Sunday, November 14, 2004
Economist on Outsourcing

The Economist has a survey on outsourcing, which says that "the global deployment of work has its critics, but it holds huge opportunities for rich and poor countries alike."


A few years ago, the combination of technology and management know-how that makes this global network of relationships possible would have been celebrated as a wonder of the new economy. Today, the reaction tends to be less exuberant. The same forces of globalisation that pushed Flextronics into China and its share price into the stratosphere in the 1990s are now blamed for the relentless export of manufacturing jobs from rich to poorer countries. Brillian's use of Indian engineers is no longer seen as a sign of the admirable flexibility of a fast-growing tech firm, but as a depressing commentary on the West's declining competitiveness in engineering skills. The fibre-optic cable running between America and India that used to be hailed as futuristic transport for the digital economy is now seen as a giant pipe down which jobs are disappearing as fast as America's greedy and unpatriotic bosses can shovel them.

These anxieties have crystallised into a perceived threat called “outsourcing”, a shorthand for the process by which good jobs in America, Britain or Germany become much lower-paying jobs in India, China or Mexico.

A forthcoming study by McKinsey looks at possible shifts in global employment patterns in various service industries, including software engineering, banking and IT services. Between them, these three industries employ more than 20m workers worldwide. The supply of IT services is the most global. Already, 16% of all the work done by the world's IT-services industry is carried out remotely, away from where these services are consumed, says McKinsey. In the software industry the proportion is 6%. The supply of banking services is the least global, with less than 1% delivered remotely.

McKinsey reckons that in each of these industries, perhaps as much as half of the work could be moved abroad. But even a much smaller volume would represent a huge shift in the way that work in these industries is organised. There may be just as much potential in insurance, market research, legal services and other industries.

Outsourcing inspires more fear about jobs than hope about growth. But the agents of change are the same as those that brought about the 1990s boom. New-economy communications and computer technologies are combining with globalisation to bring down costs, lift profits and boost growth. This survey will try to restore some of the hope.

General | PermaLink | Comments (2)

Even the short excerpt Rajesh quoted above speaks volumes about the whole outsourcing bruhaha. Software engineering, banking and IT services -- the poster boys of outsourcing -- employ about 1 to 2 percent of the workforce. And of that small percentage only a small percentage (16 percent in the case of IT services) of the workers' production is consumed overseas.

The world, ladies and gentlemen, is a very large place with about 6,000,000,000 people. Outsourcing will no more impoverish the US than it would enrich India. To a first approximation, it is just noise in the system.

Posted by Atanu Dey

I posted something along these lines to deeshaa discussion group a while back but got less than an enthusiastic response.
I toned it down a bit for this retread to suggest that obsolete video games and systems should be collected for distribution in Indian villages that have TV receivers
Anyone that watched the first Bush war in Iraq will recall that it looked like a video game. Since then millions of kids have developed impressive degrees of hand/eye coordination playing video games and some have probably improved their reading skills.
Industrialists are the last people to notice trends involving kids and computer games, but some of them will realize that kids that have driven cars and piloted planes in video games might grow up to use similar skills for controlling machines from a distance limited mostly by the requirement for near-real time reactions.
When this happens out sourcing won't rely on foreign factories because foreign workers will be able to work "in" domestic factories that have been refurbished with various kinds of
mechanical surrogates. This development would fill in the gap between remote control toys with wireless video cameras and the control of rovers on Mars by geeks at the Jet Propulsion Lab.
Somebody will come up with names for this kind of enterprise because in addition to “out sourcing, there will be in sourcing when people in Indian villages can be hired to control telerobotic machines in cities and old folks in wheel chairs can operate mobile machines to patrol malls, paint flagpoles and deliver packages, pizza— or even babies.

Posted by Frank McNeill
Books for Internet Entrepreneurs

Paul Allen has some recommendations. Among them:
- The E-Myth: Why Most Small Businesses Don't Work and What to Do About It, by Michael Gerber
- Love is the Killer App, by Tim Sanders
- Net.Gain: Expanding Markets Through Virtual Communities, by John Hagel III, Arthur G. Armstrong
- Intellectual Capital: The New Wealth of Organizations, by Thomas Stewart
- Linked, by Albert-Laszlo Barabasi
- Influence: The Psychology of Persuasion, by Robert B. Cialdini
- The New, New Thing, by Michael Lewis
- Smart Mobs, by Howard Rheingold
- Designing Web Usability: The Practice of Simplicity, by Jakob Nielsen

Entrepreneurship | PermaLink | Comments (1)

The E-Myth stuff from Gerber is very powerful- if you are interested in making your business succeed!

Here's a related blog: http://www.emythblog.com

Posted by Chris
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