A few weeks ago, Andrew Kaczynski at BuzzFeed.com published the John McCain campaign’s 2008 opposition report on Mitt Romney. I skimmed through it – it’s an even 200 pages – and the thing that caught my eye was Stream International, Inc.
Stream International isn’t a household name, but just about anyone with a computer has interacted with them. According to Wikipedia, Stream Global Services (new name) is “a global outsourcing solution provider, … with more than 30,000 employees in 50 service centers of 23 countries.” Their major customers include Microsoft, Dell, and Hewlett-Packard.
In 2008, the McCain campaign flagged Bain’s heavy involvement in Stream as a vulnerability. In the summary, they pointed out that “At least two Bain Capital companies – Stream International and Modus Media – focused on outsourced technical support services, expanding facilities abroad while contracting operations in the United States.”
In the mid-1990’s, computer tech support, for hardware and software, was generally performed by in-house staff. Some fast-growing companies – Microsoft, Apple, Hewlett-Packard, IBM, etc. – had a hard time keeping up with the demand for support created by their products. This was especially true of software companies, whose production costs didn’t change much when more people bought their products, but their support costs did.
I was working in tech support in 1995 for Symantec, which had experimented with Stream’s outsourced tech support for a few products. While I was there, the company stopped using Stream, apparently because the quality of support was very bad. Among the tech support staff, Stream was generally derided as a below-average provider. People who had worked at Stream and moved to Symantec were relieved to find a place where they could get substantial training and adequate time to spend solving customer problems. Of course, that’s all subjective, anecdotal recollections.
What’s not subjective is that Romney co-founded Bain Capital in 1984 and left in1999. According to the McCain opposition report, “Bain Bought Corporate Software Inc. In 1993, Merged It With R.R. Donnelley & Sons Unit (With Bain Holding Minority Stake) In 1995 To Create Stream International.” From then until October 2001, Bain held substantial influence as an investor in Stream, and Bain staff held a variety of senior positions at Stream. When Bain increased its investment with a leveraged buyout in 1999, and a full acquisition in 2000, Stream appointed Longtime Bain Capital Business Associate Scott Murray their President and COO.
By creating Stream, Bain Capital accelerated the trend among high-tech firms to outsource their customer support work. This isn’t necessarily a problem. Though it removes many of the soft, informal connections between support staff and the rest of the business, outsourcing tech support to another company doesn’t necessarily hurt the economy or individual employees.
The real downside to outsourcing is that it lays the groundwork for moving jobs overseas to lower-cost environments. While Stream was growing domestically, it employed the bulk of its staff in the US, with 3,090 domestic staff, and 420 international staff as of October, 1997 (according to their SEC filing). Stream had filed for an IPO in 1997, but never completed a public offering of shares. They withdrew their offering on Sept. 14, 2001, but SEC filings in the interim provide some insight into the business.
Today, Stream Global Services employs 30,000 workers in 50 call centers. Nine of their call centers are in the United States. According to a 2010 white paper on their web site, Stream is operating in the US and 21 other countries. Stream isn’t the only company which outsources tech support work, and outsourced tech support isn’t the only cause of job flight from the US to countries with low labor costs. But they’re part of the problem.
So thanks, Mitt, Bain, and Stream, for moving thousands of entry-level jobs in high tech overseas. Hopefully Romney’s plan for economic recovery and growth is different from the Stream model, but I wouldn’t count on it.