One of the major by-products of Globalization is Outsourcing; an industry that is loved as much as it is hated. Many corporations try to justify their stand on outsourcing as a necessary evil. Truth be told, this evil has saved and ruined families across the world equally. This article is not about the sentimentality associated with this topic but to look at outsourcing for what it is.
Before globalization and the WTO, companies mostly manufacturers had large plants where they went about doing their business. But as they started making money, these large manufacturers wanted to be able to reduce the cost of production so that they could reinvest more profits into expanding the business. Let us take an example of the automobile industry. The large manufacturers decided to outsource some of their non-critical work to other local manufacturers. These local manufacturers were people from the community or later stage, other companies within the state or country. This form of ‘internal outsourcing’ found a huge market. The smaller companies became vendors or suppliers who manufactured spare parts such as nuts and bolts, wipers, visors, etc.
And then waltzes in Globalization with its shining armour. The world markets changed and trade routes were re-written. Developed countries were now open markets for the developing markets and vice versa. The developed countries adopted globalization with open arms. Developing countries were wary and had to reconstruct their economy to open their markets to this new phenomenon. Developed countries were looked upon as a threat to local markets by the leaders of developing nations such as India, China, Brazil, etc.
After several rounds of talks, the WTO and the concept of globalization were accepted and it was realized that open market economy was here to stay. The developed nations who were the harbingers of globalization capitalized on this opportunity. The developing nations also lapped up the rush of new and imported products that was never easily available before. Many domestic manufacturers & local brands suffered due to this situation. North American and European countries convinced the governments of developing nations of the importance of economic development through open markets.
The internet and the IT revolution further made sweeping changes in the way the developing economies did business. Developing nations started getting more opportunities due to the price disparity. Many entrepreneurs cashed in on this along with the large MNCs of the developed world. The MNCs realized that quality work can be availed from the developing nations at relatively much cheaper costs than getting the same work done in domestic markets. So, now it was the turn of the local manufacturers and service providers of the developed world to shut down. Many lost jobs and now the tables were turned. All of a sudden outsourcing which was until now considered a boon to business, now American and European counterparts started finding problems with the same.
The developing nations are fast catching up with the developed nations due to outsourcing. It is history repeated the other way now, where in Americans is losing jobs and companies are shutting down just as India had to go through the same in the past. The adage seems befitting: As you sow so shall you reap.
Wednesday, December 3, 2008
Thursday, November 13, 2008
Job Thieves
One accusation that is leveled upon countries where business processes are outsourced – They are stealing out jobs! Most Americans believe that their job market is being invaded by the cheap labor countries like China, India and other South East Asian countries. There must have been countless debates & arguments on media, letters to the government, petitions and more protesting against outsourcing.
Not only are many politicians involved in this anti-outsourcing agenda but professors, teachers and parents are bringing this ideology home to the younger generation. You will find the youths in countries like America and UK being more and more vocal against outsourcing. Race and hate crimes are increasing day by day especially in UK because of the misplaced discontent.
Being an Indian myself I detest being accused of stealing jobs and I have been at the receiving end of grumblings and animosity during my days with the BPO industry. So one starts to wonder, are we really stealing jobs from the unassuming souls in US, UK and Europe? Are we really the villain that we are made out to be? Or are we just a punching bag for nations riddled with faulty economic policies?
Voices are raised especially when the times are tough and a financial crisis looms large. During such financial crisis, companies tend to find the quick fix policy of firing employees more convenient. Since firing employees tends to show immediate returns due to the cut in salary, companies feel they have done their job in cost cutting. Shareholders are happy since the company profits are not eroding. The banks are happy since the company has successfully evaded bankruptcy by another day. The only ones who get a raw deal is the employee who lost his job. The anger and frustration of this employee is understandable. He is seething with anger and then he sees that the company is now outsourcing his job to some low cost-center across the seas. But obviously, he will feel cheated and the anger against outsourcing makes sense. The company has to outsource now since existing employees were fired and they need people to do the same work. Obvious choice will be to approach countries where the standard of living and labor costs are comparatively cheaper.
But what needs to be understood here is that the employee did not lose his job because of an Indian or Chinese or Filipino counterpart. He lost his job because his employer could not manage the finances very well. His employer ended up in this soup because of faulty management practices. The very reason a company had to trim its staff is because they were unable to manage their costs. But if the company invested it’s time in drawing up a comprehensive outsourcing strategy at the onset of financial troubles, then they can actually contain the spiraling costs and will not have to resort to large scale lay-offs.
But since they have indulged in practices without foresight, they see read when recession hits. They have to consider the option of outsourcing because it helps them survive to face another day. Rather than going bankrupt and being a burden on the already strained economy, outsourcing keeps them in the race thereby saving thousand others from facing unemployment. Now I know that every time I take up a project on an online marketplace, I am actually not stealing jobs but I am actually saving hundreds of others from losing their jobs.
Source:
Not only are many politicians involved in this anti-outsourcing agenda but professors, teachers and parents are bringing this ideology home to the younger generation. You will find the youths in countries like America and UK being more and more vocal against outsourcing. Race and hate crimes are increasing day by day especially in UK because of the misplaced discontent.
Being an Indian myself I detest being accused of stealing jobs and I have been at the receiving end of grumblings and animosity during my days with the BPO industry. So one starts to wonder, are we really stealing jobs from the unassuming souls in US, UK and Europe? Are we really the villain that we are made out to be? Or are we just a punching bag for nations riddled with faulty economic policies?
Voices are raised especially when the times are tough and a financial crisis looms large. During such financial crisis, companies tend to find the quick fix policy of firing employees more convenient. Since firing employees tends to show immediate returns due to the cut in salary, companies feel they have done their job in cost cutting. Shareholders are happy since the company profits are not eroding. The banks are happy since the company has successfully evaded bankruptcy by another day. The only ones who get a raw deal is the employee who lost his job. The anger and frustration of this employee is understandable. He is seething with anger and then he sees that the company is now outsourcing his job to some low cost-center across the seas. But obviously, he will feel cheated and the anger against outsourcing makes sense. The company has to outsource now since existing employees were fired and they need people to do the same work. Obvious choice will be to approach countries where the standard of living and labor costs are comparatively cheaper.
But what needs to be understood here is that the employee did not lose his job because of an Indian or Chinese or Filipino counterpart. He lost his job because his employer could not manage the finances very well. His employer ended up in this soup because of faulty management practices. The very reason a company had to trim its staff is because they were unable to manage their costs. But if the company invested it’s time in drawing up a comprehensive outsourcing strategy at the onset of financial troubles, then they can actually contain the spiraling costs and will not have to resort to large scale lay-offs.
But since they have indulged in practices without foresight, they see read when recession hits. They have to consider the option of outsourcing because it helps them survive to face another day. Rather than going bankrupt and being a burden on the already strained economy, outsourcing keeps them in the race thereby saving thousand others from facing unemployment. Now I know that every time I take up a project on an online marketplace, I am actually not stealing jobs but I am actually saving hundreds of others from losing their jobs.
Source:
- http://internationalbusiness.suite101.com/article.cfm/outsourcingdebate
- http://blogversity.com/recruitomatic/2006/07/11/india-stealing-jobs-2/
- http://it.toolbox.com/blogs/dr-gupta/does-offshore-outsourcing-leads-to-more-jobs-in-the-us-2512
- http://dir.salon.com/story/tech/books/2005/01/24/indian_programmers/
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