Market Corrections: Offshoring To India Getting Expensive
from the what-a-surprise dept
A few years ago, when tech jobs were still difficult to come by there was a series of silly articles pushing for protectionist policies that would not let companies offshore jobs. It doesn't take a very thorough understanding of economics to see why this is a bad idea. It makes the US companies a lot less competitive, and simply makes them more likely to go completely out of business -- meaning those jobs would disappear anyway. However, that said, we've been pretty vocal from the beginning that those who were rushing to offshore jobs were ignoring the hidden costs of offshoring -- and that many would regret their decision to go offshore (something that proved to be true). It was usually done as a way to cover up a problem at home, with the hope that sending it overseas would magically fix the problem. The reality is that it often made it worse. Managing an overseas team can be quite difficult, and slow down the process considerably. However, more importantly, market inefficiencies only last for so long -- and some companies are noticing that offshore Indian developers are getting a lot more expensive and don't represent such a good buy any more.
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
Reader Comments
Subscribe: RSS
View by: Time | Thread
No Subject Given
[ link to this | view in thread ]
No Subject Given
[ link to this | view in thread ]
Re: No Subject Given
I vote for an "all in" policy - Let's just send everything over there, forget the people here in the US and save our selves decades worth of depreciating lifestyles.
[ link to this | view in thread ]
No Subject Given
[ link to this | view in thread ]
Yeah, offshoring makes companies competative, howe
I know I sound isolationist, but I just don't see where any of the economists who talk about the good of outsourcing relate it to the larger problem of further limiting the job pool in the states. What's good for the corporate bottom line isn't always good for the population
so, in conclusion, aside from asking the American population to take a pay cut to make ourselves competitive, what do we do?
[ link to this | view in thread ]
Re: Yeah, offshoring makes companies competative,
If, because they can't stay competitive, the companies go completely out of business and everyone loses their jobs... how, exactly, is that good for the population?
The answer is to keep innovating. We've done it before, and we've been able to build new jobs through continuously innovating. Right now, in the tech industry companies are desperate for good developers here in the US because the market has grown thin again. Innovation and new products create new jobs -- and companies that recognize the need to have local employees will keep hiring.
There's never been any indication that jobs are all disappearing -- despite the doom and gloom reports from some.
[ link to this | view in thread ]
Offshoring to india getting expensive.
from the what-a-surprise dept.
A few years ago, when tech jobs were still difficult to come by there was a series of silly articles pushing for protectionist policies that would not let companies offshore jobs. It doesn't take a very thorough understanding of economics to see why this is a bad idea. It makes the US companies a lot less competitive, and simply makes them more likely to go completely out of business -- meaning those jobs would disappear anyway.
Whomever agrees that stopping exporting any type of job prevents a US company from being competitive is an idiot. I'll you what, you go to school in a top field and then train yourself and the job trains you for 10-12 and all of a sudden your company exports its tech support to india and you tell me how loosing your job is a good thing. If all companies do this then how can the average US citizen or dweller can afford what those companies are selling if we have no jobs? Its the inadequacies of the companies management thats causing the problem not the technicians. Maybe they need to offshore the management.
[ link to this | view in thread ]
Re: Yeah, offshoring makes companies competative,
Have you been living in a vacuum? Industry has gone high-tech, while our educational system is turning out low-tech, illiterate broom pushers.
Also, in the US, people who have skills are likely trying to climb the corporate ladder. Good technicians become managers, who no longer do any real work. Meanwhile, the only source of good technical staff is New Dehli (pick your foreign city). You just don't find that many good technical people who want to stay in their current position.
At the other end of the scale, in the US you've got unskilled people who can't operate a computer and a phone set, so they can't displace the average offshore call center attendant, much less a skilled engineer or technician. Others think the government owes them a living, so aren't trying to get an education or learn a valuable skill. Why should they when our government will pay them to sit around on their brains, give them food stamps and free medical care.
What do we do, you ask? There is no easy answer, but trying to put a bunch of unskilled people into high-tech jobs isn't going to cut it. It's got to start with education, and since you had to bash the president in your comment, let me reiterate for you that he has spent more on public education than anyone. That's where it starts.
When I was a kid in the late 60's and early 70's, you just didn't have people getting passed on from grade to grade. Kids learned how to read, write, and do basic math. Now we've got people graduating high school who can't read! They can't count money so the cash register does it for them. Are you getting this? I hope so.
This country needs to wake up and start becoming competitive again.
[ link to this | view in thread ]
Re: Yeah, offshoring makes companies competative,
The problem still remains, I don't necessarily disagree with you in saying that much of the US workforce isn't prepared for high tech jobs, however, I will assert that most of the work force isn't high tech in most countries. Manufacturing and low level service jobs (broom pushers) constitute the bulk of the work force in most economies, always has. My assertion was that since in the late 70's till now we've all but let go of most of the positions that non-college people have tradionally held (think auto manufacturing, steel, etc), what do we do?
Also, I didn't "bash" bush I merely stated that his proposal to create this "resident worker" program would only exasterbate the problem of US nationals having a smaller pool of jobs to choose from (and would drive the wages of available jobs lower). Don't be so thin skinned and I would like to stop this before it turns into the standard "Bush is evil/Bush is great" debate I see on so many other threads.
Nostalgia is a wonderful thing, but I don't necessarily agree with your assertion that kids now are somehow less educated than they used to be. A lot of studies suggest that more kids are more literate than they were in the 1950s and 1960s because of almost universal access to primary education. I will agree with you that kids of today seem less "motivated".
So, the answer I seem to hear is that we need to be more "competitive" and "innovative", from you and Mike. The problem is I think you're both missing out on part of the equation that I keep harping on. In "the good ole days" we not only innovated, but we produced lots and lots of stuff. High tech is great but I just don't see how that's going to be the primary economic sustanance for a country our size. Unless we do something to increase the manufacturing sector, I still assert we are in deep trouble.
[ link to this | view in thread ]
Re: Yeah, offshoring makes companies competative,
Which is why every company I know is trying desperately to hire developers and can't find them. I don't think we're in that much trouble just yet. There are an awful lot of jobs being created these days. What makes you believe there aren't?
[ link to this | view in thread ]
Someone tell that to Dell
Here's an Article from a source in India about it (they seem quite happy about it all, for good reason)
I'm sorry, I know this was probably more about developers, but I am just sick and tired of dealing with mindless script drones
on the other end of support lines who, despite being touted as "fluent english speakers", are anything but,
and where I know more than they do, but I still have to go through their brain numbingly stupid list of useless "fixes"
otherwise their heads explode, and they loose their place in their script, start over or repeat the same question 5 times,
and all to finally end up proving that, yes indeed, the hard drive is dead like I told you in the first 10 seconds of my call - 20 minutes ago.
[ link to this | view in thread ]
Re: Yeah, offshoring makes companies competative,
They have a culture which values knowledge and education. Their politicians tend to be highly educated (not as lawyers) in highly technical areas.
The indian kids that are able to apply to IIS (India Institute of Science) keep MIT, Stanford, and Harvard in their back pocket as second choices.
Combine this culture of knowledge and education with a (comparably but as Mike points out less so everyday) cheap workforce and you have a technical powerhouse. We are just beginning to see the tip of the iceberg from India.
Wait till they get tired of doing our work and actually start competing head-to-head. Microsoft, IBM are you listening? At some point they will want ownership, not employment.
So I am firmly in the camp that says the US needs to step it up on the education front. The problem is how to get it done. We have an unbelievably strong teacher's union that doesn't seem to have measurable improvement as a goal, a culture that cares more about football than the education of our children, and politicians concerned about where there next vote is coming from.
We are driving ourselves into obsolescence. We are not educating people for the white-collar jobs of tomorrow.
That leaves blue-collar jobs. Well, as pointed out, there too we have real problems. Remember when we used to have a steel industry? Let's see, whom is poised to become the biggest steel company in the world? Why that's right folks, an indian company: Mittal Steel Group.
I'm not all doom and gloom I think their are excellent opportunities for my kids in the home maintenance and service industries.
[ link to this | view in thread ]
No Subject Given
the supply of natural resources on this planet is finite. the US and the western world has had their share. Its just natural for 2 B people to assert their right and gather their fare share in this world. It sucks when you are at the receiving end, but like it or not, the capitalists have bought this problem upon them, and this is the way its going to play out.
Unless there is a implosion in the 2B population, the trend is clear. watch out below.. Bush and Greenspan has let the genie out of the bottle
[ link to this | view in thread ]
Re: Yeah, offshoring makes companies competative,
Are these all jobs that Americans are just as equally unskilled for?
I do agree that as a Nation we have blown it in education. However, you guys at the top are going to get eaten eventually as well because when the little man or middleclass "American" can't afford the product or service that you represent or sell, guess what...YOU WILL HAVE NO COMPANY!!! AND YOU WILL BE OUT OF A JOB AS WELL BECAUSE GUESS WHAT…YOUR TOO “OVERQUALIFIED”
PUT AMERICANS TO WORK AND STOP JUSTIFYING YOUR GREED!!!!!!!!
[ link to this | view in thread ]
Re: No Subject Given
[ link to this | view in thread ]
Offshore Myths
1) No US workers available for the high-tech jobs. There are plenty of IT workers available in this country; the IT unemployment rate (including underemployment) is close to 20%. The problem is that US companies don't want to pay the US rate when they think they can get an Indian programmer for less than WalMart wages.
2) India's better educational system is beating the USA. Another myth. India infamous IIS only churns out technical graduates, it still pales in comparison to the best US colleges which turn out a much more broadly educated graduate. The US public schools need some serious attention, but the US university system is still the best in the world by far (they all come here to go to college; nobody goes to India for their colleges).
3) India provides quality low-cost IT services. India's IT costs are going up 20% per year; in fact some Indian companies are 'resourcing' to China and Pakistan. As pointed out in this article, the gap in the cost of IT services in India and this country is narrowing. US Companies are already looking at ridiculous proposals like going to Russia for dirt cheap IT costs. Also what can't be overlooked is the poor quality of India IT services. Although it is a lot better quality than when I started in 1990, India IT services is still the 'fast food' of programming.
That being said, my 15 years of offshoring experience has found a model that does work. For lower complexity, shorter duration, utility-type projects, outsourcing to countries like India (as long as internal company controls are in place) has proven to be a cost saver. It just takes years of 'practice' to find the right type of project.
[ link to this | view in thread ]
Is anything truly gained?
[ link to this | view in thread ]
Re: Someone tell that to Dell
Unless, of course, you move your entire operations there.
Yes Dell is hiring another 5,000 workers for its India operations, a 50% increase in its India workforce, which is significant. Here is the story.
The article goes on to mention this will be Dell's fourth call center in India. It also mentions it wants to double its staff at a nearby testing center, and build their manufacturing plant there. It says the majority of Dell's plants are now located outside the U.S., six out of nine.
Looks like Dell has been busy in India these days.
[ link to this | view in thread ]
Can't agree
Yet none of the directors of these companies are taking pay cuts. My entire department could be salvaged by the top people taking a 20% pay cut, but hey I am not a big enough fish.
So Mike next time your at McDonalds, please don't get mad when I ask you if you want fries with that, it's just about all I have left. I just don't see where all of the "new" jobs are, and believe me I have been looking since we were told.
[ link to this | view in thread ]
Re: Can't agree
[ link to this | view in thread ]
Re: Yeah, offshoring makes companies competative,
---------------------
I had been laid off for a long time, and it was easy to blame the international outsourcing. I'm heartened by the fact that outsourcing is not a panacea. Right now I am working as a consultant, and there's a blend of folks from the U.S. (here) and folks in India, and more outsourcing is going on all the time. Clients like having me around because I'm visible, very quick to respond, and am very productive. I can usually beat the outsourcer's average turnaround time. Maybe that's part of what will continue to happen - permanent jobs will continue to evaporate, outsourcing will continue, and consultants like me will be asked to fill in the gaps on an ad hoc basis. That's my 2 cents, admittedly limited by my point of view.
[ link to this | view in thread ]
Re: Yeah, offshoring makes companies competative,
[ link to this | view in thread ]
Re: Yeah, offshoring makes companies competative,
It will happen so soon your heads will spin. With education in US in decline and our government leadership shifting from a fact-based reality to a belief-based reality, our best hope is in fact that China owns so much of the United States' future, in the form of debt, that China has to ensure our economic failure is very gradual and drawn out. The free market so beloved by some will guarantee labor will receive the least amount of money possible and wealth will accumulate in smaller and smaller enclaves. Geographic constraints are disappearing, due to cheap telecomm and efficient shipping. Providing compensable value will be more and more difficult in high cost environments like the US and Europe. Jobs that will remain will be either protected by the government (unsustainable in the long run) or unshippable; or multinational.
Since the US has dropped out of the economic competition as a nation (viz free trade agreements) the US government will have to settle for managing the national debt, try to distract its citizens with wars and ideological "struggles", and self-preserving reconstruction of the constitution.
The people of India are not stupid or illiterate; they will soon learn our jobs better than us and beat us at our own game.
No worries.
[ link to this | view in thread ]
Re: Can't agree
I am not talking about semi-skilled workers, I have 8 years IT experience in a medium to large scale environment, and 7 before that in smaller environs, not installing office and typing docs.
[ link to this | view in thread ]
Re: Yeah, offshoring makes companies competative,
I just don't agree that the job market is depressed. I have a great job in IT and am not looking, but I do take the occasional glance at various job sites. There are tons of good-paying IT jobs to be had. The problem is they're in Atlanta or Houston or some other place hundreds of miles from my home and family. I'm one of those who simply will not move, regardless of the payoff.
In regards to manufacturing jobs being lost, I can see why the auto makers (and others) replace people with machines as much as possible. How could they not, when the unions have driven wages through the roof for people who turn bolts and snap together plastic parts. I've always said that I will work any job that pays well, and I would jump at the chance to work a job with little responsibility and good pay and benefits. Why do you think a Ford Taurus costs $20K with a few niceties? It ain't the innovative engineering, it's the cost of labor.
I also agree with some of the other posts that executive management tends to bleed companies of money that could be used to keep jobs in the US. But as Frank told Tony in _Scarface_, "Never underestimate the other guys greed". At my last job, they eliminated Christmas bonuses the same year they gave the CEO a $6Million bonus (on top of his $2.2M salary). That company had 12,000 employees at the time, and the bonus had been $500 for each full time and $250 for part time, or a lot less than just the CEO's bonus. This doesn't count the bonuses of the CIO, CFO, COO, etc., etc. Personal greed drives a lot of people at this level; the worker bees are just a commodity, or worse, a liability to be minimized. But don't get me wrong; I'm not a socialist, but I do believe you reap what you sow in life. As an example, the CEO aforementioned died of a massive heart attack 3 years before he could retire to enjoy any of that money.
You may remember many years ago that a textile mill burned to the ground, potentially putting several hundred people out of work in a small town. The story was covered on _60 Minutes_. What did the CEO do? He paid every single employee their full salary the entire time the factory was closed. And as a result, every single employee came right back to work when the factory opened, increased efficiency and production, had fewer accidents and sick days, and were loyal and committed to their company. They also had ZERO turnover for about 5 years after re-opening. This CEO put aside his personal greed in favor of the working people who depended on him. Too many people in these type positions will simply cut and run when things go bad.
[ link to this | view in thread ]
Cant Agree
"We don't pay nearly as much unemployment as we used to because we have shortened the time you can collect."
I would like to know what the true tally of unemployed people in this country is. They stop counting you after you have exhausted the time allotment they give for paying unemployment.
Then you are stuck w/ no income and are not even given enough respect to be considered an unemployed American.
I am sad that people want so badly to believe the numbers that the government wants to "shove down our throats"
[ link to this | view in thread ]
Them dumb, edumacated bankers!!
"Cost Cutting Prompts WaMu Layoffs
Washington Mutual's plan to move some of its functions offshore has resulted in mortgage job layoffs in South Carolina. The repositioning is part of a bigger plan to make the thrift leaner, more efficient and more profitable."
There is that "profit" werd gain...in stark contrast to the importance of people...
Gonna get fun after all our cotton pickin equity is gone what are we all going to live off then? Oh and by the way what will happen to the econnomy when the work horse that has carried us since 911 is gone? (MORTGAGE INDUSTRY)
Jobs and the salaries attached to them may start hitting home more then. Should be interested to see how the American people are going to deal with this reality once it implodes.
They are gonna be pisssssseeeedd, and whoa I feel bad for whoever was responsible for this once they do wake up and smell the coffee.
[ link to this | view in thread ]
Re: Can't agree
You would prefer that the company can't compete at home and the entire firm goes out of business? That's the thing. The people who complain about offshoring never seem to take into account the fact that if the company goes out of business they'd lose their jobs anyway.
As for your complaint that there aren't any jobs, take a look around. Just about every company I know is desperately looking for *skilled* programmers.
[ link to this | view in thread ]
Re: Can't agree
And a lot of companies will create a position just so they can grab someone with real skills from a competitor instead of having to stick with their usual gang of paper this-or-that engineers/techs who don't really have the skills that the paper says they do.
So, if anyone finds themselves flipping burgers, maybe that's what they're really qualified for if they can't find gainful employment in their chosen field.
[ link to this | view in thread ]
Re: Can't agree
What f'ing planet do you live on? Wait, your in IT, given your attitude, you must be a CIO! How was your chistmas bonus you delusional unsympathetic cretin.
So, you think the corporation would go out of business if they didn't offshore eh? Buy into that do you? Profit is their motive and they no longer want to pay US labor costs. They're making money, they just want to make MORE!!!!
Multinational Corporations are sucking the life blood out of of everything they touch. They get a free ride to PUT JOBS ON FOREIGN SOIL. Tax breaks, I think their called, to promote foreign trade.
And your part of the problem. Just keep putting your head in the sand and speak up on behalf of your temporary employer. Help mask the problem while something can be done. If fact, just grab your bible and head South to the promised land while your at it!
[ link to this | view in thread ]
Re: Can't agree
Hmm. So you would prefer that, instead of US companies, all of these workers go work for local companies, where they'll be more competitive, making it more difficult for US companies to compete, driving them out of business?
Ok. That's your choice.
As for me, I have job skills and the willingness to adjust as the market does -- rather than whine about how the world is changing without me. I'm not worried.
[ link to this | view in thread ]
Re: Re: Yeah, offshoring makes companies competati
What is the difference between putting unskilled people in call centers here to read questions from a flow chart than to outsource it overseas. At least when we use the unskilled people here we can understand them and they can understand our responses. Having them here also creates more jobs in the US.
The language barrier is rediculous, those stupid voice response systems that companies have are easier to talk to.
[ link to this | view in thread ]
Don't hang up on them
[ link to this | view in thread ]