JetBlue Rocks The Outsourcing Argument.

Posted by: Bruce Nussbaum on October 18, 2005

We’ve all heard the economic arguments about outsourcing—the good, the bad and the ugly ones. A most compelling point is that outsourcing is a deflation phenomenon. It’s all about cutting costs which lead to lower prices, not to mention lower wages.

But JetBlue is proving a counter-argument—that the real forces behind deflation are technology, innovation and domestic market competition, not just globalization and lower costs of production overseas. Witness the new JetBlue flights between New York and Boston. JetBlue has bought 100 of the new Embraer jets that fly shorter routes with about 100 passengers.

The new jet planes and engines by GE allow JetBlue to cut the one-way ticket price to $25 for tickets bought by this Thursday. After that, the flights will cost between $40 to $120. This pushed American Airlines to begin offering $25 tickets on the same route. Delta introduced a $40 fare.

It may also be that excess liquidity—available capital—is a factor. JetBlue was able to easily raise the money to buy the 100 new short-haul jets. This added capacity, plus JetBlue’s reputation as a great consumer experience, knocked down prices.

Companies are under the gun for outsourcing. The reality of the global marketplace is far more complicated.

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It sounds great however hypocritical because I do have information that jet blue has actually used an out sourced company for its customer service especially during the cut over to the sabre system

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About

Want to stop talking about innovation and learn how to make it work for you? Bruce Nussbaum takes you deep into the latest thinking about innovation and design with daily scoops, provocative perspectives and case studies. Nussbaum is at the center of a global conversation on the growing discipline of innovation and the deepening field of design thinking. Read him to discover what social networking works—and what doesn’t. Discover where service innovation is going and how experience design is shaping up. Learn which schools are graduating the most creative talent and which consulting firms are the hottest. And get his take on what the smartest companies are doing in the U.S., Asia and Europe, far ahead of the pack.

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