Indian Outsourcers Face Labor Shortages, Increasingly Hiring Abroad

from the how-quickly-things-change dept

The emergence of the Indian outsourcing boom caused a lot of concern initially among American workers and politicians, worried about jobs. But it wasn't too long before it became clear the addition of more skilled worker, in technology and services, was a positive development, and that the market was capable of correcting any short-term pain. Still, the industry continues to change; the New York Times has a pair of articles today about some of the challenges facing Indian outsourcing firms. One of the big problems is that contrary to popular mythology, there's not a never-ending reserve of highly-educated, English-speaking workers. Though we often hear about how many engineering graduates come out every year in India, many of them are not sufficiently skilled so as to be employable. That problem is in part due to problems in the education system, particularly at the higher levels. Another interesting development is that these firms are increasingly courting employees abroad, including some from the US. Some of them will work in India, in management roles, while in other cases these outsourcing firms are feeling the need to beef up their physical presence in the countries of their clients. You could call this the reverse of the brain drain, the phenomenon whereby top talent from developing countries often comes to the US for opportunity, but what it actually shows is that national origin of countries or employees is increasingly meaningless. And next time some economic events cause you to start panicking, perhaps you should wait a few years to see how things unfold.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Anonymous Coward, Oct 17th, 2006 @ 9:49am

    I'm sorry, did you say wait and see before panicking? That's inhuman and un-American. How dare you, sir.

     

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  2.  
    identicon
    New world order, Oct 17th, 2006 @ 10:06am

    New world order

    Essentially, today's world consists of 3 countries, defined not by geographical boundaries, but by the level of education, connectedness, awareness of opportunities, and mobility. The first country consists of those with high levels in each of these areas. Geographical boundaries mean nothing in this "country".
    The second country is those who have fallen short in one or more of these areas, but can hope to get there with some effort. A lot of the people who lose their jobs due to outsourcing fall into this category, but can recover with some effort.
    The third country is those billions who are simply struggling to survive, and have a really long way to go to get anywhere.

     

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  3.  
    identicon
    friday, Oct 17th, 2006 @ 10:26am

    if you are interested in learning more on globalism check out "the global class war," you'll see how good globalism really is for the common man.

     

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  4.  
    identicon
    Xeno the Phobia Warriror Princess, Oct 17th, 2006 @ 10:36am

    Re: New world order

    >Essentially, today's world consists of 3 countries,
    ...

    You forgot the fourth: the lepers.

     

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  5.  
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    Dan, Oct 17th, 2006 @ 10:47am

    Dude I am so moving to india bro.

     

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  6.  
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    Faz, Oct 17th, 2006 @ 10:52am

    I said it B4

    I said it b4, i will say it now... cultural differences, language differences (even if you speak english) and the need to be on site to understand the client (because the client is not perfect) will always overtake the need to outsource eventually

    not being racist by any means, but when customer service picks upa phone in a foriegn country, they do not understand our slang lingo and expressions, and we do not understand theirs.. that gets frustrating ona simple customer support level

     

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  7.  
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    Tyshaun, Oct 17th, 2006 @ 11:04am

    I'm still waiting to hear how outsourcing is good for the American technologist. To borrow a euphamism from the 4th commentor about "countries", I would definately fall into the "1st country" having had the opportunity to go to very good schools and receive excellent training (and never having to lose a job for any significent length of time due to lack of skills).

    However, I am still having a tough time understanding how outsourcing has helped the American workforce in any way. I can understand the marginal impact of making products more inexpensive, but if you aren't employed does the price of something really matter?

    I'm not an economics/business person so some insight would be enlightening.

     

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  8.  
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    Wally, Oct 17th, 2006 @ 11:29am

    It was never about the good of the American technologist. It's about the good of the corporations and the politicians that they own.

     

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  9.  
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    Don Gray, Oct 17th, 2006 @ 11:34am

    Re: I said it B4

    I read somewhere that the tech support people in India actually study newspapers and advertisements for this very reason.

    To try and sound like they are part of the culture and can follow along in an informal conversation.

    Not that I've ever actually seen this work.

     

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  10.  
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    Tashi, Oct 17th, 2006 @ 11:44am

    This is part of the unseen or hidden cost in the rush to take advantage of outsourcing. Many times the savings is greatly overestimated, is only marginal or outsourcing actually costs the company more because difference in language, culture, training and management style are overlooked on the road to obtain bigger profit.

     

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  11.  
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    Larry Vandewalle, Oct 17th, 2006 @ 11:53am

    A Quick Fiscal Policy Primer

    If you want more of something:
    a) Subsidise it,
    b) De-regulate it,
    c) Tax its alternatives,
    or d) Regulate its alternatives.

    If you want LESS of something
    a) Tax it,
    b) Regulate it,
    c) Subsidise its alternatives,
    or d) De-redulate its alternatives.

    In this country we tax those who work, those who supply jobs, and subsidise (via tax breaks) those who export jobs and effectively de-regulate (i.e. not enforce) those who hire illegals.

    Therefore: we have fewer jobs (especially in the tech sector where this is especially the case).

    True, you will get more and cheaper goods from the cheaper lobor, but the question always missed by economists is "What makes people happy?".

    One of the basic economic assumptions is: More (and cheaper) goods and services make people happy. The problem is: This isn't true. If you ask Psychologists and Sociologists (the people who actually study what makes people happy) you come up with a somewhat different answer, namely: WORKING to acquire those goods and services.

    Therefore, I suggest, we're promoting ing the wrong thing. Instead of the goods and services, we should be promoting the WORKING for goods and services (i.e. jobs).

     

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  12.  
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    Wally, Oct 17th, 2006 @ 12:07pm

    Therefore, I suggest, we're promoting ing the wrong thing. Instead of the goods and services, we should be promoting the WORKING for goods and services (i.e. jobs). What a novel idea. Let's give it a try!

     

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  13.  
    identicon
    Anonymous Coward, Oct 17th, 2006 @ 12:12pm

    Re: A Quick Fiscal Policy Primer

    In the same vein, a personal improvement primer:
    If you see a wave coming, you can choose to either
    a) ride it and have fun
    or
    b) fight it and take your chances. If the wave is small or isolated, you might be able to fight it. If the wave is large or persistent, you are better off riding it.

    So the question is: Is the outsourcing wave an isolated and weak wave or a large and persistent one? I think you know the answer.

     

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  14.  
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    Anon, Oct 17th, 2006 @ 12:24pm

    Some Numbers

    Engineers (those with 4 year graduate technical and engineering degrees) from ever increasing number of Indian Universities -> 400,000 every single year, and increasing.

    1% of India's population -> 10,000,000.

    There are definitely long term benefits in using the technical services from countries like India, but there is a short term impact, and a very severe one, considering the hordes of Indian firms who are racing to fill every possible cheap engineering job from there.

     

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  15.  
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    Lone Ranger, Oct 17th, 2006 @ 12:34pm

    india sux

    go home injuns

     

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  16.  
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    Anonymous Coward, Oct 17th, 2006 @ 12:38pm

    Re: Re: A Quick Fiscal Policy Primer

    True, outsourcing is not going away. One of the alternatives that has presented itself is, many Americans upon graduating are indeed heading to India. Some of the perks I've been told are:

    Cost of living is dirt cheap.

    You don't spend years and years wishing and hoping for a position in management. India seems absent of the type of job politics Americans contend with. So opprotunity for advancement is better

    If you make under 60K you don't have to file taxes backe home. I THINK. Don't quote that last one.

    If I was still single, I'd take off for India in a heartbeat.

     

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  17.  
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    Anonymous Coward, Oct 17th, 2006 @ 12:53pm

    I worked for a small CRM (Siebel) consultancy that recently got into outsourcing. They realised pretty quickly that hiring a bunch of cheap students was pretty dumb because although they may be academically smart they have no real world skills or experience.

    They are persisting with outsourcing buthave gone down two roads. The first is to bring a lot of the offshore resource onshore so they can be better trained and the second is to send a bunch of managers to India to manage them directly.

    My personal experience with outsourcing is it really wont work unless the people you use are actually experienced and competent. Their cheapness does not make up for a lack of experience. Second several companies in the UK now boast the fact that their call centres are UK based, and guess what? They are MUCH, MUCH better than the offshore crap centres.

     

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  18.  
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    Sal, Oct 17th, 2006 @ 12:56pm

    Plenty of Jobs

    If there are not enough jobs to go around, how are millions of Mexicans comming in and getting them. Americans today think they are better than yard work because they have a degree in some tech field. If a man has a wife and kids, his job was outsourced and is looking for a good job that can support his family, what good is sitting at home all day waiting to get a call? At least get a part time job at the Burger King so your family can eat until you do find a job. I don't care what degrees you have or how good you think you are. Working in the shit filled mushroom fields in Kennet Square, PA is not beneath you!

     

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  19.  
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    Geoff, Oct 17th, 2006 @ 1:27pm

    Re: india sux

    Really smart comment dude, goes to the bottom line that is plaguing corporate America.....stupidity. Even in jest a comment like that shows a person's true colors.

    To the facts. America is losing jobs and we are blaming it on outsourcing. Interesting argument, and based on IBM, Dell and other technology leaders moving call centers abroad, a fairly decent argument. But is the problem really a technology problem or is it more. Look at the “big three”…..Oh wait, Ford and Chrysler are not on the list. The problem is that companies and corporations can’t compete with the rest of the world in manufacturing and labor costs. A good worker in China who makes screws or nails or something like that makes $0.50/hour or less. The same employee in North America, with the backing of a union might make $15.00/hour. How is the North American manufacturer supposed to compete with this? Well the American companies have finally realized that without the aid of government sanctions, they can’t compete. They need to find a way to manufacture in China and market in North America. If you want to beat your enemy, you better be able to do what he does, but BETTER….and clearly that’s not what we are doing. The India and other countries repatriating our call centers and tech supports issue is one of labor costs, purely. There are places in North America where it is cheaper to run a call center than others, but none of them compete with the other parts of the world. The accent is an issue but the savings outweigh it 10-1. If you but a Dell and call customer support, you deal with the accent, the same as a northerner dealing with the southerner’s accent, it’s adapt and overcome plain and simple, if you don’t like it, sell your Dell and buy an IBM….Oh wait, that’s the same issue. Facing that call center and tech support jobs are leaving the country is the first step. Overcoming it is the next step. Ask yourself no why that person in a foreign country took my job, but rather ask yourself, “how can I meld my skills and make myself irreplaceable to the employer”. Life will go on, it’s how we adjust to our new lot in lot that will make us the bigger, better people.

     

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  20.  
    identicon
    Brad Eleven, Oct 17th, 2006 @ 1:31pm

    re: Plenty of Jobs

    Surely you're trying to be funny, Sal. Illegal immigrants get jobs that US citizens don't because the employers who hire them:
    • pay less than a living wage
    • don't pay insurance or other regulated, employee-related expenses
    • can just chase away any/all of their illegal "employees" without paying them, because the illegal immigrants can't go to the police

    It's close to the way the market works for illegal drugs. With sufficient demand, the dealers charge what they want, and if you get a raw deal, too bad--you certainly can't go to the cops. You can retaliate on your own, though. Same with in-market competition: the solution to your competitor's unfair business practices is to kill him.

    Further, it seems that you're assuming that--oh, wait. You're a troll, aren't you, Sal?

    Never mind.

     

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  21.  
    identicon
    Anonymous Coward, Oct 17th, 2006 @ 1:45pm

    Re: Plenty of Jobs

    This is the loser way of thinking. If you are educated and enterprising, then you should be able to think of better things to do those jobs and earn a good wage. Here are some examples:

    - Lawn mowing: use your technical skills to develop an automatic lawn mower or popularize synthetic lawn or develop organic lawn methods

    - Burger flipping: Develop a way to market healthier burgers or develop recepies for garam-masala burger and sell it to the Indians for a profit!

    - Mushroom farming: Do some genetic experiments to figure out better quality / higher productivity / more nutritious mushrooms, and so on.

     

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  22.  
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    Jamie, Oct 17th, 2006 @ 1:55pm

    Call center outsourcing doesn't work

    I don't know about the engineering and programming industries, but I can tell you that the overwhelming trend in the call center industry is to move the call centers back home. Everyone thought it was a great idea to move all the call centers out a few years ago, but companies are finding out that they actually lose customers due to cultural and accent related misunderstandings. I live in a town where many people work in call centers. A few years ago those call centers started closing and moving out of the country. Many of my friends lost their jobs or were in danger of losing them. Today, the remaining call centers are all expanding, and new ones are opening as fast as they can hire employees.
    Some industries make sense to outsource, and some don't.

     

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  23.  
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    Xeno the Phobia Warrior Princess, Oct 17th, 2006 @ 2:39pm

    Re: Re: Plenty of Jobs

    Here are some more examples:

    - Prostitution: Become a pimp.

    - selling drugs: making drugs.

    -begging on the corner: organize a consortium of corner beggars and standardize the industry, lobby for health benefits, and study begging-related repetitive injuries, like carpal tunnel from jiggling the change cup for 8 straight hours. Also, you can fight for the federal gov't to pass a minimum hand-out wage so people won't be able to throw in just a few cents.

    sitting around reading techdirt all day: go the hell outside!

    X

     

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  24.  
    identicon
    DV Henkel-Wallace, Oct 17th, 2006 @ 2:40pm

    You know those jobs were already outsourced once!

    "Outsourcing" to other parts of the USA is what killed manufacturing in most of the northeast and moved jobs south and later west. The train made it possible to ship goods around the country, and then the phone to ship services. And those places recovered, even prospered....after a century.

    The rhetoric back then was the same.

     

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  25.  
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    dorpus, Oct 17th, 2006 @ 2:47pm

    Quirk of the English Speaking World

    The outsourcing phenomenon has mainly affected English-speaking countries. For the foreseeable future, countries that speak other languages will be immune to that type of outsourcing. Few people outside of Germany speak German, few people outside of Japan speak Japanese. Outsourcing in the English world has not raised standards of customer service -- if anything, it has lowered them.

     

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  26.  
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    Lone Ranger, Oct 18th, 2006 @ 6:05am

    Re: Re: india sux

    The comment WAS in jest, but the underlying point is serious. Stupidity is not the biggest corp. problem (although it is yours), it is old fashioned greed. That is why the jobs have gone overseas. Why "face the fact" when it is simply wrong. The jobs are slowly coming back because no one wants to listen to some heavy accent read from a script.

    “how can I meld my skills and make myself irreplaceable to the employer” LMAO @ U

    whatever - dream on gutless puppet

     

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  27.  
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    Proud American Pig, Oct 18th, 2006 @ 3:37pm

    English

    It's not just the English speakers who are at issue. The problem is dialect. Heck I can't understand Redreck dialect sometimes either. I don't always immediately recognize when I call a web hosting provider and the gal on the end of the phone says rebost. (pronouced reb-'ost)

    And here's the funny thing.

    They don't always understand me either.

    The b.s. I always hear when someone argues about this is, well Americans are lazy pigs because they only know one language. We're arrogant and we demand everyone know our language rather than learning another one, whereas in Europe or other areas of the world, people commonly know two, three, heck sometimes upwards of five languages.

    Perhaps that's true, but the issue isn't so much how many languages can you learn, but HOW MANY LANGUAGES CAN YOU LEARN WELL.

    The issue is that stupid call-center companies hire someone for being bilingual, when they're not really bilingual. Just because I took a couple years of Spanish in high school and can order at a Taco Bell does not make me qualified to work as a bilingual call-center operator in any Hispanic country or culture.

    Similarly, just because some non-U.S., non-English speaking persons have taken courses in English and have achieved a minimal level of proficiency in the language, that should not qualify them for call-center work in American businesses.

    The real issue, to me, is not that Indian people or any other people are applying for so-called "American" jobs, but that American companies are lowering their standards by hiring people who are unable to effectively communicate with their customers.

    Like I say, it's not a nationality thing. I would be just as horrified to call tech support and get some redneck named Cletus who I couldn't understand because he was uneducated and talked funny because he had a big chaw of tabbacky in his mouth.

    I think people are far too quick to label someone "bigotted" when they complain about getting an unintelligible person on tech support, when really the issue isn't a racial or nationality issue at all, but simply one of communication.

    What's more, because this has become such a hot issue, if you're actually on the phone with someone you can't understand, people of "harassed" nationalities or cultures have more than once gotten NASTY with no provocation other than a simple, gentle request to have them repeat what they said.

    Q: "I'm sorry, I didn't understand that last part. Could you repeat it?"

    A: "YOU DIWTY AMEWICAN ATO PIG - YOU THICH YOU THO MUH BETTA - I THED REBOST! REBOST! YOU NO I THED REBOST! IF YOUD STHOP BEAN THUCH A PIG REED AWEADY BEDUN RITH THITH CAW! GO THINED REBOSTING THUMBWARE ELTH. "

    Whatever.

     

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  28.  
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    Lone Ranger, Oct 23rd, 2006 @ 7:49am

    Re: English

    Amen!

     

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  29.  
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    Lone Ranger, Dec 6th, 2006 @ 10:54am

    Geoff

    No response Geoff ?

    You really are a gutless piece of crap. I bet your boyfriend beats you.

     

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  30.  
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    superindian, Mar 17th, 2007 @ 7:01pm

    Re: india sux

    read the article boy n then react, dumb lone ranger!!

     

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  31.  
    identicon
    joe, Sep 13th, 2008 @ 6:14am

    re: Germany

    I'd like to comment on dorpus's post:
    "The outsourcing phenomenon has mainly affected English-speaking countries. For the foreseeable future, countries that speak other languages will be immune to that type of outsourcing. Few people outside of Germany speak German, few people outside of Japan speak Japanese."

    Not true - about Germany at least. I've been working for 2 years in an outsourcing center of HP (Sofia). We provide support to German-speaking countries (for Proliant/Integrity servers/HP-UX etc). Let me tell you, outsourcing is _the_ trend in Europe right now - many tech support jobs are outsourced to Bulgaria/Romania/Ukraine/god knows where in Eastern Europe. I think the main problem with outsourcing though is the fact that initial savings are always hugely overestimated by managers. In the long run it is vastly more expensive to outsource any business. Like here is an example:
    1) Business A decides to move abroad. Severance payments have to be paid.
    2) Hiring and training people at the new location (this is a huge expense btw), renting offices or even purchasing property.
    3) Inevitably, a part of the customers pulls back - this has nothing to do with xenophobia - some people just prefer to be understood _all the time_ when they are saying something, and not just guess they are being understood. So this means an inevitable drop in revenue.
    4) Above three factors initially get offset by the lower wages of the workers. At least for the first 2-3 years. Then things always follow this path:
    5) Wages in the country slowly rise i.e. cost savings slowly diminish. People who have worked longer must be paid higher, or they would leave.
    6) It turns out (oh whata surprise) that there are many places (like poorer regions) in the country of origin (USA, Germany) where young people exist, who would be willing to receive comparable salaries to do tech support. So:
    7) With cost savings almost non-existant (and revenue at an all-time low) managers have to make a decision in about the 5th year of the outsourcing venture: Either move to another low-cost destination or get back home. Choosing the first option obviously takes us to point 1) so... You get the idea.

    In the end, companies lose customers, have to pay a whole lot of "additional" (unforeseen - they are always qualified as unforeseen, funny as it is) expenses, have basically abandoned people who conscientiously worked for them many years only to move back without having achieved a thing. Plain dumb.

    My opinion on the thing is: don't outsource. Dumping people who have worked for you is mean and effed up. Look at countries like Sweden or the other Scandinavian countries - that's a brilliant example of running one's economy in a reasonable manner.

    Man, I could write a book about outsourcing :) Been there, seen that :)

     

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