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"Outsourcing is good for us" - also known as "good land in Florida - cheap!"
by Mike Crane

Over and over the debate about outsourcing, free trade and immigration comes back to the same ole, same ole ...

Immigrants and outsourcing only take the jobs that Americans will not do

This is good for our economy and creates jobs

But industry by industry your future is being sold on the auction block of political pandering to special interests. Lets take a closer look at outsourcing, the new age term for shipping American jobs to foreign countries. When this first began, it focused on lower paying jobs doing routine work. One of the best examples of this was call centers.

Many elected officials and their appointed cronies were quick to abandon this segment of the American population. We were told how by saving money these corporations would become more efficient, increase production, increasing exports and thus create more jobs and improve our trade balance. So the jobs of all of these call centers employees were sacrificed on the alter of being good for our country.outsourcing

According to Offshore Tracker there have been just over 281,000 jobs sent offshore. According to the India Times, just over 192,000 jobs per year are moving to India and the rate is increasing. So according to the Bush Administration we are making great strides in improving productivity - thus creating more jobs and improving our trade balance! The Bush Plan of supporting outsourcing is making great progress!

Well this all sounds good, but lets a look at what these Americans sacrificed their jobs for:

Trade Balance:

Record breaking trade deficits.

Take a quick look at the chart on the right. There is absolutely no sign that sending jobs to India by the hundred thousands is improving our ability to compete globally. In fact every indication is that just the inverse is occurring. Our country is becoming less competitive.

Job Creation:

But President Bush tells us that outsourcing creates more jobs than it sends to foreign countries. So as the rate of outsourcing increases, our job creation must be booming.

Well this all sounds good, but lets take a look at what these Americans sacrificed their jobs for. The following is extracted from the latest economic reports on job creation:

New hiring in the service sector fueled November's overall jobs increase, led by health care, restaurants and hotels. But retailers lost jobs, their payrolls falling by 16,200 last month.

That reflected indications of a disappointing start to the holiday season, as retailers reported lackluster sales for November. The much hoped-for surge in Thanksgiving weekend business failed to materialize.

The manufacturing sector continued to shed jobs for the third straight month, losing 5,000 from its payrolls. The nation's factories, in a long slump, have failed to jump-start hiring in the face of rising competition from low-wage countries such as China.

The weaker-than-expected employment report could fuel concerns that the labor market recovery is stalling. Economists say employers should be adding more than 200,000 new jobs or more each month. Just to keep pace with population growth, about 150,000 new jobs are needed each month. Since August 2003, monthly job creation has averaged 152,000.

It is hard to find the great benefits that President Bush touts in his support for outsourcing!

Apparently the jobs of 192,000 Americans a year are being sacrificed for something other than making our country more competitive and increased job growth as President Bush claims.

But the story gets worse!

Look at the article below from the India Times, and material on one referenced company iSoftTech. Now the target has shifted from call centers to development centers. Look at the projected growth rates: $8 - 10,000,000,000.00 a year by somewhere between 2008 - 2010.

According to the President Bush theory of economics this should be a virtual "Boom" period.

He is willing to support the loss of another 1,000,000 American jobs, closing of countless development centers and an increase of at least another $10,000,000,000.00 to our Trade Deficit and tell you - "that it is good for us !"

Didn't we try this on other products? Take Televisions for example.

An American invention that had a world wide market. First some production was moved to Japan and other countries. This was good for us ! But today can you find a TV made in our country? No you can not, nor can you find an American who has a job making TVs. But you can find a lot of Americans buying TV's (an American invention) from foreign countries. Every TV purchase contributes to the Trade Deficit.

Looks like we are headed down this same road with software product development! How many industries must be sacrificed on the alter of globalism?

These are dangerous trends and there is very little to show for something that is supposed to be " good for us ." How long are you going to let these trends continue before demanding the proof that this is good for us ? How many Americans can lose their jobs before we face real economic hardships? How long can record Trade Deficits continue before we pay real economic prices for our lack of responsibility?

But there isn't anything to worry about is there? President Bush has told us - this is good for us !

India set to capture IT biz worth $8 bn


From interfacing directly with consumers to working diligently on core processes and products, Indian companies are doing everything for the overseas buyer.

India doesn’t do things with a bang like China does. Everyone now knows that. But given an opportunity, Indians will grab it. In the area of offshore development of software, India is on the radar of any organisation wanting to cut costs and gain efficiencies. Indian IT companies have now gained enough confidence and knowledge to stick their necks out of the huge services rut and breathe in fresh air from the product space.

Meanwhile, equally bold moves from pioneers - mostly in the US - have actually resulted in the core stuff being outsourced to India: product development. Remember, these are still early days so numbers are still miniscule, but they are on an upward growth path.

A just-out Nasscom report on offshore product development states that export revenues from product and technology services have grown from Rs 121 crore in 2001-02 to Rs 166 crore the next year.

The study estimates that by 2008, the figure should touch US $ 8-10 billion (Rs 37600 - 51700 crore). That’s a huge jump, but that’s what the right momentum can do to a company, then to an industry and finally to the entire country.

According to a study conducted by Meta group, global sourcing of product development will no longer be an optional strategy by 2007-08.

"With offshore outsourcing being accepted as a key strategy to stay competitive in the globalised economy, the production cycle for technology-centred products will require global resources and global delivery," says Sunil Mehta, vice president, Nasscom.

A more subdued figure is projected by the Ireland-based market research firm, Research & Markets: from US $ 1.3 billion in 2003 to over $ 8 billion by 2010.

But the study also notes (perhaps a mite inaccurately) that Indian companies have started to move away from call-centres and other low-end services, and have started to exploit the intellectual capacity available in the country.

According to the report, the factors driving the increasing momentum of R&D outsourcing industry are availability of highly skilled manpower, cost-effectiveness, proximity to fast-growing Asian markets, benefit of follow-the-sun schedules and information security solutions.

Further corroboration is provided by Frost & Sullivan, whose report says that the R&D outsourcing market for IT in India is estimated to grow to $ 9.1 billion by 2010.

US-based venture capital firms are doing their bit to push work towards India. Their logic: it costs around $ 2 million to develop a modest software product in India as against $ 5 million in the US.

Nasscom has found that there are product development companies in several IT sectors and that there are over 50 companies with revenues between $ 50 - 100 million and several small companies with lesser revenues.

There are unfortunately no records to tell who started the trend in India, and in fact several companies in the space don’t even want to discuss what they are doing. But we found some willing to share information.

Chennai-based Aspire Systems has been growing at over 150% year on year since the last two years.

Gowrishankar Subramaniam, CEO, Aspire Systems, pegs the company’s revenues at Rs 12 crore currently and expects to touch Rs 16 crore in 2005. Aspire started out by helping companies in the US (and now some in UK, Switzerland and Ireland) to release new versions of existing products.

Typically, the old products would be written in a language that’s defunct today, but new versions would find no market if presented in the old format.

Aspire revamped and ported the new version on contemporary languages for the customer at a fraction of the cost they’d have had to spend. "In some cases, the cost would have been so high, it might have been better to just shut down the company," says Gowri.

Breathing new life into old but still valuable products could make India’s role as essential as that of a coastguard on a treacherous beach.

The TeNet group (promoted by IIT Madras) company, iSoftTech is also quite bullish about the space. The company, in fact, launched Bloomba (world's first search based e-mail client) in

India. Bloomba was almost completely developed by iSoftTech engineers in India.

Pune-based Persistent Systems - perhaps worthy of being called the pioneer in this space - has so far provided full-service outsourced product development services to over 120 clients.

Vijay Babu, president & COO, iSoftTech, says that this (offshore product development) model requires engineers with very high level of domain expertise. "A product development mindset is very different from the services mindset. We work as small expert teams, focus on scalability and robustness, understand the user scenarios and live and breathe the product," he says.

"We are now working with nine customers in the US and Europe. For all these customers we are working on developing some or all their products here at iSoftTech. We focus on embedded/ networking, enterprise and messaging domains," he adds.

Aditi Technologies, in its recently rediscovered niche, is committed to do product development for customers. IT services giants too want a piece of the pie. Says Ramesh Emani - president, embedded & product engineering at Wipro, "We want to sustain our leadership in the offshore based product engineering market."

With faster time-to-market an imperative, organisations are taking the wise path: farming out development work to specialists. Some of those specialists now happen to be in India.

More Information on iSoftTech - Specialists in transferring American Technology and Jobs to foreign countries.

Media Release

Integrated SoftTech to focus on telecom outsourcing

The Hindu Business Line, Jan 15, 2004:

THE Chennai-based Integrated SoftTech Solutions Private Ltd is cashing in on the increased demand from global telecom and networking majors to outsource their research and development. The firm will double its turnover to about Rs 10 crore and increase manpower to about 100 from the present 50 in a year, a senior company official said.

There is competition from companies like Future Software, another city-based firm, and Tata Elxsi. However, Mr V. Vijay Babu, President and Chief Operating Officer, Integrated SoftTech, believes outsourcing business from US majors is huge and can accommodate many Indian players.

He anticipates companies with revenues below $3 billion , to increase their R&D outsourcing in the next couple of years. Integrated SoftTech targets only the SME segment that has a market size of about Rs 1,000 crore, he said. Started in 2001 by the US-based industrialist, Mr Ray Stata, founder and chairman of Analog Devices, Integrated SoftTech provides research and development to telecom and networking product development firms. As an extended engineering team, it provides solutions to clients in the entire product development. It is currently working with six global firms and provides various services, including software architecture, design, validation and technical support of products, said Mr Babu.

Integrated SoftTech was formed when the telecom and networking sectors were going through a bad patch. In the last two years the company focussed on setting up infrastructure - it has now two centres in Chennai, including one in Tidel Park - and delivery capabilities. It will shortly set up sales and marketing team in the US, he said.

When asked about competition from Chinese and Korean firms, Mr Babu said US-based firms outsource software from India and assemble the kit in China and Korea. Integrated SoftTech planned to enter hardware development soon, he said.

Raj Simhan T.E
Chennai, Jan, 14

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