Outsourcing is Good

The Indian Perspective

Here in India we are riding on the high wave of the outsourcing boom.
And yes, there certainly does seem to be a boom. I was in Bangalore a year back before relocating to Bombay.

I used to pay Indian Rs. 7000 per month ( USD 155) for a 2 bedroom apartment and last month when I visited bangalore the rents for such an apartment was touching IR 9000 (USD 200). When I asked why, the estate agent said that a lot more people in bangalore were making more money because a lot of US( and British as well, english language seems to be the key) jobs were flowing in there.

So more people, fresh out of college were landing jobs not just writing middle/high end software but also workingin call centres doing ticket reservations for British Airwys and pursuing credit card payment defaulters in Milwaukee all sitting down in Bangalore.

What did I notice about these youngsters? Let me make a list:

1.) Most have basic college degrees. This puts them at an advantage compared to the run of the mill call centre agent in the US who would most probably have dropped out of high school. At least that's the idea I get from news articles highlighting this mismatch.

2.) They have money to splurge. An average call centre agent makes about USD 200 a month. Their fathers would be making the same. An engineer doing high end coding could make about USD 1000.
The same engineer in the US would make about USD 4000. This is where US corporations save money. Of course, at the cost of American engineers who are laid off!!

3.) Now these youngsters are extremely independent. Earlier it was unheard of that people who were 19 - 21 were staying seperate from their parents. Now many of them are on their own and the traditional family cohesive structure may be breaking down. Today a young girl could just walk out of the house knowing fuilly well that she will do well anyway.

4.) Of course welcome pizza hut, Levis, KFC, Coke and yes sexual liberation.

5.) American accents. Most of these call cantre agents will put on Western accents while speaking to their customers. But out of the office many still cling to it, and believe me, that's irritating to my ears. Listening to someone who till yesterday did not know a vowel from a consonant(and still don't) speaking like Prince Charles gets on my nerves.

Yes, much of this boom is still limited to the bigger cities like bangalore, madras, delhi and bombay but it seems to be percolating down too to smaller places where rents and wage bills are lesser.

But this is where I think the Eastern (indian, jewish, chinese) cultural importance given to education has paid off. Indian families would never tolerate that their kids drop off from college and would often push education down their throat. But I guess in the west(more so in the US) kids had their own way.

So when you have a better educated guy who demands less wages asking you for a job, who will not give it to him?
So for every 1 american engineer losing his job 3 are created here in India.

In short, a lot of people down here are having a good time.


7,032 views 40 replies
Reply #1 Top
I personally have very mixed views on outsourcing. You have highlighted the things that are best about it. Excellent post.

As for the issue of college you raised, in many ways, our culture is very different. In some families (mine included), staying at home with the family through college wasn't an option. It was made very clear to me that I WOULD be out of the house at 18; then I went into foster care, where I pretty much had to anyway. This means that college meant fulltime work and fulltime college; no easy task for the best student. So, maybe the parents push college harder there, but they also offer familial support for it. That's often not the case here.
Reply #2 Top
Very well said.
Outsourcing out of the country has led to a subtle shift in the balance of power. The funny thing is India is not having to fight for it, the Americans are giving it away.
Reply #3 Top

im surprised that so much sensitive information is apparently being processed outside the us.  tax data for example.

outsourcing would be seen in a much more positive light if a.) those who were relieved of their jobs in the us also owned stock in corporations that save money by shopping their work out to the lowest bidders; b.) we were permitted to shop things in as well (like pharmaceuticals which cost much less to make in india).  

if india has a highly qualified professional workforce (which they clearly do) that can be trusted to handle personal and business financial and credit data (as they are), surely they must be formulating medicine in an equally competent way?

Reply #4 Top
The more other countries are like the US, the better. I see outsourcing as a way of homogenizing the world. That's a good thing, because when the world is just basically one big country economically, the political world will have to follow suit. First coke, then sexual liberation, then world peace!!!
Reply #5 Top
>>So when you have a better educated guy who demands less wages asking you for a job, who will not give it to him? So for every 1 american engineer losing his job 3 are created here in India. In short, a lot of people down here are having a good time.>>

Meanwhile...a person in the US is looking at life through a drive through window and is trying to support his family on 1/3 of the money he used to.

A good friend of mine is from Bangalore. He came over here, got his Bachelors from Tulane, His Masters From Utah State, has an awesome job making 150,000 bucks a year, and even HE thinks outsourcing to India is a bad idea.

Have you ever stopped to think that maybe you folks could do better by doing what he did?

Reply #6 Top
Reply By: kingbeePosted: Sunday, August 15, 2004I'm surprised that so much sensitive information is apparently being processed outside the us. tax data for example.


That is the down side. many companies are not really thinking about how to outsource. We spoke about this in class and from what I see, outsourcing is part of the overall economy since forever. In order to keep costs low, you outsource.

The funny thing is that American consumers benefit from all of this by keeping costs down. The bad part is the jobs that are lost. I have a few articles on my Archive Links that portray the outsourcing as good from America and the economy. All this good will, if you will, comes back to America. If other countries have better lifestyles and more empowerment there is more opportunities. Travel is one immediate outcome of this.

Eventually, the cost to outsource to India will rise as people there ask for more money to preform essential services for the companies.

Anyway, I don't think outsourcing is a bad idea. It just has to be done correctly.
Reply #7 Top
To that I would say that many Americans live pretty well compared to their counterparts in other countries.

I just think that all this outsourcing eventually comes back to the USA in money and good relationships (not to mention world stabability... if a country can have something is a way of an economy it is less likely to become a criminal haven)
Reply #8 Top
The more other countries are like the US, the better. I see outsourcing as a way of homogenizing the world.

The news suggests this approach seems to be working rather better than invasion and occupation ...
Reply #9 Top
The news suggests this approach seems to be working rather better than invasion and occupation ...


That's how the ancient Chinese created their empire... introduce a way of life... show it is better than your old one, and you can have conformity without a bullet being fired.

Outsourcing is a fine idea as far as I am concerned... I just wish companies were honest about it... We have large telco's here who make their phone operators in India learn local wheather patterns so they can make mindless chit chat about the wheather... There are over 1 billion Indian dudes, and 260 million Americans... so in the scale of things, outsourcing is beneficial for the general population of India...

I never thought I would say this... but...

AMERICAN CORPORATIONS ROCK!!!! hehehe...

BAM!!!
Reply #10 Top
I can see both sides of this argument, and frankly the thing that bothers me most about this whole issue is that the Indians taking these jobs are being payed so much less than Americans in that role would be. Of course it's not a matter of them being "forced to take the job," but by being payed considerably less, they're being insulted by the company, and ensuring that equally qualified Americans can't really compete as easily.

Then there the other point, that by saving themselves money the corporations pass the savings on to Americans, so in the end it evens out, but I'm not at all convinced that the consumer, whether here or in India, really saves anything on this, and it's not just a matter of:
Corporation makes four times as much.
American professionals have a fourth as high a chance of getting a job.
Indian professional have to work for a fourth of what the acceptable wage would be if they only lived in America.

Then again, I could be wrong, I'm not exactly as informed on this issue as I should be. Maybe it is saving the consumer money, but when I think of IBM, one of the companies that I know is outsourcing their support, if not more, and I look at how horribly overpriced their computers are, I see no savings.
Reply #11 Top
Corporation makes four times as much.American professionals have a fourth as high a chance of getting a job.Indian professional have to work for a fourth of what the acceptable wage would be if they only lived in America.


Lord Shitzu: You are right here but remember for the Indians it still is a lot of money. Much more than the national average and of course the cost of living here is less than what it would be in the US. For e.g. in India an average cup of coffee costs Rs. 5 (USD 0.12)
Reply #12 Top
We have large telco's here who make their phone operators in India learn local wheather patterns so they can make mindless chit chat about the wheather...


And how do you feel listening to that pratter?
Reply #13 Top
b.) we were permitted to shop things in as well (like pharmaceuticals which cost much less to make in india).


kingbee: But then how would all the big American Corporation (they have branches in India that sell the same drugs cheaper) make all their billions?
Reply #14 Top

Those who oppose outsourcing I assume are careful not to shop at Walmart and careful to see where the products they purchase are made right?

I've met plenty of people who talk of the villainous companies that outsource jobs as they head over to Walmart in their Toyota Camry.  Apparently to some people it's only okay if THEY save money or choose foreign labor over American.

Reply #15 Top
I strongly oppose the way our country does outsourcing. In no way is it done for anyone's benefit but the corporations. And I watch who I do business with, believe me. We are currently a country full of anti- depressant users graduating college and being told we are lucky if we have a miniumum wage job because look at the way the rest of the world lives. If we craft a basket we are told "we are buying one from this country for a dollar instead where they work all day for a bowl of rice".
I'm very happy for you that things are improving. This is kind of a nobody wins situaton to me, like when they used to bring in the scab workers past the strke lines. The ones doing the work were trying to do the best for their families and the ones standing on the picket lines were too.
I think everybody here knows it doesn't have to be this way.
Reply #16 Top
Outsourcing is, and can be, very efficient and beneficial for all parties involved.

The problem with the current bout of outsourcing to India (and other places) is not displacement of workers (that always happens), but the pace and the size of the displacement. Historically, when an industry started outsourcing (such as with the automotive industry in the 1970s), the shift took long enough that the existing worker base was grandfathered, and they were simply not replaced, ie. the next generation did not enter the dying field.

This time around, we are dealing with outsourcing at the speed of the internet. Since the 1970s, North America has been outsourcing manufacturing jobs, pushing its' workforce instead toward knowledge work. But knowledge work can disappear at the flip of a switch, as many have found, and there really is no defence against it. Many companies state that outsourced workers need to be more productive in order to compete, and that's true. But that only works when the competition is on an even footing. I can name a half dozen friends who have seen their jobs outsourced, with their replacements earning under 10% of what they did. Obviously, the option to become ten times more production is not an option, so they're pretty much dead. I know one guy with 20 years experience who has effectively been out of work for three years, because he's overqualified for everything. Companies won't hire senior people for intermediate or junior positions, and the senior jobs are all gone. So, they starve.

That's why the local WalMart greeter has an Electrical Engineering degree, and why the eight man construction crew working on my condo includes an Oracle DBA, two roofers with Java certifications, three day labourers with MCSEs, and a welder with Master's degree in cryptography. Those skills are worthless in North America, because an offshore software developer with those skills earns less than minimum wage here.

The real problem is that the companies are doing this in the most self-defeating way possible. While many are shedding workers like there is no tomorrow, they are also concurrently lamenting the drop in university enrollments, and panicking that there will be insufficient replacement workers in the future. Bill Gates and other CEOs have gone on speaking tours to universities, begging CS and EE students to not give up, because they will be needed in the future. Of course, the students are not stupid; they know how marketable the skills that they are aquiring really are, so 20% bailed out this year alone. When the average IT job in Toronto attracts 3,700 qualified applicants, it's not a field you want to bother with.

Eventually, it will even out. As Americans stop going to post-secondary schools to learn unmarketable skills, the American standard of living will drop, while Indian and other countries wealth will increase. Eventually, there will really be no need for them to work for American companies, since they will have all the skills needed to compete on their own. Of course, as Americans move away from outsourced technical skills, they quickly become overhead who can be disposed of.

Reply #17 Top
Those who oppose outsourcing I assume are careful not to shop at Walmart and careful to see where the products they purchase are made right? I've met plenty of people who talk of the villainous companies that outsource jobs as they head over to Walmart in their Toyota Camry. Apparently to some people it's only okay if THEY save money or choose foreign labor over American.


Man, no need to be so venemous, I mean about 75% of the opinions before your comment were pro-outsourcing anyway, and mine was ambivalent. It's not like there there was some great anti-outsourcing attack...

Then again, AFTER you posted your comment, the ones by WiseFawn and William were quite an interesting look at that side of the discussion. And even they say that outsourcing can be a good thing, just not the way it's happening right now.

I don't know how realistic William's vision is, but it is kind of disconcerting, though I think it's more of a doom and gloom version of where things will go.
Reply #18 Top
I know of several towns in the US that would dry up if foriegn corporations moved their manufacturing back to their own nation. Tit for tat.

The bottom line is people are never, ever satisfied, not even in India. As time goes on they'll start feeling that they deserve better wages and benefits, and then they'll be less competitive. Then, if I had to predict, the Middle East will be the next spot for well educated, low wage labor.
Reply #19 Top
"I don't know how realistic William's vision is, but it is kind of disconcerting, though I think it's more of a doom and gloom version of where things will go."

I wasn't talking about where things will go, I'm talking about where things are now. I see it every day. The supermarket checkout man at my local grocery used to be a Sun administrator. The coffeeshop down the street is staffed almost exclusively by Nortel expatriats. A friend's wife who does the welcome wagon for the city advertised an $8.25/hr job and received 300 applications from Nortel expatriates. And so it goes.

Partially because Canada was "Silicon Tundra", the government spent the last decade pushing people into IT and away from other disciplines. That's resulted in a massive displacement in the number of senior technical people who are considered too experienced to be hired, and who are not really able to start at the bottom of another trade, since few trades will take on 45 year old apprentices. So, they find what they can to eke out a living. A local trucking firm got in trouble recently for putting "applicants with Electrical Engineering or Computer Science degrees will not be considered" on their advertisement, because it was deemed discriminatory.

One of my friends works at a large Canadian bank, and the help desk in his division recently started hiring again after a two year freeze. They filled two of the three entry level positions with Master's degrees. Keep in mind that the applicants had to go through a six interview process to get that. Sure, these are $US23K positions, but after 18 months unemployed, they're damned grateful for it. The senior manager who previously ran that group is now driving a 18 wheel rig up north, and he'd take that help desk job in an instant.

It's not all outsourcing that's behind this, of course. There are other factors. Companies have become considerably more efficient. And with IT jobs so scarce, many companies I know of work their employees to death, because they can. One friend has kept his $US60K position while 22 of the 25 positions in his team were outsourced. But in order to keep it, he (and the other two survivors) are on call 7/24, put in 80 hours a week on average (no overtime pay, of course), and he had a total of eleven days off in 2003. Of course, he could always quit, but he knows it would mean at best a 60% drop in salary, even if he was lucky enough to find something.

The stated intention many companies have is that they outsource the grunt work, freeing up local workers for the more senior and interesting skilled work. The reality is pretty much the opposite. There's far less savings to be gained by outsourcing a $7/hr minimum wage phone answerer with a $1/hr worker overseas; however replacing a $45/hr senior Java architect with a $3/hr counterpart is major savings. The end result of this is getting rid of the high paying jobs, and being able to fill entry level positions with senior people.

Obviously, this is an artificial situation that cannot be maintained indefinately. Currently, there are a lot of senior workers locked into the system who can be taken advantage of because they have no options. But as they leave the field, they are not being replaced, and a new equilibrium will develop. Of course, many companies are panicking because they see enrollments plunging, and their supply of cheap labour is drying up. But it's drying up for their competitors, too. So prices will rise to accomodate that, and a generation from now, North Americans may re-enter the field.

Many CEOs are on record as stating that they cannot afford to hire North American workers because of the wage disparity. So there's little point in worrying about it; just write it off and move on to something else.

Reply #20 Top
"if I had to predict, the Middle East will be the next spot for well educated, low wage labor."

Africa.

The Middle East is too unstable politically.
Reply #21 Top
Looks like the job situation in Canada is worse than the US.

Africa is not exactly a bastion of political stability either. My guess it that jobs will move to Central/South America. Note that there are new trade agreements on the table for those regions.
Reply #22 Top
"Africa. The Middle East is too unstable politically."


Africa compared to the Middle East educationally is dismal, with the exception of a few countries. The Middle East is really not that unstable, believe it or not. Look at nations like Jordan, Egypt, Qatar, Yemn, now even Libya. People think "Middle East" and immediately associate it with Iran, Iraq, Palestine.

Anyway, Africa on the whole isn't any more stable. ( I assume you mean central/South Africa, since a good portion of the Middle East is in Africa.)
Reply #23 Top
And how do you feel listening to that pratter?


It's just rather stupid... We know the outsourcing is being done... why try and pretend they are in Australia? I would rather hear about the weather in India, or some crazy story involving Sachin Tendulkar...

BAM!!!
Reply #24 Top

And how do you feel listening to that pratter?

a friend who lives in nova scotia and who recently bought a dell computer told me she had to call the service desk when her modem fried during a storm.  before theyd send someone out to replace it, they insisted on talking her through a buncha diagonistics and re-installs.  while waiting for one of those to finish, she asked the guy shed been on the phone with for the past 2 hours whether it was raining there as well (thinking he was perhaps in halifax or ontario)   after a brief pause, the helpdesk guy said something like 'maam i am in india'.   she told me the rest of the call was terribly embarrassing to her because she responded (without thinking) by saying, 'holy cow!'  

Reply #25 Top

(they have branches in India that sell the same drugs cheaper)

am i correct in thinking that the drugs sold in india are often also manufactured in india?