"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.
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
TIMES NEWS NETWORK[ THURSDAY, NOVEMBER 18,
2004 11:13:20 AM]
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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