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Offshore Outsourcing Threatens Offshore Outsourcing
Posted by
michael
on Fri Jun 06, 2003 08:54 AM
from the giant-sucking-noise dept.
from the giant-sucking-noise dept.
theodp writes "India offshore tech support companies may soon face job losses as U.S. companies such as IBM, Intel, Hewlett-Packard, Oracle and PeopleSoft explore countries with even cheaper sources of technical labor, including Romania, Russia, Hungary, the Czech Republic, the Philippines, Singapore, Thailand and Vietnam. Concerned that outsourcing might be outsourced from India in the near future, a Bangalore call center owner said 'It's hard to know where it will all end. Is there a country where people will work for free?'" There's a Newsforge story about the same subject.
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Offshore outsourcing troubled? (Score:5, Funny)
Oh well. I can always fall back on that SCOX stock.....oh wait.....
Why are you complaining (Score:5, Funny)
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Captain Obvious Strikes Again! (Score:5, Funny)
Now, when they start outsourcing management...that's when I'll be happy.
I told you so... (Score:5, Interesting)
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Re:I told you so... (Score:4, Insightful)
First of all, if anyone actually said business is about saving the world, then you were stupid for believing them. Of course its about making corporations rich! And let's not obfuscate things, it's about making individuals rich, stockholders specifically. Which is awesome! That means that they were able to present someone with a better alternative use for their dollars than anyone else at a moment in time.
Anyway, the whole free trade thing...I live in Texas. I'm tremendously concerned about: <MASSIVE SMARM>
Come to think of it, I'm a programmer living in Dallas. I'm very concerned about all of the IT jobs that have gone to Austin and Houston. Perhaps I'll petition my local government to restrict companies from farming out jobs to them.</MASSIVE SMARM>
Here's the point: I pursue those restrictive policies, and so Austin does too. Or Florida, or whatever. Of course, Florida wouldn't care about the orange grove jobs they'd lose to Texas, so they'd do something like Texas-produced steel, or something we specialize at, just like Chicago specializes (duh) in Chicago tourism.
To an economist, this is a real head shaker. This whole sequence I'm talking about is called reciprocity [freetrade.org]. It's a solved problem in game theory. The only people who argue about it are people who haven't read and understand the solution, i.e., 90% of the whole world, unfortuately.
Now that I've kind of dropped a nuke on this whole argument, I'm going to pull back a bit. There is such a thing as hidden costs in free trade. I obviously understand fundamentally that free trade is a Pareto optimal [gametheory.net] solution for nations, and yet, I don't think we should trade with China under certain circumstances. Why? Because the cost of goods carries a moral cost borne in production not represented by the price. If I buy a shirt from China, I'm not entirely sure it wasn't produced by PoliticalPrisonCo (motto: where products are made by people who think like Americans!) I'm open to the idea that that factor might exist elsewhere. I don't, however, see that factor in dealing with India.
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Re:I told you so... (Score:5, Insightful)
This can be clearly seen in the French governments illegal blockades on British beef. Years after they were taken to court and found to be blocking imports for no valid reason, they are still doing it, because otherwise their rural farming communities would go bankrupt (and agriculture is a powerful voter influence in France).
The same is true of steel import tariffs imposed by Bush.
So, we can see that fundamentally the concept of free trade is broken - like most of classical economics, it doesn not work in the real world, and to pretend it does is to deny reality.
Most "real" economists have realised that free trade is not something that should be preached, because despite best intentions it has simply become an abused idea. "Free trade" in practice meant the ability for the US to freely export its goods, but not the other way around (and Europe is just as bad in many respects). This has led to crippled economies in the third world.
So, to say it's a "solved problem in game theory" is correct - it's a solved problem in theory only. In practice, it's not a solved problem and people are looking at alternative economic constructs to help increase wealth and distribute it more fairly (see the work of Lietaer and Gesell for some examples).
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Clarification (Score:4, Insightful)
Yes, we do trade for imports,....
Unilateral Free Trade
This is a joke, the aim of our corporate government is not to get imports into the US, but to get our corporations into their markets, which is why they only trade with countries that trade with us.
Ok, it seems like the two quotes are contradicting each other. By "we" in the first statement, I mean the people of the US. In the second statement, I am referring to the corporate government, whose motives are different, IMO. There are also two kinds of imports, which I didn't necessarly make clear. There are intra-corporate imports, which is what corporations want, and their are imports that come from foreign companies which is what the rest of us Americans should desire. The reason we want the latter, is because foreign companies will typically return more of the profits to that country, which will mean higher wages for countries we trade with, which means more consumption by that country and more money flowing back into the American middle class. Intra-corporate imports means lower wages, and the profits get returned to that company and it's investors, who will simply hoard that money.
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Re:I told you so... (Score:5, Insightful)
One would think that more than two centuries after The Wealth of Nations was published this sort of dark, superstitious nonsense would have been extinguished by the light of reason. Sadly such is not the case.
The beauty of a market is, provided that fraud is not allowed, the greed of all paradoxically leads to the betterment of all. Yes, the corporation wishes to spend less, and so goes with a cheaper supplier of the same good. Well, guess what--that's better. If B can produce the same as A for less, then it is a waste of one's money to use A; it's also a waste of A's time. Going with the cheaper supplier rewards those who do more with less; it is economical.
You know this, I'm certain. Who does not shop for the best prices on groceries? Why is it bad for an employer to shop for the best prices on labour? Of course it's not.
There is the law of comparative advantage to keep in mind as well. If A is better at X and B is better at Y, then it is best for A to devote all his time to X and B to devote all his time to Y; this ends up yielding far more of both X and Y than otherwise. If India is better at call-centre staffing at the US is better at R & D or at finance, then it is best for India to focus on call centres and the US to focus on R & D or finance. This yields more call centres (a good thing) and more research or financing (also a good thing).
The message in return being sent to Americans isn't,"Thanks for helping us get to where we are.", but instead was, "Other countries are out-competing us, you better start working more hours." Of course, what they don't state explicitly, is that you are simply competing with another branch of your employer in a different country.
Hey, you have no right to a living. Why should anyone pay you more to work less? It's insane, like buying lettuce for $50/head. That's what competition is about. It's rough, but that's Real Life.
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"*s" don't do shit, PEOPLE do shit (Score:5, Insightful)
IMHO, there is a real difference here.
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Price? (Score:4, Interesting)
Re:Price? (Score:5, Interesting)
If a company can churn out the crappiest possible software at the cheapest possible price in the least amount of time, and then have their marketing department convince Joe CEO that their software is the "LEADING!!", "BEST-OF-BREED!!", "INNOVATIVE!!" solution... *shrugs*
Will someone please illegalize marketing? kthxbye.
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Re:Price? (Score:5, Interesting)
Better yet, check out this other article [wired.com], linked from the above one.
Obviously not all companies use these kinds of practices to simulate Americanness in their tech support people; some companies make no effort to disguise their people as being people someplace other than who and where they are. But apparently at least some companies do this, and apparently at least some of their US customers are indeed fooled by it.
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IS this what inspires terrorism? (Score:5, Interesting)
Other reasons... (Score:5, Interesting)
Most of the countries named have an actual infrastructure. EG I doubt Romania, Russia, Hungary, the Czech Republic have electricity problems.
Many of the Eastern European countries are not that far away from the Western markets, with some actually joining the European Union.
All in all it just makes for simpler business....
Funny though... (in an ironic sense)
Guess this means. . . (Score:5, Interesting)
India offshore tech support companies may soon face job losses as U.S. companies such as IBM, Intel, Hewlett-Packard, Oracle and PeopleSoft explore countries with even cheaper sources of technical labor, including Romania, Russia, Hungary, the Czech Republic, the Philippines, Singapore, Thailand and Vietnam.
What's good for the goose is good for the gander. American employees hopefully won't lose any more jobs than they have already; but it kinda sucks for the Indian employees who are going to be out of work now.
The biggest problem with a global economy is that it caters to the lowest common denominator. The second biggest problem is, you more often than not get what you pay for. I have to wonder if American IT companies are even concerned with the quality of their technical support anymore?
Re:Guess this means. . . (Score:5, Funny)
Maybe this will lead to an explosion of Indian blogging.
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Re:Guess this means. . . (Score:5, Interesting)
Or put another way, one of the great things about the global economy is that jobs can migrate to those that want them most. This is an interesting phenomenon to see, really - after decades of IT/IS endeavors increasing efficiency and achieving headcount reductions across a variety of fields, American IS professionals are now facing the same pressures themselves (myself included). While the recent currency weakening might slow the tide, this appears to be a permanent shift.
For those who wish to remain in IS, the high ground appears to be in the analyst realm, or heading towards smaller companies that haven't achieved the scale whereby outsourcing makes sense...
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Or, to put it another way... (Score:5, Insightful)
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but what's your solution? (Score:4, Insightful)
But you claim this is justified?
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Perhaps.. (Score:4, Insightful)
is cheaper the real answer? (Score:5, Insightful)
this kind of thing haunts most developers - and, every company out there who needs to get something done is always seeking for the smaller cost/quick solution for all their projects. its also become common that a lot of developers are lowering their rates just to get work - its not looking good at all..
meanwhile, i perform consulting services - and, i simply refuse to budge from my standard rate for employment. they pay a little more - but, they will get what they pay for. i have had many clients do development in india, then, come to me - and, for a little bit more they get the product faster, of higher quality - and, are very satisfied.
the sooner these companies realize cheap labour has its down-falls, the better of they will be.
Re:is cheaper the real answer? (Score:5, Insightful)
Software development is not some special industry that is exempt from the laws of macroeconomics. If you don't have some competitive advantage over the next guy or the next country, then, guess what, you're going to have a hard time getting work. I hear that Buggy Whip manufacturing is an industry that's about to boom; maybe it would be a good time for a career switch.
meanwhile, i perform consulting services - and, i simply refuse to budge from my standard rate for employment. they pay a little more - but, they will get what they pay for. i have had many clients do development in india, then, come to me - and, for a little bit more they get the product faster, of higher quality - and, are very satisfied.
Well there you go. As long as your salary is justified by your productivity, then you're in good shape. Cheaper is not always better.
I suppose there are activist types who think that the development of the third world is morally wrong--that they should be dirt poor forever. That's what's happening here. The high-tech industry in India is becoming sufficiently developed that it is starting to demand higher wages. For companies seeking the lowest possible price, they may begin to find it elsewhere, until 'elsewhere' becomes sufficiently developed also. But, there are more factors to consider than just price.
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Technical support dumbness... (Score:5, Interesting)
Farhat Gupta, owner of several Bangalore call centers, said that little attention is paid to technical training, as "all the answers are always on the computer screen in front of the workers. We exist for people who do not want to use the Internet themselves to find their own answers."
The only time I ever call technical support is when checking the manual and web doesn't get me the answer. If the person on the other end of the line has no more information available to them, what's the point?
Re:Technical support dumbness... (Score:5, Insightful)
But the call center full of untrained people in India with computer screens guiding them? They're fine for about 99% of the clueless users out there who don't realize that the answer is in the documentation.
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Cycle of Poverty (Score:5, Interesting)
Take for example, the automobile industry. In the early 1980's, the US auto industry had some of the highest wages/benefits for auto manufacturers in the world. Alot of those jobs went overseas to Japan/Korea who (at the time) had lower wages (and better quality). This depressed US wages. Now, the reverse is true. Both German and Japanese automakers see that US wages are lower and have located plants here.
So goes it with IT. US coders were first to the trough and wages went up. Then the multinats moved to India who trained their people well and had low wages. Indian coder's rates go up and now the multinats are headed for Eastern Europe. As tech wages get lower in the US and we refocus on quality, the multinats will move coding operations back here and the cycle with start anew.
Re:Cycle of Poverty (Score:5, Insightful)
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Re:Cycle of Poverty (Score:5, Insightful)
No, you need to find a high-paying occupation that by its nature cannot be outsourced to foreign countries.
This is why so many intelligent Americans end up being lawyers.
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Re:Cycle of Poverty (Score:5, Insightful)
Thre are now more educated people in India, they have a better economy and they've got moer infrastructure than before.
As the money gets pumped from place to place, there's a gradual (and slow) increase in the quality of living.
Eventually you run out of people who will work for rice and you have to step up to paying a slightly higher amount, and the big cycle begins again.
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About time... (Score:5, Insightful)
When your business consists of undercutting others, and providing services to willfully "outcompete" someone out of a job, don't expect pity.
As a piece of advice I once heard goes: "If you are stupid enough to date someone who dumped someone to be with you, don't be surprised when you get dumped, too."
There is a country where people work for free (Score:5, Funny)
The Race to the Bottom (Score:5, Insightful)
Once one company gets their employees to go along with a heath care cost increase or a salary cut, the other companies will rush to offer just as low pay and benefits. They call this "competitive" compensation. So if the jobs can be outsourced for cheaper, then the majority of businesses will all race to find where that is. It happened with manufacturing jobs, it is happening with service jobs. I don't really know what (if any) jobs are "safe."
Also, don't think this automatically translates into lower prices. It doesn't make the products better or less expensive, just cheaper to make. How much in lower prices do you pay for your Nike tennis shoes made in Burma?
Yes there is! (Score:4, Funny)
Yes, such a country exists. However, to be part of this country you need to have a big needle stuck in the back of your head and your whole body gets submerged in Astrolube. Your then stored in this "pod" where this "dream" of your life is pumped into your brain by a big computer.
Now, in this dream your actually answering the phone and solving technical problems and you only "think" your getting paid for it. In real life, that money is getting collected so that more people can get plugged into the machine to make them more money...
There was this dude who realized it was a dream and managed to wake up. He now cleans the floors in the building that holds all the people and the big computer. We hear him wanding around go "Damn Red Buritto..."
Some thoughts about cash flow (Score:5, Insightful)
- Automatization leads to fewer and fewer workers being needed to do the same amount of work, meaning higher profits for the producer.
- Outsourcing leads to those workers being paid less and less , meaning again higher profits.
- This, in turn leads to higher unemployment rates and a higher number of workers with low wages.
- While any individual company might profit from cost-cutting measures, wide-scaled implementation of these measures will lead to too few consumers with enough money to buy the products.
- Thus, to keep the system going, those profiting from it - the producers - must eventually give back enough of the profits to keep the whole thing going, otherwise the distribution of wealth will be too uneven to allow the system to work.
(If you happen to be immoral, other possible ways to boost the economy would be forceful destruction of goods and/or workers, which would a) create the need for rebuilding the destroyed goods and b) lower unemployment, because after the destruction there'd be not only more work but also less workers left. This process is commonly known as "war".)
Preemptive anti-xenophobia post (Score:4, Insightful)
If we've been smart (this is slashdot, right?), we've been saving money to help us through tougher times. More jobs will always be created.
History is not on the side of business (Score:5, Interesting)
The textile industry, at least what I consider the modern, industrialized version of it, began in and generated considerable wealth for England. Then, with the promise of cheaper labor, the bulk of textile manufacturing moved to the Americas, specifically the Carolinas, Georgia and a few New England states. The total generated wealth of the industry started to decline at this point, and another disturbing trend started as well. The distribution of the wealth began moving to a smaller percentage of people, namely the factory owners. Again, the prospect of cheaper labor induced the factory owners to move the bulk of textile manufacturing first to Mexico from the United States, then to the Far East from Mexico.
The important things to remember is that the total wealth generated by the textile industry declined with each geographic hop around the globe, and that fewer and fewer people got a larger and larger percentage of the total wealth of the textile industry.
How does this relate to IT? Well, considering that in the late 1990's we saw a mass movement of IT jobs for the US to India, and the associated wealth generated by the IT industry decline, I think the example of the textile industry is playing out again. Soon, the Indians who offered such low labor rates to win contracts and jobs away from American workers will be on the other side of the equation.
Russia, Eastern Europe and probably some African countries will do to India what they have done to America. The sad thing is that while India has been "carpet-bombing" the IT industry in the United States over the past few years with cheap labor and low costs, ultimately they've been laying the ground work for their own, future demise.
If all you offer is low costs and a cheaper price, then there is nothing to keep customers loyal. As soon as someone else comes along with a cheaper price, your customers will move to them. All because of the trend you started!
Enlish language and customs advantage (Score:4, Interesting)
Holes in the Theory (Score:5, Insightful)
So the cycle we have today, will be the cycle we have tomorrow, or hundreds of years from now, just with different industries, different technologies and different products. You'll benefit from the countries establishing better infrastructures, but did you really expect some countries to continue their civilizations on candle-power? The employment cycles and people wallowing in corporate migration-mires will continue. People will always be subject to the fear that they will lose their jobs to outsourcing. Infact it will be easier and faster every time as corporations establish a base of operations in all the potential countries, and have accumulated experience from making these shifts.
One place will always be better than another, in the eyes of a profit-seeker. Making these evaluations and determining the best choice is what executive decision makers get paid big money for, isn't it?
Outsourcing in eastern Europe (Score:4, Interesting)
Singapore!? (Score:4, Interesting)
Nice move. We need more outsourcing! (Score:5, Insightful)
Until the issue of foreign labor hits the hightest steps of corporate ladder nothing is going to be done. The funny thing is that if outsourcing is going to continue at this pace, pretty soon we'll end up in a world where only a few people will have buying power. Both American and foreign workers will not have capital; just watch the world's economy go down the crapper.
Serious Sam.. (Score:4, Interesting)
Serious Sam is considered one of the most fun games of late. It cost $20 at the store. The developers are all in the former Yugoslavia. The cost of living in Yugoslavia (and living wages, etc) are *tiny* compared to the US. Not only do they not have to sell a lot of games to make an equivalent amount of money as they would if they were based here in the US, but it proves that there are LOTS of creative and talented programmers elsewhere who can produce QUALITY work and still make a good living for themselves. Personally, I love seeing other countries offer up their best and brightest, it ups the bar for the rest of us. I like the competition!
Out of equilibrium (Score:5, Insightful)
Re:There are lots of free workers (Score:5, Interesting)
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Re:There are lots of free workers (Score:5, Insightful)
Issue: I have a software package that doesn't due what our company needs it to do and I need some modifications to it. The developers/company doesn't want to do it.
Closed Source/Proprietary: - You beg the vendor to do it, and threaten to switch if they don't. This is generally a limited threat, because of the fact that it will cost your company a huge amount of time and effort to switch to another vendor (who will have other issues). You could offer to pay the vendor for the development, but unless they are a small shop this probably won't do the trick either, or you will be paying HUGE $$$$ to them. You could have your own developers, provide some type of workaround, but this will break when the vendors upgrade/fix their code. Basically you have no good option, except to pray that the vendor will address your issue. Also when the vendor does release the upgrade, it will probably contain code enhansements that you don't care about, but will probably cause you other errors... I have lived in this world for a long time... and still do with Oracle and Microsoft.
Option 2, use Open Source: You quickly determine that nobody is going to work on the "patch/enhansement" that you want. You will need to now hire a coder that knows the language of the system (probably C). That coder will have to take some time getting up to speed on the program, and then fix it. The coder can then release that code back to the open source community, and it will "probably" make it in future releases. Now if you find yourself making significant changes to the code on a regular basis, then I would hire/contract development to give you what you want, and you wouldn't have to pay for time needed to get the developer use to the code. They can still release their code back to the open-source community, and it probably will get put in the main codebase, so you will be protected with future upgrades.
Both options cost time and money, development isn't cheap, and some companies hate giving stuff they paid for away for free. However, at the end of the day THEY ARE IN CONTROL!!!, not some outside vendor.
This flys in the face of "nobody ever got fired for buying xxx".
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Re:Open Source is the answer (Score:5, Insightful)
Whats more, I don't think I'd trust running a control system that someone had written for free. Where would I get support? Updates? Who would I complain to if it went wrong without running the risk of the OSS programmers saying 'Sod it. Can't be bothered any more.'
As for the work being higher quality, you may well be write in the case of the big and famous OSS projects like Linux, OpenOffice, Gimp and so forth, but don't go thinking that OSS === Good Software any more than Pay For Software === Good Software. You get utter tripe in both camps.
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Re:A country where people will work for free? (Score:5, Funny)
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Righto (Score:5, Interesting)
Yeah, those Indians sure are living the high-life financially at the moment.
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Re:Stay with the times (Score:4, Insightful)
"Kill or be killed" is not an enlightened guiding philosophy. It is not the principle upon which the United States or any other modern democracy was founded. It's unfortunate so much cynicism exists that this philosophy can become so widespread. It only leads to economic uncertainty, fear, and a life little better than living in a cave wondering how you are going to catch your next saber-toothed tiger.
Aspiring to be a human is not a right, it's a responsibility.
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Economic Darwinism (Score:4, Insightful)
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Re:The democratic party has no solution... (Score:4, Insightful)
Actually I think castrating the CIA would do a good bit to prevent the rise to power of types like OBL and Saddam. Ya' see both of them had a lot of help from the CIA earlier in there 'careers'. The CIA has a policy of supporting the enemy of our enemy, no matter how unsavory the character is, or what his motives are. Well, when you lie down with dogs you get fleas. And we are paying the price for our past actions now. And we are doing it again. We are, so hypocritically, allowing a terror group in Iraq to keep it's weapons and camps, because they are against Iran. I for one will not be surprised one bit when in 10-20 years we are dealing with that group forcefully after they blew up some Americans.
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