Outsourcing: Not Safe for Work
I've taken Workbench back from Vivek Seal.I appreciate his efforts -- especially considering some of the abuse he took -- but remain unsold on the notion that outsourcing is beneficial to Americans. Seal's clear on the fact that it helps India, of course, but the most he offers us is a platitude that's laid on downsized employees all the time -- you ought to develop skills for another job that'll make you more valuable:
I know many jobs are being lost but there are many new jobs which are being created. A person has to forecast what kind of a job is indispensable and should strive for that to retain one's job. I am absolutely sure that now the time is here where a person cannot relax in his job and must keep adding extra qualifications and training on a regular basis.
No one who offers this advice ever provides an example of an indispensable new job. For geeks like me who gravitate to software development and related professions, I don't see anything that can't be done in places where $15,000 a year buys an aspirational middle class life. When I was 20 in 1987, a computer science degree was a pretty solid path to the American dream. Today, even software project management is being outsourced. What do career counselors tell college freshmen with undeclared majors when they express an interest in programming? They ought to wire their chairs and dispense a corrective electrical shock.
I don't begrudge Seal's people taking their shot at the Indian dream, but I think it's in Americans' self-interest to make outsourcing as expensive as possible.
In April, Information Week reported that the cost-saving benefits of outsourcing are exaggerated:
... while more companies are turning critical IT and business functions like help desk support and customer service over to third parties, who in turn often send the work to subsidiaries in low-cost countries like India or China, they're saving less from the process than is widely believed. In India, programmers and service workers are paid anywhere from 80% to 40% less than their U.S. counterparts. However, the overhead associated with outsourcing appears to be eating up the bulk of those savings. Factoring in transition, legal, advisory, and management costs, outsourcing typically lets a company reduce the expense of a particular function by 15%, TPI says.
A 15 percent savings seems pretty vulnerable, considering the hassles involved in moving a company's labor to the other side of the planet. Americans don't like jobs moving overseas, because the fears of a shrinking middle class are one of the things on which red, blue and purple America agree completely. Companies like Dell are vulnerable to the publicity associated with moving work to India. If outsourcing became the dolphin-unsafe tuna of this decade and that 15 percent savings dropped, it could be extremely tough for workers in places like India to compete with Americans closer to home.
If that happens, I hope Vivek can find new training in something more indispensable.
Comments
I don't begrudge Seal's people taking their shot at the Indian dream, but I think it's in Americans' self-interest to make outsourcing as expensive as possible.
The net effect will be to will make those goods/services more expensive for those same Americans: it will be a hard sell to tell people to pay more for something to protect jobs they don't do.
The old bumper sticker "if we all buy imports, where will our children work?" failed to ignite any interest since many parents had higher hopes for their children. And when you compare the products of GM vs Toyota, why would you want to preserve that standard of quality?
I don't see how this is a new debate at all. We have already sent so many at one time vital American industries across borders -- textiles, electronics manufacturing, petroleum: why is tech support or programming more important than the clothes on our backs?
The atom:author of this entry is by Vivek Seal.
Rogers,
Now that's it's over I'll ask... Did you pay Vivek? Because if you didn't then I'd call it a "guest blogger".
Outsourcing implies payment in my mind.
I was bothered by the lack of uptake in the echo chamber for this experiment... I searched Technorati for people mentioning the experiment and expected more "conversation". The comment pit was interesting... and I did see the Drudge Retort cross-postings.
For me this was one of the most interesting meme's on the web over the recent week. I'd expect to see a memeorandum post and some feedback. It says something about the closed nature of the echo chamber or maybe a backlash from your recent conflict with an A-Lister that people are afraid to irk.
How can one measure such effects? Keep the surprizes coming.
McD
I have seen companies try the outsourcing trick. After they factored in the costs mentioned by you, they also work in the problems with outsourcing anything. That is, if you pass work off to a third party, it's like trying to build two sides of a tunnel through mountain. Sure, you can get them to line up. In software development, disconnects and feature creep are common. It's easier to shout down the hall to your programmer; or call her in for a meeting than it is to set-up an intercontinential conference call with a 10 hr. time difference.
With a new Secretary of the Treasury in the US, there has been a lot of talk that his role is to oversee a calm slide of the US dollar.
I've watched the US:Canadian dollar go from 1.00:0.62 all the way to a recent 1.00:0.89. The talk is that the two dollars will be at par in a year. Some of that may be a Canadian increase in value; a lot of it will be a US slide. When that happens-- when the US dollar loses 6-10% of its value-- it will make offshoring look a lot less attractive. That 5-9% gap can be chewed up in patriotism (don't offshore for the good of the country); and working smarter. Limited to the offshoring discussion, the devaluation is a sunny prospect; wait until it affects inflation numbers.
Rogers,
While I found Vivek's point-of-view dogmatic and querulous, I was appalled by the racist epithets hurled at him so I didn't participate. I feel the comments should have been moderated.
My best,
Joel
The net effect will be to will make those goods/services more expensive for those same Americans: it will be a hard sell to tell people to pay more for something to protect jobs they don't do.
If Americans don't get paid to make anything and don't get paid to know anything, at some point isn't that more important than low, low prices?
I don't think knowledge jobs are worth saving more than manufacturing jobs, but where do tomorrow's Americans find prosperity without either one? We're narrowing down future job prospects to two professions: Wal-Mart greeter and home care worker for aging boomers.
If outsourcing was unassailably cheaper and incontrovertibly better, then resistance would be futile. But I don't think the benefits are as clear-cut as the conventional wisdom, so it seems to me that we could slow the trend with a consumer backlash.
I don't begrudge Seal's people taking their shot at the Indian dream, but I think it's in Americans' self-interest to make outsourcing as expensive as possible.
Oh, how very enlightened of you! You would give an American some change, cause he just needs it so. Really, a very modest need. But you would make it expensive for an Indian man to earn his living himself.
BigSphincter,
I don't think Rogers comments show so much of a short term of interest of "giving change". But as making America competitive in the long term.
Long term productivity is the source of wealth for nations (Castells 1998). Technology/Genetics/IC design/Software is the current source of long term productivity. Unfortunately manufacturing is not.
By moving long term productivity to other nations we are lowering our future wealth. Its not about costing an Indian a job, I wish them well, but the American goverment should not make it a benefit to a corporation to do outsourcing offshore. Currently the American government is operating around the idea that what is good for the corporation is good for the country. But long term competitiveness is defined different for countries and corporations (Cohen 1993).
See related WebSite
Lets not chastise a 23 year old kid for not holding the worlds wisdom on outsourcing. Just think back If when you were 23 and someone tried to attack the work you do.
I think in India and the world over consists of hundreds of thousands intelligent young men and women who would like a better a life. Unfortunatley with outsourcing its at the cost of someone else.
I think greed and fear will decide how much is outsourced or insourced..
till then enjoy the coffee
This is a bit different than truly outsourcing my blog the way American companies outsource. To do that, I'd be paying Vivek and use him as a ghost writer or insist he adopt an Americanized pseudonym so my readers never catch on.
...
I've taken Workbench back from Vivek Seal.
I don't believe you.
It was fun while it lasted, I hope he read the comments.
He seemed like a benevolent, cocky, twenty-something professional on the move. Reminds me of me at that age.
All comments aside.........the American Motto.........faster cheaper better........it's all shit. Couldn't get back to the moon now, but nobody cares, technology was only the second thing to leave here, machining was the first. And although GM maybe be a lackluster company, how many more of us are willing to watch out military industry get outsourced to the Chinese?
Hi Guys,
I must that I have learnt a lot about Americans in the last week by reading all those comments. Whether those comments are racists or not, does'nt matter to me at all, coz I have no time to think about those trivial things in my life. The real experience of actually communicating with the real people is quite amazing if you compare it with interacting with various consultants and CEOs. And that is why the blogs were created, right? THE REAL PICTURE
I am really thankful to Rogers to help me open up my mind about the Americans perception about outsourcing.
For generations, countries like India have been "consuming" American products, ranging from toothpastes to Pizza, and toothpicks to heavy machinery.
There have been few splinter cells within India who opposed this trend and appealed to people to use "Made in India" products. They have not been succesful..because their arguments lacked economic sense.
I feel that "anti outsourcing" voices in US will have a similar outcome.
Call center is not even 5% of Indian outsourcing business. The bulk of outsourcing is in IT/software development sector. These "coders" don't have to interact with US customers on a regular basis and the issue of accent is infact a non-issue.
US companies will continue to outsource as long as they get the work done cheaper. If not India..then China, Phillipines, Mexico or Russia.
Related to the current topic of this blog.
Quoting from the Newsweek artilce:
Our greatest danger is that when the American public does begin to get scared, they will try to shut down the very features of the country that have made it so successful. They will want to shut out foreign companies, be less welcoming to immigrants and close themselves off from competition and collaboration. Over the past year there have already been growing paranoia on all these fronts. If we go down this path, we will remain a rich country and a stable one. We will be less troubled by the jarring changes that the new world is pushing forward. But like Britain after Queen Victoria's reign, it will be a future of slow, steady national decline. History will happen to us after all.
IT / ITES outsourcing culture may be not safe for USA and other europian countries but in my country india its a essential part of economy.
for more plz read my blog
Global outsourcing market
Thanks for your nice post. What is so funny to me is that US consumers are crazy to get cheaper products but they hate the idea that their jobs are moving to china and India. If you want a DVD player for 20-30$ then of course it has to come from China.
Many companies that do international business really have no allegiance to any particular country, so I think that from their point of view, it's not 'outsourcing' at all, but shifting the locations of services for efficiency.
Maybe it's time for another look at Adam Smith's 'The Wealth of Nations', and time to consider some revisions in economic policies for the United States.
It seems impossible that the world can support the infinite expansion of all nations' economies. Surely the continued expansion of China's and India's economies will force the U.S. to reassess its position soon. More competition for fewer resources may cause us to reconsider what real wealth is.
Dumb comment of the day on the subject: there's a billboard in Nashville that says "Hey Bridgestone, export tires not jobs!" If they took that advice their Nashville plant would be gone--the opposite of the author's intent, I suspect... (probably doesn't realize that Bridgestone is in fact based in Japan)
If we go down this path, we will remain a rich country and a stable one. We will be less troubled by the jarring changes that the new world is pushing forward.
How is the U.S. enriched by the exodus of well-paying jobs in sectors like information technology over outsourcing?
How will it remain a rich country with less of these jobs?
"How will it remain a rich country with less of these jobs?"
Yeah, a rich country where 10 per cent of the people control 90 per cent of the wealth. Ten per cent of 300,000,000 is a lot of people. This country is already reduced to third-world class divisions, so there will always be job opportunities for those willing to do the 'dirty' work.
That idle ten per cent want us to believe that they are very busy, industrious people. They may have putative jobs, but they have lots of leisure time, compared to the ever-more frantic average Joe.
I got some 'other' America feedback from a Brazilian attendee of a salsa convention in Amsterdam. He said, "In the United States, the rich play golf and tennis, and drink in between...in Brazil, the rich work, and celebrate at night."
Amen.
To echo MDC's comment, I too was surprised there wasn't more in the blogosphere about this interesting experiement. Heck, I even tossed it into DIGG when it started and it didn't go anywhere - digg.com
alek
P.S. Speaking of outsourcing, no plans to outsource my charity lemonade stand this weekend ... even though I'll be broadcasting live on the Internet via three webcams - fun stuff!
www.komar.org
Rogers asks, "How is the U.S. enriched by the exodus of well-paying jobs in sectors like information technology over outsourcing?"
It promotes the use of English around the world and which may someday, with the consequent hybridization, be the universal language. It opens the door to understanding between diverse cultures and attitudes. It broadens the base of those who consider the United States to be the icon of invdividual freedom and liberty.
It enriches the country by promoting investment in the US by those countries where the US provideds jobs and benefits, and in support of increasing those jobs and benefits to themselves; e.g., Japan's rapid economic rise and investment in the US.
"How will it remain a rich country with less of these jobs?"
As has happened to every country which has invested in foreign trade and cooperation, the US will gather wealth as part of that partnership and reap the benefits of new investment in the US and friendship(s) with the countries we cooperate with ...
No need to be afraid, at all, Rogers. The more we outsource the more we "insource."
Alek,
Thanks for echoing my surprize.
Tech.Meme usually catches interesting blogging news but only if a few A-List bloggers comment on the post.
I think Rogers experiment and the discussion going on in the comment pit were news worthy. It should have involved a lot more voices. It had the makings of a great story for MSM.
Vivek confronted and even asked for anyone that was displaced by outsourcing so I think he did a good job at kick-starting some real dialogue. I was actually sorry to see it end. I don't think there are simple answers to the mechanics of a global economy but I really like the improtant question being raised: who benefits? what about race issues in a global economy? and on and on...
Great experiment and good creative conflict. My hats off to Rogers for getting and implementing the idea and to Vivek for his enligthening posts from his perspective. Well done.
Outsourcing: Not Safe for Work ??
How is it unsafe for work? Care to explain please.
Hey Rogers,
1st of all now a days you can have any kind of studies to prove anything and everything you want. The grass root reality is that outsourcing exists and India is a major player in that.One report from TPI doesnt prove anything, I can give you 5o reports which says Outsouring is good and India will remain a leader for the next 30 years.
So Rogers dont come to any conclusions from just one report, after all all those corporate houses are not fools to invest billions of dollars in India.
"It enriches the country by promoting investment in the US by those countries where the US provideds jobs and benefits, and in support of increasing those jobs and benefits to themselves; e.g., Japan's rapid economic rise and investment in the US."
.....By walking over the backs of "assassinated" American workers, left prostrate in the streets of a country where they can no longer afford to live.
"I've taken Workbench back from Vivek Seal." - Rogers Cadenhead
OK... now do something with the blog!
Vivek commented at my site in response to my tongue-in-cheek "Outsourcing Hoax" post. I mentioned that he might NOT be real... humor doesn't translate across cultures well and sometimes I don't communication in culture all that well.
But I refuse to stop trying to stir up shit... It makes the day shorter (for me).
I like Vivek's spirit. That's what makes this world go 'round. Peace to everybody.
Tom proselytes to the workers, ".....By walking over the backs of "assassinated" American workers, left prostrate in the streets of a country where they can no longer afford to live."
How about California stealing the bread out of the mouths of French and Italian wine workers? How about the US stealing the jobs of German, British and Italian car makers, in their turn?
Your argument is pure emotionalism and does not represent reality -- in any way!
You don't help working individuals with your rhetoric, because instead you marginalize collective bargaining with your post-communist drivel...
Since about 8 weeks I'm collecting and reviewing news and other information about IT outsourcing in my blog. It is a evident fact that all major service providers like IBM, EDS, Accenture etc. - all of them are US-based - are massively migration work to Asia espellially to India. At the same time East of the Ganges river there is the next giant rising: China. 100-times larger then India in their ambitions and their goals. The US and Europe are definitly loosing (not only IT) jobs to Asia and Eastern Europe. The reason? Cost of labor. This is a fact. Now, what have we to do? What lessons do you learn from this trends?
Albert Einstein, visiting the United States for a 1921 lecture tour, attributed America's success to high labor costs. Einstein, who worked as a patent examiner before publishing his 1905 special relativity paper, thought expensive workers made Americans look for efficiency and new technologies; he called labor costs "the stimulus which evokes the marvelous development of technical devices and methods of work." India and China stood in gloomy contrast, as giant but impoverished museum-pieces where "the low price of labor has stood in the way of the development of machinery" and industrial development had come to a halt.
Does costly labor drive innovation? What happens when labor costs go down?
Perhaps one place to start would be the Federal Government recognizing a wind-fall and start charging for the right to out-source beyond USA boundaries by taxes or permits. The monies could be used to help belay the National Debt or to prop up the Social Security System.
It might even engender a small amount of patriotism in these companies that are intent on sending dollars, one way, outside of the borders.
High cost of Labor? I can't disagree that it is a problem. I'm not sure where to start with combating it. It seems to be a self-consuming spiral.
It would be something that would please me if we could get back to a single bread-winner house-hold and allow the couples to raise their own family. Not only will the cost living be a part of that, but salaries and job availability as well.
For as long as I can remember and as far back as I've read, employees have been expected to be loyal to their company, even beyond reason. It's unfortunate, in this day and time, that companies don't accept some responsibility for loyalty too.
Airline workers have been asked to cut salaries, or at least not expect raises. That is in the news. I have a neighbor who is a mechanic for a Car hauler company. The same tactics are being used there as well. They have lost benefits, retirement, jobs, overtime pay and raises all to keep the company afloat.
I'll bet the CEO's of these companies are still taking home multi-million dollar bonuses while they send employees to the streets by farming out their jobs to other companies both in and out of country.
The American Worker is taking a hit from every direction. In a war zone, it would be called Casualty of Friendly Fire. Those don't count as much as being blown up by the enemy.
It's not Solidarity and Unions that are needed as much as it is the need of all factions of the country to pull together and work within our own means. The welfare of the rest of the world is not the ultimate responsibility of the USA.
I'm not complaining about a free world market where goods are bought and sold on a level playing field. I'm concerned because it creates an unlevel playing field. It takes the money out of the USA that is needed for the continuance of these same out-sourcing and off-shore companies to exist as USA companies. By outsourcing and sending jobs off-shore, they are killing their golden goose. It's the selfishness and greed of the small minority at the top, capable of making these decisions, that is driving their company toward destruction. They are creating a market that can't afford their company's goods.
What does an American worker have to do to compete for these jobs?
Tom asks, "What does an American worker have to do to compete for these jobs?"
I was hired as a mill press operator by an aircraft parts company and as part of a union contract negotiation between the AFofL and the company.
After learning my responsibilities and production schedule(s) and quota(s,) I examined the company's production incentive program, and which was a part of the negotiations under which I was hired.
I was very encouraged. This was 1960, and I was making a base of $12.95 an hour (good coin, then.) With the incentive program, I could earn near to $20.00 an hour (equivalent) because my basic quotas were easily done (3-4 hours of a 12 hour shift.)
So I did go over quota for nearly 80 hours and was into my third week of over quota production, when my paycheck was delivered by the union supervisor and also the steward.
... I was told that if I went over production again, without express permission, that I would have a terrible accident where an arm or leg might become broken ...
Unions are the cause of high wages in the industries they throttle and the bleed-over into other areas of the business economy; accommodated by stupid politicians who believe they can 'manage' our economy by forcing dictatorial laws and regulations concerning wages!
Notice, that it is always the socialists, the pie-in-the-sky communists who believe in dictating this-or-that rule or regulation against another individaul or group, in order to accomplish their demands -- and that, invevitably, for MONEY?
Petty tyrants and drones who slow work while demanding more pay and benefits!
... that's the unions for you ... or they'll break your leg ...
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