This haircut will put Al-Queda on the run.
Posted on 02/04/2004 6:50:48 AM PST by ClintonBeGone
Outsourcing of information-technology services continues to be a hot topic — and a sore point for many IT professionals. As they stand in unemployment lines, they see their former jobs being shipped off to India, where they are now done by people making one-fifth as much. It has aroused much bitterness and led to legislative efforts to restrict outsourcing in the name of saving jobs for Americans.
I can't really offer any comfort to unemployed programmers, but the process of outsourcing is good for both the U.S. and world economies. Any jobs saved in the short-run by restrictions on outsourcing will come at the expense of better jobs in the future that will not be created.
The problem really arises because India, rather than, say, Canada or Germany, is the perceived threat. We don't generally worry about American jobs going to wealthy industrialized countries like Canada and Germany, because their workers are highly paid and cannot undercut us based on low labor costs. Because Indian workers are paid only a fraction of what a comparable American (or Canadian or German) makes, the competition is viewed as unfair.
But how did the U.S. and other wealthy countries get that way? It was by being the low-cost producer in some area. No doubt, the European farmers of the 18th century were bitter about being undercut by American farmers, whose cost of land was a fraction of that in Europe. They must have felt that this was as unfair as unemployed IT workers feel about India. But as time went by, costs equalized as capital and labor migrated to other countries and other industries. This is all part of the process of economic growth.
An article in the February issue of Wired makes this point well. It points out that Indians now doing jobs outsourced from America are seeing a rapid rise in their wages and standard of living. In the process, they are becoming more like Americans, which is translating into demand for American goods and lifestyles. The Indians also know that they can't compete only on price; the quality also has to be there, and they believe that they are delivering it.
Daniel Pink, the author of the article, goes on to make this important point: "Isn't the emergence of a vibrant middle class in an otherwise poor country a spectacular achievement, the very confirmation of the wonders of globalization — not to mention a new market for American goods and services? And if this transition pinches a little, aren't Americans being a tad hypocritical by whining about it? After all, where is it written that IT jobs somehow belong to Americans — and that any non-American who does such work is stealing a job from its rightful owner?"
Perhaps more starkly, Carly Fiorina, CEO of Hewlett Packard, recently said, "There is no job that is America's God-given right anymore."
It's worth noting that the U.S. is not the only country where outsourcing is happening. British and Australian companies are also outsourcing to India, while European companies are outsourcing to the Czech Republic and other formerly communist countries, where wages are low but education levels are high.
It's also important to know that when countries outsource work to India or China, they are only doing so for very low-end operations that require little skill or training. The high-end work and wages stay here — work that might not be retained if it could not be augmented by outsourced functions in low-cost countries like China and India.
A Jan. 30 report in the Wall Street Journal illustrates how this works, using the case of a computer mouse manufacturer called Logitech. It sells a wireless mouse called Wanda for about $40 that is assembled in China. Of the $40, China gets only $3. The rest goes to suppliers, many based in America, which make components for the mouse, and to domestic retailers. The biggest component of Logitech's cost is its marketing department based in Fremont, California, where the staff of 450 Americans makes far more than the 4,000 Chinese who actually manufacture the product.
Those 450 Americans, making good wages in California, might not have jobs at all if Logitech wasn't able to stay competitive by outsourcing some of its costs. Studies have also shown that workers displaced by outsourcing are often retrained for better jobs within the companies doing the outsourcing. Cisco, for example, is a leader in outsourcing, but has not reduced the number of its domestic employees because they have been redeployed into other areas, doing higher value-added work. These jobs often pay better than those that were outsourced.
I know that this is no solace to those who have lost jobs due to outsourcing. But the nation as a whole will be worse off if outsourcing is restricted.
Exactly right!
This is a political economy where people vote on today not tomorrow. 'In the future' ends on election day. In accounting terms it's closing day and you can't book future earnings currently.
Don't laugh. I know of two engineers who are now running a SuperCuts in Monterey.
Oh now that's real encouraging. Puts us in a good spot when the next Future War comes along. We'll send our people out to fight with nothing useful in the way of weaponry, but they'll have a great-looking GQ hairstyle. They'll get mowed down by whatever high-tech weapon the enemy has developed and built and we haven't, but they'll look damned good while getting killed.
This is better. And Buchanan predicts the Death of "Gringos" :)
Oh really. Like the telephone tech support for Dell® Computers?!? THAT type of little skill. Huh, you MORON?
A couple months back I was wondering why I was always getting a tech who COULDN'T SPEAK ENGLISH (and would have to hang up on), it was then reported that they were outsourcing the phone support to Malaysia, or some other god forsaken place. But once they were outed they then vowed to end that practice. Don't know if they did as I haven't called since then.
Next time I'm building my own frickin pc. The heck with them all.
Very good point. However, it has been commodified quite clumsily, leading to the impression that one Java programmer with three years experience is interchangable with any other. Demonstrably false, and plenty of studies show it. But at the moment, with almost all the attention on quarterly numbers instead of long-term growth, it's an awfully attractive idea.
Incidentally, your comparison bewtween American and Indian wages is way off of reality. Recent studies show about a 1/3 savings at best (and every company jumping into this assumes they'll be one of the best) when work is offshored. Salary is obviously only one factor - and Indian salaries are structured differently than in the U. S. so you can't just look at base salary.
On the other hand those sort of ridiculously large disparities are definitely stuck in the minds of most Americans - and CEO's and Boards of Directors are infected with that same dazzling vision. They think they've finally found a lunch which, if not exactly free, is darn close.
Hindsight will show that the market didn't pay Indian workers so much less on accident. It was a measure of their productivity and subsequent market value. And while it's certainly on the rise, it is not equivalent to U. S. workers.
This haircut will put Al-Queda on the run.
Looks like GQs standards have slipped a bit. OTOH, it beats a mullet (maybe not)...
I'm inclined to agree, if only because of my experience with outsourced call centers. I think we will see some jobs boomerang, especially the service centers. You can teach a young Indian to speak English well, and you can teach him the corporate policies and procedures; but you cannot teach him the cultural nuances necessary for successful customer relations in the U.S.
I was on a customer service line with an Indian worker for AMEX and witnessed (via phone) her complete meltdown. A complete inability to handle the competing interests of the customer and her employer. In America, we understand (generally) the concept that the "customer is always right", even if we know that statement is a literal falsehood. I'm not so sure foreign cultures understand.
I cannot see the bright side for this country in outsourcing at this point in time.
Good point. Most of them don't understand the reality that the customer might not always be right, but it's your job to make them think they are for as long as it takes to fix the problem, or at the very least have a damned good explanation and course of action to correct it. Most call centers everywhere are scripted, but the Indians have gone overboard with it and can't seem to operate on the fly. I have plenty of horror stories from friends that have encountered Dell's customer service.
Service centers are the tip of the iceberg. That's actually one of the simplest tasks in IT, which is why it was one of the earliest offshore candidates. Yet as you have noticed (and so has Dell, who reversed its decision to offshore support for business clients due to complaints similar to yours), the quality just isn't there.
Complex engineering is a far more difficult thing to offshore. The popular notion seems to be that it involves a highly skilled person sitting alone and doing mysterious things with a computer. In fact, it's a highly collaborative, communication intensive process. Some models of doing this lend themselves to better success offshoring, but most do not. And almost none can claim to offshore with no impact to productivity, quality, or timeline. The communication problems you notice in the call centers are amplified many times, even in well run engineering projects, by the simple volume of communication required.
Another thing being ignored is that, like most other countries in the world, the best and the brightest Indian IT workers come to the U. S. and pursue green cards. Assuming that these folks are representative of the average Indian IT worker is a fallacy.
Did he consider, while he was immersed in all the good these gone jobs do that the new workers in foreign countries don't:
Go to US restaurants
Take their cars to US auto repair shops
Take their clothes to US cleaners
Buy groceries from US supermarkets
But auto parts from US auto parts stores
Buy their clothes in US clothing stores
Buy property form US sellers
Rent housing from US landlords
Buy materials from US building supply stores
Have their furniture rehupostered by US upholsters
Buy their autos from US dealerships and car lots
Pay for licenses and car tags from state offices
Buy gas and oil from US filling stations
Go to movies, and games in US theaters and arenas
Buy US postage stamps/products from US post offices
Ship their packages using US FED Express or UPS?
Surely he didn't forget all this, did he?
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