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Outsourcing Grandma to Mumbai
| March 24, 2004
| Ben Rothke
Posted on 03/31/2004 1:20:31 PM PST by Mini-14
In "The Brain Center at Whipple's," a classic Twilight Zone episode, a ruthlessly efficient businessman, Wallace Whipple, deals brutally with his employees when he decides to fully automate his factory. Installing computers and robots, Whipple drives a longtime dedicated worker to take desperate measures to protect his job. In the end, it is Whipple who finds that he is no longer needed when he is replaced by a similarly behaved robot.
The message of that episode from 1964 rings true today. Whipple's goal was efficiency; today, it's saving money, and it's being done by outsourcing application development overseas.
Outsourcing has decimated the programming field, but it won't stop there. Consider this scenario, which you might at first think is ridiculous: It's possible that in a matter of years we might see outsourced thoracic and other types of expensive surgery.
Think about it. Heart operations can cost well over $250,000. A thoracic surgeon in the U.S. can make as much as $496,000, and hospital beds can cost over $1,500 per day. But the scene is different in India. A surgeon there makes much less than his U.S. counterpart, and hospital rooms are far cheaper.
For health insurance companies, this could mean colossal cost savings. Putting a heart patient on an Air India flight might even be cheaper than sending him across town by ambulette service. Should this scenario come to pass and you find yourself in this situation, you could try to fight the insurance company. But heart patients need surgery without delay. They don't have time to appeal what the health insurance company considers a normal and customary charge.
This is my prediction: After the outsourcing cabal is done with the programmers and systems analysts, it will go after the doctors. The cost savings to the insurance companies are far too compelling.
What can be done? The same thing that should have been done when the first programmer was outsourced: protest and get the word out. As Eldridge Cleaver so aptly stated, "You're either part of the solution or you're part of the problem." If we as a society accept programmers' jobs being outsourced, how long will it be before Grandma is sent to Mumbai for hip replacement surgery?
The fact that outsourcing saves money is undeniable. But money is only one small part of the much larger equation. Henry Ford said he would have given his cars away for free if he could have been assured of having a monopoly on the automobile replacement parts business. Ford's long-term vision enabled him to free himself from the perceived short-term cost issues.
People are clearly more valuable than a Model T, and the long-term negative repercussions of outsourcing far outweigh the initial cost savings involved. Those who fall prey to the allure of short-term savings while ignoring the plethora of serious long-term consequences in areas like security, competitiveness and the protection of privacy and intellectual property will fall victim to the very budgets they were attempting to penny-pinch.
It's 2004 and we have entered the Twilight Zone of outsourcing. Let's hope there are enough sensible people to get us out of this quagmire.
Ben Rothke, CISSP, is a New York-based security consultant at ThruPoint Inc. McGraw-Hill Osborne Media has just published his book, Computer Security: 20 Things Every Employee Should Know. He can be reached at firstname.lastname@example.org.
TOPICS: Business/Economy; Foreign Affairs
KEYWORDS: employment; h1b; l1; offshore; outsource; outsourcing; unemployment
posted on 03/31/2004 1:20:32 PM PST
Was talking to an owner of small web-development company this past week. They have offices in S. America where they had hoped to develop talent to send work to. Instead, there is so much demand down there that they S. America is outsourcing back to headquarters in the U.S.
If you want to decrease the cost of healthcare, cut the ridiculus malpractice insurance premiums AND get more doctors into the market place. Reduce costs to operate and reduce price pressure by having a larger pool of talent. Too bad the AMA would never like to see the number of doctors increase.
posted on 03/31/2004 1:40:13 PM PST
Personally, after the corruption shown by Martha, the leaders of WorldCom, Tyco, Enron, Aruthur Anderson, etc..... I think that the boards of of directors, at the urging of stockholders and employee pension stockholders, should "outsource and offshore much of US corporate management.
Can't you just imagine the stockholder savings if the New York Stock Exchange had been managed by someone from India or say someone from Nigeria? The cost of golden parachutes would also drop dramatically, to say nothing of the expensive perks and stock options!
Yes, offshoring should now move to the Executive suites of most major companies. Chrysler offshored to Germany and one of the key cultural problems in the takeover of Chrysler was that European executives made far far less than their US automotive counterparts.
posted on 03/31/2004 2:28:52 PM PST
Think about the security issues of outsourcing programming to foreign nations. Think about back-doors.
Your bank outsources its accounting code to China, say...
posted on 03/31/2004 3:01:35 PM PST
(The deadliest Weapon of Mass Destruction in History is a Leftist With a Word Processor)
Comment #6 Removed by Moderator
Putting a heart patient on an Air India flight might even be cheaper than sending him across town by ambulette service.
This is already being done, but its billed as a combo vacation as well for wealthy Europeans taking boat cruises down to India for surgeries.
Of course "wealthy" in this case means "you have enough money and don't want to wait around 3 years for the socialist hospital to have an opening." Aparently the hospitals are just as good.
I find it fascinating as its a twist on the idea that only the cheap routine stuff gets outsourced to India.
posted on 03/31/2004 3:57:21 PM PST
With stringent controls, non-time-critical work could easily be outsourced.
That's the only way I think the American Programmer is going to survive in this environment. No matter if you're 10x more productive, if the main concern is about cost they'll just move the work to a place that's 9.5x a productive as a normal person.
This works for large projects that take a lot of time (and more often than not fail). However it doesn't help out your company if you want to be first to market, be that with some software to sell or that you need some genome mapped. Or if you want some custom financial reporting. Where time is critical the person closest to the action that's highly productive has the edge.
posted on 03/31/2004 4:09:19 PM PST
The Economics of Progress
By George F. Will
Friday, February 20, 2004; Page A25
It is difficult to say something perfectly, precisely false. But House Speaker Dennis Hastert did when participating in the bipartisan piling-on against the president's economic adviser, who imprudently said something sensible.
John Kerry and John Edwards, who are not speaking under oath and who know that economic illiteracy has never been a disqualification for high office, have led the scrum against the chairman of the president's Council of Economic Advisers, N. Gregory Mankiw, who said the arguments for free trade apply to trade in services as well as manufactured goods. But the prize for the pithiest nonsense went to Hastert: "An economy suffers when jobs disappear."
So the economy suffered when automobiles caused the disappearance of the jobs of most blacksmiths, buggy makers, operators of livery stables, etc.? The economy did not seem to be suffering in 1999, when 33 million jobs were wiped out -- by an economic dynamism that created 35.7 million jobs. How many of the 4,500 U.S. jobs that IBM is planning to create this year will be made possible by sending 3,000 jobs overseas?
Hastert's ideal economy, where jobs do not disappear, existed almost everywhere for almost everyone through almost all of human history. In, say, 12th-century France, the ox behind which a man plowed a field changed, but otherwise the plowman was doing what generations of his ancestors had done and what generations of his descendants were to do. Those were the good old days, before economic growth.
The disappearance of whole categories of jobs can be desirable for reasons other than economic rationality. The economist Irwin Stelzer recalls that John L. Lewis, the fire-breathing leader of the United Mine Workers of America from 1920 to 1960, said that he hoped to see the day when no man would make his living by going underground.
For the highly competent workforce of this wealthy nation, the loss of jobs is not a zero-sum game: It is a trading up in social rewards. When the presidential candidates were recently in South Carolina, histrionically lamenting the loss of textile jobs, they surely noticed the huge BMW presence. It is the "offshoring" of German jobs because Germany's irrational labor laws, among other things, give America a comparative advantage. Such economic calculation explains the manufacture of Mercedes-Benzes in Alabama, Hondas in Ohio, Toyotas in California.
As long as the American jobs going offshore were blue-collar jobs, the political issue did not attain the heat it has now that white-collar job losses frighten a more articulate, assertive social class. But an old lesson applies to this new situation.
The welfare state, beginning with unemployment relief, was pioneered in part by European conservatives, Disraeli and especially Bismarck, to reconcile people to change -- to the frictions and casualties of economic dynamism on which, such enlightened conservatives saw, national greatness would depend in the industrial age. It is sound social policy, and simple justice, that the party benefiting from free trade -- the nation as a whole -- should be taxed to ameliorate the discomforts of those who pay the short-term price of progress.
That is the case for education and job training for persons needing to change their skills. Such assistance is especially imperative when the casualties of change bear no responsibility for their fate -- unlike, say, U.S. steelworkers, whose overreaching in collective bargaining deepened the problems of their industry.
Kerry says offshoring is done by "Benedict Arnold CEOs." But if he wants to improve the health of U.S. airlines, and the security of the jobs and pensions of most airline employees, should he not applaud Delta for saving $25 million a year by sending some reservation services to India?
Does Kerry really want to restrain the rise of health care costs? Does he oppose having X-rays analyzed in India at a fraction of the U.S. cost?
In November, Indiana Gov. Joseph Kernan canceled a $15 million contract with a firm in India to process state unemployment claims. The contract was given to a U.S. firm that will charge $23 million. Because of this 53 percent price increase, there will be 8 million fewer state dollars for schools, hospitals, law enforcement, etc. And the benefit to Indiana is . . . what?
When Kernan made this gesture he probably was wearing something that was wholly or partly imported and that at one time, before offshoring, would have been entirely made here. Such potential embarrassments are among the perils of making moral grandstanding into an economic policy. email@example.com
posted on 03/31/2004 5:39:39 PM PST
(Talk is cheap...dear)
If you want to decrease the cost of healthcare, cut the ridiculus malpractice insurance premiums
That is exactly right.
posted on 03/31/2004 6:07:58 PM PST
Pills are another sore topic.
Nah: it's just a topic used by the leftists to turn people against capitalism.
It's a well-known fact that American customers pay extra for the same pills sold in other countries just because Americans can afford to pay more.
So, what's the way out? They can't charge the same prices abroad, as you pointed out. So we can prohibit sales abroad outright -- who will win? Nobody: smaller income for Americans.
So, the leftists tell us to reduce prices here. But what makes prices what they are now? If they are unreasonably high, as the leftists suggest, then the drug companies would be making enormous profits. They do not.
If they do not make enormous profits and you force prices down, what will happen? The same thing as would happen with any other product: the production output and/or quality will decrease.
So, I suggest you cover that sore spot with some oinment and get over it.
posted on 03/31/2004 6:14:23 PM PST
Oh, and welcome to FR!
posted on 03/31/2004 6:14:56 PM PST
So the economy suffered when automobiles caused the disappearance of the jobs of most blacksmiths, buggy makers, operators of livery stables, etc.?
Silly analogy. The blacksmiths, buggy makers, and operators of livery stables didn't have their jobs outsourced to India and China --- more likely those occupations died out for lack of employees after those workers took the new better paying jobs in automobile manufacturing. Besides there are still blacksmiths needed today -- more horses than ever and it's one job that would be difficult to outsource.
posted on 03/31/2004 7:54:49 PM PST
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