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To: Texasforever; Southack
You left out the most important. Quality and time to market.

If we were having a more theoretical discussion of what consitutes competitive advantage, there are several other factors to consider.

But we are talking about outsourcing in the context (I presume) of China and India. Outsourcing means having some other company do what a company used to do for itself. Time to market (in the context of developing new products) doesn't enter in because the design, fab, shipping, etc have all been done. That 'time to market' race has been won by the company that is outsourcing. The Chinese or Indians reap the benefit of the outsourcers win. They have no significant 'time to market' problems when taking in outsourced production.

Which leaves your point of quality.

If an American workforce is in the revenue stream of a corporation then the focus has to be on faster and better quality throughput than can be achieved in a foreign location.

Quality is important but it also has a cost component. That cost of improving quality is lower in China and India as are all their costs. While there are quality problems now, they will be resolved, just as Japan resolved theirs. Some short-term realignments will happen (Dell pulling is corp tech support back to Austin for instance). But moving a chip foundry or assembly operation back won't happen. The quality problems will be worked. Poor services for the most part are not coming back either. The cost of keeping them here is prohibitive relative to the costs saved by competitors who remain 'outsourced'. There is no point in improving quality if the cost of it drives all your customers to your competitors.

Lastly, a point both you and Southack overlook with regard to China's competitiveness and 'quality' is that the companies that are outsourcing and moving to China do so also because China demands it in exchange for access to their markets. Nigeria has no market that anyone wants access to and so very little will be going to Nigeria because China 'demands' that it receive the outsourcing investments. Even if Nigeria worked free, it has no market leverage.

Lastly, Southack, as an aside exchange rates do not dictate incountry costs of living. It dictates how much an Indian can buy from an American, or a Chinese from an American (and vice versa). But as explained above with China, outsourcing to China is a condition of market acess, not because the exchange rate with China or elsewhere is attractive or not.

201 posted on 03/21/2004 1:10:43 AM PST by Starwind (The Gospel of Jesus Christ is the only true good news)
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To: Starwind
Quality is important but it also has a cost component

Only in the abstract. If work is done right the first time vs a workforce that requires 3 attempts to get it right then the labor cost advantage is narrowed significantly. Now China and India are 2 very different labor pools and it is not honest to place them in the same category.

Outsourcing means having some other company do what a company used to do for itself.

In the case of IT you missed the salient point. The work done in India is company overhead tasks. Support functions that add nothing to the bottom line of the company. It would be insane and a fiduciary act of irresponsibility for the officers of that corporation not to take advantage of the low costs offshore workforce.

203 posted on 03/21/2004 1:21:46 AM PST by Texasforever (I am all flamed out.)
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