Summary of Outsourcing

Is there a way out from Job Outsourcing?

Most experts think not. They feel there is no escape from the attack of E-commerce on industry after industry that threatens to transform traditional industry structures into new configurations. Managers they feel will be forced to rethink their outsourcing strategies in profound ways. Studies have shown that more and more companies outsource still more complex activities. Also, a considerable reduction in supplier base can be detected, leading to closer relationships between companies. This development has called for a totally new way of doing business. Successful outsourcing has become a key to competitiveness. For the seller or vendor, the sale of total solutions has become a key to new and expanding markets.

Americans seem to love the low prices generated by globalization but not the low salaries. Levi's recently closed its last U.S. manufacturing plant. A pair of blue jeans made in the closed factory would sell for $80. On the other end is Wal-Mart which makes no bones about paying slave wages to people in China, India or Thailand and prices its jeans at $ 12-a-pair jeans. Even knowing of all this, would the consumer in the US still buy the Levi's jeans? That is one question that has disturbing answers.

It is not so much the change but the speed of change that the Americans have been unable to cope with. They have faced similar situations earlier but have always emerged out of it. 20 years ago - the threat to economic prosperity and national sovereignty was not Indian coders but Japanese autoworkers. The predictions were equally alarmist - the "hollowing out" of America, people called it. And the prescriptions were equally blunt - trade sanctions and "Buy America" campaigns.

The best option for America is to stop worrying and to take advantage of the situation. It's inevitable that certain things - fabrication, maintenance, testing, upgrades, and other routine knowledge work - will be done overseas. But that leaves plenty for them to do. After all, before the overseas programmers have something to fabricate, maintain, test, or upgrade, that something must first be imagined and invented. And these creations must be explained to customers and marketed to suppliers and entered into the swirl of commerce in a fashion that people notice. All of these require aptitudes that are more difficult to outsource - imagination, empathy, and the ability to forge relationships. It seems clear that the white-collar jobs with any lasting potential in the US won't be classically high tech. Instead, they'll be high concept and high touch.

But there's also a far more positive view -- that harnessing Indian brainpower will greatly boost American tech and services leadership by filling a big projected shortfall in skilled labor as baby boomers retire. That's especially possible with smarter U.S. policy. Companies from GE Medical Systems to Cummins to Microsoft to enterprise-software firm PeopleSoft that are hiring in India say they aren't laying off any U.S. engineers. Instead, by augmenting their U.S. R&D teams with the 260,000 engineers pumped out by Indian schools each year, they can afford to throw many more brains at a task and speed up product launches, develop more prototypes, and upgrade quality. A top electrical or chemical engineering grad from Indian Institutes of Technology earns about $10,000 a year -- roughly one-eighth of U.S. starting pay. Says expert Rajat Gupta, "Off shoring work will spur innovation, job creation, and dramatic increases in productivity that will be passed on to the consumer."

Whether one regards the trend as disruptive or beneficial, one thing is clear. Corporate America no longer feels it can afford to ignore India. "There's just no place left to squeeze" costs in the U.S., says Chris Disher, a Booz Allen Hamilton Inc. outsourcing specialist. "That's why every CEO is looking at India, and every board is asking about it." neoIT, a consultant advising U.S. clients on how to set up shop in India, says it has been deluged by big companies that have been slow to move offshore. "It is getting to a state where companies are literally desperate," says Bangalore-based neoIT managing partner Avinash Vashistha.


White collar jobs ranging from call centers to software engineers to medical technicians are being "outsourced" to India resulting in comments from the White House and the presidential candidates in the USA. This "outsourcing" is blurring the lines in the globalization debate as well. When globalization mainly meant that blue-collar jobs were going overseas, it was ok with many American professionals who supported Globalization. Opponents of globalization, on the other hand argued that only the bad, dangerous jobs were being sent overseas...setting up a kind of sweatshop slavery. The scenario seems to be drastically changing as really good jobs in glass office towers with air-conditioning are now going overseas. Anyone opposing this is seen as a hindrance to the development of a legitimate middle class, even if that means more people of the country of origin are forced into the bad jobs.

If India can turn into a fast-growth economy, it will be the first developing nation that used its brainpower, not natural resources or the raw muscle of factory labor, as the catalyst. India desperately needs China-style growth. For all its R&D labs, India remains visibly Third World. IT service exports employ less than 1% of the workforce. Per-capita income is just $460, and 300 million Indians subsist on $1 a day or less. It has taken Infosys' Narayana Murthy to remind rapturous India that with less than 2 per cent share of the global IT market, India is still a toddler, not a superpower; that potential should not be mistaken for performance. Too late! India is set to reap the harvest of its bragging.

Last Updated on : 20/06/2013