India no longer as attractive for outsourcing, says analyst

CMPnet Asia ^ | 11-Aug-2003 | Jorina Choy

[magellan]

India’s cost structure for business process outsourcing is no longer low compared to the more developed countries, warns Meta Group.

"To be more agile in outsourcing, you have to find personnel with more skills and capabilities—English, business, and IT. How do you find such a ‘superman’ at a low cost?" asked Wissam Raffoul, vice president, Meta Group Asia Pacific.

"So you’ve got to invest. Increased agility costs money."

Besides escalating costs, the Indian outsourcing services companies are also facing increased competition from MNC-services-providers in their country.

The MNCs apparently offer 10–12% lower rates than their Indian counterparts (see ACW May 26 issue).

The Indian vendors can even learn from what some of the MNCs did in reviewing their cost structures.

"EDS reduced its 48 industry vertical offerings to five or six. HP keeps its outsourcing services costs low," said Raffoul.

But he added that local services players in Asia in general are not in a bad shape.

"An international vendor may not be strong in every geography, every area. Therefore, the local players have to structure their value proposition around [the international vendors’] weakness," he said.

He gave the examples of Unisys and EDS, which focused on the outsourcing areas that IBM did not, or were not as strong in the early days, namely Unisys on business process outsourcing and EDS on mid-range IT systems.

[RightWhale]

So the outsourcing crisis is over. Two weeks and *poof*.

[Last Dakotan]

Tell that to the unemployed IT folks with families. They'll feel a whole lot better.

[Monty22]

So what's a worse slave labor place on the planet for US companies to outsource to? They'll just hop around to the worst from now on I guess.

[Joe Bonforte]

Several of us in the IT industry have been maintaining for years that the outsourcing "crisis" was overblown. It's just not possible to get the kind of capabilities from a cheap person in India that you can get from a person that (a) knows English, (b) has relevant experience, and (c) can sit across the table from you and understand what you want.

Most companies that have used Indian outsourcing extensively have been disappointed. The best feedback I heard was a company that basically said it was a wash on cost, but they didn't have the exposure of so many employees.

I'm glad to see some confirmation in the press of what many of us have been saying all along.

[Lazamataz]

dingdingdingdingdingdingdingding

[Myrddin]

So the outsourcing crisis is over. Two weeks and *poof*.

Not yet. It takes time for the dopes in upper management to feel the effects of their folly. Their brains work in increments of quarterly results. They will understand the folly about 90 days after their pissed off customers stop sending them money. Meanwhile, the loyal and talented folks that built the business that was outsourced are scrambling to find replacement jobs. They may not want to return to work for their former disloyal employers. Moving the work back to the states may also take some time to ramp back up and with the loss of much of the necessary corporate memory that resided with the discarded former employees.

[meadsjn]

Is your phone ringing yet?

[Lazamataz]

Is your phone ringing yet?

I am deeply loved.

Recruiters try to french-kiss me when I walk in their offices.

[meadsjn]

No graphics, please!

I suspect, as stated above, that corporate fads won't shift until some numbers get floated and massaged (and a new book of buzzwords goes to print).

[magellan]

I think what this article is stating is the depth of the talent pool in India is less than many corporations expected.

Now we are hitting diminishing returns.

One thing about India is it is a (very) different culture. While some Indian employees can be trained to support American and European cultures, that number is limited.

India has probably peaked as a phone support country. Watch for the Phillipines to surpass it. Unfortunately as well for India, if English language skills are not required, the work will go to China.

[waterstraat]

How many american companies have announced that they will be immediately cutting back on outsourcing and rehiring american workers? I must have missed it on the news?

[SJSAMPLE]

Tell that to Dell.
I ripped our corporate rep a new asshole for the way Dell customer service is handling our calls. I tried to order a PC NIC card, for which I had a valid quote and part number, and spent the better part of an hour trying to get the "technician" to order it for me. Even though I kept giving her the EXACT part number, she kept putting me on hold and coming back (five minutes later) with different items and prices. I finally hung up and called him directly.

I don't mind Dell trying to make a profit, but THEY asked for my business and better start delivering.

[Dominic Harr]

Yep, this is the beginnings of what we've been talking about.

Altho let's see how long it takes this *obvious* reality to seep into the consciousness of the typical American tech reporter . . . I'm thinking it'll be a while.

I notice this is from a source in Asia.

It still looks like there's not one single success story from outsourcing to India.

Oh, while I'm at it I'll make another prediction -- the next idiotic management initiative that will sweep the IT industry like a storm is "process". Six-Sigma, and all that.

And again, the promises of easy profits will not come true.

[Jimmy Valentine]

As soon as U.S. producers wake up to copyright violations, viruses, pirated software, sloppy processing, identity theft, etc. etc. etc., there will be a flight to quality back to the U.S.A.

Regards,

[harpseal]

Well now even with the currency manipulations its not that good a deal. Looks like thos who are stillin iT a year or two from now might just be doing better. That still doesn't mean we do not need tofix the structural problems in our economy.


In no particular order of importance.

1. Get rid of government subsidies for offshore investment of US companies. OPIC is the first such program which should go but support of World Bank programs that subsidize the outflow of Capital would be another.

2. Use tariffs on those nations which are engaged in unfair trade practices such as currency manipulation (China and India for example), those nations which refuse to open their markets to US products (China for example with its 50% tariffs on US consumer goods and non tariff barriers), those nations that subsidize competition to American Industry (airbus for example) and those nations which have slave conditions for their workers.

3. Use tariffs and other means to prevent the relocation of jobs offshore that are essential to the national defense. If necessary take control of the company seeking to export vital technology or industry by means of eminent domain (No I do not like this last option and I will only defend its use as an absolute last resort like say in the case of rare earth magnets essential to smart bomb technology). Provide a hardened, widely distributed infrastructure to supply all that is needed for our military units and civil defense that can be continued to be deployed in the event of any military attack.

4. An immediate end to guest worker programs. If people wish to come to the USA to work and make a life let them immigrate according to the rules.

5 Provide economic development zones where the corporate income tax is zero for operations within these zones. In order to operate in this zone a company must agree to only purchase American components if available and employ only American citizens or legal immigrants in these operations. These economic development zones shall be eventually be expanded to include every bit of every state once the benefits are shown I would like them to be totally implemented immediately but I realize that may be overreaching. It must be stated for clarification that simply being in the geographic area of the zones does will not subject any company to any new mandatory regulation. Everything is voluntary for getting the exclusion from corporate taxation. The profit attributable to direct imports is subject to the same rules that exist everywhere else in this nation for corporate taxation. Only free from such taxation is the profit attributable to American content and any American improvement. In short no new mandatory regulation will be a part of this. It is my opinion that there will not be a lack of companies seeking this tax relief. And no the regulation implied is absolutely minimal in order to get this through.

6. Scale back unnecessary regulation including the tort system. Institute a cap on punitive damages, limits on class action suits, and limits on liability to the actual percentage of liability with no plaintiff able to collect if said plaintiff was involved in the commission of a felony at the time of the alleged tort or was more than 49% negligent in the alleged tort. Note that the loser in a frivolous lawsuit shall pay the attorney fees of the winner. There are many other regulatory structures that also need to be included that need to be included such as repealing the Family leave mandate, getting rid of OSHA etc.

7. Increase the domestic content in purchases by the Department of defense and give absolute preference in non-domestic content to proven allies of the USA over say the French or Germans. The only reason any content for DOD purchase may come from non US allies is that content is not available elsewhere and is essential.

8. Do not allow expense involved in moving operations overseas to be included in business expenses under the IRS code.

9. Prosecute for perjury anyone who has made a false statement in order to employ an H1B or L1 visa worker. I will be lenient on the actual perjurer if he/she was ordered to make this false statement and he/she provides testimony to aid in the conviction of the person ordering the perjury. Just because a person is a CEO does not give them a pass on criminal behavior.

10. Prosecute anyone who orders the transfer of vital defense technology or funds a R&D project that could be of use to our military overseas except to strong allies of the USA. Make the necessary enhancements to our espionage laws so that continued support or funding of any R&D in a nation whose government has threatened the USA is guilty of espionage. The UK and Australia come to mind as meeting these criteria for being eligible for transfer of technology first. There will be other nations and a gradation of what can be transferred to which specific nation. Under no circumstances may technology be transferred to any nation whose government has threatened the USA within five years without a complete change of government or specific exemption from Congress and the administration.

11. Deport all illegal aliens immediately and take measures that prevent the entry of any more illegal aliens. Fine all companies knowingly employing illegal aliens Criminal sanctions should be imposed on anyone helping an illegal alien stay in the USA in violation of our laws.

12. Decrease the punishing levels of taxation on companies and eliminate the double taxation on corporate dividends. See effects of item 5 for how minimal this will be if item 5 covers the entire USA. Eliminate all IRS provisions that inhibit free use of independent contractors by businesses for example section 1706.

13. Eliminate the minimum wage so that the worker can be paid based on productivity. Overtime compensation will remain the same but instead of 150% of the "wage" the worker would receive 150% of the production pay. If one through 13 are enacted # 14 becomes an irrelevancy as no one will be working for that low a wage.

Now since I started posting this plan another idea has come up that in my opinion is a very good policy that stands on its own. Now I give credit to Jim Gibson and Freeper Ed_in_NJ for coming up with the idea, separately to the best of my knowledge. However I can be corrected on that. The tariff phrasing is from Jim Gibson.

“I suggest that the US Customs Department charge a $1,000-per-container inspection fee on every container entering the United States. This fee would be used to completely fund the cost of inspections. If we assumed that a four-man team could fully inspect two containers a day or about 500 per year, it would require 48,000 inspectors. Allowing for at least 2,000 support personnel, we would need at least 50,000 workers. Because these workers would require high intelligence and skill levels they should earn at least $30 per hour. At 40-hour weeks plus benefits, I estimate the cost per worker to be over $75,000 per year, all paid by the foreign manufacturers. Even so, this would still leave over $2.25 billion to cover all other costs. Any revenue not used would be used to compensate American workers displaced by foreign imports. “

I urge and encourage everyone who agrees with this plan and or the terror tariff idea to communicate this to every politician you can think of.

[Lazamataz]

Oh, while I'm at it I'll make another prediction -- the next idiotic management initiative that will sweep the IT industry like a storm is "process". Six-Sigma, and all that.

You suck. ;^)

I'm in Green Belt training for half the day -- Six Sigma.

[Dominic Harr]

I'm in Green Belt training for half the day -- Six Sigma.

:-D

[waterstraat]

Lots of good ideas you have there, who would be against them?

[harpseal]

Lots of good ideas you have there, who would be against them?

Well there does not seem to be a lack of opposition from supposed conservatives. I can not see the Democrat party getting on board with my plan but I was tired of seeing only complaints about what the current situation is and wanted to come up with some positive steps to improve things.

Of course i have been called a communist, A sociailist, A nazi, a racist, a bigot and several other names.

Oh well I have a thick skin.