Posted on 01/03/2005 12:03:06 PM PST by jb6
Many in India especially in Southern India (Bangalore, Hyderabad) are dancing right now with unbelievable amount of outsourcing contracts from America and Europe. While people are having difficulty in finding new jobs, BPO and IT companies in India are having a bonanza.
What is the future of this industry? When I asked this question to ten different largest IT and Call Center operators, their CEOs avoided the question and went on saying – the American companies never used to talk to us, today they are eager to keep us busy. It is a bonanza of money and contracts for the Indian companies.
The recent model is obvious. The basic innovation and implementation will be in America, Europe and Japan. The commercial manufacturing will take place primarily in China but also in Eastern Europe, India and some other countries. The back office and customer support will be handed over to India.
No matter what the International business model is, what really is the future of outsourcing?
India is a popular destination for outsourcing contracts because it has a tremendous number of cheap qualified educated English-speaking intelligent work forces. The Western companies have started using this talent pool to make sure they can reduce the cost of their goods and services in a deflation dominated world where lack of pricing power makes it difficult to expand and stay in business.
However, the work that is outsourced to India are those that can be replaced by automated programs, are repetitive in nature and less strategic for the Businesses.
Given this backdrop, if after three years of semi-satisfactory upswing in Business cycle, the world faces another economic downturn; it can be killer for the outsourcing world.
India has recently expanded relentlessly to accommodate the outsourcing mania of Western Corporations to cut cost by any means. This relentless cost cutting has provided extra cash to boost the tax-free dividends in America. But it also has created a fundamentally productivity driven weaker economy where the new style is not to hire, and if needed get the work done from India for pennies on the dollar.
The net outcome can be horrific. For example, the lack of high paying jobs in USA has forced car companies to provide excessive incentives to sell cars. Now those incentives have stopped working also. The debt level is so high and savings rate so low in America that a mild downturn can propagate into major recession.
In that case the deflation will show its teeth again. The Western companies will be forced to cut cost further and lower the price. This time tough they will look for eliminating outsourcing from India with Web based and other productivity enhanced automation to save even the pennies on the dollar.
That will be the killer economic Tsunami wave for India. China will be less effected as it will still be the hub for cheap manufacturing. China will get effected though when cheap Chinese semi-skilled labor is replaced with intelligent and even more disciplined Robots.
The killer economic Tsunami will cause a sever effect on Indian private sector.
The scenario may work out in 2005 or it may happen any time within next five years.
With the dollar down, it's not going to be as profitable as it once was.
I said it a while back that outsourcing would not really hit until late 2005 or 2006. But when it does it will become the central political issue. Outsourcing is hurting the middle class, and they are starting to notice.
I say bring on the automation, bring on the robots.
"I say bring on the automation, bring on the robots."
That is inevitable, and if I were India, I would be saving for hard times.
Any economics majors want to weigh in on this?
I say bring on the automation, bring on the robots.
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Sounds like just another way of saying: "Convert To Islam" !!! ;-))
You noticed Hildabeasts new platforms? Secure borders and anti-outsourcing. Just what the hell is the GOP going to bring up to confront that? I've got a really bad feeling for 2008 will be the year of the Hildabeast and once it's set it's roots in, that might be the last real presidential election we'll ever be having.
This will be THE issue in 2008, and coupled with the second issue of illegal immigration, whoever is willing to buck the international corporations on both these will be able to waltz into the White House if they can handle the poop-flinging the press will do.
Demand expends only when the customer base can afford demand. As salaries stagnate and jobs move, easy credit creates a timely bandage...ooops almost out of bandage.
Hildabeast is already setting roots on both issues. There is darkness moving in Mordor and we had best take notice.
I noticed that.
I am still waiting for India to create something.
work in IT & the #1 complaint about telephone tech support is that the caller can't understand the person on the other end...these Indians may claim to 'speak' English, but can anyone to whom English is their first language understand them? Don't think so.
Further, I've been in planning meetings where the outsourcing idea was brought up & dropped even quicker. Who wants to know that the tech-support for a product is rented out to a bunch of people that can barely talk (in English)?
That is 'death' to customer goodwill!
I know of several people who have maxed-up there home equity and are now looking down the barrel of having nothing for a rainy day. The sad part about paying off you credit card with equity is that in a few years most have run up their cards again. The economy is floating on cheap credit, when it runs out expect a crash, a big crash.
I don't for a moment buy into this scenario that if the rebates stop the auto sales will stop also. I was in the business for many MANY years and incentives are used to push product that can't carry the weight of its pricing as a value. Toyota and Honda for instance almost never have rebates because they don't need them. They will offer low interest financing but seldom if ever cash back. Toyota, probably the most successful automobile mfr in history has no debt and is sitting on a huge mountain of cash. I can not remember when they offered cash rebates, at least in the NY Region. A product that offers value in it's pricing can stand on its own. Cars are really not impulse purchases, and it is these purchases that may suffer in this scenario.
The ruling elite in this nation need cheap labor (illegal immigrants) and outsourcing to make money in the global economy. They give money to both political parties. Any candidate (including) Hilliary Clinton will be demolished by the global corporate/media/government matrix, unless the American people unite and vote. Right now, we are too divided to act. Most of the new high tech computer/software companies gave money to the DNC, while the more traditional companies gave to the GOP. High tech companies need outsourcing, and their CEO's need illegals to be the nannies, gardners and etc.
Good post. I like your tag line. Is there a ping list for moderately right wing believers who see this as an issue of economic patriotism?
No but we should create one. Hildabeast is already taking the lead on this. Watched PR piece on her on CNN about 2 weeks ago. This is going to be a big bone in the gullet in 2008.
>>Outsourcing is hurting the middle class, and they are starting to notice.<<
Which reminds me of this article from Fredoneverything.net. Specifically, after reading the article, think about this "coming" economic Tsunami and the last line of this article:
Whose Side Are Black Leaders On?
The Political Congruence Of David Duke And The NAACP
Tell me, is there any functional difference between the average black leader and David Duke? Any difference, I mean, besides candor? Do they not produce the same practical results--i.e., precisely nothing?
Duke says straightforwardly that he thinks blacks are stupid and shiftless. The black leaders act exactly as if they thought the same thing, though they don't say it. Why is one better than the other?
Think about it. What blacks need if they are going to have the slightest chance in this country is education. We're a high--tech society and getting more so by the week. Either you get the right schooling or you wait tables. Period.
Blacks are badly uneducated. This is obvious as a wart on a prom queen. Blacks don't fumble the SATs because the tests are rigged, but because they don't know the answers. Lockheed doesn't lack black laser physicists because it dislikes blacks, but because there aren't any black laser physicists.
It follows then that if Al Sharpton and Jesse Jackson and the strangely named Kweisi Mfume actually wanted to help, they would be beating the education drum vigorously. Schooling is the only chance blacks have to avoid permanent residence at the bottom of the social heap--or reliance on affirmative action, a shaky prop which fools no one.
Do we in fact hear calls for better schools?
Ever see Al Sharpton holding a mass meeting to demand Algebra II? Jesse Jackson thumping the tub for Standard English? How many racial do-gooders of any color, for that matter, have you seen working the ghettos, trying to sell grammar and advanced-placement history? Ever see a March for Calculus? A public meeting trying to get parents to make sure their kids do their homework?
No. Instead, professional blacks tell their people that everything is the white man's fault. Don't turn a gear, they teach implicitly, don't bother to try, because life is rigged against you. Just sit back, feel aggrieved, and passively hold your hand out.
Is this something you say to people you believe to be capable of succeeding? It sounds like David Duke to me.
Now, why do professional blacks play this dismal symphony? Three reasons offer themselves. First, it gets them prominence, an easy living, and probably just a whole lot of women. Second, actually doing anything constructive would be laborious, generate criticism, and take up a lot of Saturday nights. Third, they don't think that blacks can be educated.
That is, the choices are selfishness, cowardice, and racism. Which?
I'm generous. I'll say all three.
Trying to improve schooling for blacks would be a bloody struggle. You would really have to care about black kids to undertake it. The first step would be to get rid of lousy teachers. Many are black. The teachers unions, always protective of their rice bowls, would scream like scalded dogs.
It would take guts to say, "Our kids are more important than your jobs." (Note, by the way, that Catholic schools do a documentably far superior job of schooling urban blacks: Improvement is possible, the professional blacks know it, and still they do nothing.)
You would also have to tell black parents to raise their kids, maybe even to get married. You would have to be willing to expel unruly students who kept everyone else from learning. All hell would break loose at the suggestion.
You would have to do a lot of incorrect things, hard things, even cruel things, that might cut into party invitations. The fancy honoraria might dry up. It looks to me as if the career blacks just don't care enough. In fact, one might conclude that the whole black-leadership thing is a scam.
Am I being unfair? Tell me how.
If it's not selfishness or cowardice, then it has to be racism. By all appearances, the professional blacks figure that their people just aren't smart enough to compete.
The evidence for this is strong if not conclusive. Notice that the pros demand much from whites, but little from blacks. They want reparations, affirmative action, special privilege, money from lawsuits, removal of the Confederate flag, renaming of bridges, and so on. The underlying premise appears to be that blacks must be protected from competition, not prepared for it.
Now, where is this going to take us? In fifty years, are blacks still going to be at the bottom of every measure of academic achievement? Apparently so. Who will profit from this? Whites? No. Ordinary blacks? No.
But will professional blacks profit?
You bet.
(Incidentally, I might ask Jesse and the gang, why am I, a white guy with nothing to gain, sticking my neck out to suggest what you ought to be suggesting? Odd, isn't it? Can I be a black leader?)
The Sharptons and Jacksons perpetuate the current racial stasis, which is likely to prove dangerous. Racial relations are not improving. The eerie censorship we call political correctness holds the lid on, yes. Nobody can complain very much, except blacks. The economy is good. All seems quiet. But.
Resentment, hostility one might almost call it, grows among whites. Blacks are already angry. Nobody any longer seems to expect real improvement. Whites mutter about unqualified blacks at work, speculate on the proportion of blacks who can work at a federal agency before it ceases to function.
Meanwhile, it seems to me that despite (or even because of) the symbolic victories of blacks, their political position imperceptibly worsens. Hispanics are about to become more numerous than blacks, and they know it. Hispanics view blacks as competition. They are winning the contest for unskilled jobs.
Further, the economic position of blacks is heavily dependent on affirmative action, which is under attack across the United States. The anger of whites is a carefully overlooked, deliberately unmeasured force of unknown portent. Whites never respond to political attack, haven't yet anyway, but some rubber bands are better not stretched.
If an economic downturn comes along, if Hispanics rise too quickly, if racial preferences go away, if the veneer cracks--I want to be somewhere else.
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