Let’s say that Indians hated the US and wanted to destroy our economy by causing US companies to outsource everything to India. Let’s say that Indians could (and would) perform all business services at half the cost. All of them. Everything. And since we’re imagining things, let’s imagine that it takes no time to set up a business. So Indians immediately put half the US business service workers out of work. Boo hoo for them! Waaaahhhhh! But we’re imagining that it takes no time to set up a business. Companies in America are saving 50% on their business services. They’re flush with cash. They immediately set up new services and hire back the US workers to do different things.

Ultimately with this set of assumptions, every job that CAN be done by Indians WILL be done by Indians, and yet there will still be plenty of money to hire Americans in America to do the jobs Indians can’t do.

No worries, mate.

Speaking of setting up services, how about “Call A Doc”, where somebody in the west gets to call up an Indian doctor who’s moonlighting, and actually talk to an experienced doctor at length for a reasonable price. When a doc is available, he signs in, and becomes part of the pool of available docs. When she needs to stop taking calls, she logs out. Could even make a USB device which takes patient vitals: pulse, temperature, and blood pressure. Patient history is available.

Best quote in the whole piece for me. I don’t think anyone has to apologize or justify the issue. Outsourcing or job creation in countries in India are well within the context of capitalism and globalization.

The prevailing wisdom on skilled work being shifted abroad - outsourced - is that it is anecdotally alarming but not really a big deal economically. Sure, the thinking goes, some software engineers and others are losing their jobs to low-cost workers in India, but there is always churning in the dynamic American job market of 130 million people. It’s what makes the United States economy competitive.

Last Monday, at a dinner at the Waldorf-Astoria in New York, Mark R. Anderson, editor of The Strategic News Service, a technology newsletter, sounded like a traitor to his class. He was speaking to a group of technology executives and venture capitalists, fans of Mr. Anderson but also champions of outsourcing.

The current research on outsourcing, Mr. Anderson said, tends to be static and understates the trend. “The actual outflow of jobs is huge and growing,” Mr. Anderson said. “I call this the C.E.O.’s dirty little secret.

“When people really find out what’s happening,” he added, “our view of India will change dramatically.” Steve Lohr
———-

Prashant,
Can we do a Type-M argument for a change - Atanu favors Type-M over Type-C for the real world, & I do as well.
So, What might be the motivation of a hypothetical Prashant to relocate from USA to India & head an outsourcing firm ? Lets forget about the type-C issues ie. increased prosperity for Indian BPO employees, improving infrastructure in metros etc. Just the type-M issue. What is the motivation ? If outsourcing were really much ado about nothing, a noise in the signal, a nuisance value, then your average technocrat would just stay put in the US & wait for the signal to clear up. If it is that insignificant, neither would Nasscom tout the large number of expats who returned to India from the US as a positive for India, nor would Lou Dobbs tout the same number as a negative sign of impending doom, that this many US Green Card Holders & Citizens are voluntarily walking away from the US back to India to set up companies because they are PIO. If a PIO finds India more attractive than the US despite having a green card or a citizenship, and there are a million such PIOs, are all these million people completely foolish ? There are a million idiots mistaking a mirage in the desert for an oasis ?? I just find that incredible hard to believe.

“Displaced” means that when the West outsources a package of services to India, then that particular part of the value chain moves to india i.e. someone is no longer earning that income in the West. Second, since cost arbitrage (at 30-40%) is the primary motive involved with outsourcing, the value of the outsourcing should be grossed up to arrive at the true income loss to the West. Finally, income has to be converted to GDP to avoid comparing apples with oranges.

Sanjay

Sanjay

“Nor is India’s services outsourcing limited to IT with total services exports touching $51.3 billion in ‘05. Assuming a cost arbitrage of 30% means that India has displaced almost $170 billion in white collar earnings in the West.”

Er, what exactly do you mean by “displaced”, Sanjay?

Sanjay - Since income is related to GDP by a factor of 2-2.5, the total GDP impact is $350-$400 billion. More than the GDP of Switzerland or Saudi Arabia.

Not sure if I understand your calculation or the point you’re trying to make… can you pls explain

Nor is India’s services outsourcing limited to IT with total services exports touching $51.3 billion in ‘05. Assuming a cost arbitrage of 30% means that India has displaced almost $170 billion in white collar earnings in the West. Since income is related to GDP by a factor of 2-2.5, the total GDP impact is $350-$400 billion. More than the GDP of Switzerland or Saudi Arabia.

Sanjay

The ‘Package’ was offered site wide for ‘Services’ and enforced for a few individuals. Thereafter we had a work ‘buddy’ from India, assisting us. Now before you get all defensive, the Indians made up very few of the ‘work buddies’. Most of our work buddies were from South Africa, so may that whole operations for ‘Royal Sun Alliance’, ‘Royal Bank of Scotland’, ‘LLoyds TSB’ are now run from South Africa.

When we asked why south africa, the reply we got was unexpected.

Indian companies have been inflating prices at 15% per annum, and the lack of skilled (Yes skilled, not just read a book ‘There have been terrible problems with the can-do attitude’) I.T workers leading to inter-company attrition rates of close to 30% has meant that South Africa which IBM has been working with for the last few years now has a core of certified Engineers ready to take the work.

Most shocking of all, South Africans are cheaper than Indians, and there is apparently not the same stigma with outsourcing to South Africa, as there is with Outsourcing to India.

So there you have it, India has always played the ‘low cost’ game, and this is a game in which there are no winners. Unfortunateley Outsourcing will still go on, and yes everyone will blame it on India, apart of course from those of us who have been there and seen where it is going.