Outsourcing Catch-22

Outsourcing Catch-22

By Rajesh Setty on Sun 19 Aug 2007, 4:03 PM – 8 Comments

I read that presidential candidate Hillary Clinton warned about Outsourcing in a message to the audience at Pan-IIT conference

“If the United States continues to outsource jobs to India in increasingly large numbers, people will begin to feel insecure and may very well seek more protection against what they view as unfair competition. America is not just a a marketplace to get a foothold in.”

The above quote made me think about Outsourcing again. For me, it was and it is always a given that marketplace determines what is right and what is wrong.

Let me explain my dilemma through a scenario:

Let us run a scenario. You are a $100M company and all your competitors are outsourcing and gaining some sort of advantage. Would you stop your Outsourcing initiative because it may not be good for the greater good of the country. That would mean taking a hit and having a competitive disadvantage against others who ARE outsourcing today.

Extend the scenario. You are competitor to the company that is discussed above. You are already well into full-scale outsourcing. Would you want to go back on your Outsourcing strategy because it is good for the country or would you rather press on the initial advantage you have got over your competition?

Whatever way you think, I get a feeling that it is ultimately the marketplace that defines what’s next for Outsourcing.

My $.02 of course.


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University Update – Hillary Clinton – Outsourcing Catch-22  on August 19th, 2007

[…] Clark Outsourcing Catch-22 » This Summary is from an article posted at Life Beyond Code on Sunday, August 19, 2007 […]

Nagesh Belludi  on August 19th, 2007

Outsourcing need not be the sole enabler of competitive advantage.

In Senator Clinton’s comments, is there a mention of manufacturing jobs moving to China or Vietnam as well? How about a distinction between outsourcing and off-shoring?

Most discussions on outsourcing lack a broader perspective. The world has experienced, more so in the last decade, an enormous shift of consumption patterns. Offshore sources of lower-cost services (e.g. India) and manufacturing (e.g. China) are today the world’s biggest consumer markets. Would America tolerate restricted access to these markets in exchange?

Engenharia da Computação :: Frase do dia #18  on August 19th, 2007

[…] Hillary Clinton in Outsourcing Catch-22 […]

Raja Choudhury  on August 19th, 2007

I think Clinton is on to a very subtle point here that has to be considered seriously. With India emerging as a KSO center as well as already being the major KPO center for US companies, the fear that R&D and more sensitive jobs will shift to India is a valid and politically sensitive one. The US’ lack of investment in IT and science education may well need to it becoming the worlds biggest consumer of K leading to the creative classes much touted by Peters and Pink. But this is still a way off and there will be some years of transitioning pain during which time India will make a convenient scape goat. Perhaps NASSCOM and indian KSO/KPO companies should learn to use the US spin and PR machines better by making concerted a effort to allay fears here and to invest some of the Indian profits here in sensitivity, giving back and philanthropy.

BlogReader  on August 19th, 2007

You are a $100M company and all your competitors are outsourcing and gaining some sort of advantage.

Depends on what kind of advantage they are gaining. My opinion is that companies should keep their core competency in house and outsource most of the rest (provided that you already have a good system for managing that).

Are they making gains as they are paying less for labor and can charge less? Do you really want to get into that game?

Frase do dia  on August 19th, 2007

[…] Hillary Clinton in Outsourcing Catch-22 […]

Doug Withau  on August 20th, 2007

Perfect political speak. I have read the quote three times. Is Mrs. Clinton in favor of protection, or in favor of globaliaation. I would never expect her to be ‘against’ any topic where a normal person may have an opinion.

Read “The World is Flat”. Better, get it on CD. It is a big long book, but Friedman lays out the outsourcing, and off shoring arguments very thoughtfully.

India is not a worry. We are already seeing engineers and other skilled workers job hopping. This is causing their pay to rise. The economics of outsourcing to India are not as attractive as they were 4-6 years ago.

China is a much greater concern. The Chinese do not have a free economy. They will hold salaries and people static. They can manipulate the salary to keep the work cheap, and keep the work coming to China. It is possible to work in a sweat shop writing code just as easily as making Nikes. The threat of going back to the farm and starving is just as real.

Blah, blah. Whatever the consequences, protectionism never ever, ever works.

Here is an arguments for the US National health care plan that Mrs Clinton is proposing. This is the only one that makes any sense to me. China has no health care insurance. It all comes from the government. India also has a socialist health care system. That means the per employee expenses for a corporation are less. US companies would be able to compete if they did not have to pay for employee health care. Please,do not think that the national health care system is on the Democratic agenda for the “little guy”. It is for corporate cost savings and a better bottom line.

Read about the WalMart health plan. The majority of the cost for the uninsured temp workers is paid by the taxpayer. WalMart’s profits soar!

Bage Anderson  on August 20th, 2007

Clinton’s observations are correct as are the scenerios proposed by Rajesh. There are no easy answers to the delimia facing corporations already involved in offshore outsourcing. Increasingly, corporations are finding that there are hidden costs associated with outsourcing to countries such as Pakistan and India, not to mention language, cultural and time zone barriers for effective customer service. In fact, some corporations before entering into the offshore outsourcing fray are considering a new business model as an alternative – rural sourcing.

Rural Sourcing is the model of taking call center and software support for a corporation to the rural regions of the US and taking advantage of the untapped pool of IT talent there. Partnerships between economic development agencies and institutes of higher learning bring high tech centers to cities like Abilene, Texas where those who would like a career in IT without the hassles of the big city can have the best of both worlds – pay and a slower paced lifestyle. The aforementioned barriers to successful customer service are also eliminated.

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