I have been pondering on this for a while now and the Say no to Bangalore slogan by Obama forced me to find the answer a bit sooner. This will be less of an opinion and more of a conversation. I exhort all our readers to chip and drop in your 2 cents about this.
To give a little background, President of the United States for a change has kept his election promise. Which is good for politics in general and I hope our politicians follow him on this just like they followed him on the twitter and social networking arena. The companies which ship jobs overseas will be taxed more than they were used to. Companies which do research in the States will be given incentives.
Fast forward few months back and there was a scandal in India IT which has jolted the industry but the reading on Richter scale was less than 3. Which means, it did not effect India nor the outsourcing in general. That has opened up significant leaks in the outsourcing industry in general.
It is not all plug and play. Companies cannot bring the work back or choose a new vendor as fast as they chose the vendor to start with. There are lot of things which come into picture. Technical competence, Intellectual property retention or the loss of it, lack of documentation and all the good stuff which ails IT industry.
It is ironic that only few vendors left Satyam and many chose to stay back. Not out of love for Raju’s dream company called Satyam but it doesn’t make any business sense to shift vendors. It is not mugs or T-shirts which you are sourcing. It is programming skills which require people thinking and coding.
With that spiel of mine, I will open it up for trak.in’s readers.
Can outsourcing be stopped? Will Obama have his way? Will Indian IT come out as a different sector which ships products along with services?
Outsourcing will not stop untill business in U.S. and Europe concentrate on their core domain. they will continue to receive services from countries like India and China. It improve their profits margins and stakeholders in those countries are happy as long as profits keep flowing in.
Rahul
Indian Car Advisor (Carazoo.com)
I do not know if outsourcing can be stopped or not, but there is a question I want to ask…what are the jobs that are outsourced?…Call center and back office or Medical Transcription….apart from IT. I think only IT jobs are white-collar jobs in USA…that pays more and you can live a good lifestyle.
I as an Indian will not do a call center job or Medical Transcription job for a domestic market, as they will pay very less to me. It is same for US also. Just think US has a huge shortage of nurses today. Estimates are that the US will be lacking over 500,000 nurses in the next seven years. When asked to Mr. President about getting nurses from India or China, he said we would produce here in US. But when…Maybe there are a lot of jobs yet to be produced in US…but the government in US is just like our politicians. They only say for vote and do nothing…Just read this “http://www.reuters.com/article/domesticNews/idUSTRE5270VC20090308″…
Actually, when we say the jobs that are outsourced are due to cost-cutting, it is the duty of the government to see that some benefits are given to their citizens. For e.g. If Medical Transcription jobs are shifted abroad and the hospitals are saving something, they should give some benefits (if not all) to those patients who cannot pay or those who do not have insurance coverage. That is a win-win situation and that can only be done by the government (I mean Mr. President and others). If Mr. President thinks that stopping the jobs to be outsourced will work, he is absolutely wrong as it will again bring them to the same situation, as they were 10 or 15 years back. I think he can ask those organizations (either credit card companies, hospitals, etc) to give some benefits/discount to their customers/patients due to the savings that they are doing. As someone who was earning $30,000 annually a couple of years back can, in this recession period, be ready to work for $20,000 a year or even $15,000, but can never be ready to work for $3500 a year which an Indian earns in an outsourcing job. So, the difference is huge…
@all : I agree that there will be short-term effects. But as @Sumedh pointed out this will only help improve the resolve of India Inc and move up the value chain.
May be this is a blessing in disguise.
@paige : You are right. It was neither about the quality of work nor about the geography. It was all about money – always.
It will certainly be interesting to see if outsourcing is stopped. There are many under-employed Americans that have the abilities to do the work that is currently being outsourced. The biggest reason that American companies have been outsourcing is the cost of labor, not the quality of labor. If the taxes are high enough, I think that the outsourcing will be slowed significantly.
I think there will certainly be effects on margins of IT companies in short terms…
In long term, they will continue to move up the value chain by consulting business, product outsourcing, product building and so on…
They will also work more and more with other countries in Europe and Australia reducing our dependence on US…
The margins will grow again after a couple of years when downturn is over and IT spending in US increases…
Hi,
As you rightly mentioned, outsourcing cannot really be stopped. The companies have to get the job done, and competently. Eventually marking out the cost benefits, they might shift to having subsidiaries in cost competitive areas around the world.
BPO’s might have an immediate loss in business, however whenever there is need for any analysis I feel there will be significant costs involved.
I dont know how the ‘Obama Promise’ will legally effect work done by subsidiaries, but I have a feeling that at least the larger organizations (IBM/Microsoft/etc) will expand their bases in India.
i completly do agree with the fact that it is not about t-shirts,mugs it requires the brain,hardship for work and then transform that in money.so i guess the ball is in american compay’s side that what do they actually want(and the answer is yeh money money money………………………)?
As you said, it is not all plug and play, I don’t think that they can stop outsourcing. Companies will be willing to pay more tax if they would still make more money than without paying tax and stop outsourcing.
And as of now 2nd sector for products is still not in Indian scenario.