Slashdot Mirror
Growth in Indian Offshoring Slowing
quantumstream writes "CNN/Money is reporting that high wages are causing some software companies to look to other countries for outsourcing, including Eastern Europe and several other SE Asian countries. Gartner Research believes a drop of 45% in India's share could happen in the next two years. Is this the beginning of the end of the dominance of India in the tech offshoring market?"
In a global economy, there will always be someone able/willing to do it for less money. Eventually those who were the go-to people are undercut. And then the undercutters are undercut. And it so on, and so forth. Eventually a global economic equilibrium is reached, where the price is the same everwhere.
When price is no longer the main factor determining where to outsource a project to, the focus will shift back to quality, maintainability, and so forth. Indeed, it is quite possible that the future software industry will appear very similar to that of today's automotive industry in terms of multinational competition.
Cyric Zndovzny at your service.
Quality of life standards are improving, driving up labor rates, and most of the "easy" outsourcing has already been done. Outsourcing larger development projects ends up not saving as much as expected because of the added management layers that are needed here and there to ensure a successful project.
Jerry
http://www.cyvin.org/
What's more important is that these increases so far have not been passed on to clients in the U.S.
Well duh, after all we never saw the drop in prices thanks to switching from hiring people for $1000 a month to $120 a month. I'm sure they won't raise prices until they hit $500/mo.
a number of business sites are saying Latin America is the new India for outsourcing. They have similar timezones to U.S., speak English, and are even a relatvely short plane trip away. Who knows, might be a more attractive spot to immigrate to than south asia too, for those willing to follow the work
If construction was anything like programming, an incorrectly fitted lock would bring down the entire building...
Yes, you are correct.
I was in Romania and Bulgaria recently. There are very few if any computer laws there at all. I remember my hostel in Bulgaria. They had a computer in the room for internet access. The internet itself was so slow, you could have almost considered it dialup. However, it didn't come over phone or cable, but cat5. I don't know how they get ethernet service to each appartment building, but I immagine it would involve WAP's on the roof.
Anyways, while browsing was slow, you could get any single album, movie, game, or piece of software at speeds of 1-2 megaBYTES per second. Why? The ISPs cache the files on their servers and distrubute them over ethernet. They don't have to fear legal reprocusions, so they do it.
Transmogrifying the American economy from a producer to a consumer is a big mistake.
... and one that's just as growth oriented as a "global" economy.
First of all, it's a huge security risk. What happens if a third world war breaks out? Are we going to fire ACLU lawyers and Fox News pundits at the enemy?
Second of all, where is all this extra growth that's supposed to come with globalization? Last time I looked, the growth rate about the historical average. Globalization and actually enforcing the borders create about the same growth rate. Only difference we used to make computers and cars and now we just make McMansions (with Mexican Labor and Canadian wood).
If we can tax Joe Hardworking American 30% of his income, why can't we tax outsourcers 30% of their income? Is their income more special than Joe Americans? If we taxed foreign trade like we taxed the American middle class; we'd see a closing of that price differential.
I'm not advocating isolationism and please hold of on the "xenophobe" accusations; but we'd be better off with favoring American companies and workers. American was built mostly by Americans and we're better off by engineering a more egalitarian society
it occurs to me that it was "trendy" to outsource to India (and managers basically fabricating lies about how much money was saved and how quality was maintained), will it be "trendy" to move outsourcing *from* India? The U.S.of A provides the lion's share of India's outsourcing income and I could see a cascading collapse of major portions of the economy over there ...
I'm probaly not best suited to answer the question. To be honest it's a loaded bean-counter question. We maintain both a U.S. and an India presence. It's case by case. Certain clients are better off keeping the support here stateside, others are better off (financially.. no comment on the quasi-language support issues) sending it offshore.
If I had to make a blanket statement... I would say yes it is profitable for larger corporations and not so much for smaller companies.
I've listened to the complaints that come back from people about "speaking with India" and overall the general attitude has changed over the last few years. Customers have gotten "used to it" to the point they expect it. Anyone expect to call Dell support anymore and not get India? They gripe, they complain... but at the end of the day they keep consuming the same product from the same company.
Now from a personal standpoint.. man there are certain things that just shouldn't be in India... like our H.R. contact... *grumble*
"why don't you just slip into something more comfortable...like a coma!"
A recent study (I was one of the contributors, plug admitted) was done by a Dutch University. The link to the website is http://stitch.ewi.utwente.nl/detail/chakra/-page=e n-info.htm, but to be honest I don't know if the results are currently online.
Nigeria? Are you serious? Without prejudice - it's one of the worst states for corruption. The streets of London are full of Nigerian traffic wardens putting tickets on ambulances, or on vans parked in loading bays, and then pretending not to speak English.
I know of $large_banking_firm who outsourced lots of coding over there, and 6 months later, found there was a huuuge backdoor in the system. Their 'professional' coders wanted lots of cash to reveal where/what the backdoor was. The bank paid, as it would have taken them waaay too long to go through every line of code and figure it out themselves. I think the crooks got busted in the end (this was about 4-5 years ago), but hey - why risk it?
I think it is because the products are cheaper. Costs have come down and continue to come down. Dell is all about economy in large scale. Look at memory prices for an example, they have dropped like a rock and there is very little manufactor support required for them so the savings was not from cutting support costs.
Getting off topic here to your post but along the lines of the article.
I personally think the bottom level support systems of any large company are completely useless. They might as well have no support structure at the lower tiers. They would serve the customer at the same level and not have to pay for something that is useless.
A recent example with HP.
To start off. I had a dead IP Console switch (16 port IP KVM). It was completely dead and the power led was not even on. When I finally got to the right department, the first level tech refused to acknowledge there was no power. He wanted me to upgrade the firmware and call back. I repeated that the device does not even power up at all, no fan, no power led and it is impossible to upgrade the firmware. He asked what firmware was currently on the device. When I said I did not know has asked me to connect a server to it, power it on and read the firmware to him from some menu after the device was done booting. I repeated that it does not power on at all. He finally understood after I described what the product actually does and what it was for, hello, it is a KVM and it is DEAD. Okay, new one on the way...
HP like many other companies has a system in place to send you emails about the status of existing open support tickets. I recieved one about the replacement KVM I was to recieve but it was noted to be on backorder. In the email I was given a link to inquire about the new shipping date. The link took me to the HP self serve web site. I filled out the form with all of the case information and asked when my part was going to be shipped. The result of the web request was another email asking me to call the 800 number to inquire about my shipping date. What the hell was the purpose of that exercise? I called the number (1800-HPINVEN(T)), and the voice system had absolutely no options for IP Console Switch, KVM or anything I could possible use to describe the product. It said I could use "OTHER" but it only actually understood the word "OTHER" after saying it at least 5 different times. I was transferred to bottom level support to describe my problem. I supplied the case number and the person asked what product I was talking about. I asked her to pull up the case number and see. She does not have access to case numbers so I had to describe to her what the product was. She had no options for IP Console switch or KVM and I finally asked for the server group. Finally, after 12 minutes I was at level 2 in the server side, an english speaking person (unknown location but at least sounded like he was a native english speaker with a southern accent). Regardless of where he was, he pulled up the case number, knew what the product was, had some in stock and I recieved the new one via overnight morning delivery.
I know everyone has their own tech support nightmare stories but my point with this one is why even have a tier one or general support line at all? More often then not, it is 100% completely useless and gets you nothing. I guess the status quo keeps them there but they could save even more money getting rid of them entirely.
Bad boys rape our young girls but Violet gives willingly.
I visited Bangalore a couple of years ago, and talked to a bunch of people in the IT industry there. They were already starting to realize that the outsourcing business is, basically, working for wages.
The real money is in developing a property income. Look for a wave of Indian software products, developed from their own designs. A couple of years later, look for the same thing from China.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
I work for a bank that's outsourcing call centers and some IT work to India. It's to soon to say for the call centers -- but I know that it does not in the long term save money for IT.
Objectively: absolutely, the up-front costs are much cheaper for much of our software development work. $25/hr outsourced labor compared to $75+/hr for onshore work -- there really is no comparison.
The problems begin when we first receive the work back. If it's a simple project (bug fixes and the like), there are few issues. Anything of any complexity often does not meet all requirements. Additional development is required -- however, it this point it's still far cheaper.
Once all development is complete, we review it with our onshore team. The time and cost of this review process is not taken into account.
Typically, there are a handful of minor issues -- this is normal for any kind of development. Also typically, there are one or two major issues. Because of the schedule of our releases, about 90% of the time we're stuck in a positon where we have to say, "We'lil have to address these issues later, there's no time left.". And I suspect that most of us here know that 'later' never comes.
These issues frequently return to haunt us -- I'm dealing with things today that were done "for now" 3 years ago, and it's a much bigger problem now.
Now, the true cost is no longer measured strictly in terms of development hours. Because at this point, there has been customer impact. Our call center users have to work around this issue in the software, which increases their call handle time. (Call handle time quickly adds up to hundreds of thousands of dollars annually when aggregated)
Subjectively: I've canceled my own credit card account with the bank I work for because I called for service and had to repeat myself several times in order to make myself understood. I speak fairly clearly, and this has never been a problem in the past. Secondarily, I had a very difficult time understanding the rep because of their accent. This in spite of the fact that I am pretty good with accents, since many of my coworkers over the last few years are from India.
Monitoring calls has shown me other account holders closing for similar reasons -- however the company will most likely never realize this, since the list of reasons for account closure does not include "customer service".
Realistically: I believe that the true cost of this is too long-term for most companies to accurately measure. The people who track these things in our company have not requested us to put, "I didn't like his accent" in the list of reasons a customer may close their account. They also don't consider the broader impacts of a change that is done incorrectly the first time.
Without acknowledgement that these things exist as valid issues, the true price of outsourcing can never be accurately measured.
As more countries make the transition from 3rd world, the people living there will begin to realize they are worth more then the $5,000 a year they are making
I'm afraid its not as simple as that. For you, in the US, $5000 is not much because the cost of everything around you is too much for you to support yourself and your family in $5000 a year. Even as 3rd world countries grow, their currency value doesn't necessarily appreciate. Due to this, for me, in India, $5000 a year translates to 200,000 a year, which is a decent middle class income, sufficient for me to get a two room apartment and other necessities. Add to that the fact that companies also provide other facilities like lunches and travel. So they already have what they're worth and are unlikely to ask for more.
What could be a bit discouraging for the indian BPO market though is the fact that BPO employees (especially call centers) do not always stick to that line of profession. that's not because they're not paid enough, they get paid more than what they're qualified for, much much more. its only because people who are employed are generally part-timers from college or freshers who just want to start earning first and then think about a career path. That is why you would always see a huge demand for employees for call centers in India, not necessarily because of the sheer volume of business they get.
I'm in an MNC operating out of India. Being part of the workforce, I know pretty well the wretched condition Indian coders work in. Our training is inadequate, faculty is of poor quality, resources are lacking and we are always in a hurry. No wonder India has never produced a world renowned software product. At this rate, it never will.
Have you bloody BEEN to Japan recently? Because I think you're overlooking a hell of a lot of things about the Japanese culture and economy. Here's a few:
1. Most cheap goods in Japan are produced in China or Korea nowadays, and most lower-level work is done by Korean and Chinese immigrants who don't have citizenship, even though their families have been there for generations. These people have been moving up in the economic food chain, but lack the solid ties to Japanese society that citizenship would help bring.
2. Japanese secondary schools are rapidly going to shit; teachers get assaulted, students don't pay any attention, and other than the entrance exams, the material covered is not terribly difficult. Japan needs a major dose of education reform.
3. Japanese workers used to have employment for life in the 80s; now, the only lifetime workers are government employees. This has caused mounds of social problems, doubly so because everything in Japanese society is based on seniority.
4. Better educated and more competent? Japanese work twelve-hour days, getting eight hours of work done, because their culture demands it, and afterwards, those Tokyo salarymen go out and drink and smoke as if cancer and liver failure were going out of style. Even if a younger employee has good ideas, they are overlooked because of their age, and the amount of pure ass-kissing that happens is beyond belief. How would you like it if you *had* to go to your boss' house and fix his bratty son's computer, for no pay, and you can sleep on the couch because the trains stop running at eleven.
Don't get me wrong. Japan's not a horrible place, but it's no paradise either. Their big advantage over the U.S. is that the younger generation is disgusted by most of the things I've listed, and fortunately, Japanese education is still very science-centric (unlike the American school system). So Japan stands a better chance of reinventing themselves; but make no mistake, they are not in a happy position right now.
Apologies about my English, as got back from Japan a few weeks ago, and I'm still not quite adapted to being home.
--
I Hit the Karma Cap, and All I Got Was This Lousy
I think more companies should look at Newfoundland Canada as a potential place to outsource. In the town of Grand Falls-Windsor there are multiple companies that are US based and rely on Canadians for their workforce. Those companies are benefiting from the lower cost of living that Newfoundlanders have compared to the rest of North America which in turn keeps salaries down. The people there are highly educated professionals with the credentials to suit most technology jobs. One of the companies that has a location there, choose Newfoundland in the late 90s after outsourcing to India for years and being very displeased with the results.
You just don't get it do you? You can't say no if your alternative is starvation.
First off, if your only alternative really is starving to death, then by offering you a terrible job, that company has saved your life. That crappy job is far better than not having that crappy job, so they are improving your situation. You then respond to that by bitching about it.
Secondly, that is almost never the only alternative. There are very few situations in which one particular job is the only one available to a particular person. There is almost always some other possibility, it just might be less appealing. For example, if I get frustrated with my IT job, I could probably get a job working the register at McDonalds. It would pay much less, and not be as rewarding, but that option is there. I may look for better options than my current job, but if it's really my best one, then maybe I shouldn't complain about it all the time.
Even in an economy where people aren't surrounded by as many corporations offering positions as I am, there are still opportunities. At rock bottom, there's still self-employment. Maybe you find out that the guy with all the food needs more water, so you travel to the neighboring village to get water from their well, and you bring it to the food guy in exchange for some of his food. Whatever form it takes, "having a job" is ultimately about providing something of value to other human beings. If you're really, truly incapable of finding a way to do that, then you shouldn't be so convinced that other people owe it to you to provide you with a living.
You are barking up the entirely wrong tree, economically speaking, and Alan Greenspan has little effect on the world economy - when Beijing talks, people listen.....
Brilliant points, parent.
The real problem here is trying to get "all gain with no pain". The recession has been buried with paper-printing and off balance sheet spending. While growing the government to huge proportions has propped up some of the unemployment -- the rest is covered by simply changing how we compute the data.
The way we compute unemployment now and inflation is different from the 1970s. Plus, the new phenomenon of both parents working and people working more than one job have skewed everything. If I am employed for two jobs, does our current unemployment figure account for that? I don't know. But you aren't counted as unemployed after about 5 months -- which means anyone can be jobless but not unemployed. That is called a discouraged worker. Anyhow, the real growth has been in disability. If you really want to not work, you go on disability -- this figure is a huge revenue drain and is not counted in the CPI data that everyone nods sagely to on the Financial News Network.
Just from common sense; with all the changes we've seen in the economy from 1990 to 2005, the unemployment figure has (as far as I remember) never fluctuated more than 1 % from 5.5 %. So, from booming economy to massive off shoring and we still get pretty much the same number. Putting it that simply, doesn't that tickle your Bull Shit detector?
OK. Still not convinced? Now I blow your mind. When GM massively lays off people, the Department of Labor, Bureau of Labor Statistics can actually compute job creation. How? Well, only 40 % of large businesses are used to compute actual employment. Since a lot of jobs are based on small companies and self-employment and none of those are actually sampled -- the government can assume that those 12,000 workers in the auto assembly plant at GM have now become profitable entrepreneurs selling doilies on e-Bay. What the F@%#, you ask? This is called the CES Net Birth/Death Model.. A name that is so weird and obscure that you wouldn't stumble upon it accidentally and worry your pretty little head about economic matters that might be inconvenient. Yes, it is 1984 every year where we come up with meaningless names. Since wall street likes unemployment because this lowers wages because more people are trying to compete with illegal workers that we let in for construction and sweat shops, but doesn't like them too low because that scares consumers into not rotating debt between 3 credit cards and a second mortgage... well, they want to tell us that we got about 200,000 new jobs each month. So, this past year we've had 35,000 actual new jobs reported and 180,000 estimated with B/D Model in one particular month and another month we actually had about 320,000 (which might have scared wall street) and 120,000 were subtracted (because whatever). But on average, we've had about 80k jobs added each month this year to "fluff up" the figure. OK -- these are from a vague memory. I get all this info and then check it out with actual www.bls.gov figures at this web site -- good source of rumors and Angst.
Inflation. Well, basically, the government now has a huge incentive to keep this reported figure as low as possible. Union Wages and government programs and a whole host of other expenses have built-in inflation increases. The 3% inflation that we keep getting reported doesn't include volatiles like the price of Gas, Food, or Day - Care. Volatiles aren't included because they change a lot and it is reasoned that those prices are going to effect the durables eventually. But let's look at what we actually spend money on in my house; the House payment is just near the top of expenses. Since I refinanced with a low interest loan (and these rates are a danger to our countries debt finance) and a lot of people have re-fied to 30 and 40 year low interest loans -- so that reduces a major expense that reduces apparent inflation -- even though the price of the houses is going up at about a 20%
>>"ad space available -- low rates!!!"