Slashdot Mirror
Offshore Outsourcing Threatens Offshore Outsourcing
theodp writes "India offshore tech support companies may soon face job losses as U.S. companies such as IBM, Intel, Hewlett-Packard, Oracle and PeopleSoft explore countries with even cheaper sources of technical labor, including Romania, Russia, Hungary, the Czech Republic, the Philippines, Singapore, Thailand and Vietnam. Concerned that outsourcing might be outsourced from India in the near future, a Bangalore call center owner said 'It's hard to know where it will all end. Is there a country where people will work for free?'" There's a Newsforge story about the same subject.
This reminds me of the story of Saudi Arabia and mideastern oil. Way back around the turn of the century, there was no great oil industry in the Arabian Peninsula. They were trying to find something to do with this deset wasteland. Then, the US comes in, offers to pay the countries (then Saudi Arabia was the focus) 1 penny per barrel exported, all drilled by the US, worked mostly by US oil workers. Now, we see what has come of this situation... Should we be as worried about tennis shoes and cheap nylon jumpsuits?
Speak for yourself.
I think there are multiple reasons here...
Most of the countries named have an actual infrastructure. EG I doubt Romania, Russia, Hungary, the Czech Republic have electricity problems.
Many of the Eastern European countries are not that far away from the Western markets, with some actually joining the European Union.
All in all it just makes for simpler business....
Funny though... (in an ironic sense)
"You can't make a race horse of a pig"
"No," said Samuel, "but you can make very fast pig"
Personally, I think the multinats are on to something. They're cycling through countries, creating artificial "boom-bust" cycles in employment.
Take for example, the automobile industry. In the early 1980's, the US auto industry had some of the highest wages/benefits for auto manufacturers in the world. Alot of those jobs went overseas to Japan/Korea who (at the time) had lower wages (and better quality). This depressed US wages. Now, the reverse is true. Both German and Japanese automakers see that US wages are lower and have located plants here.
So goes it with IT. US coders were first to the trough and wages went up. Then the multinats moved to India who trained their people well and had low wages. Indian coder's rates go up and now the multinats are headed for Eastern Europe. As tech wages get lower in the US and we refocus on quality, the multinats will move coding operations back here and the cycle with start anew.
"We're sorry, but the website you're trying to reach has been disconnected."
The history of the textile industry, I think, gives a pretty clear indication where the future of IT is headed, particularly due to the big trend of American corporations to outsource to India over the past few years.
The textile industry, at least what I consider the modern, industrialized version of it, began in and generated considerable wealth for England. Then, with the promise of cheaper labor, the bulk of textile manufacturing moved to the Americas, specifically the Carolinas, Georgia and a few New England states. The total generated wealth of the industry started to decline at this point, and another disturbing trend started as well. The distribution of the wealth began moving to a smaller percentage of people, namely the factory owners. Again, the prospect of cheaper labor induced the factory owners to move the bulk of textile manufacturing first to Mexico from the United States, then to the Far East from Mexico.
The important things to remember is that the total wealth generated by the textile industry declined with each geographic hop around the globe, and that fewer and fewer people got a larger and larger percentage of the total wealth of the textile industry.
How does this relate to IT? Well, considering that in the late 1990's we saw a mass movement of IT jobs for the US to India, and the associated wealth generated by the IT industry decline, I think the example of the textile industry is playing out again. Soon, the Indians who offered such low labor rates to win contracts and jobs away from American workers will be on the other side of the equation.
Russia, Eastern Europe and probably some African countries will do to India what they have done to America. The sad thing is that while India has been "carpet-bombing" the IT industry in the United States over the past few years with cheap labor and low costs, ultimately they've been laying the ground work for their own, future demise.
If all you offer is low costs and a cheaper price, then there is nothing to keep customers loyal. As soon as someone else comes along with a cheaper price, your customers will move to them. All because of the trend you started!
I have commented on this before to the people on slashdot promoting free trade. I told them that this was not about helping the people of India, and as soon as they got too "uppity" the corporations would drop them on their face and move somewhere else. See, folks, this isn't about helping out poor countries, this is about making corporations rich. It's not about exporting capitalism, it's about importing a 3rd world standard of living, which is why so many people around the world are against this. It's about making a market place, a product out of entire countries, whose populations are shopped by corporations, much like individual slaves were shopped for in the early United States. The message in return being sent to Americans isn't,"Thanks for helping us get to where we are.", but instead was, "Other countries are out-competing us, you better start working more hours." Of course, what they don't state explicitly, is that you are simply competing with another branch of your employer in a different country.