back to article Indian outsourcers prepare for US trade war

India’s outsourcers are girding their loins for a trade war with the US over Barack Obama’s attack on US companies who export jobs and hide profits overseas. President Obama outlined a plan last month to encourage US firms – especially tech outfits – to stop spinning jobs overseas. The idea of “US jobs” being done by cheaper …

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Not quite the same

It's not the same to ship a job offshore as it is to employ a foreigner locally, locally employed foreigners get a local minimum wage and contribute to local taxes and the local economy and community. Foreigners employed in a different country do nothing for the local economy or community and the taxes stay offshore so there is very little benefit to anyone locally. In fact there a whole load of people who only have the benefit of looking for another job in another sector.

It's funny how Senior management and HR services aren't moved offshore, isn't it?

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Say one thing, but do another back

While "the people" might whinge and moan about the lost jobs, they are very happy to accept the lower prices that using cheap foreign products and labour allows. It seems to me that there are very few american companies who have succeeded with the advertising line

"Yes, our products cost three times as much, but at least it will be an american, who keeps you on hold for half an hour"

Actions (and shareholders) speak louder than words.

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Coat

"This is a huge market"

Nasscom chairman Pramod Bhasin added that India’s tech firms were beginning to focus on their domestic market. “Seeing the opportunities in government, telecom and insurance sectors, service providers are increasingly focusing on the domestic market," he said.

"Companies have to create new operating and business models to tap into the domestic opportunity. This is a huge market.”

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So if their domestic market is so huge, why all the fuss?

And why do they think they should be made immune from the effects of a severe recession? When money's tight, then things will change. Deal with it instead of whinging.

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RE: It's funny how Senior management and HR services aren't moved offshore

The perks of running a company is "Do as I say, not as I do!".. nuff said!

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Unhappy

Keeping manaufacturing in the US

Look what that did to their car industry...

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Better Service

If the net result is that fewer companies direct their customers out to Indian call centres who barely grasp that language and whose customer services can't deviate from a script then it's good news in my book.

I'd rather pay more for a product or service if I know it'll benefit the domestic economy, employment etc. That said, it was our idea to start offshoring the front line stuff for a better return and now it appears we've got our nose bent of shape now the economy's on the rocks!

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In America

we give thousands of IT jobs out to India while our high school and college students can't find jobs in their chosen fields. While we lay off thousands of workers then have their jobs transplanted to other countries.

I work for a company that's done this and I personally find it degrading to thousands of people well qualified to do these jobs. I understand saving some money and cutting corners but to take jobs away from your own country to save is just plain wrong. America is steadily losing in the job market so why not bring some of those outsourced jobs back here?

Yeah wishful thinking...

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Shiote work quality

Outsourcing is just about finance and accountants.. The quality of work produced out of India is very poor but at least the company outsourcing is saving money in the short term.

Outsourcing has been going on for years and if people still believe it works then they are nuts.

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2nd paragraph

Illegal immigration issues aside, Americans are primarily afraid of being unemployed. Period. If unemployment was negligible, I doubt you'd be hearing complaints.

Pete + NogginTheNog actually makes for a interesting point though. All "Buy American" led us to was an industry that thought it was immune from having to innovate or provide QA. Maybe that's why Obama is focusing on a less tangible job line...

@author: And wtf dude, we don't have nannies - Mary Poppins was an American film set in *England* :p

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Re: "This is a huge market"

"And why do they think they should be made immune from the effects of a severe recession? When money's tight, then things will change. Deal with it instead of whinging."

And that's what India is doing - instead of US weapons they will buy Russian ones. You know, those are cheaper (unless you reinvest in India's outsourcing companies, wink, wink).

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Anonymous Coward

I didn't read it as that...

S'funny. I read this as a warning shot across the bows of the big US IT companies not as an attack on Indian IT companies per se .

We all have seen how the big IT companies have been making big profits (often from Federal contracts), paying their bosses big bonuses whilst shedding US jobs and cutting worker drone pay and benefits.

Whilst the companies behaviour is perfectly legal , perhaps the Obama administration is beginning to wonder whether these companies really benefit the US economy in terms of share dividends that stay in the US , wages paid to US workers and tax paid at Federal and State level . I'm sure an accountant with access to all the figures could do the math and work out whether a particular company has a beneficial or detrimental effect on the US economy.

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re: benefit local economy

I am sure if they dig deeper - the outsourcing rarely benefits the company, but as impact costs come out of different budgets - it looks a good deal for the directors.

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Alien

Empire strikes back

It's funny, finally US govt attained enlightenment during recession (wink wink). All along the proclaimed champions of globalisation- realised when they were beaten on their own game, outsourcing becomes pariah. Well done lads.

Now wait for the empires(India and China) to stike back it's gonna be long hard fought losing battle.

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Stop

Alternative Option

India could ban all use of Microsoft software by 2015 (announcing this now). Then it could use some of the vast IT resources starting this year in making a robust Linux and Open Office version user friendly and manageable (i.e. to everyone, not just El Reg calibre readers). That should dent Microsoft revenue.

I'm amazed there are so few Indian software products in the world.... yet Indians abroad seem to manage to innovate (e.g. Hotmail).

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Anonymous Coward

Man, I'm gonna take shit, but here goes

Despite popular opinion right now, capitalism works, when applied and regulated properly.

The rupee is rising for a reason, as the dollar is sinking for a reason. The US has a trade deficit that has sent a crap load of money to India, and both currencies are reflecting that. A strong rupee and weak dollar will correct the situation by making US workers cheaper by comparison, and shift IT jobs back to the US naturally, no sabre rattling needed!

Meanwhile India has managed to pull 300 million people out of poverty, and become an increasingly stable part of the globe, one more that the west doesn't have to worry about attacking us or harboring terrorists, because they are enfranchised with the global economy.

And yes, *certain* Indian firms produce crap software. Namely the cheap ones. You get what you pay for, be it a cheap Indian firm or cheap American firm. Don't try to save a buck, then be dissapointed when it turns out the whole thing needs to be rewritten.

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Bah!

Are you saying these (law-breaking) nanny employers should send their kids to India instead?

Sorry. For too long US companies have been able to have their cake and eat it too. If you want the benefits of US ownership (the weight of the US government in your corner, military and all, when things don'tgo your way), register your company headquarters in the US and pay your G-D taxes.

If you want to register your company in India, feel free. Don't expect to use US law to bully the rest of the world on your behalf afterwards though. We should look after our own, but by these actions companies are saying they don't want to be American.

It'll be hard though. Current practice is for Americans abroad to refrain from learning the local language when at all possible, even in foreign embassies. Difficult to see how these companies will function if the board don't speak Mandarin, Hindi, Udru or whatever.

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The IT market is a bit inverted...

Right now you can hire a consultant cheaper than you can hire a FTE.

This inversion is due to the loss of local jobs with the work being done overseas.

With respect to the slogans, ever hear "Buy American" which was the war cry of the US auto industry. That is until Nafta meant that they could ship work outside the US to Mexico and Canada and still consider it US. And of course the Japanese car companies produce their cars for the American market in America. (All work done in non-union states with non-union workers.

The point is that the US based companies can deduct their expenses in current fiscal year and then defer income until they bring it back to the US. So if Microsoft were to spend $500 million to make products overseas, they can deduct that expense in current year. If said software had revenues of 1 Billion dollars, that money could sit offshore, be invested offshore, grow offshore before the bring it back on shore. The net is that they then only have to pay tax on what they bring onshore.

Think its not a big issue? Going from memory, during a tax amnesty period, I believe IBM brought 8 BIllion USD onshore under the tax amnesty program. That's not chump change.

India is going to be hurt because the loss of this incentive could reduce IBM's desire to sack US and EU workers shifting their jobs off shore.

Yes its a global world. But look at the Japanese. They manufacture their products for their markets locally. Meaning cars bought in the US are primarily made in the US.

Think about it.

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"US job" indeed

Damn, Obama really doesn't get it. So much hope and promise gone the way of every other megalomaniacal politician*. Those 25% import duties on trucks really did wonders for the U.S. auto industry and I'm certain these boys will find a way to shoot the everyone else's feet quite nicely.

Why doesn't anyone complain about "shipping a job" out of a state? If a "California job" gets in-sourced(?) to Wyoming because it's cheaper to hire people there, why isn't there some great outrage about putting Californians out of work? Seriously, nobody in CA benefits when a job goes to WY, right? Local taxes and spending move from one state to another and the fact that the workers get paid less in WY also means the Fed. gets less money since the income tax is lower. The price of the product goes down to remain competitive in the market so the sales tax is lowered at the point of purchase. Everyone loses, except the buyers... who might even include some Californians. Odd but you don't see Obama crying about that... well, unless he's talking to some group of local voters that is.

Oh, Peyton, we do have nannies, or au pairs if you like. You just have to be rich, a politician or both and you can hire an "illegal" from places like Guatemala for low pay and no taxes necessary. No it isn't exploitation, you're "helping" them. Just ask the elite shits who get caught and slapped on the wrist every now and then.

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Gates Horns

So what?

Please India, turn to China and get ass raped by them.

The consumer has never benefited from lower prices" do to some head shop moving a job overseas or illegally using visas. Only the massive bonus on top of the gross saleries of executives might be affected when they have to pay for a real skill set rather than the shell game that is outsourcing.

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India can Bite me

I have no problem with the Indians I work for or with domestically. The folks abroad.... they can start talking smack when they help close the GIGANTIC trade deficits the US has. The US economy is no longer a production economy, but one of consumption. If consumption goes down, all secters are affected. But STILL with that, we have the worlds largest trade deficits. Most Asian economies are wholey dependant on US consumerism for thier success, just as the US was successful in the 1900s as the world was buying from us. What the Indian government doesn't realise or care about is that if we dont work, we cant spend. Besides, the quality of most outsourced work....is lacking to say the least.

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keeping jobs

Anyone notice that Indian Outsourcers say it's *bad* for the U.S. to protect domestic jobs, but *good* for Indian Outsourcers to take them? Since trade wars serve nobody's interest, India should not have fired this first shot.

Anyone notice that it's middle-class Americans who want to keep (their) jobs in America, and the rich who mostly employ those cheap foreign nannies, groundskeepers, etc? Short-term thinking.

Keeping jobs in your country is in your country's national interest, even if it causes prices to rise (or not decline). The payroll dollars (or pounds or rupees for that matter) get spent locally, creating jobs and adding to tax coffers locally.

I guess if India wants to buy castoff soviet-era defense hardware to spite us (that's U.S.) they should feel free to do so. But as the capitalist exploiters say, you get what you pay for. Particularly the North Korean goods have still not been shown to work at all. Probably the Indian defense establishment is smart enough to figure this out. Can India build their own military industrial complex? Well, they've figured out how to do the bribery and corruption part, so I guess they can have a world class mess.

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As mentioned above

India has a huge software industry, and the companies we have worked with seem to be able to throw an indefinite number of people at a problem. So where is all of the innovative Indian software?

Why not take all of the resources and turn them to actually producing something rather than just providing services? the sheer weight of numbers could mean that a new OS and software suite could be developed relatively quickly and, if it's good enough, it will get a respectable market share.

From experience i suspect I know the answer as to why there is very little innovation, however, manage to get over that little stumbling block and you wouldn't need the American market.

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Obama just doing his job

Obama is doing what only someone in his position can do, correct the reckless stupidity of greed motivated globalization with political measures (protectionism).

American (or any) companies have be to looked at as purely capitalist entities devoid of any ethics or sense of national interest. Protectionism is about providing a level playing field for wages with your international trading partners - that playing field doesn't exist at the moment and without it the US economy, along with numerous other western economies, are heading down the toilet. Politicians may not be the best business minds but it's unfathomable how readily they have swallowed the pro-globalization bullshit of big business lobby groups. Those f*ckers are only looking at personal profits not the impact on society.

About time a politician started to work for the people he was elected to represent!

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Anonymous Coward

people are missing the point here

It works both ways, the US offshores jobs so that effectively money flows from the US to India.

India receives this extra money and spends it on US goods / services therefore sending money back to the US.

US citizens get cheaper goods / services so they have more money to spend, which the partially do in the US and partially for offshored stuff.

Now Obama wants to reduce offshoring. Fine, it's his fucking country, but every action generates consequences and the consequence of reducing jobs to India is that India will spend its money outside of the US. As they are entitled to do, it is their fucking country.

US protectionists seem to think that it is OK to protect their own jobs but when someone else decides to do the same then it is crossing a line and they get all whiney.

Try it with the EU, the commission has already said that protectionist behaviour will be met immediately and proportionately.

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Anonymous Coward

Empty Threat

India has always made a point of buying major military hardware from countries other than the US.

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Unhappy

An odd threat.

Why would a county, like India, bemoan the possible loss of foreign investment? Do we not hear daily stories of how dismal living conditions are for even the middle class who are employed at these outsourcing companies (according to a recent report – the tap water in the developed areas of one of their largest cities is toxic). The economic effects from these industries has obviously missed the vast majority of the people employed to man those phones. Not to mention the millions of poor people living in squalled conditions.

The government and the business do not appear to have the countries interest in mond, just their personal interests.

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Anonymous Coward

what defense business

They haven't bought any ships, tanks and made any massive purchases of aircraft... What a couple missile systems? Bus fare!

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I call bullshit!

"Now Obama wants to reduce offshoring. Fine, it's his fucking country..."

The fuck it is. He just happens to be the one the unwashed masses elected figurehead, not that they had a real option given the political duopoly / cartel in this country. The fundamental problem is these asshats in charge don't have a clue how economies work and why would they, they are lawyers, actors, doctors and veterans without a real economist among them. Sorry but "we screw the other guy and pass the savings on to you" economics doesn't work.

Perhaps you meant; "Fine, he's fucking his country..." which is closer to the truth. Oh well here's hoping Obama is all just bluster and no beef.

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Finally

Nothing against the Indians who are hard working people but the rate things are going the only people who will be left employed in the US & EU will be the public sector and who will pay the taxes?

The whole outsourcing thing is only benefiting the rich who own the companies and the Indians.

Obama is right on this.

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Anonymous Coward

bring it on...

Shaking a few comments loose here...

@Dustin: Asian countries depend on US consumerism

*YES*, and how many US corporates make 5hit-loads of money from hidden investments in Asian companies? Most large corporates (any country) would happily sell out their country as long as they were at the top of the pile. Preston Blake only exists in fiction (Adam Sandler: Deeds)

@Lee: US citizens get cheaper goods

*YES* , because they couldn't give a rats ass where it comes from as long as its cheap, and no they don't care if American jobs are lost, as long as *they* have *their* job. Once they lose theirs, then they bitch and moan like no tomorrow.

The tipping point is when the 'invisible earnings' from financial products evaporates and the sham of being an importer nation is revealed in all its wonder - like October 2008.

@Curt Guntheroth

*YES*, but India buying up Chinese weaponry doesn't worry the White House, it worries the Pentagon - not because the Chinese stuff is better, it just means the top brass will miss out on top jobs with defence companies when they retire early.

And since Pakistan has US military technology, India will want to play chessboard over Kashmir with Chinese technology? Yeah, right.

@Gumby: keeping moolah offshore / low tax

*YES*, but its the same for most companies. Could be argued to drop the tax take a little then hammer the companies if they still don't play ball. Could also be argued the US Govt squanders money like its pumping it out of firehoses down the drain... search google for the trillions that has vanished from the federal budgets.

India, huge internal market, but no-one is buying outsourced services because they *don't need them or don't want them*. India *needs*, as in desperately needs Western IT outsource business otherwise they'll fold. Hence Satyam et al are big time establishing onshore resources in Western countries, hell-bent on taking your job in your town: the irony must be well understood in the White House on that score. But the US Govt hasn't the guts to haul back jobs to the US because its permanently on the leash of big companies that do business in other countries.

It will be test of Obama if he makes this stick... maybe because he's a fresh-face from the provinces he doesn't give a rats for the corporate big guns. Can't wait for Cheney to make a comment. The article could have been an indirect dig at Haliburton?

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Stop

Defence comments

The US and Pakistan were defence partners - Pakistan used to buy US planes. India had to go to Russia, Israel and the UK (Hawk Jets) for it's armaments as the US would not supply them to keep Pakistan happy. This may now change.

This is besides the point. Trade barriers may be good in the very short term for the US, but bad for world recovery. What next - Obama stops Apple, NVIDIA, Garmin et. al. from outsourcing manufacturing to China ? If India didn't have a democracy and trade unions, it'd be competing with China for the low cost manufacture of goods - the unions won't tolerate severe abuse (Indian's go on strike).

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Linux

Remember Dyson

Dyson invented a new type of vacuum cleaner and everyone thought he was very clever. He had a UK factory employing lots people, I for one was quite happy to buy one of his cleaners. Some years later when the cleaner had seen better days, my wife and I went to the shops to buy a new one. But, he had made 1,000 workers redundant in his UK factory and EXPORTED THEIR JOBS to Eastern Europe paying a fraction of his previous labour costs. Great, you think, the price will reflect this. NOT A CHANCE !! The price of a Dyson stayed up there as expensive as before. So, where did the benefit of this move come from? Some foreigners got jobs in Eastern Europe at local rates of pay. Some (1,000) UK workers got the opportunity to seek out new jobs in the UK. And Mr Dyson? Well, he got to pocket the difference, because if you reduce labour costs it goes straight to the bottom line of the company's accounts !! PROFIT !!

Is there a solution which works for everyone? Yes there is ! You subtract outsourced labour cost from previous labour cost and tax the difference at 100% minus some allowance for product price reduction based on per piece. NOW if you want to benefit the locals in the outsourced country, maybe you will pay them closer to UK rates and REALLY BENEFIT THEM AND THEIR COMMUNITIES ! They always claim that to pay too much creates 'distortion' in the local areas. Right, like some UK company chairmen having salaries of over a million pounds? Was that the kind of distortion you had in mind?

Obama's comments were clearly directed at the bosses of the US companies who are PROFITEERING from outsourcing and at the same time creating misery for the US employees whose' jobs they outsource. It is not an attack on India !!

I think there is a huge difference between SOURCING piece parts from anywhere in the world and having YOUR OWN PRODUCT manufactured somewhere else. If you sell a huge amount of product in India, then by all means open a factory there to SUPPLY INDIA and ONLY INDIA! Profits from that factory being taxed by the Indian Government. Maybe a 'license fee' per piece sold might be paid back to the original company to help cover the R&D which brought it about in the first place. This way of bringing your product to the Indian market cuts down on the use of energy which is otherwise wasted in transit -- adds jobs in India and DOES NOT throw out your original workers.

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What utter shite

"The Times of India said that Mittal warned that if the US followed through on its protectionist threats, "This war could get started off”."

I'll take a leap of faith here and say I think that the giant ponzi scheme that is the Indian economy needs US outsourcing a fuck sight more than the US needs the arms sales to them.

Take away the outsourcing and they have pretty much nothing left.

The US could always just sell more arms to Pakistan and the Saudis to pick up the slack.

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Joke

But.....

I live in the US, work for a German company, spend most of my mornings talking to SW developers in India, working on developing a product to be built in China. Should I worry?

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