Posted on 08/22/2004 2:33:58 PM PDT by Willie Green
For education and discussion only. Not for commercial use.
Bangalore -- If you think this is a year of impressive growth for offshoring to India, as has been signaled by the first quarter financial results, you ain´t seen nothing yet.
Western firms and independent IT vendors are for the most part marking time, waiting for the US elections to be over. The jobs traveling to India are mainly resulting from the need to take care of growth and attrition and little because of layoffs.
This has resulted in as much as 15 percentage points being shaved off the overall volume growth.
Avinash Vashistha, CEO of the offshoring consultancy neoIT, predicts that next year IT services offered out of India are likely to grow at 40 per cent. The potential for Indian companies in particular is underlined by the small part of global IT services delivered by them.
If this is the optimistic scenario for IT services, for ITES or BPO the potential for growth of offshoring is even greater. So far only a small part of BPO services has migrated to India, dominated mainly by call centre work.
But call centre work is only 3 per cent of the universe of BPO work. “The major challenge and potential lies in getting a slice of the remaining 97 per cent,” says Vashisth.
In software, the ramp up in the immediate future is likely to take the form of the $100-500 million multi-year deals looking to come to India. There is nothing amiss in the ramp up for Indian companies being incremental in nature as that is also the pace being adopted by MNC vendors with captives in India.
They are ahead, with $100 million plus deals already in the bag but the pace of growth for both Indian third parties and captives is gradual.
If offshoring of IT services to India is likely to touch 40 per cent next year, what will enable Indian companies to beat the competition? What is or will remain their USPs?
Indian firms have stolen a march on their nearest competitors, the Philippines, in the last five yeas by improving the capabilities and supply of their middle-level managers. This has enabled the firms to deliver both quality and improved productivity, asserts Vashistha.
There will be a challenge to Indian IT but it will come around three years down the line. And it will be posed by Russia in product development and support, and by Vietnam (its people costs are around half of India´s) in PC-based and new technology-based applications.
But Indian advantage will remain in large enterprise application and end-to-end technology services.
Indian edge will also persist in the telecommunications vertical in which companies like Sasken, Subex and Tarang represent successes in different sizes in both product ownership and development services. This has great potential as once a company´s products or IP click, the cash register simply keeps ringing.
In BPO, future traction is naturally likely to come in transaction processing and more and more elaborate back office services but this will have a significant corporate restructuring dimension, feels Vashistha.
Some of the growth will come from a ramp up in both MNC captives and Indian third party operations. But there will be instances of BOT deals maturing, as also MNCs setting up shop the quick way by acquiring small captives.
But by far the most interesting will be MNCs selling their captives, taking partners in their captives or accepting third party business for what has till now been their captives handling only in house work. GE has the ability and the desire, according to news reports, to accept third party business. EXL has capability to offer in its own vertical, insurance.
Willingness to take on third party work can be the stepping stone to divestment once the business is seen to be maturing. WNS of today was a part of BA earlier. There are also instances of Indian third parties like Crossdomain, till now serving MNCs only in India, seeking to venture out to the developed markets.
“These developments will take time. But captives, and through them the market, will have great capabilities. And some of these captives will become third parties,” says Vashistha.
At a time when there are questions over the future of third party Indian BPOs in an increasingly scale-dominated world, he sees “the market dominated in 5-8 years by third parties, some of which are former captives.”
"Thank you for posting this. It's ironic that India is worrying about the competition for American jobs from the Phillipines, Vietnam, and Russia."
Well, newsflash for them, there are not enough American jobs to go around. Guess they will have to start creating their own.
I have an infinitly high opinion of my country and its citizens. You on the other hand, seem to believe that the government has to regulate everything to death, and that "we" Americans need the government to help provide us jobs.
You mean the very same Ross Perot, whose Perot Systems is busy offshoring their IT work to India?
Gee...I guess we will have to invent more shit and lead the world into the next generation of inovation again...darn.
As a business owner this isnt a problem...its an opportunity...labor markets are fat and ripe for picking...invent somthing and grow a business with cheaper local labor...
America leads the way...it always will, as long as a few of us dont get absorbed in self pity
And just who's going to do this, I wonder? All the American graduates of computer science and engineering programs across the country? Let me know if you can find any.
Good point. In fact, an excellent point. At the undergraduate level, you'll find some Americans.
At the Masters level, Americans become a minority in the classes. Let me be very clear - American citizens are a numeric minority in graduate level University courses in computer science, engineering, and other hard sciences.
It gets worse at the doctoral level.
But that isn't the really bad news. China and India are turning out 300,000 engineers per year each to our 50,000. (This is at the undergraduate level).
So...are our engineers 6 times smarter, more creative, and better than one of theirs? 'cause if we're going to have more innovations than they, that's what we've got to do.
Did I mention that the average Chinese gets 10 days off per year? That's total - including holidays, vacations, weekends, everything.
Now, which country shall we suppose will have more innovations?
you mean, the lawyers, health care workers, government employees, and service workers can't do this? they can't invent new technologies and industries? uh oh...
not everyone's goal in life is to own some service business, and staff it with low cost workers.
And then there's the little issue of creativity and natural ability. We keep hearing about how the offshore tech workers will never be able to come up with anything innovative in the tech arena. They just don't have the ability, the savvy, the curiousity, anything.
Amazing how the very foreign students who can successfully navigate the toughtest engineering and computer science programs this country has to offer won't be able to come up with anything innovative, revolutionary and new.
And the country (China) who gave the world gunpowder four hundred years before it ever got to Europe will never be able to reverse-engineer all the cutting edge high-tech gadgetry whose manufacturing we've given them.
Nope. Never happen. Besides, the Chinese are our friends. They'd never do anything to hurt us.
Not to India. They're stricter than we are about immigration.
Not only do they limit immigration; they also strictly limit US goods, or place high tariffs on them.
The purpose is the creation of a "new feudalism" - a tiny minority of managers, owners, and investors, and the rest being serfs. Think of the British aristocracy in the Victorian and (pre-WW I) Edwardian years. There were dozens of servants for every upper-middle class / upper class person. We're moving toward the same outcome, only our "servants" now are fast-food workers, manicurists, day-care workers, nursing home staff, Wal-Mart cashiers, etc.
Not quite the end of the story. If "tech is dead" in the US, then the endgame is invasion by some foreign power for whom tech *isn't* dead.
Fuedalism with small possibility of advancement. Our kids and grandkids are screwed.
We can't afford to be arrogant. Civilizations *do* fall as well as rise. If we think we're going to run a first world country on Wal-Mart greeters and masseuses; if we think that spreading our forces all over the globe for "nation-building," and that an *inefficient,* *aging* and *clunky* defense industry are all going to keep us from being a plum ripe for the picking, we're delusional.
Almost fifty years ago, President Eisenhower built the interstate highway system *for national defense.* (Suburbia was an unintended consequence.) In the 1960s, we had a space program *for the national defense.* In that same era, we loaned college money to future teachers under a program whose original name was the National *Defense* Student Loan (later changed to "Direct" to salve the consciences of those against the Vietnam War.) We saw an educated populace as a *national security priority.*
Similarly, we need to treat engineering as a high priority issue of national security/defense. Same thing with manufacturing capabilities. But I fear we won't see it until it's too late.
You bring up some excellent points about the Chinese. My focus has been on gross civil rights violations, and forced abortions, but I haven't been keeping up with issues like their space program.
The first thing that I thought of were bomb shelters, regarding large amounts of concrete and steel. I don't know what they're doing with all those engineers, but when a totalitarian government tells you what to study for, you do it. Our students have a choice, so perhaps we should be guiding our students towards these careers and quit importing foreign born engineers. Will it happen? Probably not.
I didn't realize that we've been neglecting the space program. To sum up a reply to your post, my mom used to talk about those who are determined to bring about a One World Government. I thought, "yeah right, like that's ever going to happen". Our large manufacturing plants and jobs started rolling out the door after NAFTA. Then they left Mexico and ended up in China. Then the tech jobs started disappearing to places like India. Meanwhile, illegal immigrants are flooding in and bankrupting our state governments.
Imo, the border problem could have been contained many generations ago, but for some reason it isn't considered a priority. I'm sure you know that when unemployment figures are listed and touted as proof that there are more jobs, it's bunk for the most part. People ran out of benefits and no longer show up on the unemployment rolls.
Families are experiencing a lifestyle regression. I'm talking about Americans who mind their own business, so to speak. Average skilled people who are being hammered by rental housing costs, lower pay, and higher costs for food and utilities. More and more families are doubling up and living in the same house. Since you mentioned the America of fifty years ago, remember when you could buy a small starter home, and work at the same job until retirement? Of course this required the proper attitude towards saving and responsibility. Things that have been actively discouraged for the last forty years.
It seems like all the "little problems" interlink with one another. Don't get me started on the quality of education.
OK, I've clicked on your name to find your home page.
You're not a troll :-)
Are there any commercial applications of their discovery--say, in encryption?
[Other countries may have caught up with the US on nukes
but we still have WAY more lawyers ;-) ]
You wrote:
". . .Actually, it's not outsourcing -- it is importing of services, no different than if you import a German car or a Japanese TV."
Actually, there is a difference.
A German car (Mercedes) is built by a German company.
If an American buys a Mercedes, his money goes overseas.
If Mercedes then builds a plant in the Carolinas, some of
that money pays US workers in the Carolinas and the
rest of the American customer's money goes overseas.
If as a result of the new plant in the Carolinas, Mercedes
sales go UP, then the brass in Germany will indeed make
more money.
However, this is not likely to cheer up the German worker
who has lost his job to the worker in the Carolinas.
---If it had been Indian companies, who had started in
India, servicing SE Asia and not initially competing
head-to-head with us, until they had developed expertise;
and then attempted to compete head-to-head with us on
the basis of price--that would be one thing.--
--Instead it is US-owned companies--who until 'recently'
had hired US employees--who have unilaterally dropped
US workers and hired overseas workers to do the same work.
--And lied that 'the company would go out of business'
if not allowed to hire overseas in preference to the US.
--Who in the *&*#$ really thinks that the only thing
keeping Intel, Cisco, Microsoft afloat is cheap overseas
labor? What other companies are about to eat their lunch
based upon lower labor costs?
[Note: I chose those companies specifically. If and when
you respond, please reply in terms of other companies
which are in DIRECT competition with these three, not
with bilge about tech companies in general.]
My beef is not so much with the fact of outsourcing,
but the sliminess of the lies, and the underhandedness
of the fashion, in which it was performed.
Best post in a long time.
Totally agree.
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