Why Do We Outsource Jobs to India?
Wednesday, July 16th, 2008Intro: There is a lot of contraversey over the outsourcing of jobs to India. A lot of people question why it is done, and others while they understand the potential monetary and bottom line advantages, wonder why morally we outsource jobs to India. It is important to learn and understand why it started happening, and then think about if it actually helps our economy in some ways to outsource jobs to India. Ultimately you have to decide for yourself if it is something that you would like to do, as the world is becoming flat and a global economy will mean more outsourcing in the future.
History of job outsourcing to India
During the mid-1990s, global trade agreements opened international economic markets, while internet businesses thrived. As a result, many cultural barriers vanished and the world became virtually smaller. Corporations, looking for ways to cut costs, took stock of these factors and decided that overseas labor markets might be useful in boosting the bottom line.
Large American technology corporations were among the first to take the plunge. Universities in India had foreseen the need for programmers and developers and developed information technology curriculum to fill the growing world demand. Newly graduated teams of Indian programmers came to the United States to train in American corporations.
The Cost Savings of Outsourcing Jobs To India
These Indian teams, once trained, returned to India to continue work on a telecommute basis. Outsourcing jobs to India had begun. Due to the lower cost of living in India, American corporations were able to pay much less to Indian workers than to their American counterparts, thus saving hundreds of millions of dollars.
The corporate planners projected that outsourcing jobs to India would save at least 20% on labor, an enticing figure indeed.
Outsourcing jobs to India became the way to go, with most IT corporations in the U.S. following suit. By 2001, American programmers were virtually unemployable, undercut by the cheaper Indian labor. This produced what amounted to a depression for the American IT industry worker.
The Drawbacks and Backlash of Job Outsourcing
Corporate planners failed to anticipate several factors that ate into the savings in labor costs. Ultimately, projects ended up costing more than those done by American workers. Communication with non-native English speaking programmers half a world away proved to be a great difficulty. Time zone differences made normal work hours in India opposite that of the American management teams, resulting in massive scheduling problems. Another serious problem surfaced when programs written in India could not be readily integrated with interfacing programs developed in the United States.
After several years of intensive outsourcing, the American IT corporations began to realize that overall profits were waning, not growing. Meanwhile, American programmers and developers had been forced into new career paths, depleting IT resources in the U.S.
However, other U.S. industries continued outsourcing jobs to India, by the hundreds of thousands. From resume writers to telephone answering services, cheaper Indian labor put more and more Americans out of work.
A tightening economy and higher energy costs in the U.S. created resentment among displaced American workers. The impact of outsourcing now affects a large segment of U.S. workers.
Where are we now?
While some corporations now still enjoy higher profits by outsourcing jobs to India, the strategy may eventually backfire. Workers in the U.S. who are laid off in favor of an overseas worker cannot afford the goods sold by these corporations. Reduced operating costs may well turn into excess inventory. So the question remains, do we want a strong economy at home, which benefits all of us, or strong economies abroad?
Conclusion: Outsourcing has grown and even now India is not the dominant outsourcing solution for all situations. There will continue to be a shift of outsourcing trends for different industries, niches, etc… I hope that you can think and understand outsourcing and the world economy and make educated decisions about this global trend. There are some jobs that make more sense to outsource and can help grow small businesses into large ones that have the opportunity to hire more local jobs. The trend of virtual assistants has been hugely successful, letting executives and start-ups control daily operations more effectively so they can grow their business.
