Posted on 10/03/2004 4:22:37 PM PDT by Willie Green
For education and discussion only. Not for commercial use.
New Delhi, Oct 3 (UNI) Top 100 global financial companies will offshore jobs worth over 200 billion dollars to India and other countries in 2005, says a new research by Deloitte and Touche.
''Financial institutions are moving business functions to India because they are recognising compelling cost advantages and they are able to lock in savings and manage risks effectively,'' Mr Peter Lowes, the US leader of Deloitte's outsourcing practice, said.
In 2005, Deloitte expects the top 100 global financial companies to offshore a total of 210 billion dollars of their operating costs, saving on average, 700 million dollars.
The survey, covering 43 financial services companies around the world, suggests that the number of firms taking the offshore option increased by 38 per cent last year.
Deloitte also estimated that by 2010, 20 per cent of the operating costs of global financial institutions would be centred abroad, reducing costs by about 37 per cent.
Analyst Datamonitor also said earlier this year that outsourced, offshore call centre positions will more than double by 2007 to 241,000, from close to 110,000 at the end of last year.
However, the Deloitte survey said most of the companies sending jobs to India and other countries had concerns about risk management. Half of those surveyed had contingency plans if the offshore operation went wrong.
''Risks related to government change and policy changes are prompting companies to have a multiple-country strategy, which makes it easy for them to migrate services if there is a problem in any operation,'' Mr Lowes said.
Apart from India, other countries with high proficiency in English are emerging as popular destinations, including Malaysia and the Philippines, the report added.
Even if what you are saying is true, it does not matter. Am I supposed to pay more for a product (computer, car, phone, etc.) to help your friend? What don’t they consider helping me by taking less in salary so I don’t have to pay so much for the goods and services I want? I don’t think people should pay more for some product under the misconception it is “helping an American”. Do workers in America collectively agree to be paid less for a product being sold to an American? If the good people of India can produce a product or service of higher quality or at a reduce price than someone else and I agree to buy that product, that helps us both, and encourages the producers of America to make better products at a reduced price. All benefit.
Interestingly, China ( Haier ) has built a $40 million refrigerator manufacturing plant in Camden, S.C..--350 employees.
Strange how Kerry cries about the moving of certain types of jobs overseas (as is happening in EVERY industrialized nation on earth), but see's NOTHING wrong with turning over our national defense to those who will NEVER have our best interests at heart.
Interesting times.
Let's take this to the ultimate. The whole concept of outsourcing is to lower consummaton prices by minimizing production costs. So let's outsource our entire production economy so our consumpables are the cheapest possible. Then what exactly do you do for a living? What would the world want from the US?
Do you want to produce in life or just consume?
Most of us seem busy doing something, and for some reason, the median income in real terms just keeps going up. What the US does best, and generates the most highly value added, are things requiring heavy brain power and creativity. I don't expect that to change, since the US sucks up the best and brightest like a vaccuum cleaner - now more than ever.
well at least we know where you stand regarding your fellow americans.
funny, I don't see you complaining that Carly Fiorina earns 8 figures per year - I guess that's OK with you, you are willing to pay for that and the compensation for the rest of the CEOs and the executives suite.
who gives you the right to decide that? are you also telling Carly Fiorina she can't pull down 30 million a year?
First, what is the Deepika Times or whatever? It sounds like the Indians are trying to go bragging again.
Just because something is 'projected' does not mean it is certain.
Second, look at the internal source for the article. Deloitte & DoucheTM.
They are a consultancy practice, hoping to cash in by 'advising' and 'administrating' outsourcing projects.
Of course they are going to try to stampede executive lemmings over the cliff.
Please note from the article, it is claimed that globally,
companies will move $210 billion of financial-related business to India in 2005.
Is that the price currently being paid to First World employees, or the anticipated price in India wages?
And what is the total value of all financial services back-office work worldwide?
How does this figure compare to the $210 billion?
Also note that even the article claims that half of the
companies have contingency plans in case the outsourced
work is screwed up.
Sounds like our Indian friends are gaining quite the reputation, there.
Finally a couple of points of my own. Look at one of the recent issues of E-week (an IT industry rag).
There, it is noted that JP Morgan is INSOURCING a lot of its development. This implies that the executives there have figured out that no matter what the price, sometimes a Yugo...or a Tata...just isn't worth it.
Second, one of the trends, as noted in articles on BW Online, E-week, and others, is simply that many Indian outsourcing IT firms are beginning to make acquisitions. You could argue that this implies they are flush with cash...and to some extent, this is true. But what is carefully left out of the stories is the implication:
their astronomical organic growth rate is slowing.
It is a general truism in business that "You grow organically first, later you purchase growth."
In other words, most of the low-hanging fruit of offshoring the easy stuff--call centers, low-level programming--has been done. And much of the work has come back either so screwed up, or so behind schedule, or so in need of being re-written from the ground up--that news is beginning to filter back to the Carly Fiorina's of the world who were under the gun to produce results out of thin air in otherwise dying companies. (BTW, does anyone know if the screwed-up SAP integration which they blamed for their missing latest quarter financials was done offshore?) And if you can't trust an offshore concern to simply set up a simple Oracle database without extensive hand-holding, then you will not trust your entire enterprise to them. IT JUST TAKES TIME!
The question is whether or not the greedy executives will have effectively eviscerated the US economy, and the underpinning of technically competent Americans in the meantime, in their insane haste for fictitious, unlimited cost savings from the third world.
[Full disclosure: some of my earlier posts have savaged US executives for their short-sighted greed in offshoring. Please look up and read those postings before flaming me!]
First, what is the Deepika Times or whatever? It sounds like the Indians are trying to go bragging again.
Just because something is 'projected' does not mean it is certain.
Second, look at the internal source for the article. Deloitte & DoucheTM.
They are a consultancy practice, hoping to cash in by 'advising' and 'administrating' outsourcing projects.
Of course they are going to try to stampede executive lemmings over the cliff.
Please note from the article, it is claimed that globally,
companies will move $210 billion of financial-related business to India in 2005.
Is that the price currently being paid to First World employees, or the anticipated price in India wages?
And what is the total value of all financial services back-office work worldwide?
How does this figure compare to the $210 billion?
Also note that even the article claims that half of the
companies have contingency plans in case the outsourced
work is screwed up.
Sounds like our Indian friends are gaining quite the reputation, there.
Finally a couple of points of my own. Look at one of the recent issues of E-week (an IT industry rag).
There, it is noted that JP Morgan is INSOURCING a lot of its development. This implies that the executives there have figured out that no matter what the price, sometimes a Yugo...or a Tata...just isn't worth it.
Second, one of the trends, as noted in articles on BW Online, E-week, and others, is simply that many Indian outsourcing IT firms are beginning to make acquisitions. You could argue that this implies they are flush with cash...and to some extent, this is true. But what is carefully left out of the stories is the implication:
their astronomical organic growth rate is slowing.
It is a general truism in business that "You grow organically first, later you purchase growth."
In other words, most of the low-hanging fruit of offshoring the easy stuff--call centers, low-level programming--has been done. And much of the work has come back either so screwed up, or so behind schedule, or so in need of being re-written from the ground up--that news is beginning to filter back to the Carly Fiorina's of the world who were under the gun to produce results out of thin air in otherwise dying companies. (BTW, does anyone know if the screwed-up SAP integration which they blamed for their missing latest quarter financials was done offshore?) And if you can't trust an offshore concern to simply set up a simple Oracle database without extensive hand-holding, then you will not trust your entire enterprise to them. IT JUST TAKES TIME!
The question is whether or not the greedy executives will have effectively eviscerated the US economy, and the underpinning of technically competent Americans in the meantime, in their insane haste for fictitious, unlimited cost savings from the third world.
[Full disclosure: some of my earlier posts have savaged US executives for their short-sighted greed in offshoring. Please look up and read those postings before flaming me!]
its happening across too many tech companies in too many industries for it to be "anecdotal". and its feeding back into the college education system - americans are piling their kids into law school, fleeing tech and the sciences. once India and China have an opportunity to build their higher education systems, those foreign engineering students will also fall out of the US system. I guess we will still have arab muslims studying engineering in the US - just great.
you want statistics? tell the labor department to show us wage growth, and remove those making $250K per year from the stats. because when Oracle sends 1000 $70K US programmers to India, and pays their top 25 executives bonuses that total the amount saved, the wage statistics "even out", but we all understand the real effects of such a move. at least I do.
well, pickup truck manufacturing by foreign corporations is increasing in the US. oh, we have a tariff on imported light trucks - nevermind, bad analogy.
"Half" seems low; most big financial companies are well-known for their contingency planning.
Wall Street did a good job of recovering from the World Trade Center attack, thanks to the thorough planning that goes on at most of the larger firms.
Business continuity planning is expensive, and like other insurance, you hope never to use it, but it is a necessity and I suspect that the "half" reported is only half of the story.
The real tragedy here is that these companies are moving these jobs to India and other countries. It isn't a tragedy for these companies individually (I hope) -- it is quite a benefit to each company's bottom line -- but for us as a country, it is a significant loss. I know that when the WTO treaty was debated, the discussion wasn't how quickly we could ship off white-collar jobs in the financial industry, but of its great benefits.
Instead, we see a hollowing-out of our financial industry and, to add insult to injury, are incurring massive debt to pay for all of this "free" trading.
you got a credit card? call customer support right now and tell us who answers?
yes, JPM was one of the few bright spots recently in breaking their deal to outsource/offshore through IBM. let's see if it starts a trend.
LOL You can make your case for outsourcing on free trade merits and India is a better recipient than most, but its a stretch then to shade government retraining under the umbra of either free trade or capitalism.
You do know the difference between median and average don't you? I used the term median for a reason, because I anticipated your riposte.
China is doing just fine, don't you worry. not with software and IT - semiconductors is their top tech target.
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