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The Future of Outsourcing in India
aaditeshwar writes "Economist has an article on the current and projected state of outsourcing IT and other business processes to India. The biggest problem seems to be that the talent pool of skilled workers will not able to keep up. Currently there are about 700,000 people working in IT and outsourcing, which is likely to grow up to 2.3 million by 2010, but only 1.05 million new graduates will qualify from local colleges in the next 5 years leading to a shortfall of 500,000 workers! All this despite the fact that almost 2.5 million students graduate in India each year." From the article: "In IT the growth in Indian exports is expected to come both from the software market, and from 'traditional IT outsourcing'--such as the remote management of whole systems, a market now dominated by the big global IT consultancies. This is expected to rise from 8% of Indian sales now to about 30% in 2010, while software-development's share will fall from 55% to 39%. In business-process-offshoring, the big industries will remain banking and insurance. But rapid expansion is also expected in other areas, like legal services."
Eastern Europe has a lot of IT/programmer types.
Since some of them aren't employed, they're part of the burgeoning spam/trojan/virus/worm market that has been growing over there. Organized crime too.
Once the Companies have run out of Indian workers to shift jobs to, they'll move to Eastern Europe sooner or later.
And by Eastern Europe I mean former Soviet Block countries & their neighbors.
[Fuck Beta]
o0t!
It is ALL outsourcing. Why separate IT from, say back-office banking, insurance and other tasks...
Heh, or are they trying to distinguish "IT" from trivial paper-pushing.
This issue is a bit more complicated than you think.
In my opinion (14 years of consulting), the India craze did cause a significant dip in rates for US people but even couple years ago we already were scratching the bottom of the barrel. I think the shortage of programmers is a global thing and caused by primitive immature tools and processes and outsourcing is not a magic bullet. My typical client cannot coordinate people across the room let alone across the ocean.
As far as I know (from cousins, friends, and general chat from India), there is still a strong demand for the outsourced jobs. Almost tens of resumes per open position, so the prediction of "short fall" looks to be based on shaky ground. There are so many factors involved: there is a large pool of current workers, not all positions require an "IT" degree, and that many jobs may not be created (may move to other countries, or be simply automated).
The unemployment rate in India is still staggeringly high, and the couple of million jobs that *might* be created will be quickly gobbled up.
I suspect that the industry agenda is to continue to have a huge surplus of applicants (or even increase the applicants to positions ratio), so that they can put a downward pressure on the salaries. I'd call it Walmart-ization of the IT (and non-IT) outsourced industry.
S
complains about the lack of programmer graduates from the US.
Does anyone wonder why few Americans want to take up programming any more as a career? There's no jobs for them - the corporations crying about a lack of programmers refuse to look to the US to hire any.
And when BPO hits the banking sector, you can kiss the security of your identity goodbye.
--- Grow a pair, liberals... stop letting the Republicans bully you!
Are there fewer and fewer students entering accredited universities in the US studying IT fields? YES. And you know what, the reason just might be because the big companies are outsourcing the jobs. There is a direct relation to the expected number of jobs available in 5 years to the number of students entering those fields of study. By saying that they will be outsourcing the positions, the companies create the very lack of qualified personnel that they cite they need to fill the positions in the first place.
Now here is what I get. Everyone wants to make a buck. The companies want to save money and still keep the same quality "product" that they have now. The people in the field who understand the science/technology want to be paid a fair wage for their work and knowledge. They have invested upwards of $100k into learning that knowledge, and want to be compensated appropriately for it. This basically turns into a "cost of living" issue when you get down to it. In the US, it costs more to gain that education, thus the people with it demand more compensation for the knowledge. In some other contries, that same education may not cost nearly as much, and as a result, the people with that education do not demand as much compensation for the knowledge.
What I do not get is why. Labor is just another commodity to be traded. As such, how much longer will it take for all non-physical labor to be traded at the lowest going rate? As a result of this, how much longer until the economic crash of the school systems in areas that charge higher then other institutions for a degree on a global scale?
We were all warned a long time ago that MS products sucked, remember the Magic 8 Ball said, "Outlook not so good"
...that current outsourcing trends slow enough due to a competent IT worker shortage in India (for what piddling amounts the US companies are currently willing to shell out for outsourced positions anyway), such that the US labor costs can drop slowly. This would allow existing US IT workers can continue to find *some* work and do nice things like FEED THEIR FAMILIES until the global economies even out. This will likely take years though, so I'm not holding my breath.
At the megacorp where I worked we tried filling a Perl/sysadmin type position to work from India for a YEAR. I know those poeple are out there, they just need to pay them more $$$.
v2sw7CUPhw5ln6pr5Pck4ma7u7LFw0m6g/l7Di5e6t5Ab6TH.
We're in the process of hiring 100 Engineers from both India and Pakistan, with the plan being to bring them into Mainland China to work in the telecom industry.
:)
During our recruiting so far, we're seeing a yield of approx. 5% after all interviews and testing, but that is prior to them coming into the PRC. We've gone thru nearly 4,000 candidates since Sept.
For the record, I'd source domestically, but mgmnt. wants to curry favor with the home countries, so the burden to fit them in is on me. At least the bonus program is in my favor
I dont trust these numbers, IT numbers leave out IS and other comp-sci, engineering people who also do the same programming, dba, systems/network engineering.
I think a few things will happen.
Government will have to figure out how to tax those people, the outsource loophole, the company doesnt have to pay insurance, workers comp or benefits. The biggest problem is we outsource work for one of the high end middleclass sectors and drop the pay in 1/2 to 1/3 when the cost of living stays the same in the US. While those people offshore dont pay local taxes. When enough people start feeling the money crunch, expect some laws passed.
Software programming will be cheap, you can buy custom software quickly. I know some web developers who work with a couple outsource groups who just send the specs, and the company sends the completed software. While its not perfect, its cheaper and only takes 20-30 days. Good enough for first generation software.
And last, there will be some scandles about IP issues and copyrights.
I'm the network engineer for a company considering setting up an engineering / design shop in India. I just got pricing for a DS3 Internet circuit there. HOLY SPANDEX, BATMAN!
/constantly/, so you'd better plan on two of everthing for redundancy.
A straight E1 circuit (2Mbps) to the Internet is about $4000/month, and about $3000 to install. (All prices in US dollars) Not cheap, but not bad.
A 2xE1 (4Mbps) jumps to over $10,000 per month.
Once you hit DS-3 which is scalable in the sense that once you have the circuit installed ($17,000 one-time fee), you can go from 0-3 Mbps to start all the way up to 45Mbps, your rates go from $16,000/month for the 3Mbps up to over $80,000 PER MONTH for the 45Mbps.
Depending on what you're doing there, the straight E1 isn't that bad, but you really can't pump that much data through it. The ds3 prices are through the roof. Plus, I've been told that the infrastructure there is so bad that shit fails
Now if you're truly outsourcing all of this and therefore feel that you don't eed to worry about the sunk costs, fine, but when you pick the cheapest-of-the cheap bid, that most likely means that they have a crappy DSL out to the 'net that goes down at least once a week for 24 hours at a stretch. "sorry, couldn't {manage your network | take your callcenter calls | upload those CAD files you REALLY REALLY needed by 8AM the next morning} because our local loop was down because some dude running a backhoe trying to upgrade our highway system just yanked our a thousand strands of fiber."
Oh yeah, there's also the problem that India gov't managed-monolopy telcomm says that you can't terminate out-of-country VoIP calls into the Indian PSTN. So now you need either two phones on every desk, or softphones, or ??. Again, two infrastructures for them to manage. (If, of course, they feel that their wageslaves^H^H^H^H^H employees need to be able to call locally while at work.)
My guess is that as these hidden 'costs' start to surface, and as the cost of labor increases in India, people will start to move on to the next cheap area. Lather, rinse, repeat, wait a few years, and everything balances out (or so the economists in the group would say??)
Anyway what do you folks say? ------- Apologies for typos and bad formatting - NO TIME.
I would opine about how India and China are going to become giant behemoths and own everything but I remember Japan. Remember movies about Japan in the 80s? Then remember the Japanese recession?
China and India are different. I'm just talking about India here.
Let's be brutally honest: we only outsource to India the dumb shit of life. They are like the Migrant Mexican workers, picking our vegetables or mowing or lawns or making the beds in the hotels: it's just some dumb shit we don't want to do. Calling to dink around with your account or reschedule your flight is just some other dumb shit we don't want to do, so we give it to cheapies cause, you know, what the fuck.
So, if I was India, I would be extremely scared, because one significant advance in artificial intelligence means everything in India gets re-outsourced to robots. Let's face it, there's nothing an Indian can do that you can't do yourself on a website, barring mere technical limitations.
Dig it?
The problem with all systems like what China has is that distortions of the free market system due to excessive buraucracies always lead to a collapse of the monetary system. There are signs of this in China already with huge amounts of dead loans. IMHO there will be a huge banking collapse in the next 10-20 years leading to a big change in the government.
It is only a matter of time and how hard it will hit the rest of the world economies.
When it is over China will finally be a free nation.
I think that most states require those that practice law in court to have passed the state's bar, and the standards for the bar include arbitrary requirements to prevent inexpensive offshore competition. Thus only paralegal work can usefully be sent offshore.
This is a situation that really ought to be fixed. Outsourcing lawyers would likely be a tremendous boon to the US economy. It would discourage some of our most talented college graduates from pursuing a career which is of marginal (and possibly negative) benefit to society, and reduce the strength of the lawyer's lobby in the US which keeps many of our legal codes too complicated to be understood without plenty of expensive legal assistance. Finally, it would make our businesses more competitive by reducing the "lawyer tax" they pay for doing business here in the United States.
Unfortunately, the people we'd have to convince to make this happen tend to be lawyers themselves.
First things first: Your micro-rant, while cute and seemingly poignant is actually nothing but a simple troll. And while I realize it's best not to feed the trolls, not everything blatantly stupid should go unanswered.
When dealing with something as complex as economics, nothing is quite as simple as "So, how do you like it now?". Outsourcing of jobs from the United States to India doesn't just mean more money in India, period. What it actually means is less income in the United States to afford the products that many of these (outsourced) jobs in India were created to support.
Understand?
By moving a sizable portion of middle income generating positions to another country, we are not spreading any wealth; only distributing new vistas of poverty to our own people.
Do you get it?
Fewer dollars generated in the United States does not mean secure fiscal longevity for another nation. What it means is that when the United States becomes a middle classless society, India will go back to where they were before the mass corporate migration: one billion odd people struggling to find a place in the global economy.
You simply cannot build a solid economic base on cheap labour alone.
#SickNotWeak
having, in the past, worked with indian call centers, [IE flying to india, and training staff to answer the phones for a previous employer.] The reason I consider Indians a dime a dozen is because they were.
.. EVERY SINGLE ONE had certificates that said they met all three requirements. [IE Language skill schools certification, degrees, resumes listing years of call center work.] Around the 700th interview, we figured out something was wierd ... the people who had passed english fluency exams, couldn't answer simple questions asked them in english, like 'how old are you' or 'what is your name'. The people with degrees in computer science, had trouble turning on the test PC we had set up, the ones that could turn it on, had problems opening up ACT, or answering a list of simple technical questions we had: [how can you tell if a cat-5 netword card is working, how do you start up a web browser, how do you ping another computer] let ALONE any programming questions. The ones that had call center experience, were having problems transfering a call to another phone, putting people on hold, and dialing another country.
.. we were mystified, but skeptically drudged through more interviews, somewhere around the 1200 mark, I personally got a guy who spoke decent queens english, was technically compatent, but had only 1 call center job. I asked him, politely, to tell me why i should hire him over the 1200 people i had spoken to so far. His answer was simple :
.. thats FIFTY .. people who could pass all the tests. [we had been expecting to get 1k easily]
.. but at least I know he speaks english, really has his degree, and could actually DO the job.
Literally, we had 10 staffing agencies give us over 10k people to screen. The requirements were as follows :
Must speak english fluently,
Must have a degree in computer science,
Must have call center experience.
out of the 10k that showed up
All in all
'I am actually fluent in english, and I really have my degree - I may only have 1 call center listed on my resume, but I actually worked there - and you can call this number [which was in the UK] to verify that I was employed.' He then went on to tell me that he was SURE that lots of people had impressive references, and said they had degrees etc, but that in India - there was a whole black market of places that would sell you certification for whatever you needed to get a job.
out of the 10k people they sent us, we barely got 50
My personal favorite was a guy who MUST have been 80, who repeated 'Yes, I am perfectly fluent in English.' over and over, no matter what we asked him. [Including when we told him he could leave the interviewing room.]
The impression we got from the people we hired, was that we were paying very well for a call center, and that many people figured that we would be hiring like any other call center - basically, anyone that breathed. So they just did what they always do, get papers that could be attached to a form that is sent to the US showing they were qualified, and apply for the job.
Apparantly MOST US and British companies don't actually do what we did. They just hire a local guy to staff their centers for them. Who normally train folks to just read a set of scripts. Anyone will do. [Normally this fellow will take bribes from people desperate for work - to give them the priveledge of working.]
So when you ask what makes me (personally) think that a guy in a US college class would be more productive, My answer is that at least I have a very high certainty that he really is trained in what his degree is in, and if I am skeptical, I can verify the college is accredited, and call them to check his facts. I can call his previous employers, and although leagally they can't tell me if he was a crappy worker, they can at least verify that he DID work there, and the dates he worked there, how much notice he gave, and what his salary range was.
He may not work as hard, as some guy in india who REALLY needs the $2 a day, and he may not be as cheap
--Ne auderis delere orbem rigidum meum, non erravi pernicose!
New US IT graduates may be able to find programming jobs in India. If the "glamour" jobs all go to the multinational firms there, then perhaps local governments etc. will have a hard time competing. If India allows reverse H1B's (B1H), then perhaps a newbie can get experience in such a shop. Sure, the pay might suck, but you gotta start somewhere.
Table-ized A.I.
Most of what you say is true.
I've worked with indian programmers and they are decent to good.
Couple points.
1) Yes the indian system is so hard that many commit suicide. The japanese used to do this to, once their standard of living came up they got lazy like americans and said, Why are we sacrificing our children to advance- we have advanced far enough.
2) Yes the indian system is hard, so we are seeing the best and brightest- there are only so many best and brightest- as a result wage increases of 18% were observed last year.
3) At that rage, we see loss of savings in 4 years and wage PARITY in 12 years or less.
4) The u.s. will not be a 3rd world country in 12 years.
5) Asia is not going to continue advancing forward without some kind of a setback. And the last time they had a setback in China, they killed about 95% of the people with any kind of education.
So...
Wages will rise there (yea!)
India will have to deal with hyperinflation- taxes will skyrocket, the cost of kheer will go through the roof (It'll be 5 bucks a serving like it is here).
Some programmer jobs will continue to require american programmers and american business is going to have to face up to the fact that they are destroying that class of jobs- when they need them back, they'll be expensive to fill - and it won't get better because our population of workers is dropping now and will continue to drop for the next 15 years. After a mild recession next year and a harsh recession in 2010, 2011, it's going to be pretty nice for about 5 years.
6) Indian companies engage in very blatant age discrimination- so I expect they'll start dumping their guys as they approach 40 or 45 just like americans do.
---
But he is right- outsourcing works often. But it is sold as saving 50% of cost sand it is looking like it is really saving 15% as projects are being delivered- still a huge amount but very little inflation will close that gap.
And finally- business is lying it's ass off to american programmers- the line is "You be the senior and they will do the code" but any fool can see, in 3 years business things "and then you'll be gone and they'll be the senior coders.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
The indian education system is still a fairly pure meritocracy.
For example, in the US, we might allow folks who make an "A" to go to a special school.
And once enough "A"'s had applied, the school would be full.
In India, you would take a test, and the top 70 scorers get to go- even if 180 of them made A's. Not first come first serve- the top.
I have been told that that concept starts early- by the end of highschool you are either going to a trade school, going to college, or ineligable for further education- all the basis of testing.
It's very harsh and a lot of high school students commit suicide when they realize their life is over before it started (they should probably come to the US instead of killing themselves- here if you have drive you can always succeed).
But that means, that the people who make it through college, are smart and exceedingly driven compared to a similar groups of americans who were not culled so severely.
But it's like a mono culture vs a sexual culture.
If the environment is well defined, they can master it. Once we are thrown back into an undefined environment, it may be different.
But do -not- under estimate indian programmers- a lot of them are competent and they are getting experience now.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
That there among 100 million East Europeans are different kinds of IT people can hardly be any surprise.
That some of them are unemployed is hardly surprising, considering that there are unemployed people all over the world. That this is the cause for a statistically higher amount of virus production is just a wild guess.
That companies would turn to Eastern European workers only when there are no Indian workers left is blatantly false. There is already outsourcing going on from Western to Eastern Europe. Besides, the Indian market is unlikely to ever run out of workers. They may temporarily run out of workers with the right skills, but as long as the skills are well defined, they have the resources to teach them to millions of new students each year.
The only interesting thing in the post is the strange definition of Eastern Europe as being former Soviet Block countries and their neighbours. This would inlcude Finland, Germany, Turkey, Afghanistan and China, just to mention a few.
I asked a friend who worked in India many years his sage advice on opening a BPO:
.... Maybe 10% may work out....
--
What I may say below could be construed by some people as not politically correct or intercultural insensitive by some. This is based on facts and observations from living there and not reading about it...So, fuck them....
Hyderabad is OK but you have a much better level of people in Bangalore..
but you must never ever be talked into Calcutta, Madras, Delhi or Bombay as they are shit holes that are continually under some form of religious, political or just union strife in which they tends or riot for a few days and kill a few of the opposition off... Never enough in my opinion...
Never ever allow the boss under boss or anyone who actually has or even thinks he has power from hiring a relative as its the beginning of corruption on a grand scale... NO EXCEPTIONS...
Don't bring in anyone from out of the area to run the place... he has to be local and speak the local dialect....
Try for a few Christians in key positions as they will not be swayed by the religious horse shit that manages to pervade all levels of the workforce...
Never ever try to be smart mouthed or even think you can get around the local politicians including the police as they are vicious bastards to a man and will hold a grudge forever so just be nice but don't let your local boys get into the bribery business as it tends to take on a life of its own... I punched out the local postman early on and got amazing respect with a spot of fear from half the town. (not an advised method)
Its hard to find but a smart Indian woman is worth ten men.. Look for a good independent woman..
Try at all costs to avoid Indians returning home from the US or UK as they are looked on as "Brown Sahibs" and tend to act a bit superior
If you have any ex-pats working there tell them not to bonk any of the workforce as she WILL TELL so its best to have a favorite among girls at the local hotel... She will also tell but it wont cause a problem...
Finally because people tend to be respectful and some very deferential does not mean that they aren't trying to cheat you, steal from you and generally smile politely while they are fucking you...
The Sage words to ALWAYS remember...
Its not good for the Christian health to hustle the Asian Brown;
for the Christian riles,
and the Asian smiles
and he weareth the Christian down;
and the end of the fight is a tombstone white,
with the name of the late deceased,
and the epitaph drear,
"A fool lies here, who tried to hustle the east"............. Rudyard Kipling
Not a lot has changed from the days of the Raj
if you don't think first
if you back down to easily
if you are not seen as the boss
if you have bad manners....
The instability largely comes from political corruption, monopolies of any kind, insufficient worker protections, price gouging, accounting fraud and other such elements, where the normal feedback mechanisms cannot work or are even actively prevented from working.
The most screwed-up economies are the ones that are the most regulated. India's economy before 1980 was very regulated and very screwed up. It would take a year to get a permit to import a computer, thanks to trade protectionism. Now India's economy is only slightly screwed-up as regulation begins to be lifted.
Regulation always sounds like a great idea. "The market has failures, let's regulate it." Unfortunately, the track record globally is that more regulation tends to damage the working parts of the market more than regulation fixes the failing parts of the market.
Government regulation has proven to be an incredible tool of corruption, and unlike private corruption, you generally can't get away from government corruption.