February 2nd, 2004, 06:28 AM
The US Govt has a proposal to stop Outsourcing from India. Whether this move is justified and what will be its implications?.
The indian IT industry seems to be generating the same sort of protectionist attitude that the Japanese companies generated in the 80s and the Chinese manufacturing does today, i think the reason behind this backlash is more to do with the current depressed economic conditions in the US and Europe. the threat to the BPO boom is being seen as one of resistance in the developed world to jobs shifting to countries like India. After 9/11 there is a patrotic fervour in the US, so the combination of patriotism and job losses is driving the backlash.
the BPO backlash is worrisome. Given the danger of negative backlash from their own population, the US and UK are retriving their outsourcing units from India. the backlash against the Indian IT firms is a important issue. we can learn so many things from this backlash. Indian IT companies must reduce their dependence on US market and develop markets in countries like France, Germany and Japan
This Outsourcing Ban will definately affect Indian Economy but it will have greater implications on the Us economy. US economy will suffer more than this ban.
Costs are direct result of everyday
wage and prices in India, which are much lower. In India a software engineer is paid about 25% of the wages, which his counterpart in USA will get paid. And the quality is same and delivery is timely. Hence, this becomes an important factor when decision to outsource is taken. A direct result this lower overall costs is higher profits to the corporation and better value to the shareholders.
"At the end of the day, economic scene will prevail. There are certain job losses but these are due to US domestic turmoil, downturn and not due to outsourcing, rather there are strong and visible gains to US companies due to outsorucing as well", Karnik (Nasscom president)said.
The rising discontent
against outsourcing would not have any impact on India in the near-term, while in the long-term developed nations would approve of the country's capabilities in the business process outsourcing arena, Gartner India Research and Advisory Services Pvt Ltd has said.
"The backlash is a temporary phenomenon and the phobia of losing jobs in developed countries will gradually fade and outsourcing will result in improving financials of global economies," Partha Iyengar, vice-president (research), Gartner, told reporters in Mumbai on Wednesday.
Backlash is hotting up, but would cease to be a major issue by the end of 2004 or early 2005, he said, quoting a Gartner study, 'Top ten predictions for Asia Pacific in 2004'.
Through 2004, despite the threat of human resource backlash, 80 per cent of the United States executive boards would have discussed global delivery options, of which a majority of the companies would seriously pursue these options, he said.
The global delivery options would include both nearshore and offshore activities, he said, adding around 80 per cent of the companies would increase their people resources by around 30 per cent.
By 2005, India would be in the driver's seat of global BPO operations with companies like TCS and Wipro Technologies leading the global outsourcing industry, he said.
This would also result in large US and European companies opting for external service providers who would provide a global delivery model, he added.
February 2nd, 2004, 03:57 PM
apparently the US is pushing India to open up its own it field, meaning, it too is playing the protectionist game, in that it wants to take others outsource work but not allow any foreign work inside India. Comment?
February 2nd, 2004, 10:31 PM
US Govt.? That article opens with a notice about Dean wanting the legislation. Is that what the Dems are doing to get at disgruntled IT workers? The article is also from an S. Asian perspective.
February 9th, 2004, 05:27 PM
so how do you explain new legistations been introduced to restrict OutSourcing. No matter what you do Company's will go for profit and it's not that bad the way it is projected that all jobs will be outsourced and all americans will became jobless
Outsourcing to add 22 mn US jobs
Diana Farrell, director, McKinsey Global Institute, said, “People in the US are looking at it as a job issue. They are not economists and therefore, they don’t necessarily see the whole picture. What’s going to happen is that offshoring is actually going to benefit US businesses even more than India.” She said it was a profoundly new way of doing things and would change the structure of organisations. Offshore was about global wealth creation and integrating economies, she explained, adding that it would create more high-value jobs in the US than people could imagine today.
Based on the research that the McKinsey institute had carried out, Ms Farrell said conservatively, for every dollar invested in the offshore space, $0.58 was directly saved. This could be either redistributed to investors or customers. But she added that there were indirect benefits to the US, in terms of the import of US goods and services into India by Indian service providers, and so there was some transfer of profit back to the parent in the US. She pointed out that the Bureau of Labour Statistics was predicting a job gain of 22m in the US by ’10, against a job loss of 2m due to offshoring.
Steven Gruber, managing partner, Oak Hill Capital Management and non-executive chairman, EXL Service, (a BPO company with operations in India) said, “Indian companies must worry about extreme legislation that might come out of the political battle to win elections in the US.” This could be in the form of new banking regulations that ban sharing of customer data.