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A handful of strong reasons why outsourcing is no surprise. And I think people here in this part of the world are quite ignorant of these reasons and they continue to remain in the dark.
1. Revenue. Outsourcing/offshoring seeks to advance revenue and EPS every quarter for obvious reasons, and any move backward will put earnings behind the same quarter last year. That's a disaster, happy ground for shorts and you see a stock devaluation of 15% and more.
2. These companies are not American, though they were started here. Clearly they are multinational today and they have the right to get their money made however they want. For example, the iPad is not even manufactured in America 20%. Yet American consumers reward Apple with long queues.
3. Non-American workers tend to work long hours and are prone to sacrificing leisure and weekend time for work. It's in their work culture to put the job above everything else. So, no random vacations, time offs and you can boldly bet on your asses that they will be in the office in rain, tornadoes, sleet and even acid rain.
4. They are docile and subservient and the employers get to dictate how much they wanna pay them and how long, coz it's simply ingrained in their mindsets to take orders. And they are willing to work late and weekends without extra money. So, effectively, the guy works 50 hours a week and the employer still gets to pay him for 40 hours.
5. Added caveat. These people are sincere at work, though the quality can be a little bad sometimes or more often times. But given the above 4 points, this thing can be overlooked But wait, some Chinese and Indian brains are absolute gems. Such kind of raw and stunning talent is difficult to find in such huge numbers elsewhere. Their only negative can be poor English, which is also getting better in the coming years.
6. The cream of the world's talent today is in China and India. And this is the case in American colleges too, where these faces are very common in the professional education institutions. The local population places more emphasis on Football, American Idol and picking less stressful education domains, like history.
7. The greedy institutions that exist in the USA, aka the educational institutions, which place 50,000 USD debt on every college graduating kid which makes it impossible for them to take a lower wage like their peers in foreign countries.
8. The companies get to violate labour and working condition laws in foreign countries and there won't be much fuss there coz the countries are so much more thankful for the FDI (Foreign direct investment) which seeks to bloat their country's exchange traded funds and other indices. In broad bizspeek, this is called being "business friendly"
So, there are a lot more reasons and I don't wish to write a novel here and bore you folks. But I have been a former IT industry insider and I know how things work for I have had access to the cross section of the industry, good things and bad things.
6. The cream of the world's talent today is in China and India.
I disagree with this. The volume of the world's talent is in China and India, but the overwhelming majority of innovation that drives the industry comes from Americans and Europeans.
I've worked with more than my share of Chinese and Indians who had more advanced education than could fit on a one page resume but turned out to be mediocre performers. Part of the problem is both China and India have standardized exam driven education systems that don't foster reward or advancement of independent or creative thought.
"It doesn't always make sense to keep permanent staff on payroll"
Yes I agree, but it stinks that many temp agencies are borderline predatory and temps and contract help are treated like second class. I have temped many times and have found this to be the case at times. I think many people would be OK with the temp position thing otherwise. I liked doing it, did not like the fact that I never knew when the gig would end. Every day could have been my last day.... I was never signed on for a specific contracted amount of time, which would have been OK. someone who temps for a living should never take out any long-term loans.
I only qualified for benefits once I worked a certain amount of hours with that temp agency.
"It doesn't always make sense to keep permanent staff on payroll"
Yes I agree, but it stinks that many temp agencies are borderline predatory and temps and contract help are treated like second class. I have temped many times and have found this to be the case at times. I think many people would be OK with the temp position thing otherwise. I liked doing it, did not like the fact that I never knew when the gig would end. Every day could have been my last day.... I was never signed on for a specific contracted amount of time, which would have been OK. someone who temps for a living should never take out any long-term loans.
I only qualified for benefits once I worked a certain amount of hours with that temp agency.
You might not get benefits, but you get paid more hourly to make up for it. Like a software engineer might only make $100K (w/ benefits) if they were full time, but would get $100/hr without benefits if they were contracted. So it evens out.
No. Jobs are outsourced b/c labor overseas is cheaper. And the businesses that outsource love to blame academia for why they outsource so that busiiness doesn't look like the unpatriotic bad guy. Businesses often go overseas for tax breaks, cheap labor, materials, etc. and they always reason that they "have" to in order to stay afloat.
But it's sort of ridiculous to say that U.S. college graduates are not "qualified" for a position as a customer service rep or telemarketer or even "techie"; there are plenty of qualified people for those positions, they just demand a higher pay check b/c they live in a country with a higher cost of living. So, by going overseas, the company can pocket the larger difference between labor and product cost. The result is usually a lower-costing product but less jobs and job stability for U.S. citizens, which is why the working class in the U.S. has become a land of consumers living off of credit.
And this is why my bachelors in computer science is useless, yet its all over TV and the internet that college grads can find work with a college diploma and no one does anything to stop it because it puts money in the pockets of bankers and institutions at the expense of the student and/or the parents who pay for it.
Technology continues to improve and grow by leaps & bounds every year, so outsourcing clearly doesn't hinder progress in any way.
It's the same outdated mentality in manufacturing that says China is only used to make cheap products without acknowledging China also makes many high quality expensive products from Designer clothing to Nike sneakers to Apple computers.
I remember a TV episode where someone was comparing the quality of a cheap bootlegged Nike to an expensive "original" Nike showing us how to tell the difference in craftmanship... in the end, both were made in China.
When we see a disproportionate number of Asians (foreign & domestic) in top American universities and even Asians winning English spelling bees every year, it's about time we let go of our superior than thou attitudes and face reality.
We have to study and work harder than ever to compete.
Innovation in 3rd world countries will inevitably improve as they technically become 1st world.
There is no reason to re-invent the wheel so their priorities is to "catch up" first.
Historically, China has been extremely innovative, so you don't judge an entire population's future potential because it fell behind in a few hundred years when they led the world for a few thousands of years.
While I agree with most, as it's the lower labor costs overseas, there is also a lack of creative technical people here, forcing Microsoft to bring in a large percentage of their employees from other countries. We live in an area that is popular with MS employees and many came here from India to accept positions there, others from various european countries.
Google and Facebook seem to be doing just fine, but they also actually pay their engineers 6 figures.
Outsourcing has more to do with employers not understanding the reality of the market and trying to depress the cost of skilled labor. The people that are actually good technically move here to get paid fair rates.
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But wait, some Chinese and Indian brains are absolute gems. Such kind of raw and stunning talent is difficult to find in such huge numbers elsewhere. Their only negative can be poor English, which is also getting better in the coming years.
