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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...
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!"
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'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
If the goal of the country is to increase next year's GDP at all costs, then listen to the economists.
... None of these figures puts any red ink to a balance sheet, so why should the economists care? Their job is to serve the holy God of The Market.
Not all economists view max GDP as their goal. Some, and increasingly more, attempt to minimize the GINI coefficient (which also tends to maximize GDP as a secondary effect).
The externalized expenses of increased unemployment numbers (the real unemployment numbers, not the crap the Labor Dept. puts out), stagnant wages, and increased costs of living have been largely absorbed by increased reliance on credit (thanks in part to the housing bubble).
And economists have been warning about this for quite some time. What you failed to mention is our increasing trade imbalance. That's the biggest threat to our long run economy. As far as the housing bubble, read some economic journals for some positions on that. Reading economics as interpreted by the popular press/media tends to simplify positions to the point where it looks like economists think all of this is OK. In reality, it's the exact opposite.
have been largely absorbed by increased reliance on credit.
Economists have been concerned with the low American savings rate for decades. That does have far reaching negative impacts on the market, as does increased utilization of credit (read about the money multiplier and inflation). Even if the goal of every economist was to worship the market, as you put it, the points you've made and suggested that economists have ignored are entirely opposite of the truth. They're all valid concerns of every competent economist out there.
I have a feeling that when China decides to stop subsidizing us, we'll find out that our economy (and country) has been bankrupt for years.
This is an excellent point and I'm glad you brought it up. This is something most economists are very concerned about. The growing trade gap is everyone's concern, from Greenspan to Buffett, and seemingly to everyone BUT the current administration. I'm a republican (the true fiscally conservative kind, not the kind we have in office now. neoconservatism = liberal spending, oppressive social agenda), and I happen to be appalled by all of this. Fiscal responsibility should be the #1 concern of every administration, because that DOES trickle down in a sense. Want to keep the middle class afloat? Howbout not doing things that will raise inflation. The rich can take the hit, the middle and lower class sure can't. The first concern is the trade gap.
Anyway, I hope I was able to clear a few things up there. I have a degree in economics and a job as a programmer, I'm middle class, republican, and absolutely pissed off at the current state of affairs. Such a combination DOES exist, you know. Not all of us are concerned with the party line or pretending everything's OK because "our guys" are in office. I really hope a candidate runs in '08 who really has a handle on this, or at least the right advisors, because the last election gave us two candidates who were economically clueless, if not absolute liars. Whether your choice was "The economy couldn't be in better long term shape" Bush or "We can afford socialized healthcare" Kerry, the outlook for that 4 year term were awful. The problem is, none of these older-than-dirt politicians seem to understand the workings of a global economy because it didn't quite exist the way it does now for the majority of their lives.