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Posted on 05/20/2010 8:24:56 AM PDT by altair
I am an expat (once again) this time in India. Last year my job was outsourced to India and I decided to follow it. Too few people seem to understand why jobs are being outsourced. It's all about economics.
I work for a major multinational firm that everyone who accesses the internet does business with (whether they want to or not). We originally started in San Jose, CA, but now have offices throughout the world. There is currently a slow, but inexorable drive within the company to get out of California and relocate elsewhere. The two "satellite" centers are located in RTP, North Carolina and Bangalore, India.
The PHBs have come up with a term called "Market Adjacency". All that really means is that the company employs people near where there exists new markets to sell to. Increasingly in the 3rd world, there exists opportunities to both decrease the cost of doing business with respect to salaries, but also opportunities where the companies involved are offered "incentives" to locate there.
This actually makes a lot of sense on more than the raw bottom line figures. How many of you have ever been transferred on a service call to a call center in a different part of the world and experienced difficulty communicating with the person at the other end? That kind of outsourcing is only going to bite you in the long run as customer satisfaction takes a pretty big hit.
I predict that Bangalore, within the coming decade will become the new global "Silicon Valley" even though it's not in a valley. Let's take a look at Bangalore. Climate-wise, it's located away from the coast and experiences arid climate. Although located in the tropics, it is largely immune to passing storms that seem to always miss it. (There's probably a term for that - the place Mrs. Altair is from in Mindanao has exactly the same feature). Once all the facilities get built, it easily has the capability of becoming a popular tourist destination.
The real "secret" as to why businesses are collecting here now lies in Indian law and designated SEZs (Special Economic Zones)
India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone (EPZ) model in promoting exports, with Asia's first EPZ set up in Kandla in 1965. With a view to overcome the shortcomings experienced on account of the multiplicity of controls and clearances; absence of world-class infrastructure, and an unstable fiscal regime and with a view to attract larger foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April 2000.
Now compare the following to the current US business climate (and I include Bush-Clinton-Bush in this).
This policy intended to make SEZs an engine for economic growth supported by quality infrastructure complemented by an attractive fiscal package, both at the Centre and the State level, with the minimum possible regulations. SEZs in India functioned from 1.11.2000 to 09.02.2006 under the provisions of the Foreign Trade Policy and fiscal incentives were made effective through the provisions of relevant statutes.
To instill confidence in investors and signal the Government's commitment to a stable SEZ policy regime and with a view to impart stability to the SEZ regime thereby generating greater economic activity and employment through the establishment of SEZs, a comprehensive draft SEZ Bill prepared after extensive discussions with the stakeholders. A number of meetings were held in various parts of the country both by the Minister for Commerce and Industry as well as senior officials for this purpose. The Special Economic Zones Act, 2005, was passed by Parliament in May, 2005 which received Presidential assent on the 23rd of June, 2005. The draft SEZ Rules were widely discussed and put on the website of the Department of Commerce offering suggestions/comments. Around 800 suggestions were received on the draft rules. After extensive consultations, the SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th February, 2006, providing for drastic simplification of procedures and for single window clearance on matters relating to central as well as state governments. The main objectives of the SEZ Act are:
(How familiar does the following sound?)
It is expected that this will trigger a large flow of foreign and domestic investment in SEZs, in infrastructure and productive capacity, leading to generation of additional economic activity and creation of employment opportunities.
Executive summary: What part of getting government out business and letting business do what it does best doesn't anyone understand?
Here's another quote from an investment web site.
The Government of India (GOI) has formulated a policy for setting up Special Economic Zones (SEZ) in India. SEZs are proposed to be specially delineated duty free enclaves for the purpose of trade, operations, duty and tariffs. These zones are self-contained and integrated having their own infrastructure and support services.
India didn't suffer at all from the Great Crash of 2008. QED
India is partially aided in the fact that India's equivalent of Wall Street doesn't have anywhere near as a voracious appetite as Wall Street Manhattan, but still ...
To me the most interesting thing about Spurlock’s show were the familiar issues. Things like the destruction of the family were concerns because Indian families were working different shifts and no longer dined or prayed together.
Another issue was religion. Indians are increasingly tied to the west through work which means their time off was often tied to Christian and other western holidays. I’m not going to get into a religious argument but its an issue where I can see their concern.
I hope you mean giving them a pass on the inspections that should have been made but were not. I've lived in the 3rd world too long to be a "pure libertarian". Government and government regulation is required, it just needs to be sensible.
But not for long. This is the problem...when you instruct someone "how" to build your product, they learn idiosyncracies of the product that the "innovators" no longer have access to because they outsourced it to Asia. Actual manufacturing and innovation is a two way street. US companies assume that they hold onto the intellectual property of their products, but in reality they don't. The manufacturing company learns more about improving and innovation by the act of manufacturing than the original innovator, resulting in a complete transfer of intellectual property to the foreign company.
Very interesting point. I could understand a lot of those concerns, when I think about how much different my work schedule was when I was living just two times zones away from New York City and had to account for the time difference in the hours of the New York Stock Exchange.
Morgan Spurlock produces a show called “30 days” where he attempts to put the viewer into the perspective of the other side. Sometimes he puts an illegal immigrant in the home of a border control proponent or a PETA freak in the home of a farmer.
Much of it is crap but he occasionally hits on something interesting like the show about the California IT worker following his job to India.
>> Off-shoring redundant technology and business processes is NOT innovation, it’s simply getting easy work done cheap.
That’s true, of course. However, believe at your own peril that Chinese and Indian and Eastern European and Russian folks can’t learn and think and design and innovate for themselves.
Europeans and Americans have no monopoly on brains. And they are already way behind in the perseverance and elbow-grease department.
We have been too busy eating up the fruits of past accomplishments — but not working nearly as hard as we should to grow new fruits. Therefore, if we don’t start “getting it” right away, and reversing the process, the rest of the world will soon be eating our lunch.
(Thanks for your clarification)
Don't forget corporate income taxes. One of the most evil inventions.
The hell of all this is is that if we eliminated corporate taxes and capital gains taxes without even touching personal income taxes, we could probably pay for enough of Obama's communist welfare state to survive for quite a long time without any particular new misery.
That's not exactly what I was focusing on, but ...
That’s true, of course. However, believe at your own peril that Chinese and Indian and Eastern European and Russian folks can’t learn and think and design and innovate for themselves.
Correct. Knowledge (as opposed to a formal US college education) is cheap now-a-days with easy internet access. Obama and all his communist university buddies ought to discredit huge portions of the US educational system for a long time. I'm not going to hold my breath, but it should happen.
At least where I work, the work is not easy and requires real skills. I have not met a single peer coworker whom I would not consider bright. Rough on the edges, needs more training - sometimes yes, but not bright enough to do it, no. Be careful dissing that which you do not know.
Hmmm.....Not sure what you mean by “be careful dissing what you do not know”.
I am here in the valley and have been for twenty years. I run an ISP, a hosted telephony business, a construction company and am starting another company next week.
What Might I not know about business and the current climate?
Two thumbs up on the vanity!!
Sure, Indian programmers are cheaper, but when it takes 10 to 20 "programmers" to equal one of our guys here, the payoff just isn't there. Overall, I haven't been impressed with offshoring.
On a personal level, if I call a company for something and get routed to India, I'm a hell of a lot less likely to continue to do business with them.
I've discovered you always have to get them to say what you want them to do in their own words, when they start with "yeah, yeah, yeah" routine. It's obviously a cultural thing. Many just plain will not admit that they don't understand what is being discussed.
It varies by individual.
If you're outsourcing by collaboration, then you also have to take into the time zone differences. Most business people cannot deal with that. Email is the killer app in that case, not Skype, IRC, WebEx, etc. that requires synchronization at both ends.
I don't particularly want to assist in outsourcing, so I'll stop here. My only intent was to explain what is going on.
With anyone actually. Mrs. Altair is a Filipina and I've learned from her that I can usually never trust a "yeah, yeah, yeah" response. India and Philippines have English as an official language, that doesn't necessarily mean a whole lot day-to-day.
The US manufacturing industry has destroyed itself by outsourcing manufacturing to realize short-term profits
Although the U.S. manufacturing industry has outsourced many products, the manufacturing sector in our country still produces a very large amount of products. We employ far fewer people than years ago but productivity and output remain fairly stable.
it depends on who you outsource to and whether it’s outsourcing or offshoring. If you have your own firm set up in India then you pay for the best guys. If you outsource for lower bucks, you get code monkeys
Eh. The PHBs don't really understand what's the cheap part.
I work in telecomm R&D and the current effort has about 10 long term USA engineers being thrown into a late project being worked by a group of Indian contractors. A couple are good, but most are DeVry Institute quality coders.
The PHBs believed the contracting house's siren song of quality, but it was a mirage. And they've already lost any price advantage they might have had as the total staff is more than I think needed if they'd staffed initially with USA employees who know the industry and the kind of quality and robustness the company expects, and how to get there. These guys were trained to Microsoft levels of quality ... just reboot once a day.
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