back to article IT JOB OUTSOURCING: Will it ever END?

HL Mencken once told us that in a democracy the electorate should get what they voted for – and good and hard too. So, on that basis, I present to you a piece on outsourcing, as requested by one Gordon 10. The commenter in question wrote: What would be really nice is [an article] on the race to the bottom on labour …

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I've seen it work well

For IT support, I think having the customer facing call centers offshored doesn't matter at all so long as they speak good enough English without too thick of an accent (Central America seems to work better than India, in other words, for US support, and wages are similar between the two now anyway)

For back end support, having the lower end support offshore in India isn't a big issue. A lot of that stuff is simple rote work that anyone can do, following a simple formula. When you get to higher levels of support for more complex problems where you might involve customers and/or vendors, it doesn't do well in India. Not that there aren't smart people there, but the really smart ones are in such demand they don't stick around very long and you end up with the ones who don't know enough to be able to move on to other jobs quite so easily. It is better having that last line of support local, especially if they're still located on site with the customer so they can develop relationships with them, etc.

The problem is, as pointed out earlier, where do you get those high level guys in the US (or UK or other expensive countries) once all the low level jobs have moved on? The ladder by which new IT workers in the US learn on the job and become high skilled is being removed rung by rung, so fewer are able to climb it each year.

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Development is Uneven

Outsourcing (or "trade" as it is known when the goods are tangible) depends on having some place to outsource to. Countries that are only flyspecks on a map will only have a very limited global effect. It takes large countries such as China, India, and Indonesia to really make a difference. Once you get beyond those ones though, the number of poor but "ready for growth" countries starts to look a bit scarce.

Africa is expected to have a massive increase in population by that time, with Nigeria alone expected to grow to have a population similar to India or China. However, when you start looking at social and political factors, most of Africa (with a few exceptions) does not look anything like becoming the next China or India.

Even in India, there is a huge social gulf between the educated elite who staff the outsourcing businesses and the rural peasantry. This means that the pool of usable labour is much smaller than simple population count would lead us to believe.

I think what we are going to see is a group of mainly east Asian countries move from third to first world (or in India's case, different parts of the country straddle the boundary), leaving the rest of the third world to stagnate behind. This is much like how Europe moved far ahead of the rest of the world starting a couple of centuries ago.

In other words, I don't think the whole third world will leap forward in one smooth motion. Rather, select bits of it will move to catch up and merge with the developed world, rather like Japan and South Korea have done. We will then have another period of stability until some other region moves ahead.

We don't know what it is that enables a society to progress. It can't be just access to capital and education, since there are loads of countries which have both but can't make productive use of them. Whatever that something is though, some parts of the third world very obviously have it (e.g. China), while others don't (e.g. Congo), yet.

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Anonymous Coward

Re: Development is Uneven

'We don't know what it is that enables a society to progress. It can't be just access to capital and education, since there are loads of countries which have both but can't make productive use of them.'

We don't know for sure, but we can make some well-informed observations.

Countries for whom people are a competitive advantage need structures in place to maintain social order. However big a stick the government wields, carrots are also necessary and both China and India are people-centric economies that have progressed markedly in living standards since they liberalised in the 90s (though with the unsavoury sideline that the stick wielding elites have seen their wealth grow even faster).

Countries for whom resources are a competitive advantage really have no economic need for people outside a few narrow industries and so are at high risk from divide and conquer politics, repressive dictatorships and civil war. Efforts by those countries to diversify into people-intensive industries often flounder because a successful people economy would require a loosening of the often repressive rules that keep the elite in power.

In short, supply of capital and education are necessary but so is an economy which demands and rewards that education. Supply without demand creates anomalies like the many saudi men who study expensively and extensively abroad before going home to do nothing (or plot revolution).

The narrower point, and a reason for concern among the working classes in the west, is that economic power is tied in the long term to political power. If globalisation and automation continue to marginalise people economically then their political power will disappear with it.

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Re: Development is Uneven

thames,

Africa is getting much richer already. For example quite a few countries haven't employed sufficient economists. So they've been guessing their GDP based on surveying a few big companies, and then guessing the rest. This was based on the idea of having this level of subsistence agriculture that only supported limited services, and basically hadn't changed much in years/decades/centuries. Several countries have now re-assessed this, Nigeria being one big example, and discovered that they now have a lot more trade going on than they thought.

For example lots of goods (sometimes second hand from the West) like clothes and mobile phones now get right to even the remotest villages. This is why whenever you see documentaries that take cameras into the middle of rainforests, loads of people are wearing the same Chinese, Vietnamese and Banglasdeshi made tshirts as everyone else in the world.

Globalisation is still going. Not that it won't be a bumpy ride. If the next door country suddenly becomes rich, and your repressive government is seen not to be letting you join the party, then revolution looks attractive. But revolution doesn't always lead to a better government. The French are on their 5th Republic, plus having had 3 Empires and an ancien regime - all since the 1780s. Just going from memory, they went through serveral revolutions and 15 different constitutions between 1789 and 1870.

On the other hand, only a few countries have managed to jump into the "1st World" camp in the last 50 years. Not that anyone calls it that anymore. Lots have got into the middle-income group though. Which is a much nicer place to be than the other alternative. It'll be interesting to see if globalisation will improve things for them, or leave them where they are. Countries like Chile, Brazil, Argentina (who are the only one I can think of to drop out of the top group last century), Thailand etc.

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Holmes

Re: Development is Uneven

"""We don't know what it is that enables a society to progress."""

Yes we do, it is a mix of individual freedom, including separation from state and church, and rule of law, including both the rights to private property, and some decent-quality democratic political system.

The more a country conform to that the more prosperous they become, the farther from that, the less prosperous they become.

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Societal progress by definition can't be uneven

I question the suggestion that the progress of society has prosperity at its core. Plain and simple: "richness" is subjective. A decent-quality democratic political system is clearly not attainable when capitalism is a driving force. I don't see society-as-a-whole being supported when the polarization of politics (as I prefer to call it "classholism") is seeking to maintain the status quo of those divisions. This has clearly manifested in the aforementioned quick rise to the 10 to 50 times in global inequality as well as the inequalities that exist in the same (quite efficient) structures (eg. the mailroom and the penthouse). It doesn't seek to progress things from a social perspective. Individual freedoms and private property's are obviously not inherently society building. I'm not saying they couldn't be or never are.

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Splendid

Nicely done Tim - thank you!

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One day they'll be outsourcing to us.

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They already do and have for years. By far the biggest growth market for western luxury brands is Asia and while the stuff mostly gets made there too the 'expertise' and whatever else it is that makes a bag or pair of shoes worth £10,000 flows back to the west.

Similarly architects, law firms and financial services outfits do tremendous business out there.

And on a more basic level consumer brands like Coke and Unilever as well as western music and films have been there for years.

Whether we'll ever get to Chinese NGOs fretting about the conditions in british sweatshops is another matter, but the times are certainly changing.

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At the big outsourcing companies the biggest problem is graduate recruitment. They bring in a load of grads to do tech jobs, and then promote them into non-tech roles - which was what the grads wanted to do in the first place. The training budget has then been blown on staff who stay don't use the skills after the first couple of years. If there's a skills shortage - do something about it rather bleating on about it and employing a load of spreadsheet zombies.

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FAIL

Even with cheap labour, my experience is that the cheapest way to outsource is to pay the money to the service provider, but do all the actual work yourself.

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Anonymous Coward

It will only stop for IT when....

...people realise that quality is a function of a team which takes pride and ownership in their work.

If you keep sending the work offshore, it's a race to the bottom - lowest cost in an emerging economy, remote to the business, will always result in poor quality service and low productivity.

Intellectual property and thinking cannot be delegated outside of your business - it has to be built up and retained internally to maintain capability.

Off-shoring is certainly not cheaper in the long run when you look at the impact this has on your business. It may look good on the balance sheet for the first couple of years, and the Execs who implement this will be well rewarded for it. However - it will screw up your business beyond the short term, if what you outsource that which is core to it.

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Rarely outsourced depts

In my limited experience if you want to avoid being outsourced, (or should that be undersourced). work in HR or Finance. For some unfathomable reason these 'skills' seem to be regarded as so sensitive they cannot be performed outside the sovereignity of a company.

The poor IT bods that curate and protect the companies data to say nothing of turning the intellectual capital of a business into code can be sited anywhere??

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Banking debt and increasing cost of living; how does one deal with that as wages stagnate?

As the global economy continues toward a convergence my salary has become stagnant, but as some of you will be aware, the cost of living keeps rising. At what point does one either let the bank come get those things we thought we'd be able pay for or does the governement step in?

It appears at present that, the banks will be taking over a great deal of debt from a lot people, and the property that entails, 'cause here in NA the banks and any other sufficiently large corporations own the governments.

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