore outsourcing is that it’s driven by rapacious firms eager to maximize short-term profits. This raises an interesting question — what if consumers are the ones driving offshoring? I raise this because Tyler Cowen links to a press release that’s an interesting test of the extent to which consumers reveal their preferences on the subject:

E-LOAN, Inc., a consumer direct lender, today announced that home equity customers designated to its Indian outsourcing program have the power to decide whether they want to participate before they complete their application. Home equity customers who choose to participate in the program enjoy the benefit of closing their loan two days faster than if the entire transaction was processed domestically. “Our Indian outsourcing pilot program is an important component of our overall strategy to cost efficiently provide customers with even faster service by becoming a 24-hour processing operation,” said Chris Larsen, E-LOAN’s Chairman and Chief Executive Officer. “At the same time, we continue to believe that privacy and security, combined with transparency and choice, are key to building a trusted brand. Therefore, we have decided to fully disclose our outsourcing program and empower customers to weigh the benefits of their participation in it. We believe that this approach will help us continue to earn and preserve consumer trust and confidence in E-LOAN.” The pilot program, which launched in early February, currently has the capacity to process 25 percent of E-LOAN’s home equity applications. Testing shows that 86 percent of the customers designated for the program are choosing to take advantage of the faster processing time associated with it — the ability to close their home equity loan in ten days versus twelve days. (emphasis added)

CBS Market Watch has a story on this as well. A question to those who oppose offshore outsourcing — should this expansion of consumer choice be banned or restricted? If so, what other limitations should be placed so this sort of thing doesn’t happen? Eliminate Wal-Marts? Japanese auto imports? In other words, to what extent is the outcry over outsourcing a slippery slope to policies designed to block all forms of trade and technological innovation? UPDATE: This story talks about how other firms are dealing with the offshoring phenomenon in their marketing strategies. Key line: “‘No outsourcing’ could become the latest twist on the ‘made in the USA’ slogan.” Just to be clear, even though I’ve defended offshore outsourcing as a good thing, I have no problem whatsoever with this kind of marketing strategy. If consumers prefer to pay higher prices in return for the satisfaction of buying American, that’s fine. Consumer choice should not be restricted in either way.