Outsourcing faces new era of scrutiny

January 27, 2009

ericauchard1– Eric Auchard is a Reuters columnist. The opinions expressed are his own –

Outsourcing, Indian-style, is challenged as never before by an erosion in business confidence that makes corporate spending, even to generate quick cost-savings, harder to justify.

“No New Investment” is the order of the day; cost avoidance, the mantra; zero percent, the growth target in the current era of uncertainty.

Software service providers emerged out of the 2000-2002 technology spending bust with sales growing up to 50 percent a year as they won over companies to contract out inefficient operations instead of managing them in-house.

But shocks to the world economy seen over the past 18 months are triggering reassessments of corporate growth expectations, cost considerations and operational accountability. It’s no longer safe to assume that the logic that drove outsourcing in the past will drive it again, once the economy picks up.

Here are reasons why the industry will find it difficult to repeat its past performance in the tough times ahead.

CUTTING BACK ON COST-CUTTING: The paradox at the moment is that spending on services meant to cut costs and save money is itself being squeezed.

Technology Partners International (TPI), a research firm that has tracked the outsourcing industry for 20 years, reported this week that total contract volumes fell 22 percent in the fourth quarter from a year ago.

Just how bad things could get this year is only likely to emerge as corporate customers nail down their 2009 spending plans to vendors in the next two to three months.

“The worst of the IT (information technology) spending slowdown likely remains in front of us as we start the clock on slashed 2009 budgets,” Goldman Sachs warned in a report on the software industry earlier this month.

The conventional wisdom is that companies will eventually need to cost-cut their way out of the economic morass. But as the software services industry has matured over this decade, Goldman analysts say the sector has become more cyclically dependent on overall IT spending, reducing the chances it will be an early winner in any corporate recovery.

Tata Consultancy Services , the largest of the Indian software service providers, estimates that budgets for IT outsourcing will fall between 5 and 20 percent during 2009. Market forecasters predict more declines in store for 2010.

KEY CUSTOMERS IN TROUBLE. One problem is that the $40 billion-a-year industry’s fortunes are heavily linked to the financial sector. Indeed outsourcing started out 30 years ago as a way to help banks automate tangled back-office operations.

But while it grew more diverse in the 1990s, branching into telecom, manufacturing, retail and other industries; banks, brokerages and insurers are still the biggest slice of the market at 20 percent of overall sales, Goldman Sachs estimates.

The finance sector is not just in trouble, it is experiencing a meltdown like no other since the 1970s or perhaps even the 1930s — long before outsourcing itself was invented. And while the credit crisis has left many institutions needing to slash costs, we are seeing a wholesale contraction of the market that will lead to steep reductions in overall demand. Whole parts of the business will disappear and not be replaced.

Moreover, the financial industry’s reliance on governments for bailouts has curtailed the autonomy of bosses. Governments are likely to be dubious should big banks and insurers seek to offshore financial jobs, especially in countries with mounting unemployment. Outsourcers may have to get used to having fewer, and more conservative, financial services customers.

GROWING COMPETITION. Even if volumes hold up, Indian software services may find their market share eroded. After all, Indian firms no longer lay claim to the sort of exclusive cost advantages — lowest cost technical labor — they did.

In recent years, the industry has expanded into other offshore regions such as Southeast Asia, Central Europe and Latin America but promises to handle sensitive work “near-shore” or onsite when customers demand or labour politics require.

Big computer services firms IBM , Hewlett-Packard and Accenture got in on the act by expanding into India or by acquiring offshore companies themselves.

Accenture now has more staff in India than in the United States. Because these firms are agnostic about whether they offer their services offshore or near-shore, they look better placed to navigate global labor politics than Indian rivals.

TRUSTWORTHINESS. Adding to the sector’s troubles is the massive corporate fraud uncovered recently at Satyam Computer Services Ltd , India’s fourth largest software services provider. The scandal has Satyam customers scrambling to find alternative providers.

Other offshore services providers report stepped-up scrutiny from clients of their own corporate governance and financial viability. It has also revived questions about the trustworthiness of Indian accounts and the adequacy of corporate controls.

That’s a big black eye for an industry that sells risk management and corporate governance services as a major client offering. It may raise the risk premium investors require for holding these stocks.

PRICE PRESSURES. Rising competition isn’t the only threat to offshore outsourcers’ margins.
Many of the more profitable, longer-term contracts worth tens or hundreds of millions of dollars are being put on hold as companies scramble to reassess their business strategies.

Customers want more control over projects and are demanding fixed-price deals that are more likely than not to limit margin growth. Infosys, Tata and others say they are doing their best to make up for price cuts by driving greater sales volumes.

The trend is disguised by the long-term nature of many existing software services contracts. Recent reports suggest many customers are scaling back or canceling long-term “mega-deals” until they can get a handle on the impact of economic decline on their own businesses.

The industry is subsisting on short-term, quick-fix contracts aimed at cutting operational costs as fast as possible. These price-sensitive deals are what software services firms had been trying to move away from in favour of higher-value projects to create new businesses for customers, not just manage existing software or customer services.

There is a big cultural change underway in global corporations that may be less friendly to outsourcing. Fallout from the financial crisis is likely to mean far greater pressure on chief executives to run a tighter ship. There’s likely to be less merger activity, less headlong expansion and less resulting need to consolidate organizations using external services.

Chief executives are sure to be more closely scrutinized for the operational choices they make, instead of farming out responsibility to lower level technical managers in order to focus on deal-making.
Inevitably there is a lack of control involved in contracting business operations out around the globe. This more constrained environment could be less favorable for outsourcing than downturns of the past.

– At the time of publication Eric Auchard did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. For previous columns, click here. –

52 comments

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In addition to the aspects described in your commentary, individuals in management positions seek to outsource in order to deflect accountability for their processes and decisions.

Posted by Philip Blanthorne | Report as abusive

Eric,you have made some good points.I do see some near term challenges,however I also see opportunities for this industry too. But overall,gives you a perspective where things may be heading in near term.

Posted by Gaurav | Report as abusive

I will somehow feel better knowing that I can fully understand a customer service rep and that he/she is sited in the USA. At this point, I am sure there are many knowledgeable people willing to provide tech support here.

Posted by ly | Report as abusive

And the pendulum swings.

Posted by Matt T | Report as abusive

Out sourcing IT does not work because you give away your crown jewels. Sorry money saved today is competive advantage lost tomorrow. There are no short cuts to building success. Giving away the farm for momentary gain only ensures you are on a path to failure tomorrow. Tomorrow has arrived what will you do, you know longer control the very technology that you business is built on. Your over sea’s competion knows exactly how you do business. Face it you lost your bet and the company.

Posted by WhatWeKnow | Report as abusive

Does this mean that when I call Honeywell seeking information on classified or ITAR regulated military hardware and software I won’t be diverted to a call center in Bangalore?

The orgy of cost shifting at all levels to the Asian slave markets is coming home to roost.

Posted by RFL | Report as abusive

2002 was a terrible year for domestic software engineers. There was a tidal wave of outsourcing offshore. In the years that followed, my company saw a great deal of rescue mission work as we took failed projects over from offshore groups. While I can’t say this was true in the financial market, I’ve seen that corporations are now keenly sensitive to quality and intellectual property security leading them to keep their outsourcing partners on U.S. shores.

The outsourcing will flow where talent is available . The drivers for Out sourcing is quality more than costs and the quality is present in Asia and the back office stuff and new technologies are being embraced in India and being provided to MNC’s and this strategy for getting work done faster and at lower cost is what will bring the world out of recession.

Posted by AAA | Report as abusive

Outsourcing was just another one time cost cutting strategy aimed at artificially raising margins in markets that had matured a long time ago. John Steinbeck was right to be critical of the growth based economy when he wrote Grapes of Wrath, and we would do well to take his criticism. The economy should efficiently distribute resources in a sustainable manner, not just generate mindless profit. IMHO

Posted by Josef H | Report as abusive

It is hard to justify this kind of thought process, specially when we want to sell our Ford and GM cars in India and China. We are all dependent on each other in some way or the other. Share, trade, and care are the mantras of the new world.

We have to innovate and spend ourselves to come out of this depression. Shutting down is not the real answer.

Posted by Sam | Report as abusive

agree with ‘WhatWeKnow’

Posted by PwlM | Report as abusive

Outsourcing is stable here in the Philippines, for now.

Posted by Inan | Report as abusive

I urge every business to take away their outsourced work from Bangalore. Please, do it NOW. you guys have caused lot of pain to Indian real estate market. The prices are not affordable anymore. And you guys without any reason give away so much money to these outsourcing companies. While 10 to 12 dollars per hour itself it too much, you guys are paying more than 45 dollars per hour.

As an Indian I would like to see my India to back to 80′s. No improvement in the country. only corruption, cheating, fraud, fights and poverty. but at least real eastate was affordable. you see what you guys did to India?.

Posted by Bill Clark | Report as abusive

hey, the option for non Indian companies are services from Mexico, what they are calling Near shore services.

As long as things are going fine,your home is safe,nobody bothers, now when the job loss and other fear has started for everybody.you people start crying INDIANS did this, INDIANS did that.

Come on Guys.
Outsourcing was done by MNC Companies. It is just another business strategy,when people started it is giving good results, the flood gates opened,now more than the good result, you are facing more problems, it is now upto managements to decide what is proper action code.

I feel, in this hour of economic crisis, businesses should more focus to align their business process to achieve the operational excellence and get the increased profitability. Service providers have been the great partners to achieve the same. There is an initial investment but in long terms you will get a great ROI.

Posted by Rashid | Report as abusive

I dont know why outsourcing still hasnt been recognized as a natural shift in Contemporary Business Practices. There is so much hue and cry over competitive edge lost, Real estate prices increasing and all knee jerk comments. Can you see outsourcing from employers point of view, when he needs to get a job done and he gets hard working, professional and ambitious people somewhere else as well, he will go for it. Especially when he gets the youngest population of world in India. Moeny is not the factor, had it been, you can get even cheaper labor in Bangladesh and Pakistan but why no one goes there and only to India. After all, India is not the cheapest country of the world. Grow up guys and stop complaning. Its here for ever.

Posted by Praveen | Report as abusive

While a number of points made are relevant, the fact that leaders have to make choices and “do more with less” is a given and hence, even with a pressure to provide jobs locally, its simple survival that is going to dictate the need to do the same/or more cheaply – and hence outsourcing may not see a dip in business of the same degree as compared to other businesses.

Aditionally, I think, companies are still going to go in for a tried and tested model in these times rather than take their chances and experiment with Latin American/SA/SE Asian countries and hence may stick with India in the medium term.

Posted by simon | Report as abusive

Outsourcing is only part of the problem …. there is still the influx of H1B visa workers and other “immigrants” who come to the U.S. with no intention of staying and becoming productive members of the U.S. society – and only want to stay as long as is necessary to learn the technology and make some dollars before they return to India, or Pakistan, or wherever they have come from so they can start their own business counterfeiting U.S. good and technology. I see it all the time with the people I work with here in the Middle East.

Posted by US Expat | Report as abusive

I think companies will not just looked at cost but also the country that the companies are operating in and the culture they are in too. As that will most likely affect their investment decisions.

Posted by Alvan | Report as abusive

I oppose companies that blindly outsource jobs (such as IT). There are loads of local talents available to do the job. Outsourcing will not necessarily guarantee low cost. The secondary costs associated with outsourced works are much higher. Besides the quality of work may not be good (according to a recent report, only 8% of Indian IT workers are good at what it takes to do the job). And most Indian IT vendors do body shopping (adding headcounts into a project account). This raised many questions after the Satyam fiasco was revealed. The company was billing for 15000 non existent employees. Thirdly, the violation of copyrights and IPRs raises amany questions.

Posted by T Drowler | Report as abusive

Outsourcing will not be diminished by the recent scandal. It just proves the point that creative accounting and fraud knows no boundaries and is not limited to any one country. It will only be found if one is willing and bold enough to look for it though. It will go on just as outsourcing will all the more now when pressure to cut costs will intensify. Please don’t recall the good old days of India and the bad old west comming to take it away. There are more benefits to the country than what was lost. It’s the price any country has to pay for economic progress. No one can stop it and you can’t have it both ways.

Posted by Franz Kafka | Report as abusive

Funny article Eric, using fuzzy logic to try and peep into the future. Its probably as far fetched as conspiracy theoritsts, fear of who drove Obama to take a 2nd oath. Models would change and evolve. Its too shortsighted to look at outsourcing as one way traffic. Its strategic, not only for delivery of services but also to grow markets in the destination country. Unless of course everyone closed their borders and stopped talking to people of different nationality, I see this changing course (like any other industry), but not necessarily going down at all.

Posted by Ruchir Verma | Report as abusive

A few points mentioned here are good. The outsourcing industry will DEFINITELY be hit and rather badly. But the flip side is until the corporations are absolutely sure that they are gaining atleast 5 times from outsourcing compared to the local market they donot outsource. Take for example: if you are recruiting a fresh college grad from a US university and place them into financial services you need to pay atleast 60K + benefits + expenses. Hence it would be atleast 80K. Compare that to India. You pay at the max 20K (1 million INR), infact now after so many companies cutting jobs you will find a 5 year experienced person with that salary. In a sense it definitely helped the corporations.

Now the clients donot have significant funds to come up with new strategies and will tend to cut on their IT spending. The first round of cuts are likely to be the ones which are more project oriented like if they want to create a fancy financial model. But there are some CORE businesses which are also outsourced. Take for example: many insurance companies have outsourced their operations e.g. claim department, catastrophe modeling, underwriting, actuarial work back to India. These are specialized and can very easily be done in an outsourcing model. I can bet the cost differential is huge (of order 10 times in some cases) and these operations have been build over many years. There are processes running here. It would be difficult or might even be impossible for the company to take back these work from these centres.

A few years back I visted the GE Capital offices in India. I came to know that 60% of their employee strength for their insurance arm is in India. The India center used to do almost every operation that you can look for. Even they used to take care of each region separately. So they had a global operations being tackled from there. I cant think of a reason why the companies would take back their work and redo all their work they have done over years.

But all said and done the pure IT companies like Infosys, Wipro will suffer since the overall IT budget is going to go down. While they can bank on their existing processes that they already got hold of.

Posted by Phil | Report as abusive

Let me ask you guys a few questions.
Who invented ‘outsourcing’? Who made money by getting the work done by Indian’s at dirt cheap rate? Who is making money by importing a to z from China? Tell me who fought for globalization? Who is still crying to open up the Indian market more and more so that they can dump their Chevys and Pontiacs (which you can’t sell in US because the ppl realized that they are no match for Toyotas and Hondas). What is the root cause of US sub-prime mortgage crisis? What seeded the global economic melt down? Does any other country in the world have frauds in the scale of Enrons’ and Madoffs’? (and you are talking about corporate governance..lol)

Come on guys, 3/4th of the US population is lazy to the core (not their fault, its just the way things are). The other 1/4th is in cut throat competition to make money (cooked-up MBS & CDOs and what all). This 1/4th has gone to that extend that they have now messed-up the global economy. The sleeping 3/4th are feeling the heat now. They are slowly waking up to realize that they don’t have a home or job any more. How long were you planning to live on credit and more credit and even more credit?

So let’s not waste our energy on the wrong front? Lets not blame each other. When it comes to economy, the world doesn’t have you and me anymore. Its us, all of us. Its time to change and fix the fundamentals. Time to rally behind the new President folks!!

Posted by Manoj | Report as abusive

Outsourcing has been an absolute disaster for the United States. We have lost our technological advantage in exchange for sure term cost savings. Now we have to compete with overseas talent that can do the same job for pennies on the dollar. How do CEOs expect to sell goods and services to American consumers when they have removed our employment?

Posted by John Smith | Report as abusive

Just want to mention that while DOW Chemical whines about their numbers, force contractors to step aside, and dump employees with decades of service… they continue to shunt jobs to Mumbai with the rest of the hordes.

The spin doctors at DOW Chemical rank up there with the best of them as they roll out excuse after excuse why the deal with the Kuwait Parliment fell through (duh) and now they are trying to figure out how to spin excuses for this Rohm and Haas deal they can’t afford.

Whoever is thinking up the business deals for this company is the one who should be ‘out sourced’ to the unemployment line.

Posted by Pandora Smith | Report as abusive

I think that Americans are tough and we are NOT lazy. We are the most inventive country in the world, we invented the airplane, automobile, telephone, phonograph, most famous computer OS (both of them!). I agree that the IT industry will not be as outsourced as it once was, I consider it a fad. This is not to say that NO outsourcing will be done, of course not; but its numbers will be diminished. Outsourcers often don’t deliver what you are looking for, because of cultural and language differences. The cheap labor is made up in costs of fixing projects that got off track because of this.
I know because I am a Systems Analyst and I have to work with them frequently. Very difficult to understand them. Coroporate Management is always worried about the initial dollar, and it has never helped them. Why do we need middle management anyway? THAT is outdated!

Posted by Marge | Report as abusive

I have worked in the sector for 15yrs and have witnessed the changes, and i can honestly say outsourcing proves to be far more expensive and prone to disasters than in-house IT departments.

The whole ideaology is based purely on cost and not quality. Many companies have had whole IT dept ripped out and it in my opinion is the end of an era, in that employee & employer relationships are NEVER the same.

It is morally wrong, and I personally think illegal, that companies who receive large government contracts then outsource work that is paid for by taxpayers.

Also it is morally wrong to make people redundant and then replace them with staff from offshore companies, who end up sitting in the former employees desk.

British jobs for British people was and is a massive con trick, do we want all our children working in supermarkets? Because thats what is being allowed to happen with the antics of industry sectors like IT.

Posted by D Richmond | Report as abusive

Henry Ford said it best years ago when asked about paying his factory workers a fair wage. He replied “Ive got to pay my workers fairly so they can afford to buy my cars”
Did anyone ever hear of GATT and NAFTA? With the help of the politicans, corporate America has been given a license to outsource millions of jobs. We closed all of our factories and moved the jobs to China so that we can exploit the poor. Then after dismantling the middle class we wonder why no one is spending any money. Simple, we don’t have it to spend.
The economy today is the result of political and corporate facism. Americans are not lazy. They just need to be paid a fair wage so that they can support and contribute to growing the economy. Notice that no one is talking about the 1000′s of our closed factories and the relocation of millions of jobs to China. We cannot survive as a nation of warehouses and the economy today is the best example of this.
Support the American worker- Buy American. The job that you save may be your own!

Posted by Dennis | Report as abusive

India should have the bi-lateral agreement with other countries. Ex India should not sign multi Billon Nuclear power deal / Boeing /Military artilleries unless the same amounts of Services are outsourced to India. We could get all these from other competitive countries like France, Russia etc.
Wake up guys….In the open capital market the Newton third law applies and the system will correct them in the long term. Even the US and UK could avoided the Sub-Prime issues by allowing more India Techies to work and eventually that could have increased the demand and kept the prices in the optimum level.

Posted by Krish | Report as abusive

Sorry to spoil the fun.

Outsourcing is a business practice. It did not cause nor is it responsible for the current crisis. Outsourcing as it appears, most believe, is not only related to services. What would you call the automobile parts made in China to keep the cost of ‘American” cars down? Also how many of you would be willing to pay say $200 for a toaster oven because it is ‘Made in America’ vs the $50 equally well made imported one?

What we need to do is pull in the reigns, stop paying CEOs obscene salaries, classify white collar crimes as felonies, get off the credit train, take responsibility for our actions, stop crying, and get creative. The economy (US and the world) will always go up and down, how we manage in the good times is as important as how we manage in the bad times.

Chins high eyes straight – we will get through this. But we need to learn.

Posted by BS Averse | Report as abusive

India should have the bi-lateral agreement with other countries. Ex India should not sign multi Billon Nuclear power deal / Boeing /Military artilleries unless the same amounts of Services are outsourced to India. We could get all these from other competitive countries like France, Russia etc.
Wake up guys….In the open capital market the Newton third law applies and the system will correct them in the long term. Even the US and UK could avoided the Sub-Prime issues by allowing more India Techies to work and eventually that could have increased the demand and kept the prices in the optimum level.

Posted by Sam | Report as abusive

Because of the swindles of “Free Trade” and “outsourcing
the USA cannot even manufacture enough small arms ammunition with which to defend itself. Check out the history of the Army’s small caliber ammunition second source contract. The supplier is obtaining small arms ammunition from a variety of second and third rate ammunition manufacturers world wide. If the Chi-Comms ever attack our shipping lanes we’re scr*wed – we’ll be forced into surrendering.

Posted by RFL | Report as abusive

I think it is wrong to blame India for inviting work to their country. After all, we Americans have traditionally sold all over the world. Pepsi, Coca cola, Mcdonalds are big businesses in India. GM has large customer base in China. How will we react if all these countries block us out? Please read “who moved my cheese” to understand how we should react. We need to innovate …once again. We had the auto boom, electronoc boom, computer boom and now we need another innovation to take the economy forward. Blaming the world is not going to help.

Posted by Robert | Report as abusive

I see very little regard the loss of subject matter experts (SMEs) which have resulted in the poorest quality of IT work I have seen in decades.

This is a direct result of outsourcing and cost over quality, and the serious under-bidding by vendors for contracts whose requirements they never expect to meet.

Quality = Accountability!

Posted by Brian in Middle River MD | Report as abusive

The arguements against erecting regulations on trade all start with the assumption that India and China are buying our products and that restrictions will hurt us. But that facts speak differently. India and China are both strategic and smart about their investements and they buy far less from us than we do of them. They are investing in their infrustructure while the US watches its bridges crumble.

Its time for the US to be smart about investing in ourselves.

Posted by Mike | Report as abusive

Let me throw in a quick contribution regarding outsourcing. First, a lot of you have made some very valid points. I would love to see all countries thrive but when we are outsourcing jobs, and not increasing work in the U.S., but alternately forcing qualified and talented people here in the U.S. to make less money than they are worth, especially when they spent their money on an education…it doesn’t make sense. It’s almost like our trade deficit…when we move away from a manufacturing stance in the U.S. because we can open factories in Vietnam that do shoddy work because the factory workers are paid well below what we would consider a “livable” income…it doesn’t make sense. It does for the companies bottom line, but how does it help the people that have lost their jobs and can’t afford to go to school to change their career? It doesn’t, I know a company needs to make a profit, but to what extent will it go to keep lining it’s pockets with millions and millions of dollars. To make up for it, we should address more seriously, college education or the lack thereof. But then again, if we keep outsourcing jobs to other countries, it wont matter if you have a college degree because someone in another country will do it cheaper, not necessarily better though. We need to create more jobs here to bring back our middle class. Our middle class is not consuming and is seriously pinched with the foreclosure rate as high as it is and still nowhere near the end of it’s cycle and is trickling the non-consumer spending effect to the rest of the world’s economies who rely heavily on goods exported to the U.S.

Posted by Damian Palmares | Report as abusive

Another thing I see a lot of is people blaming the U.S. for the global financial crisis we are in and saying maybe other countries should stop buying U.S. products like Coke, McDonald’s etc…The U.S. is not consuming right now because it can’t, not because it doesn’t want too. We just simply don’t have the means with the foreclosure crisis, Wall Street and huge losses in retirement funds from the people who would normally spend, not just the middle class that is way over their heads in debt and not spending wisely but racking up credit cards bills left and right and not spending wisely. Add the effect of Tech jobs and manufacturing jobs that provide good income for a large source of talented people being outsourced to other countries…these people now can’t find work or are taking huge salary hits just to be employed. Would you still be spending if your salary went from $75,000 a year to $30,000?

Posted by Damian Palmares | Report as abusive

Interesting article, interesting thoughts.
As much as has been written about the pros and cons of outsourcing, I do agree with outsourcing being a business-affecting decision rather than a country/ continent-affecting decision.
As has been pointed out here, outsourcing does not merely relate to services, it also, in the broader sense of the word, relates to off site manufacturing, production, assembly etc. of products across industry segments.
Working in the offshoring space, from a much abused-much loved India – I am cognizant of the fact that I lose my job as soon as offshoring stops (which in reality it won’t, but reduction in volumes, is a potential). At the same time, I am unable to sympathize with the hue and cry about job losses back in the countries from where offshoring is originating from. Lets look at statistics – India is a country of 1.1 Billion people, of whom, according to the Indian Planning Commission, 30% live below the poverty line – but this doesn’t necessarily mean that they are also unemployed.
If you look at statistics released by NASSCOM, a trade association body for the outsourcing/ offshoring industry in India, 2.0 Million people are employed in the outsourcing space – that accounts for 0.18% of the total population of India!! Add to this another .00001 Mn people employed indirectly to this – yet this number is insignificant.
However, the reason I bring this up – India does not depend on the outsourcing industry to as large an extent as the world believes it does – Domestic markets account for approximately 85% of India’s revenue – this is to moot the importance of retaining in-house capabilities and functionalities.
Sure, the world selects India and China to produce engine parts for automobiles at a far cheaper rate, BUT, India still buys 90% domestically produced/ manufactured automobiles.
The idea is not India versus China versus the world – the idea to implement is to retain the core within the country, in a manner that it is self-sustaining even in the worst of times, and spread the love around the world by offshoring the non-core!
Also, be a smart spender, judicious buyer, and an educated citizen – of every country one lives in.
The key is to remember that it is a cyclical process – you give and you receive- but somewhere along the way, outsourcing has been bastardized to an extend that it is assumed to be only taking away!
I am not pro or anti outsourcing – I am about retaining skills, attitudes, and the foresight to change with times – and this can only happen with education, expertise, and a willingness to learn.
In turn, breeding an era where the world truly becomes global, but also intrinsically individualistic.

Cheers!
Surabhi

Posted by Surabhi | Report as abusive

America need to remember that its only a part of the world and not the world. Protectionism is always used to defend self interests only and it will be the biggest loser if such policies get enforced.

Posted by S Trader | Report as abusive

[...] pm on January 27, 2009 | # | Tags: Trends Outsourcing faces new era of scrutiny [...]

The biggest picture is…they’re moving out of India. And stayed in a beautiful tropical island. No longer serving American firms.

Posted by Olivia Rosaroso | Report as abusive

Hello World. It is interesting to read the comments from educated Indians in defense of their country and from working class Americans blaming others for their problems. Both viewpoints are right to a degree. I wonder what comments would be made by Chinese workers making toothbrushes and toys for ten cents an hour. Indians and Chinese are naturally defensive about their new-found role in the global economy and want Americans to look elsewhere for someone to blame. Americans have been internally outsourcing manual labor jobs to illegal aliens and automating every clerical job once held by educated white-collar employees. Computers have probably cost Americans more high-paying jobs than India and China put together. American CEOs have been brutally focused on shareholder interests and have done everything possible, legally and illegally, to artificially elevate their stock prices. CEOs who do not lay off thousands of workers, outsource, automate, and consolidate are replaced by CEOs who will do these things. When corporations run the government through lobbyists and the ordinary civilians are denied basic needs like health insurance and pensions it is called fascism. Global overpopulation, modern transportation, and the internet have reduced the value of human labor to near zero. We are entering a new century where jobs and resources will become so scarce our children will starve. I miss the 20th century.

Posted by Bob Johnson | Report as abusive

Perhaps you should remember that you’re in no place to tell America what it needs to do.

Admittedly, it was a couple years back, but in a competition among computer programmers, Poland came in first and MIT second while the Indians were not in the top ten. When the company I worked for computerized its operations, it cost them a few million dollars (a couple years back, remember) and six years to get a truly awkward program. I do wonder if custom programming farmed out to India is a false lead, and the input from the users in a generic program shouldn’t be tried first.

Posted by Bill Williams | Report as abusive

I wholly agree with Ms Rosaroso, with emphasis on our political system relying on the input of corporate lobbyist to dictate what earmarked bills will be pushed through the house and senate. Unfortunately, americans, while capable of independent thought, are willingly allowing themselves to be influenced by the next smooth-talking politician or media personality. Even in the face of facts, we swallow the latest biased report or speech as if it were the bare truth. (i.e. doing nothing about political scandals, following a notorious bill through congress while a dozen more like pass under our noses, or electing officials based on their good looks/personalities, NOT on their experience and track record).

Posted by Conrad | Report as abusive

Look at the recent headlines. Even a conservative Republican, Senator Grassley, is complaining that – perhaps – Microsoft is laying off at the same time as a morose Bill Gates went before Congress to plead for more H-1B visas. Just look at the “you’re technically the best” ( US workers are morons, Bill?) hype Microsoft gives to hire more for its burgeoning facilities in India. Poor, filthy rich Bill.

It is sad, too, that so very many of us helped to create this ‘nightmare’ by our development of satellite communications. It used to take days, even weeks, to move large quantities of data to and from overseas facilities.

Now, we dial an 800 number for technical support and get connected to the home of an Indian contractor. In a real sense, we sealed our own fate.

Posted by Bernard Campbell | Report as abusive

I’m waiting for the ‘third world’ countries to revolt, much as the OPEC nations did when they found out we were exploiting their oil at ‘bargain basement’ prices.

As people of other countries become more aware that we’ve migrated slavery abroad, they’ll rise up – and put us into the same, if not greater, ‘crisis’ than we had with the oil embargo of the 1970′s.

We’ve hired these people to come here, too. So very many of them live together in apartments filled only with mattresses and laptops.

Posted by Bernard Campbell | Report as abusive

The main point is this: now that American (and European) taxpayers are bailing out financial institutions, automobile companies, and other ailing institutions, the taxpayers want their money spent on local jobs, not outsourced jobs. The goal is no longer maximum efficiency for institutions, but rather maximum economic stimulus using local labor pools. Debating the merits of outsourcing is moot. CEOs, CIOs, and CFOs should no longer have the option of outsourcing when they are receiving bailout money from taxpayers.

Posted by Greg Gordon | Report as abusive

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