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Outsourcing Growing Beyond India 374

PreacherTom writes "One of the most controversial aspects of the global economy has been the newfound enthusiasm of companies, freed from the constraints of physical location, to outsource jobs. No country had embraced tech outsourcing with more passion than India. Of late, problems are beginning to arise in Indian outsourcing: engineers will start a project, get a few months' experience, and then bolt for greener pastures. The level of attrition can cause the turnover of a project's entire staff within the course of a year. Combine this with salaries in Bangalore that are rising at 12% to 14% per year and it is no surprise that companies are looking beyond India to a slew of emerging hotspots for IT, such as Brazil, China, and Vietnam. Will Ho Chi Minh City be the new Bangalore?" From the article: "India remains an IT outsourcing powerhouse, with $17.7 billion in software and IT services exports in 2005, compared with $3.6 billion for China and $1 billion for Russia... India's outsourcing industry is still growing at a faster pace than that of... other wannabe Bangalores... By the third year of an outsourcing deal, after all the costs have been squeezed out, companies get antsy to find a new locale with an even lower overhead."
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Outsourcing Growing Beyond India

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  • by zappepcs ( 820751 ) on Monday December 11, 2006 @05:20PM (#17199914) Journal
    While its true that it helps to 'flatten the world' into a large community, it harms our own communities when we outsource. Sure there is that short term bottom line issue of money, but you don't have to go much beyond 'short term' to see that the cost of wages is hardly the big cost in outsourcing. Before this story came out there were many others telling us how good outsourcing is and those that told how bad it is. The indicators have been there all along as to why it is bad.

    Big indicators have been the outsourcing of work from India to China! The fact that customer service companies in India cannot communicate with the average person in western English speaking countries on a level that is equitable. The high turnover rates have always been there as a problem that was politely ignored in favor of lower initial labor costs.

    Any project manager can tell you that trying to lead a project of software engineers that is not only geographically separate, but separated by as much as 12 hours from the part of the company that needs the software.

    All of that is not news, or shouldn't be. What is news is that more and more companies are finally realizing this. There will be companies that continually hunt to find short term savings, like gold rush miners, but in the end, customer service and ease of development will drive down the desire to outsource work.

    Yes, I know that Bill et al have proclaimed that there is a shortage of IT workers in the US, and apparently there is a glut of degreed IT workers in India. The trouble with such claims is that those Indian IT workers (no matter how many degrees they have) do not have any kind of realistic understanding of the western world's business environment, and often I swear that they really have no idea about software either, but I suppose that is borne from not understanding the business culture as well.

    This story is really about how outsourcing work to foreign countries is coming back to bite the people that thought outsourcing was a good idea to start with.

    Those who won't learn from history .... and all those nice cliche's

  • by loony ( 37622 ) on Monday December 11, 2006 @05:33PM (#17200092)
    So, now that management has run out of ways to prove that their plans work they will find a new, even cheaper place... good luck with that.

    So far I have not come across many Fortune 500s where outsourcing actually worked in the end - that means not just a lower rate but comparable quality. There are plenty of CxOs that announce how much money they saved and all, but if you talk to the techs they almost consistently have another story to tell. For each 100 hours of outsourced work I estimate the average will be about 40 hours of US time to review and fix the programs... And those 40 hours will eat up all the cost savings you had in the original 100 hours. Its sad - but in the end for a million line codebase that has a certain quality, it doesn't really matter where you do it - the cost will be the same... The only ones that have a big advantage there is the russians. No idea why but their quality is usually better than you find anywhere else and the prices are reasonable too.

    Before outsourcing, look beyond the hourly rate and consider skills. Then analyze your savings after the project has been in production for a while - and check if your expectations actually came true.

  • by Anonymous Coward on Monday December 11, 2006 @05:34PM (#17200110)
    I'll happily work for $3-4 US per hour, as I'm sure many other Canadians will.

    As a university graduate with 15 years professional experience and zero current domestic employment prospects, no unemployment insurance or welfare, a few dollars an hour that the tax man does not know about is most welcome.

    I can make enough to survive on for rates similar to impoverished Indians. Its all in your standard of living.

    The benefit to my clients is mainly fluency in English (UK spelling) and ease of communication.
    They get superior service at rates comparable to outsourcing to the east. And I get to eat, and buy the odd package of cigarettes.
  • Ricardo was right. (Score:0, Interesting)

    by Anonymous Coward on Monday December 11, 2006 @05:49PM (#17200294)
    Trade liberalization works. Free(r) trade agreements like NAFTA and WTO dealings are helping to drive economies from Asia to Africa. Of course, since labor is just another commodity whose costs the import/export wizards can minimize, free(r) trade means that most of those economic gains are going into the bank accounts of a few. Thus, the rich get richer and the poor stay poor.

    The funny part is most people are too stupid to figure this out (cf. Dobbs, Lou), so they bitch about illegal immigration and outsourcing instead of demanding more equitable wealth distribution. Oh well, good thing I've got that trust fund to fall back on.
  • by mpapet ( 761907 ) on Monday December 11, 2006 @06:06PM (#17200508) Homepage
    Is suspect 98% of the time.

    1. Workers who lost really well-paying jobs to outsourcing:
    I'm sorry no one informed you, but one of the economic reasons you were paid so well was that your job was coming to an end. It was always a temporary state. Consider the extra wages a "retraining allowance" paid in advance.

    2. Shareholder Demands:
    Clearly outsourcing is a cost-reducing effort. As long as those costs are measured in dollars and cents your job is on the chopping block on a quarterly basis. Unless every business owner/shareholder in every country in the world becomes simultaneously enlightened, this is the benchmark.

    The new american worker rules are:
    There is no such thing as job stability.
    Get paid for today's work because there is no promise tomorrow. e.g. retirement and vesting options are mostly vaporware.
    If you are lucky enough to be near the top of your wage curve, live at or about the middle of the wage range for your industry if at all possible. This gives you a nice F.U. fund if there's a sudden change in your employment circumstances.
  • Re:Get over it. NOW. (Score:4, Interesting)

    by NorbrookC ( 674063 ) on Monday December 11, 2006 @06:08PM (#17200534) Journal


    My, aren't you naive! No need to shout, because life will soon smack you upside the head. A little reality check - Competence does not equal immunity. You can be the among the best, even the best in the industry, or the world at what you do, and some bean counter will outsource you in a heartbeat if they think they can get it done cheaper elsewhere.

    Consider that almost half (47%)of the IT outsourcing contracts are cancelled due to non-performance. The sad truth is that the people who make the decisions to outsource are several layers removed from the people who actually perform the work, or work with the customers. Which frequently means that cost trumps quality or competence. The person making the decision doesn't know (or even care) that the people that are being outsourced are good or the best. All that manager knows is that they cost too much.

  • by theshowmecanuck ( 703852 ) on Monday December 11, 2006 @06:16PM (#17200640) Journal

    Simple, do the same as they do for the IT staff already: Pay them what they are worth in a salary, and if they do a good job, they get to keep working there. Others have some good suggestions too on this. If you don't do something about this though don't expect stupid actions that generate short term profits but long term mediocrity to end.

    To put it in slashdot parlance:

    1) The senior executives come in, make their short term profit for the company and collect their bonuses,
    2) Things go to shit (since their short term plans don't work for the long term... they don't care anyway, their eye is on the bonus) and they get fired,
    3) Take a huge severance and... profit!! (well except for the shareholders)
  • by spun ( 1352 ) <> on Monday December 11, 2006 @06:21PM (#17200716) Journal
    As long as money, products, and information are free to traverse national borders but people aren't, tehn as soon as one region wises up and starts demanding what they are worth, the megacorps will simply move on to the next desperate region. They will let the uppity region become poor again before moving back in.
  • by partenon ( 749418 ) on Monday December 11, 2006 @06:22PM (#17200738) Homepage
    Not true. The real value for a software isn't the code itself. It's the business logic behind the code. And companies only outsources tech jobs, not their business knowledge. As a brazilian who speaks a bit of english, I work (and worked in past jobs) for american companies as outsourced programmer and I can tell you: we have *no* business knowledge nor people w/ this kind of knowledge here in outsourced jobs (but, of course, we have our own IT marked).

  • by maxume ( 22995 ) on Monday December 11, 2006 @07:15PM (#17201424)
    Yes, paying people money for work they are willing to do is clearly evil. Exploitation is a problem, but isolating a country is not going to improve the situation, and there are a lot of people who would rather be exploited than hungry. Look at China and N. Korea; China decided to open up their economy, and kaboom, here they come, while N. Korea is stuck in the past.

    If you are upset about your shoes, buy American. New Balance 'tries real hard' to make their shoes here, but that's just a bonus that comes with the comfortable, high quality and reasonably priced shoes that they sell. Toyota makes excellent cars. There are lots of other examples out there.

    When people talk about living wages being too expensive, they aren't talking about the $X increase in wages being too expensive, they are talking about the $X increase in wages being larger than the profit they are currently making on that work, so if there is a minimum wage, they save $X-current profit by not paying somebody to do that work anymore, and the job disappears.
  • by Tracy Reed ( 3563 ) <treed AT ultraviolet DOT org> on Monday December 11, 2006 @11:50PM (#17203686) Homepage
    I spent 9 months in HCMC as the director of software development for a US based company last year. It wasn't my idea. The Vietnamese-American owner of the company who employed me to go thought it was the thing to do. I can tell you that it is NOT the place to outsource any IT tasks such as programming or web design to. Not unless you have some serious government contacts to get you access to the smartest kids out of the state schools (who will still have only minimal programming knowledge and only on Windows).

    I couldn't find anyone there who spoke decent english who knew anything about computers. The best I could find were straight out of two year trade school/junior college amature windows jockeys. Linux? Perl? Fat chance! It is still very much a third world country. Software is pirated wildly too. Don't expect employees to obey any sort of NDA. Also note that since people there do not have credit cards, car payments, mortgages, and are already heavily dependent on their families for most things they need they are usually free to leave your company at any time.

    At least they have cable modem in HCMC even though it can be a bit unreliable. Exepect a power outage once a month too. Expect theft. I have had motorbikes stolen, cell phones stolen, etc.

    And the corruption...oh my god. We paid off everyone and were solicited for payoffs by everyone. My coworker overstayed his visa by a day. They wouldn't let him out of the country! The soldier/immigrations officer/policeman (all the same there) took him into a side room and basically asked him how much money he had on him. $60 worth of the local currency (Vietnamese Dong) and he was free to go. We paid $400 in cash to the customs guy to get them to let our IP phones into the country when the official tax on them was supposed to have been much higher.

    And on top of it all they are still very much communist and most are quite brainwashed. It is in a similar vein to North Korea only not as extreme. Americans are lazy people who cheat on their wives and fuck in the streets and cannot be trusted. They do not know about nuclear weapons, don't know the cold war, don't really know anything about the world context in which the Vietnam War happened. Everyone treated me very nicely of course. No anti-Americanism at all as long as someone stood to gain money from me and I was paying in cash. They are always very friendly to tourists and smiling and respectful. Just don't try to date anyone there or talk politics with anyone as you will surely offend. If you hear someone say something about history which you know is patently false just smile and nod.

    Suffice it to say the project did not go well. Doomed from the start. At least I had the good sense to bail months before the shit really hit the fan and the whole operation collapsed.

    Vietnam is a fun place to visit and I recommend it. I will be going back there again in a couple of weeks for Christmas. I just won't be doing business there again until the business culture changes dramatically.
  • by karmachild ( 1036700 ) on Tuesday December 12, 2006 @12:14AM (#17203830)

    For the past two years, I have been an independent contractor for Oracle Egypt, Xceed (the largest call center in the middle east) and some other firms.

    Yes, these "professionals" *think* that they are worth what their contemporaries in the U.$ are getting, but the plain truth is that they are not.

    They are not productive. By that I mean they lack consistency, attention to detail, and follow-through. This includes employees at all levels, from administration to management.

    Process, an abused word in the American work-place is a "newer" term in many countries.

    Many of us underestimate the cultural expectation of service and professionalism in the U.$. that we are assimilated into long before we begin professional work.

    This attitude and perspective is MISSING in the "professional approach" among professional in developing markets. Most of them think that their technical skills/development merit their position and pay, which I have explained and demonstrated to them will not be enough to KEEP the job.

    Sadly, 9 out of 10 professionals at Oracle Egypt want to be told what to do. They resent having to explain themselves, sell their solutions to customers (explain what they hell they propose and why the customer should implement their solution), and especially lack the communication skills to build customer rapport.

    The unstructured and self-managed work environment is a challenge to them, and they wind-up in a corner asking each other what to do, and their managers form India offer/set no better examples and are usually in the corner with them.

    I keep thinking, one day -a divorced, childless pre-menopausal white woman is gonna ride-down on y'alls asses.

    European customers of Oracle are HAVING FITS about the level of service professionalism that they are receiving.

    They complain about the "non-technical" work expectations, the (life-long) continuous learning expectations and especially having to do such on their own time.

    Microsoft call centers are popping-up all over developing markets because it is a tool used by Microsoft to stem the use of non-Microsoft "solutions" in developing markets.

    For example, here in Egypt Microsoft is the preferred vendor to the Egyptian government, Xceed (contact center) is owned by Telecom Egypt and the Egyptian Ministry of Information and Telecommunications. The work environment is what I can only imagine what a working in prison to be.

    Egypt is a low-risk environment, and most of these professionals refuse to even learn about open source tools and technologies. For now, there is no threat of an Egyptian solution-provider in this market competing AGAINST Orace, M$, etc.

    From what I have observed, all this 'outsourcing' is doing is helping to build a middle-class in developing markets so that there are customers with the income to consume western goods/services.

    It's working, too. These markets have bodies, but not necessarily brains.

    Oracle Egypt has pretty much aggregated all of the professionals in the region who are not working for their business partners and customers and is WAREHOUSING them to keep them form Microsoft -who incidentally was only doing product activation for Europe and is now recruiting for DB professionals -most of whom already work for Oracle.

    Now, M$ is poaching and driving the cost of "labor" up. These "professionals" will jump ship for more undeserved money, IMNSHO.

    BTW: Oracle-Egypt's pay scale as far as I can be nebby enough to find out ranges from $500 p/mo for "Customer Care" to $1000-$2,000 p/mo. for Oracle Analysts. Xceed pays from $150-200 p/mo. for "call center" employees. Administrative staff make from $300-500 p/mo.

    Until they start using the magic word -"FIRRREEEE-DUH," no change is gonna come. They just don't have to.
  • by jotaeleemeese ( 303437 ) on Tuesday December 12, 2006 @12:07PM (#17209014) Homepage Journal
    We can disscuss economics without being specialists.

    The post to which you replied is clearly describing instersection of curves and how each curve compares against each other once the intersection takes place.

    The rampant anti-intellectualism in many western societies has to do with the hyperactive use of jargon in many fields of expertise.

    To everybody sane and that knows a minimum of economics, the statemnt was clear and simple, qualities some people that have learnt a bit more than most in some fields should take as their own.
  • by Travoltus ( 110240 ) on Tuesday December 12, 2006 @12:55PM (#17209824) Journal
    Ayup, then all these free trade apologists will find it's too late to say "oops" when China starts doing stuff like, oh say, embargoing countries like the Arab league did with oil in the 1970s.
  • by Tablizer ( 95088 ) on Thursday December 14, 2006 @02:03AM (#17233166) Journal
    Add up all the savings you are making in cheap stuff produced elsewhere and you quickly will realize that if it was made in the US you could not afford it.

    Bull. Most ours bills are related to housing, medical, utilities, and insurance. Cars and Walmart trinkets are a small part.

What this country needs is a good five cent ANYTHING!