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Another Look at Outsourcing (Vanity)
grey_whiskers | 8-14-2005 | grey_whiskers

Posted on 08/14/2005 10:04:04 AM PDT by grey_whiskers

Many articles have been written about the phenomenon of “outsourcing”—the practice of sending work needed within a company to be performed outside of the company. More recently, the word has become synonymous with “offshoring”—the practice of sending the work to be done by lower-paid workers overseas, often in third-world or emerging countries such as Mexico, China, and India.

These phenomena have been going on for some time—one of the first industries to be moved outside of the United States has been textiles. Indeed, while garment manufacturing was first sent to low-cost locales, there was some outcry over the growth of sweatshops—as Kathie Lee Gifford found out. Those who supported the process were quick to point out the dual benefit, of cheaper costs (passed on as lower prices to the consumer) together with greater opportunity for the impoverished in third-world countries. Although, to be honest, I haven't seen the price of $150 Nike sneakers dropping anytime recently.

Following the widespread offshoring of garment manufacturing, the trend continued. The (thankfully!) former head of Lucent and then of Hewlett-Packard, Carly Fiorina, was quoted as stating that no American had a right to a job just because they were American. And companies have put their money where their mouth is, as well. For example, 54% Dell computer’s employees are offshore. One widely-quoted statistic from consultancy McKinsey & Co. states that 3.3 million US jobs will be lost to offshoring by 2015. (*)

So clearly, there has been a great rush to send all kinds of work overseas. But WHY? The usual answer is “To be cost competitive. We could not survive as a company if we continued to pay exorbitant American salaries.” Is this really true? Consider Microsoft. One of its managers, Brian Valentine, was quoted in a trade magazine as saying “Think India! Two for the price of one!” But before its big dividend payout, Microsoft was sitting on some $50 billion (with a “B”, folks)--in Cash. And essentially no debt. Are you telling me Microsoft has to pinch pennies on salaries, because they can’t afford to compete otherwise? Let’s do the math. MBA types like to talk about comparing expected return on investment to the “risk-free” rate of return, US Treasuries. If Microsoft had just invested that money into US Treasuries, even when interest rates bottomed out at about 2%, they would have had $1 billion /year, CASH, with which to pay American programmers. And this would have been without touching the principal and without affecting cash flow from continuing operations.

I think that in fact, the non-answers above, while not true, still point to the truth: “Follow the Money”. The argument seems to go like this: if you, as a worker, want to make $80,000 a year or more, you are greedy. We should outsource your position to India to save money, so we can afford to pay our executives tens of millions a year. (Does anyone recall the retirement packages of Dick Grasso, Carly Fiorina, or Jack “Neutron” Welch?) And this is because executives are “indispensable”. Right. About as indispensable as a vampire bat is to a hemophiliac.

But on the other hand, there is one more way you can follow the money. Companies (and their stock) are looking towards future earnings. Remember, the US consumer isn’t getting any younger. And as workers get older, it costs more to retain them—from salaries, to health care costs, to risks of age-discrimination lawsuits. So companies want younger, cheaper workers. And what happens when the US workforce starts retiring en masse and can no longer afford the goods produced by US companies? Remember the two biggest destinations for outsourcing: China and India. What do these companies have in common? Cheap labor, and a large pool of relatively young buyers for American products. What else do they have in common? They are both primarily third world countries; on the whole, they cannot afford American products. So what’s an enterprising CEO to do? The answer is obvious: start a stampede of companies to relocate to China and India. This will do two things. First, it will directly lower all sorts of costs (no Social Security tax, no EPA, fewer lawyers…). Second, it will send all kinds of money overseas, to stimulate the economy of other countries, so that they can start buying goods when the US consumption tapers off.

(*)McKinsey’s motives in this, however, may not be as pure as the wind-driven snow, or even the silt-ridden Ganges. According to an article from The Times of India, McKinsey is being paid to generate jobs in India: “The Karnataka government would like to see more jobs created in these areas and has mandated consultancy firm McKinsey to formulate a strategy to generate one million jobs by 2008.” QED.


TOPICS: Business/Economy; Chit/Chat; Computers/Internet; Conspiracy; Miscellaneous; Society; Weird Stuff
KEYWORDS: ceos; computers; conspiracy; consultants; economy; executives; greed; outsourcing; techies; trends; whiskersvanity
No cheers, unfortunately. . .
1 posted on 08/14/2005 10:04:04 AM PDT by grey_whiskers
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To: grey_whiskers

Our county government outsources. When we get our tax bill in the mail we sent it to Charlotte, a few counties over.

The county says they save money by outsourcing. If they can do it why not the rest of us?


2 posted on 08/14/2005 4:07:23 PM PDT by PeteB570
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To: grey_whiskers

Note to self: read later.


3 posted on 10/06/2005 9:40:08 PM PDT by indcons (Please FReepmail PhiKapMom and Indcons if you want on/off the Norman Bombing ping list.)
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To: grey_whiskers
Kerry Outsourcing Trade Mission To China Includes pics
4 posted on 02/11/2006 12:25:12 AM PST by BJungNan
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To: PeteB570
Kerry Outsourcing Trade Mission To China Includes pics

And Kerry denies he was opposed to outsourcing. http://sify.com/news/othernews/fullstory.php?id=14119701

5 posted on 02/11/2006 12:26:39 AM PST by BJungNan
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To: grey_whiskers
So clearly, there has been a great rush to send all kinds of work overseas. But WHY? The usual answer is “To be cost competitive. We could not survive as a company if we continued to pay exorbitant American salaries.”

My neighbor, who supplies scaffolding to nuclear power plants, decided to contract with a company in China to build his parts. They wined and dine him. Supplied him with prostitutes and he paid his monies to the local governors.

He goes there about every two months to "see" that his parts are made properly. He save about 15 to 20 percent on parts. He felt he had to do this to stay in business.

The kicker is that he gets about 75% to 80% of the contracts here in the U.S. He has no real competition.

It's greed. Plain and simple.

6 posted on 03/05/2006 7:14:57 AM PST by raybbr
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To: A. Pole; Willie Green

ping


7 posted on 03/05/2006 7:21:22 AM PST by raybbr
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To: BJungNan
And Kerry denies he was opposed to outsourcing.

Bttt

8 posted on 03/05/2006 7:29:35 AM PST by Sic Luceat Lux
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To: Willie Green; Wolfie; ex-snook; Jhoffa_; FITZ; arete; FreedomPoster; Red Jones; Pyro7480; ...
The (thankfully!) former head of Lucent and then of Hewlett-Packard, Carly Fiorina, was quoted as stating that no American had a right to a job just because they were American.

Free trade bump!

9 posted on 03/05/2006 11:48:11 AM PST by A. Pole (Carly Fiorina: "Technology will 'disappear' in 25 years")
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To: raybbr
It's greed. Plain and simple.

And it's killin us...

10 posted on 03/05/2006 12:01:36 PM PST by RaceBannon ((Prov 28:1 KJV) The wicked flee when no man pursueth: but the righteous are bold as a lion.)
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To: grey_whiskers; A. Pole
Outsourcing Cartoon . . . Don't shoot me. Just joking.
11 posted on 03/05/2006 12:10:20 PM PST by ex-Texan (Matthew 7:1 through 6)
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Comment #12 Removed by Moderator

To: All
The smart American company it will send all kinds of money overseas, to stimulate the economy of other countries, so that they can start buying goods when the US consumption tapers off.

A great one liner! Not as funny as, "Take my wife.. Please!" But not bad.

It's on the par with the Charlie Brown cartoon with Lucy holding that football for Charlie.

Sure, India and China are going to hold that domestic market spot for American companies.

As Lucy says, "Ha! Ha!Ha!Ha!Ha!Ha!Ha!Ha!Ha!"

13 posted on 03/05/2006 2:20:54 PM PST by WilliamofCarmichael (Hillary is the she in shenanigans.)
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To: WilliamofCarmichael

Bump - another great post.


14 posted on 02/06/2009 6:21:38 PM PST by american colleen
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