Student Projects:Outsourcing PPF:Topic Discussion

Kiran's email

This is Kiran's original email. (David Dorwin has added some comments in bold.)

Outsourcing in IT predated by similar movement in manufacturing

1. Companies that didn't outsource then no longer exist - Verify with examples.
2. Study the possible causes that led to this kind of outsourcing and contrast with IT outsourcing.

Causes of IT outsourcing

1. Globalisation
2. WTO??
3. Fast communication
4. Fast transport (3 and 4 may be good for other reasons, too)
5. Suitable political climate - no major Cold War-like polarisation of world -> free trade (and outsourcing) all over
6. Strong dollar leads to a very favourable exchange rate - Eg:$1 = 46 rupees. (So, Oracle can afford to pay midlevel employees with 2 years experience a slary of 600000 rupees ie $12000 approx. without affecting their bottomline even marginally. The salary, on the other hand, is AMAZING by Indian standars and such salaries can facilitate a lavish lifestyle anywhere in India).
7. Volume businesses like call centers and manufacturing are better (economically speaking,of course) handled through outsourcing (any historical precedent here, Stuart?)

Case against outsourcing (US viewpoint)

1. Moral obligation to citizens and employees who helped build the company
2. Outsourcing may lead to loss of jobs, technical anc commercial advantage
3. Reverse brain drain in that good jobs may soon move overseas taking talent with them
4. Quality and control concerns about the businesses being outsourced
5. Language barrier and transitional costs may be too high

Case against outsourcing(Indian/outsourcee's viewpoint)

1. High-paying jobs,no doubt, but not really satisfying work
2. Odd hours + not much scope for advancement in industry
3. No significant improvement in country's skilled manpower and techno. advantage

Some issues to be raised and, if possible, answered

1. With the new free market economy and WTO, is outsourcing inevitable?
2. If not, will companies that don't outsource remain competitive? (Some historical studies of the manufacturing outsourcing phenom might be useful to draw parallels here)
3. The first few cos. that outsourced to India faced a lot of problems - no processes of quality,management,development but once everything was set up, its now not even a question of If they'll outsource, but how much. [ Eg:GE] Examine how policy initiatives might've helped foster this enthusiasm abroad.
4. How far will/can IT outsourcing go? Can products for Ameircan markets be designed in India? Or is outsourcing destined to remain within the fields of supoort and peripheral development?

Other issues

1. Graphs showing savings with/without outsourcing on companies' bottomlines.
2. How much of the advantage of outsourcing is due to policy intiatives rather than real benefits?
3. David Dorwin Address the claims this political season that there are tax loopholes that encourage outsourcing. This is definitely a "policy" issue.
4. Kiran Kalyan i definitely don't know abt tax breaks here in the us for outsourcing but in India, as i noted earlier, a tax holiday has been declared for all software firms till 2010 making the outsourcing boom a smppther experience. I can find out more specifi details in a week or so.

Scope

Policy

David Dorwin Do we have to focus on "policy" or can we focus on an IT issue (outsourcing)? It seems that Kiran's list doesn't focus on public policy issues. Do we need to focus more on policy for our “balanced policy brief”?

Off-shoring, visas, etc.

David Dorwin Do we really want to limit the paper to outsourcing? Do we want to include off-shoring (moving operations oversees within the same company)? That's a very similar topic, but it's not technically "outsourcing". "Outsourcing" can also occur to other companies within the US. In addition, the topic of foreign workers in the US (H1-B visas, etc.) is a big issue. Do we want to discuss/address it, avoid it, or only mention it in passing? The visas would certainly be considered a "policy" issue.

Kiran Kalyan good idea,David ,about connecting "Outsourcing" with "offshoring" . in my opinion, at least, as i noted in my list, globalisation and the tendency to offshore branches of companies led to the phenomenon of outsourcing. (a thought here: is "outsourcing" just "offshoring" on a much larger scale? what is the real difference, if any? maybe we can examine some issues here. is there historical precedent for such metamorphoses in other fields - say tea/coffee production (British Empire vs. China) ?)

Regarding the h1b visas issue is a pet concern of Diwaker and ,to be honest, all of us Indians students here in the US who want to work here for a while - so i do think more than a mere mention is caled for.