Of Interest
Johnson Conley provides regular insights and updates on subjects of interest. Enjoy!
Outsourcing Benefits and Risks
An interesting although an expected outcome of outsourcing challenges (Fired Americans Say Indian Firm Gave Their Jobs to H-1B Visa Holders).
Early on, outsourcing was a strategy leveraged to obtain better services than could otherwise be delivered with in-house staff. Firms could focus on their core business without having to manage an area of the business that they were unwilling to invest in. Employees would join a service provider that provided the support and access to state-of-the-art tools and techniques, not to mention career advancement opportunities. Corporate leadership championed outsourcing initiatives as part of their strategic vision. In many cases, it was a win-win-win for customer, service provider, and outsourced employees.
It was not too long before the strategy turned into a tactic to cut costs. All too often, the strategy devolved into other objectives. Creative financing to get assets off the books. Promising reduced costs that could only be delivered with staff reductions; “efficiencies.” It is no surprise that in the objective to reduce costs, labor arbitrage entered as a significant way to deliver cost savings. I recall the CEO of a major US firm reveling in the fact that he saved one hundred million dollars in operating expenses because of outsourcing. I also recall the many engagements I led providing “marriage counselling” to companies and their service providers for failed outsourcing deals.
Done well, outsourcing can be a significant strategy that delivers positive outcomes. Done poorly, outsourcing leads to higher costs, lower quality service delivery and human carnage.
9/11 Tribute
On this solemn day, I remember my time working in the South Tower, a place filled with dedicated colleagues, many of whom tragically lost their lives on September 11, 2001. Their memory remains etched in my heart and mind. I pay tribute to their unwavering commitment and the bravery they displayed in the face of unimaginable adversity. May we never forget the sacrifices made, and may their memory be a beacon of hope and unity for a better tomorrow. #NeverForget #September11
Data Center Construction in the AI Era
An interesting and understandable development in data center construction from an article in the Wall Street Journal.
AutoStore Innovates with Pay-Per-Use
An important development in the automated storage and retrieval system industry from one of the world’s largest and oldest manufacturers. This should accelerate the development of micro-distribution centers.
A Challenging Year Ahead for IT
A challenging year ahead per this article in the Wall Street Journal. How are you going to meet the challenge?
Revolutionizing the World of Chips: The Latest Developments in US Manufacturing
TSMC, one of the largest semiconductor manufacturers, has been expanding its operations to the United States as reported in the Wall Street Journal (“TSMC’s U.S. Chip Gambit Has Powerful Backers”). As I previously reported, there is a high concentration of chip manufacturing suppliers in Asia that has created geographic supply chain risks (see “How Secure Are We?”). TSMC’s expansion into the United States has several benefits.
First, having facilities in the United States will allow TSMC to better serve its American customers, who make up a significant portion of its revenue. This will reduce the need to rely on long-distance shipping and other forms of transportation, which have been disrupted during the pandemic.
Second, having facilities in the United States will also provide TSMC with a greater degree of flexibility and control over its supply chain. For example, the company will be able to adjust its production levels and respond to changes in demand more quickly and easily. This will help the company to avoid bottlenecks and other disruptions that can impact its ability to deliver products on time.
Third, having facilities in the United States will also provide TSMC with a more secure supply chain. The United States has a more stable political and economic environment than many other countries, which can reduce the risk of disruptions to the company’s supply chain. Additionally, the United States has a strong legal system that protects intellectual property, which is critical for a company like TSMC that relies heavily on technology and innovation.
Overall, TSMC’s expansion into the United States is likely to reduce the geographic supply chain risk for the company, by providing it with greater access to its American customers, greater flexibility and control over its supply chain, and a more stable and secure environment for its operations.
Advances in Automated Distribution Centers
Johnson Conley has recently provided advisory services to Accelerate360 to establish one of the most highly automated distribution centers in the world. This article in the Wall Street Journal describes the operation and a key feature of the automated distribution center – an ant inspired system designed by Attabotics. (Please let us know if you’d like a copy of the article)
AI in the news: Intelligence Agencies Face Challenges with AI and Developments in AI Ethics
This week’s The Economist reports on the challenges facing the use of AI in intelligence agencies. One of the issues cited in the article, “Spy Agencies Have High Hopes for AI”, is the dearth of adequate sets of information that can be ingested. AI depends on massive sets of data to be effective and in a number of intelligence settings there is limited available data.
Fast Company published two articles in its March / April 2021 issue on the subject of AI ethics, “AI Has a Big Tech Problem”, and “AI Ethics: Taking Stock and the Way Forward”. (Sorry the online links aren’t available – please contact us if you’d like copies of these articles) The overriding message in these articles is that the thought leadership in AI is concentrated in a limited number of firms and institutions. The risk reported is that ethical decisions made by this small cohort may be influenced, however subtly, by other demands – and not necessarily in the best interest of society as a whole. Something to consider.
Chief Information Officers are Becoming Accountable for Business Operations
This article in the Wall Street Journal, “Coronavirus Pandemic Helps Speed More CIOs Toward Business Operations Accountability,” confirms what we’re seeing across our clients. Woe to the CIO who doesn’t rise to the occasion (something that we’ve also witnessed).
Amazon Enters a Regulated Market
As reported from several new services, Amazon’s entry into the pharmacy business follows along the line of their well used playbook with one major exception. See Amazon Launches Online Pharmacy, Why The New Amazon Pharmacy Could Pose A Real Threat To Drugstores and Amazon Shakes Up Health Care The healthcare marketplace is highly regulated and Amazon needed a way to quickly gain entry into this market. It’s no surprise that they purchased PillPack two years ago to obtain the proper licensing to operate in all of the states. As a result of today’s actions, the traditional drugstore model will be under siege by Amazon. They’ve already advertised two day delivery for common prescriptions such as insulin, cholesterol lowering medications and other drugs. Walgreens CEO Stefano Pessina said he was “not particularly worried” about the move. It remains to be seen whether or not Amazon will succeed, but the advantage is with Amazon.
What other regulated industries might Amazon be interested in? Life insurance companies have been in fear of Amazon entering their marketplace. It is well known that the life insurance business model is very inefficient. What about health insurance? Real estate? Others?
Only time will tell.