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back to article End in sight for IT jobs outsourcing massacre

The offshoring of IT work to developing countries has been very popular with accountants looking to cut costs, but the limits are being reached of what jobs can conceivably be sent overseas. Research by The Hackett Group estimates that of the 8.2 million business service jobs available in the US and Europe in 2002, only around 4 …

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Anonymous Coward

maybe if they

Left the jobs here, the knock on effects of the jobs would be a better economy. People who earn money spend it.

Instead to save a a few pence they move the jobs abroad. We lose out in tax revenue, jobs, with a Hugh knock on effect, we lose skills.

What clever accountants there are.

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Anonymous Coward

Re: maybe if they

Management & Accountants are short-termist at best. They see the upfront cost of outsourcing and go "Kerching" - Savings. They are not recognising what actually happens.

The management where i work like this and perpetuate lies to justify the reasons.

1 - the skills are not in the UK to do this work - er we managed fine for the last 30 years and there wont be any skills left if you keep firing them all

2 - The quality is good - Absolute crap. The developers cut-n-paste existing code and do the bare minimum to satisfy the requirements. no quality at all. If it weren;t for the remainder of the on shore staff correcting the sloppy code we would have killed our buisness by now (soon there wont be any left to do that so it; be fun to see)

3 - They are protecting staff from future redundancy, What by firing them now?

Every single outsourced function has resulted in a worse, but cheaper (at least on paper) service. What happens is the remaining onshore staff spend more time and therefore cost on correcting these deficiencies. Making them look even more expensive and ripe for further offshoring.

As for skills and quality, maybe some of the offshoring partners can provide that - but we haven;t signed up to those. EG a database issue - very poor poerformance suddenly rose it;s head, our DBA service is now offshored and so a ticket was raised. After three days of investigation (still within the negotiated SLA!?!) nothing had improved. "Investigations were ongoing". One of the onshore guys decided to google it, found a possible solution and mail it to them. Lo and behold the error was fixed. Our guy would have done it himself but his access was removed as part of offshoring.

How is that good value for money?

Anonymous coward as I still want to hold onto my job for as long as it is in the UK

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Anonymous Coward

Re: maybe if they

That is one option. There is another.

The logic in the article assumes offshoring jobs - it does not assume offshoring whole chunks of companies along with the tax breaks from non-repatriated income.

IMO classic offshoring as such has stopped long ago. We are already in the time when the CIO and all of his deputies are being given marching orders (or a pink slip) to move to the new business unit offshore. IT business unit in India, Manufacturing BU in China, Accounting in Prague a lone CEO with some marketing in a large corner office in US and voila - here is your modern globalized corporation. Want examples? Do not think they are necessary - just look around.

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Short termism

The short-termism shown by management and accountants only reflects the pressure from shareholders demanding year-by-year dividends and EPS growth. Were the owners of a company to think beyond the next 4 quarters and invest for such, they'd find themselves in a much better position in their home markets.

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Re: maybe if they

...and all these unemployed guys aren't going to be buying the stuff that was once made in locally - cos the dole cheque doesn't stretch that far.

The west is well along the accelerating spiral around the crapper .

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Anonymous Coward

Re: maybe if they

we recently outsourced app development to a well known Indian company. During the outsourcing process serious mistakes were made:

1. The CIO and senior managers, assumed that we would get the same level of service as the reference customers we spoke to. Wrong! the reference customers were much bigger companies than us and much more valuable as customers

2. level and quantity of skilled technical resources available from the supplier were pretty much taken on face value. Again, probably due to our size the resources, even if available, have not been put on to our account in several key areas.

Our applications were mainly bespoke complex Oracle client server apps. They were poorly documented (how unusual) and often depended on key developers who had been with the company for years. these were mostly made redundant and have been replaced with on-shore teams from India backed up by an offshore technical development team in India (overall numbers considerably higher than before). The onshore team members rotate (BTW how do they get visas, they aren't doing jobs that cannot be filled by local resources?). Overall they have next to no business knowledge, a superficial understanding of the applications and frankly, limited technical ability. To such an extent that we have had to introduce a technical design and QA role in-house which regularly picks up howling errors and lack of compliance to standards.

End result: Productivity down, probably around 80% in the first year, leading to a slowdown in delivery to the business for which we, the hapless remnants of a once highly competent IT dept, get the blame. Quality as measured by testing defects and production incidents has gone through the floor. Additionally, the lure offered by the supplier of access to Innovation and Industrial technical 'thought leadership' has proved to be a chimaera. So is the decision being reconsidered? Of course not. Although we have delivered crap we have delivered it more cheaply. the CIO and his senior managers, and the CEO have basically staked their reputations on this as a brilliant profit enhancing wheeze, and have got far too much to lose. Time for a new job, methinks, Oh I forgot there aren't any.

Anonymous for obvious reasons

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Re: maybe if they

seems a bit unfair on Hugh??

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Anonymous Coward

Re: maybe if they - Time for a new job, methinks

Retrain in either Security or Quality Management .. you'll have a long career working with the offshore guys.

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N2
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Re: maybe if they

But all accountants know the cost of everything & the value of nothing, they only see the bottom line.

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Re: maybe if they

Not to mention that the so-called 'emerging markets' aren't (yet) filled with enough 'consumers' to replace revenue from western consumerism. Only a small fraction of chinese ppl work in these factories and their income isn't high enough (yet) to purchase the products they make.

It's a bubble and it will burst!

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Flame

A largely English-speaking population???

Obviously written by someone who's never called a tech support line in the last 5-10 years!!! I would not call what what is typically spoken on the other end of a support phone line "English".

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Re: A largely English-speaking population???

Compared to China, yes.

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Anonymous Coward

an example.....

Claiming back mis sold payment protection on a loan, one particular UK bank is using an off shore call centre where taking even the basic details is extremely difficult.

It is not that the person cannot speak English, they can, but one problem is the heavy accented English.

The other is that the delicate nuances in our language, the way we say things, not the language we speak is so different from the stiff text book stuff they have learned.

Please if you are Indian don't introduce yourself as Bob, or Roy or Mike or Jim, I find that insulting and it is demeaning for you.

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Re: an example.....

I dont get your example, why is a bank claiming back mis-sold ppi - arnt they the ones getting claimed from?

If I was the one doing the claiming, one of my priorities when choosing which shifty scumbag ambulance chasing lawyer to use would be to get one capable of taking my name on the first attempt!

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Flame

Re: A largely English-speaking population???

Although listening to the reports from the 2008 Olympics where they were interviewing Chinese school children (8 - 12 yrs ?) on BBC R4 they should be wiping the floor with Indian call centres any time soon (also comprehension of spoken English was pretty good - try that when someone won't break a script to understand what you are saying !)

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Alert

Re: PPI Reclamation

One does not need a lawyer in order to carry out said process.

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Yag
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Trollface

Re: A largely English-speaking population???

Perhaps it should be understood as "A population speaking something that may be largely called English"

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Anonymous Coward

Re: A largely English-speaking population???

> Perhaps it should be understood as "A population speaking something that may be largely called English"

What - we're offshoring to America now?

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Re: an example.....

Spot on. The Indians generally speak perfect English, but their accents are incredibly hard to follow sometimes. English for them has also evolved in a completely different way from us since we left 65 years ago.

Indian IT staff are also pretty badly treated. That guy you think is terrible is probably an expert in Exchange or SQL but they've been told by management to be a Unix admin. They don't have a culture where they say "No, I don't have those skills". They'll just do it anyway, do a crap job, and pretend it's done properly, or try and hide somewhere. Saying no just doesn't happen. Not just in IT either. It's just a different culture and one which is quite incompatible with ours, despite the common language.

If I were an Indian I'd rather work in government or the railways. Much more comfortable places to work,

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Anonymous Coward

the bank using

Call centre to process claims.

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Flame

".....would face "a PR nightmare" and risk losing staff who don't trust their employers. "

Would face a PR nightmare? They would only then experience a breakdown in trust between them and their employers? I think somebody should start talking to the poor sods presently working at the coalface. They might then discover that this lack of trust and a desire to get the hell out it it is a widespread condition today, never mind at some stage in the future. Costing cutting? That's simply a question of who gets cut. Doing things smarter, being genuinely innovative to grow a business and improve profitability - that is way to much like intellectual heavy lifting for The Directorati. Attempting to take that route might expose their total inadequacy, people might see that the managerial emperor is mother naked.

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Devil

Henry Ford

When Henry Ford introduced the $5/day pay rate for his employees nearly a century ago, the accountants and Wall Street wizards were apoplectic at the horrid waste of money. What the crazy old fox did was create an almost-assured market for his products ensuring growth in good times and survival in bad times.

Too bad businesses today (including Henry's company) have forgotten that lesson.

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Happy

Re: Henry Ford

As a matter of fact, the fairly new mgmt of Ford Motors 'woke up and smelled the coffee' about five years ago and 1) started to create quality products; 2) stopped trying to squeeze employees for the bottom line; and 3) declined to screw their vendors (did NOT file for bankruptcy). As a result, the firm actually shot to profitability, scooped up market share, won customer & employee loyalty, produced quality products and paid for some of my major remodeling projects when I sold some of those $2 shares of stock ( I bought in '09). For the record, I am VERY happy with the Ford Ranger pickup truck I bought last year -- first Ford I have owned in 40 years. :-)

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Bronze badge

Re: Henry Ford

But I keep on hearing it was the unions that caused the down fall of the automotive industry. Them being a greedy lot . What's that yo say ? i was not the unions but pis poor management that did not listen to the customers ?

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Anonymous Coward

Re: Henry Ford

When I worked for an American motor company it was widely held that union-related costs took over $1,000 profit out of each vehicle sold compared to what the Japanese competition could make... and note that's Japanese manufacturers, not some cheap-ass sweatshop. $1,000 a unit in an industry where coming up with a way to save $1 a unit makes you a hero, is a lot.

Now don't get me wrong, I'm pro-union and pro-workers'-rights, but some of the stuff the US unions had negotiated was plain ridiculous.

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Holmes

Re: Henry Ford

Ah now! That sounds more like the story of BMC to me. What we had there was a management made up of wet-behind-the-ears business graduates doing the "I'm the big boss" bit and screwing the workers. The workers assumed the other extreme, driving their union to strike at the drop of a hat, all against a historic backdrop of corporate and governmental mismanagement. The result? Well, bits of BMC still haunt various niches of the industry but all under the auspices of other companies, but to all intents and purposes, BMC (or Leyland, Rover or whatever else it called itself over the years since it was first pulled, kicking and screaming, into being) it is gone.

The moral of that story, and one that Ford seems to have taken to heart, is that it takes two sides to make an argument.

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Facepalm

Re: Henry Ford

My company did some work for Ford, so I spent a couple of years going backwards and forwards between the UK and Detroit. To get me a PC so I could do some work, we had to wait until everyone had gone home and then sneak it in. Moving and installing PCs was a unionised job, and doing a union member's job would have involved disciplinary action against the Ford guys I was working with. Never mind that it'd take a fortnight for them to do it, by which time I'd be back in Blighty.

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Re: Henry Ford

AC@08:53

Not only that, but a lot of the costs are for retirees who, however you slice it, are not producing today and are not helping the bottom line.

Back in 2007 the UAW and GM were negotiating a new contract. 48% of the UAW members in Indiana were retired AND voted on the contract. So you can guess how much retiree benefits got reduced.

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Anonymous Coward

Re: "Ford ... quality products"

LOL, wouldn't ever put those two concepts in the same sentence.

Henry Ford was the pioneer of mass production; also known as herald for the death of quality. His process championed the reduction of products to the cheapest possible way of making them.

Many automobile manufacturers from the past until today copy that ethos, sacrificing the user experience in favour of saving minuscule amounts at all stages of the process from procurement through to finishing.

This is the attitude which has led to the "throw-away" consumerist culture that we have today, which therefore makes it difficult in general to buy products that are not an utter shambles. It's worth mentioning the considerable environmental damage this contributes to, as well.

I would recommend the reading of "Zen and the Art of Motorcycle Maintenance" and "Brave New World" for those who might not identify with the above observations.

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Devil

Re: Henry Ford

1) Clearly you missed the point: well-paid employees purchase the company's products assuring a built-in market. Slashing pay and off-shoring work does not achieve said end.

2) As a reitiree of said company (30-and-out) and former IT supervisor who maintains contact with several still-active colleagues, I can assure you the current management is no better than previous management in recognizing that point although the stockholders are doing much better.

*Salaried* retirees and employees are continuing to receive de facto pay cuts through rapidly-increasing "co-pays" for benefits leaving less and less available funds with which to purchase new vehicles every very few years.

IT in particular employs just a small fraction of the people it did just a few years ago. Most IT jobs have been outsourced or off-shored and those who remain mostly write specifications and coordinate the work of the "English-speaking" off-shored sweatshops. Of course, most of the toadies and sycophants remain.

Even in the union-represented ranks, new-hires only receive half the pay and few of benefits of their higher-seniority co-workers.

Morale among the "worker bees" (as opposed to upper management and institutional stockholders) has never been lower in the 40+ years since I started there.

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Anonymous Coward

Re: Henry Ford

Well enjoy that Ranger cos they aren't making it anymore, in fact Ford shut down their plant in St. Paul... not so great after all are they?

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Offshoring works if your general concern is finding the best talent. I don't mind competing against the world on skills. The problem is off shoring isn't about finding the best. It's about saving the most money. Therefore a lot of off shoring is shit. I've seen it in previous employers.

The best way to avoid off shoring is to work for start-ups and smaller companies rather than large companies full of unskilled MBAs.

What would also help is if companies were held responsible for poor software. They're rarely not. What is the punishment for producing shit? You probably won't get taken to court, consumers find it hard enough to get their money back on software and chances are they'll buy it anyway because patents have helped kill competiton.

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Anonymous Coward

Completely agree with the parent. I'm an offshore worker (in the UK but everyone else is in the US) for a startup. That only happened because I was the right person for the job I do.

Off-shoring works both ways.

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Regardless if offshoring works or not...

"Offshoring works... I don't mind competing against the world on skills"

However, if those with the skills/knowhow are getting laid off and leave the industry, then the overall skill level will go down, knowhow will be lost and ultimately there won't be enough of 'you' to compete.

How could we be world class production engineering experts if we don't make anything? Even if you are an expert who can compete - if you aren't in the game then your its a matter of time before you get overtaken - even if only by virtue of the sheer numbers of competitors.

Sure thre will be some jobs left behind, like window washers, but who will be able to afford them?

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WTF?

@toadwarrior

"Offshoring works if your general concern is finding the best talent. I don't mind competing against the world on skills. "

Except you're not - you're competing against the world on cost of your salary. If you reckon you can live on the 5 quid a day they earn in china or india then good luck!

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Anonymous Coward

I agree totally. We may be expensive but we get the job done. If you can speak to the business, understand technology and are presentable then you really don't have anything to worry about.

A case in point:

We recently asked an off-shore team-member to add 3 columns to a grid in one of our applications. After 7 days - and hand-holding - we got back broken code. We then spent 3 hours doing the job ourselves. This is not a one-off issue; this is about average of my experience of working with off-shore development teams.

So yes, off-shore developers are maybe between 2 and 5 times cheaper than us. I'd love to see some charts showing comparative work-rates against cost.

And as to the "highly skilled" off-shore developers argument, I just don't buy it. The best ones are already earning lots in the US (because they can). Those that aren't there are in the UK, then Dubai and Singapore.

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Meh

"We recently asked an off-shore team-member to add 3 columns to a grid in one of our applications. After 7 days - and hand-holding - we got back broken code. We then spent 3 hours doing the job ourselves. This is not a one-off issue; this is about average of my experience of working with off-shore development teams."

This is where it is time to start collecting evidence. *track* the faults, the delays and most of all the additional *costs* of fixing their faults.

You only fight this ground on the benefits of in-sourcing and the fact that it is (when *everything* is accounted for) cheaper.

Their outsourcer is 1/3 the hourly rate of a local specialist. Whoopee. When they spend 3x the time to still *fail* to carry out the task they are not.

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Happy

I'm an off-shored worker. Oh yes. I'm part of a trans-Atlantic software development team :)

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Anonymous Coward

Off-shoring?

The last two banks I have worked for (including where I am now), put much of the IT work "offshore". This seems to mean, importing the Indian workers here, in large numbers, theoretically for limited periods of one or two years each, practically many staying for several years and the better ones getting residence permits and staying, a very few as permanent staff. (I live in a financially successful, middle European country).

The jobs covered now include programming, architects and endless IT admin. types, managing the paperwork associated with the managêment systems their company sold to us and so on.

I gather too, that even for those few really "offshore", the total cost can be more than employing a local worker (local, in this context, I use to include anywhere in Europe). I am sure that paying the consultancy company supplying the staff, the expenses of getting them here, tickets for home leave, accommodation, visa costs, lawyers and HR to manage the visa process, health insurance (directly or through their employer), loss of skills from local resources and so on must add up to a tidy bill. Added to all this, of course, is the cost of supervision, acclimatising them to the local culture, the local working place, systems and customs.

It is also noticeable that the sheer numbers of such workers seem to be greater than the former numbers of local employees for the same job; then of course their is the lack of continuity as well as variable skill, knowledge and experience levels. Of course, some of them are very good; a lot are very "average"; most are decent people.

Language: actually, their spoken English is often better than my Americnised countrymen's lingo; their writing skills are not as good, though again my under-educated, increasingly-Americanised compatriots are going down hill fast.

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Anonymous Coward

Oops: proof reading

Change "their is the lack" to "there is the lack". Looks as if my language is going down hill too - away too long.

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Silver badge

Re: Off-shoring?

Also in the UK we have the scandal of "intra company transfers", ie. large coorporations importing their Indian workers to the uk (but still paying them Indian wages - kerching!!) to replace Uk staff. Regulations were recently tightened but are half-heatedly enforced, as with many laws governing large companies, so tha scandal continues.

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Anonymous Coward

Re: Off-shoring?

I too have experienced something like that, made redundant and told that part of our redundancy payment is dependant on the ‘successful handover’ of our work to some Indians who are expected to learn everything you have learned in the past 15 years in just 3 weeks.

I have seen a case where a team of 8 very experienced mainframe programmers, each of them with 15-30 years experience, a total of 216 years experience between them, were expected to handover their project to a team of 5 Indian programmers who had just graduated from college and had little or no experience of mainframes. 2 of them took up jobs with a different company within 1 month of returning to India.

That’s how off-shoring saves money.

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Unhappy

"No CIO is going to offshore his own job"

...which is a shame, as honestly that and other senior roles could probably just as easily be done from India, China or Malaysia. Just sayin' ;-)

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Silver badge

Re: "No CIO is going to offshore his own job"

They won't have to. Once the factories are established, and the skill base is there, there are plenty of intelligent Chinese business people who could easily do the management jobs. Then our local "executives" will find themselves managing the shell of a company that is easily outcompeted by the foreign competitors they created. Poetic justice, really.

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Good for companies but bad for the country

Easy - make outsourcing difficult

o The Government should make off-shored work non tax deductible.

o Visas should be limited to a week to make it more difficult to offshore.

o All government work should be done in the UK.

This benefits the country as opposed to the company for the following reasons.

o Income stays in the UK.

o Market forces will take effect and companies will be forced to train staff

o Increased employment reduces unemployment spending costs (lower taxes)

o Increased employment increases spending on the local economy (more employment)

o Political stability.- high unemployment and poor prospects leads to radical governments

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Anonymous Coward

Re: Good for companies but bad for the country

Maybe the Government should create an Off-Shore tax for companies in the UK that off-shored jobs to make the companies realise its cheaper to bring jobs back.

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Re: Good for companies but bad for the country

Agree with Mark, maybe I would add the company to a public list of UK companies that off-shore, would you buy products/services from this company or one that backs the UK jobs market and economy...let the public decide or would they :-(

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Thumb Up

Re: Good for companies but bad for the country

Planning to stand for parliament Mark? You'd probably get in with your reg comment as a manifesto.

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Anonymous Coward

We're All DOOMED!

Hard to see how a 54% drop in jobs is good news - particularly since the decline ain't over yet.

Plus, this completely ignores the feeback loop that has already happened in manufacturing: it's now pretty much impossible to pull manufacturing back from China because the supply chain infrastructure in the West is gone.

Similarly, with such a rapidly contracting IT job market, people will no longer be training to join it, people who have been pushed out can't keep skills up-to-date and waddyaknow: in 5 years time there's a skills shortage that forces companies to out source further.

Plus, you have to wonder at the sense of transfering all understanding of your critical systems to a supplier. It'll take maybe three of four years for anybody with a grasp of the systems to be squeezed out of your company then basically, you're the supplier's bi-atch: you really think they're going to be help you switch to a cheaper competitor?

Then there's the question of 'suppliers' turning into competitors - e.g. HTC, Samsung etc. You're basically paying them to learn everything you do so they can then do it cheaper.

I mean, I all for helping the poor, but handing your entire economy to them just to save a few pennies, seems a tad over enthusiastic.

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Re: We're All DOOMED!

Ah, but that's the way the sacred FREE MARKET CAPITALISM system works. So shut up and eat what you're given.

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