Slashdot Mirror
BusinessWeek on Outsourcing
hotsauce writes "BusinessWeek has a couple of stories on the outsourcing of white collar jobs to India. One is a cover story on GE's fundamental research lab in Bangalore where scientists work on everything from the aerodynamics of turbines to plastics' molecular structure. The other is commentary on "America's worst-kept secret", and the effects of the upcoming elections on it."
I need to figure out a way to outsource my unemployment.
Only jobs that gives a high revenue can be done by people with high salaries (US&EU for example).
When the price drops on, for example, software is has to be done by a lot cheaper labour.
There will not be many software engineering or consulting jobs in the US in ten years or so.
This can't be a surprise to anyone knowing what open source is all about.
I've already planned my exit strategy. I am getting out of information technology next year. There is just no future in the US. Either you work for a small company and risk getting laid off due to the lack of profit or you work for a Fortune 500 company and risk getting laid off for no reason other than some Gold Collar worker thought it was a good idea.
This will not stop until we have leadership in this country that actually seems to care. Until then, I am leaving IT professionally and making a career switch into one of my hobbies, which is something that cannot be outsourced to India.
The U.S. is heading straight towards becoming a land of a permanent serf class, a sort of neo-fascist aristocracy ruling body over a nation of paupers.
(* Too lazy to look up which century it was !)
Don't go to a brothel if you want to buy broth
I find this whole spitting and cursing quite funny. A few years ago we had people losing jobs in the manufacturing industry and all I heard from IT professionals was, "oh, why don't they up skill like us", well, here we are, and no longer are India and China the "T-Shirt" making haven of corporate America. Corporate America now see that these countries not only have cheaper labour but also, the people are just as qualified and just as many people "there" who can produce new and exciting ideas and products when given less R&D dollars.
What I find funny is when I hear people complain about this shift off shore. Its the old story, when your neighbour loses their job it is called a recession, when you lose your job it is called a depression.
Erotic uses a feather; Pornography uses the whole chicken
Well, /. does not source 'new' news, it merely brings stories together in a mish-mash that is more-often-than-not revevant to the /. target audience.
/. is not a live feed from Reuters, if you want that then hire a Reuters machine, this sort of story on /. to sit back and think about, a week or even month here or there doesn't matter much.
Does it matter if this story is highlighted one week later than another? It is relevant but even this article doesn't bring some hot-off-the-press story, it is a sit back and think about it piece. The tech outsourcing trend, as mentioned in the article, goes well back to the 90s, so if an opinion piece is published now, or last month or next week, it is equally relevant as we're talking about long term trend.
To extend your argument would be to say "why didn't BusinessWeek come up with this idea sooner?", why not a month sooner if all the facts were still in place,or a month before that? Or, as this is not new information, just a collection of old information with some insight, why couldn't you have done it?
karma karma karma karma karma chameleon, you come and go, you come and go.
What really kills me about outsourcing is that companies don't realize just how they are damaging their future in so many ways. I will give just two.
1) You lay someone off here in the U.S. as an example. Guess what, that is money that is not going to be used to buy products that most likely the parent company makes to some degree. Does someone in India buy dishwashers, tablesaw, etc. Not to be mean but not in the volume as here.
2) Tribal knowledge that is desperately needed to stay within a company for future development. That is all gone, and personally the quality that comes from an outsourced job is short of atrocious. That comes from watching quite a few projects at two different companies go completey down in flames.
Sorry, outsourcing is going to tear this economy in the U.S. to pieces. Quick short-term gain for a long-term failure!!!!
Well, it's not news in the original sense of the word, but it seems to be yet another example of the other kind of news, the institutional news. This means that something becomes news if an institution that's known to be a news source -- Slashdot, for example, or Google News (they also list(ed?) press releases as news) -- reports it as such. Being reported by such a source somehow makes a fact more true, more reliable (If it isn't on the news, it didn't happen, right?) See, for example, how people still feel the need to read about a car crash they witnessed. Or how several hundred people felt the need to read about Saddam Hussein's capture on Slashdot -- they probably wouldn't have believed it otherwise...
Hell is not other people; it is yourself. - Ludwig Wittgenstein
When you and everyone else will pay more for locally produced goods then the Chinese crap at Walmart they'll change.
What strikes me in all of this is that we are talking about an essentially corporate phenomenon. Corporate entity producing proprietary intellectual property (IP) finds it has to lower the cost of producing it. Why? Well, IP is essentially becoming free due to pressure from free IP like open source software. This is really just the continued trend of IP's marginal value and cost toward 0.
So, where is money to be made? It's essentially in applying the now near 0 cost IP to people's actual business problems. That's where most OSS-based houses make their money.
2 ideas that spring to mind here:
One: What happens if this rush to off shore "skilled" starts to succeed? We (the US) is the largest consumer of products from around the world, but if skilled labor follows blue collar labor, the amount of people left to spend money on anything goes down. Even though moving that labor forces off shore will increase the purchasing power of the people in the country where the labor went to, their combined purchasing power and demand to purchase anything will not be anywhere close to what the same jobs in the US could produce (at least short to mid term). Judging by what happens to the world economy when the US economy suffers, just how much outsourcing is a good idea? When does it stop benefieting the companies and starts hurting them because they can't sell their products in a poor economic climate?
Two: In the US the commonly held belief is that if you want to get ahead, you get an education, and your hard work and academic achievement will be the keys to your success (Unlike India or China where there are relegious and other cultural pushes for education). If the people stop believing in that, and an education isn't seen as a step up, or providing an advantage less people will pursue it. In an information age isn't one of the most important factos in the labor pool is it's education and technical skill?
It's all about global competition - or so they say. I wonder what the ROI is long term. Since more and more companies are only looking ahead a quarter at a time, just to satisfy the wall street pundits, I bet the ROI is pretty good short term. So how do Western Europeon and American workers compete? Our salaries are higher, and our standard of living is higher. Eventually with enough investement and time India will be a developed nation and these differences will slowly dissapear. Jobs will also probably leak back to the US - but how long do we have to wait, and how do we survive?
In the end the US worker has to offer something that his/her indian counterpart can't. Language, proximity to the project, and superiour skill and/or inovation are just some advantages that people might leverage.
AngryPeopleRule
"Science is about ego as much as it is about discovery and truth " - I said it, so sue me.
We want everything to be cheap. Extremely cheap. And even cheaper. As soon as a manufacturer starts demanding money for US-made quality people being to bitch about high prices and coporate greed. Nobody is paying a fucking dime more just because it's US-made. Why should we do ? Slave child-workers will to it cheaply in Tibet or Taiwan. Oh, and evil company outsources my job to India, these evil bastards, they are just in for the money, these bloodsuckers !
Take e.g. Apple. Saving US jobs by US goods in the US. But when they charge prices to substain these US jobs everybody whines about teh evil Steve Jobs. Just look at the frontpage and the "iPod battery costs money= TEH EVIL" stories. And this bigotry doesn't even rule Slashdot, it rules the whole country and makes it on the frontpages of NY Times and Newsweek.
Outsourcing justs means: we get what we pay for.
Owner of a Mensa membership card.
Many of us expect too much!
Last night I went to the company xmas party. The subject of Christmas bonuses came up. The average bonus was $2000. EVERYONE got a bonus. People complained: not big enough.
The company GAVE away an average of 2K to people just because... and people still complained ("I remember the 20K bonuses at dropdotbomb... this just does stack up" - an actual quote).
I am not saying the greedy CEO's and stockholders aren't to blame also - they are. But this kind of attitude just goes to show that many American works expect far more than they are worth.
If US companies want to combat outsourcing they have to start from the bottom - offer lower pay to incoming workers, and somehow get rid of the top heavy "older" workers (attrition, lay off, whatever) from the 90's.
The excesses of our recent past are smothering us!
A question: how fast are salaries rising in India? I am betting you won't see Indian companies buying the naming rights of football stadiums and offering half a years pay as a signing bonus.
I am very small, utmostly microscopic.
As a recent Ph.D. graduate in Chemical Engineering, this is nothing new. When I entered graduate school 10% of my fellow class mates were US citizens. Our finest graduate schools in the technical fields (engineering, physics, medicine) have been training foreign students for a long time now.
Global workers trained here are just as effective and talented as native US workers. The notion that US citizens are somehow more innovative is just that a notion. They get the same education what US citizens get. They are equally as qualified, and WILL work for lower salaries in their native contries. The real reason that US students aren't going into these fields is that they don't have the work ethic or the dedication for it. They would rather sell wireless phones for commision and make a quick buck than educate themselves for the future of our country.
In terms of solutions to this problem:
The answer in NOT legislation. This problem has to be solved by the US providing technical people where it is obvious that they are the best people for the job.
In terms of developing countries: In particular this is a great opportunity for India where they can bring about social change in their country. Well at least until some time down the road when we outsource their jobs to some other developing country.
Outsourcing to other geographical locations is not new and has happened to manufacturing, and it is happening with technology now.
ESR, never shy of controversy, writes in his blog: Salaries are dropping. Time to celebrate! . He claims that the outsourcing trend will ultimately benefit Americans; that's just how the free market works. You may not agree with him but read it anyway for an alternate viewpoint.
Perhaps India will enjoy the same evolution. Maybe in ten years well-engineered software, etc. from India will have the same esteem which we hold Japanese products. Every industrial toddler country entering the world of business has to find its feet. Japan did--so will India
Harpo Tunnel Syndrome--my wrist feels funny.
Another mistaken argument is that there is only a finite pool of labor in India and so an equilibrium will be reached soon. This won't happen. Because the current level of penetration of computers and internet connections in India is extremely low (e.g: 0.4% dialup and 0.02% broadband). As this situation improves, it greatly decrease the barrier to entering the IT workforce in India and will continue to bring in an army of new workers for years to come.
As with the open source revolution, the internet changed everything.
I worked for GE for well over a decade. I have dealt with the very people at GE-Wipro in Bangalore that this article glows about. My experience differs from that of the author.
In the beginning, the helpdesk was manned by GE employees, at the HQ of the business I worked in, in the US. Helpdesk is a hard position to keep staffed with quality people, for the reasons we all know. But, those pesky GE employees were _expensive_, so they walked the helpdesk out the door one day, and brought in an outside contractor known for doing helldesk outsourcing. And there was much rejoicing (at the VP level). Problem is, helpdesk quality fell drastically, as there was a crop of new people who didn't know the intricacies of the systems they were supposed to be supporting.
Soon, (coinciding, I suppose, with the end of the contract with Keane), it was noticed that the helpdesk was sucking. Rather than acknowledge the mistake, they decided to compound it. With great fanfare and jubilation, they were pleased to announce that the helldesk was being reworked. Oh, by the way, it's being run by a company called "Wipro" in Bangalore, India.
Initially, there were many problems. Eventually, it got worse. Helpdesk analysts who could not be understood by a western ear, utterly wrong advice, that sort of thing. One coworker of mine, having a bad battery (the Dell explode-o-cell model), called to get a new one. He was told to delete his hardware profiles and that would take care of it. Not just wrong, but damagingly wrong, and not even vaguely logical. Yeah, a battery is "hardware", but that's pushing it. The analysts would identify themselves as "Jim" and "Bob". Just this is insulting - as if we can't learn how to pronounce or recognize the name of someone from a different culture than ours? It's just a sign of not understanding the needs and/or culture of the clients.
A final note - the article seems to be holding this up as a glowing success. I think it's more than coincidence that GE stock has been consistantly underperforming the market for many years - since the day Jack Welch announced his replacement, in fact. GE was succeeding because of Welch, not because his replacement is sacrificing quality for cost, calling it a "Six Sigma quality initiative", and ignoring the failures that result.
Hopefully, business executives who read this article, will do a sanity check & see how GE is doing these days, before deciding to emulate a formerly glorious company's unproven CEO's failing strategy.
Speaking from experience with H-1B contactors and L-1s working in the U.S., the cost savings these companies seem to "realize" for I/T is not as rosy as one would think. Most managers that make these decisions can barely understand a balance sheet and an income statement, but they can certainly read a stock price. When outsourcing looks like an option, you have to look at all the hidden costs that lurk about doing it before you dive in.
Unlike unkilled and semi-skilled manufacturing jobs, where the tasks performed are route and routine, a lot of programming jobs require heavy amounts of cooperating and coordinating to get a successfull result. The proper analogy to draw with your client is that of the homebuilder/architect and the homebuyer. Although the programmers may be Mexican immigrants who work less than minimum wage and get paid cash under the table to send to their poor families in Guadalajara, these folks still need the same amount of (if not more) specific direction to build a home that will be fit for you and your family to live in. Translating back to I/T, you may be mired in many, many more meetings, buried in email, and endless phone calls with your overseas colleages just to keep the train on its tracks and moving in the right direction. Be careful what you outsource.
Ever heard the old addage "too much of anything is not a good thing?" Same principle here. A proper mix of outsourced labor and internal I/T staff can build successfull solutions with less cost than the tranditional MIS department (in less time is another story). Some jobs are perfectly suited to be outsourced, such as the DBA, data-warehouse specialists and some of the programming. The traditional PC helpdesk has also been successfully outsourced overseas, but you better hope that your callers can tolerate the Bombay accent on the other end of the phone.
Some jobs cannot be outsourced without expecting a downturn in quality or a corresponding increase in time spent doing your project, such as technical writing, quality assurance, project and program management and many other jobs that require intense amounts of personal and communication skills. Hardware, network and software installs should NEVER be done by outsourced personnel. You also want to keep the programmers who are working on the big things, such as architecture shifts and regulatory changes (e.g. HIPAA) on staff for the tight projects where you don't have the luxury of time on your side.
Outsourcing CAN be done, without firing your entire I/T staff, alienating everybody and stirring up bad blood. Find jobs for the folks who are being placed out or train them to do the jobs you aren't sending out of the company.
And even when you get to the state where you can do offshore and realize a gain, you still have to keep busy monitoring everything much more vigilantly. Outsourcing companies charge vastly different prices for the same tasks, and contracts don't span very long. There is also the question about what happens to your intellectual property when it's going out of your country's borders: if you are compromised from an overseas vendor you may be left with little or no recourse (which is why so many CEOs are lobbying Congress). The cost of securing a favorable contract with an overseas parter also adds to the cost, unless you are doing it through a U.S. firm (but don't think that those international legal firms' fees WON'T be passed down to YOU). I doubt that most PHBs will get outsourcing done right without paying a large sum of dough to outsourcing specialists (hmm maybe a new career option to layed off I/T workers?).
Where does this experience come from, you ask? Well, I was replaced by Indians several years ago, which then followed up with a massive layoff at the company I used to work for. They are paying less money for the labor, but since I left they have had more projects fail miserably than before. They may have let off with benes and pension plans, but they traded it in for huge sums of airline fees to sh
When they offshored the textiles jobs, I did not speak out because I wasn't a textile worker.
When they offshored the steel mills, I did not speak out because I didn't make steel...
Taiwan became big in semiconductor manufacturing because over the course of three decades of private and government research and experience they were able to become very good at it, producing high yields that made them competitive with US producers. It wasn't because of cheap labor. Taiwan's workers aren't that much cheaper than in the US, and Taiwan's per capita income is over 10X that of India.
Japan's car industry became big because of quality, not lower cost. The first incarnations of their vehicles decades ago were cheap crap, but they didn't get anywhere in the market. Their eventual success came from producing high-quality vehicles that were able to sell for MORE than US-made vehicles of equal size and engine power.
Steel workers in the US lost jobs not because of labor costs, which make up a very small portion of steel manufacturing, but because other countries were able to produce higher yields per ton of raw material.
However the current trend of outsourcing software development to India is a management fad in pursuit of cheap labor, for a type of work that does not lend itself to cheap labor en masse. The real savings really aren't that great -- you're lucky to save as much as 25%. The quality isn't very good, and there are many risks including budget overruns due to miscommunication, intellectual property and privacy infringement which are practically impossible to enforce in India (you're lucky if the courts will see your case in 10 years), and the costs of paying people to cleanup the junk that comes back.
If outsourcing brings real net savings, we'll see the benefits in other aspects of the economy, like cheaper goods and services and increased profits that boost the stock markets. However, there is a very real danger that it is likely to materialize as another "gold rush" like the dotcom boom, only that this time the corporations and investors are chasing after imaginary savings instead of imaginary profits. And when the reality hits and they can't deny it, there will be another economic meltdown.
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There is inferior bacteria on the interior of your posterior.
Yes, it was part selfishness. It was also part optimism. The general story used to sell these sorts of policie is the old: "some jobs will be lost, but in the long run we'll all gain-- all you have to do is retrain for a more cutting edge area."
It was easy enough to believe this was true when manufacturing jobs were going overseas. It was a terrible thing for the peope losing their job, but we sincerely believed that new opportunities would open up for those with a forward-thinking attitude, because we were Americans and that's the natural order of the world. You'll see many Slashdot posters taking that line even today-- comparing the current loss of jobs to the industrial revolution, etc., admonishing us all not to worry, we just have to wait for all the great new even-higher-level jobs that are due to us now that we've offshored those pesky coding duties to foreigners.
Problem is, it's increasingly difficult to see where these new opportunities are going to open up. In the past we had the advantage of a) having more natural resources (coal/steel/etc), and b) being one of the most educated countries in the world. But in a global economy, natural resources don't matter, and we're fast losing our advantage in education, now that India and China are producing thousands of brilliant students (with enough highly-educated people that GE can open a pure research lab over there). Note that India and China are smart enough to adopt national policy to educate their people, while America is allowing its educational system to go to the wolves.
So when this new opportunity comes along-- be it nanotech, biotech, whatever is next-- what insures that Americans won't lose it to foreigners? Unless it's something that by nature can only be done by US workers (and what would that be??), we're screwed. So I think the reason people are panicking now has something to do with the realization that there is nowhere to go from here-- that we've finally been pushed into the ceiling of our own capabilities, and the magical "retrain and retool" approach pro-globalization folks have advocated is not going to carry us when foreign workers can do the same and cost 1/50th as much to feed and house.
In another news to retailiate against the outsourcing backlash from US India has decided to ban US companies from selling cellphone equipment/chips/software in their market, which is expected to reach 100 million in next two years (another url says The user base is growing at about two million a month and is expected to cross 100 million by 2005.)(US market is about 110 million for comparison) and 500 million by the end of the decade. . Similar huge numbers are expected for PC and car markets. Also, they have decided to ban the cars companies like GM, ford and other US companies like Mcdonalds, Pepsi,coke and Hoolywod movies etc. from selling in India. The govt. of India said that the local people are losing jobs because of this trade.
P.S. in case you are clueless this story is made up. I just wanted to make a point that trade is benefitial to both US and India. So, it is stupid to put barriers against outsourcing/trade etc.
Walmart doesn't sell at a loss.
They sell with slim margins, they also get lower prices due to volume.
Their selling price in some cases is even lower then other companies purchase price from the distributer.
Think about selling at a loss, first what do you gain. Secondly how do you explain to the owners that you lost money by selling below cost?
Stop laying there on your collective asses and do something about it. Contact your congress critter in your home state and bitch until ledgislation so that state and federal contracts can't be giving to companies that outsource overseas.
Unless you write your letter on the back of a $500 check, it won't do any good. They are better paid by lobbyists.
-------- -------- Support Wesley Clark for president!!!