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[Dec 22, 2006] The slacker's new bible By Jo Johnson: Management tips from the executive slow lane

An Interesting view on demoralization This time from French perspective.
Aug 16, 2004 (MSNBC) You sit next to idiots, loathe office bonhomie and crave escape. You're half-crazy with boredom, pretend to work when you hear footsteps and kill time by taking newspapers into the washrooms. Your career is blocked, your job is at risk and the most ineffective people get promoted to where they can do least harm: management. You recoil at jargon, consider the expression 'business culture' an oxymoron and wish you had the guts to resign. If this is you, help is at hand.

Bonjour paresse (Hello Laziness), a call to middle managers of the world to rise up and throw out their laptops, organigrams and mission statements, is the unexpected publishing sensation of the summer in France.

Sub-titled The Art and the Importance of Doing the Least Possible in the Workplace, the 113-page "ephlet" (part-essay, part-pamphlet) is to France's managerial class - the cadres - what the Communist Manifesto once was to the lumpen proletariat.

Written by Corinne Maier, an economist at state-owned Electricité de France, Bonjour paresse flashed albeit briefly to the number one spot on Amazon's French best-seller list.

An anarchic antidote to management tomes promising the secrets of ever greater productivity, Bonjour paresse is a slacker's bible, a manual for those who devote their professional lives to the sole pursuit of idleness.

There have been many works in praise of idleness over the decades, but with the French work ethic weakened by the introduction of the 35 hour work week, the siren's appeal has never been stronger.

The truculent chapter titles, including Business Culture: My Arse!, The Cretins Who Sit Next To You, The Best Management Con-Tricks and Why You Lose Nothing By Resigning, set the tone of the book.

Ms Maier is the closest thing France has to Scott Adams, the comic genius behind the best-selling Dilbert cartoon strips in the U.S., whose influence strongly marks her writing. Like Adams's satires of life in corporate America, her observations generate one universal reaction among readers: "Ohmigod, that's just like my company!"

The actively disengaged
Over lunch at the Café Bonaparte off the Boulevard Saint Germain, the 40-year-old mother of two says it is time for wage slaves to hit back. "Businesses don't wish you well and don't respect the values they champion. This book will help you take advantage of your company, rather than the other way around. It will explain why it's in your interest to work as little as possible and how to screw the system from within without anyone noticing."

Many already are. An IFOP poll cited in the book claims 17 percent of French managers are already so "actively disengaged" with their work that they are practically committing industrial sabotage.

Even if Bonjour paresse is quite obviously a tongue-in-cheek send-up of French corporate life, EDF, is far from amused and has started disciplinary action.

But the book is about so much more than EDF. It is a book of its time and place. France is entering a long-promised Age of Leisure. No other OECD country has witnessed as dramatic a fall in the number of hours worked per inhabitant.

In its 2004 employment outlook, the OECD reported that the French worked 24 per cent fewer hours than in 1970, whereas Americans toiled 20 percent more. France was not alone. Large declines were also seen in Germany and Japan. But the situation in France is extreme.

Two factors explain why. First, the proportion of people of working age in France who manage to find jobs has plunged to 61.9 percent, compared to over 70 percent in the UK, the U.S. and Denmark. Second, the introduction of the 35 hour week means French workers put in less time than ever.

Ms Maier, who works just 2 ½ days a week, is hardly unusual. The average French worker clocks only 1,459 hours per year, compared with a mean of 1,762 for the OECD as a whole and almost 2,000 for the Stakhanovites in the Czech Republic.

As the rest of the world becomes "always-on", bosses complain French workers are now "always-off".

In the Dilbert comics, one lesson is that it is not enough for you to succeed, others must fail. You have to improve your own standing by subtly disparaging those who surround you.

Demotivating others is also a core management skill as with employee self-esteem come unreasonable requests for money. There are many ways to make it clear to the grunts that their work is not valued: reading magazines when they are talking to you, asking for information "urgently" then leaving it untouched for weeks, and having your secretary return their calls or e-mails.

In Bonjour paresse, the very notion of personal advancement is ludicrous. Whereas Scott Adams drew his inspiration from his nine years as a middle manager occupying cubicle 4S700R for the Pacific Bell phone company, Ms Maier has had a very different taste of life in the executive slow lane - twelve years in the bowels of the French public sector.

This bureaucratic sprawl provides jobs for an astonishing one in four workers in France and enough comic material to keep business humorists in work for decades. Yet it is the private sector she most abhors.

Ms Maier describes how middle managers who have no strings to pull fail to win promotion because all the senior positions in big French companies are monopolized by well-connected alumni of the elite grandes écoles, notably the énarques from the Ecole Nationale d'Administration.

She writes for a group of people who no longer believe that work is the path to personal fulfilment. "It is de rigueur to claim you work because 'your job interests you' and even if in reality everyone is only there to pay the bills at the end of the month, it is a complete taboo to say so," she says. "One day I said in the middle of a meeting that I could only be bothered to turn up in order to put food on the table: there was 15 seconds of absolute silence during which everyone looked agonized."

It is a world where the over 50s are shoved out the door in early retirement programs at a rate that has left only a third of France's 55-64 year olds still working - "a world record", Ms Maier says. It is a world where companies parrot "our people are our most important asset" yet throw them out like used Kleenex. It is a world where impossible demands are made of the young thruster who believes the words pro-active and benchmarking actually mean something and who hopes his talents will be recognized and that he will be loved and cherished.

The disenchantment with corporate life is total. Forget In Praise of Slow, Carl Honoré's faddish new treatise on "marrying la dolce vita with the dynamism of the information age" and all the other wimpy pleas for work-life balance. It is hard to see Ms Maier and her electrician buddies rushing into new Spanish siesta salons' selling 20 minutes of sleep for €4. They'd much rather zonk out on the job for free. There's no "I don't know how she does it" quest for the tempo giusto because the object of work is simply to do as little of it as possible.

So what are some of her ten commandments for the idle? Take number three: "As what you do is pointless and as you can be replaced from one day to the next by the cretin sitting next to you, work as little as possible and spend time (not too much, if you can help it) cultivating your personal network so that you're untouchable when the next restructuring comes around."

Then there's number five: "Never accept a position of responsibility for any reason. You'll only have to work more in exchange for a few thousand more francs (effectively peanuts)." The others are in similarly, subversive vein.

A publisher's surprise
Bonjour paresse initially seemed destined to disappear without trace. Published at the end of April by the little-known Editions Michalon, the book, whose title is a nod to Françoise Sagan's 1954 novel Bonjour tristesse, generated little comment. At the end of July, however, Le Monde, the leading daily, unexpectedly devoted a front page article to EDF's disciplinary action against the book's author. The newspaper of reference reported that Ms Maier had been summoned to a preliminary hearing on Aug. 17th.

Failing to see the funny side, EDF accused Ms Maier of "repeatedly failing to respect her obligations of loyalty towards the company," and of running a "personal campaign, clearly proclaimed in the book, to spread gangrene through the system from within." Citing her habit of reading newspapers in meetings and of leaving one gathering early on May 3rd, the charge sheet also alleged she had neglected to secure permission to mention on the back cover that she worked for EDF.

Corinne Maier is as bolshy and unrepentant as her book leads you to expect. Her motor-bike helmet by her side and her long brown hair looking like it could use a good brush, she declares she has no intention of attending the disciplinary meeting. "It's the middle of August and I will obviously be on holiday," she says. "I have sent them copies of my train and ferry reservations to prove it." But she insists she is not looking to get fired. Her situation clearly suits her well.

Born into a family of aluminium siding salesmen, she studied in Paris at Sciences-Po, the French equivalent of the London School of Economics, before taking further degrees in industrial economics and later a doctorate in psychoanalysis. She has found time to write eight books since 2001, including several works on Jacques Lacan, the French psychoanalyst. Three of these come out later this year, two introductory books on Gaullism and Nazi Germany and "a more intello" book on Pasteur.

France's unions have championed her cause. They see EDF as determined to crush all sources of dissent to its transformation from quintessential symbol of the French public service into a regular société anonyme, a public company that the center-right government will then be able to privatize. An umbrella body representing the six main unions at EDF has issued a statement defending Ms Maier's freedom of speech, saying she had "not revealed any secrets, jeopardized any business or even mentioned EDF by name once in the book."

"EDF has cited the pettiest offenses," says Ms. Maier. "The real reason is that they don't like my book." Refusing to comment on "an ongoing disciplinary procedure", EDF is belatedly trying to bury the row its own clumsy response had started. The book, however, is already being re-printed. "My publisher is delighted with EDF's reaction," says Ms Maier. "It is all thanks to them that we have a best-seller. We have had interest from numerous overseas publishers wanting the translation rights."

[Dec 22, 2006] Man indicted for planting 'logic bomb' in company's IT systems

December 20, 2006 (Computerworld) -- Facing a possible layoff from his job as an IT systems administrator, a 50-year-old New Jersey man was charged yesterday with planting malicious "logic bomb" code into the company systems where he worked that could have damaged more than 70 servers.

In a five-page indictment, Yung-Hsun Lin, also known as Andy Lin, 50, of Montville, N.J., was charged with two counts of intending to cause fraudulent, unauthorized changes to computer systems in violation of U.S. laws. Each count is punishable by up to 10 years in prison and up to a $250,000 fine. A federal grand jury handed down the indictment.

Lin was arrested yesterday by FBI agents and made an initial appearance before a federal magistrate. He is scheduled for arraignment on the indictment on Jan. 3.

In a statement, U.S. Attorney Christopher J. Christie in Newark alleged that Lin planted the logic bomb in HP Unix servers at Medco Health Solutions Inc. The bomb could have destroyed critical customer prescription data, payroll information and other records stored on more than 70 servers used by the Franklin Lakes, N.J.-based company.

Lin, who worked in Medco's Fair Lawn offices, apparently inserted the logic bomb into Medco's IT systems in October 2003 because he feared losing his job. Lin learned that his IT group was being merged with another group inside the company after it was spun off from pharmaceutical company Merck & Co., according to the indictment.

Instead, Lin was spared a layoff while four colleagues lost their jobs, according to the U.S. attorney's statement.

[Nov 7, 2006] Outsourcing to India Dealing With Data Theft and Misuse

...recently, there have been allegations that call center employees there have stolen data entrusted to their employers. As a result, concerns have risen about the security of data held by Indian service providers, and companies that outsource to India are seeking out the remedies that are available to them to deal with and prevent the misuse of data in India.

...The Indian legal system is substantially based on the British common law system. While there is no omnibus Indian data security law, there are several laws that apply to data theft or misuse in India. Typically, when an incident involving data occurs, a complaint is filed for theft, cheating, criminal breach of trust, dishonest misappropriation of data and/or criminal conspiracy under the provisions of the Indian Penal Code (IPC) of 1846 and for hacking under the Information Technology Act (ITA) of 2000. Many of these offenses under the IPC and the ITA allow for an arrest without a warrant, are nonbailable and carry penalties that range from one year to life imprisonment, as well as fines.

...

While several measures have been put in place to deal with data security issues, some concerns still remain regarding the Indian legal system. Indian courts are overburdened – in 2005, the lower courts had over 20 million pending cases, while the high courts had over 3 million. Delays in the system are common, and an average case can take several years to be resolved. However, things are changing. Several measures are under way, and the prime minister and chief justice of the Indian Supreme Court have committed to dealing with the issues facing the Indian courts. Further, the system itself, while slow, works. More importantly, as previously discussed, several preventative measures are being put into place by the service providers themselves to deal with data security and privacy issues.

[Jun 9, 2006] The Corner Office in Bangalore - New York TimesBy LAWRENCE ORLOWSKI and FLORIAN LENGYEL

June 9, 2006COSTS are rising everywhere for American corporations, from energy to employee health insurance premiums. Yet in their drive to cut expenses, most notably by moving factories and call centers to other countries, they are overlooking the escalating cost of the executive suite. It's time to apply market logic to this disturbing trend and begin outsourcing chief executives. This measure would unlock tremendous value for shareholders.

So far, outsourcing manufacturing and services has led to higher chief executive compensation, at the expense of shareholder profit. For example, I.B.M.'s chief executive, Samuel J. Palmisano, who has been moving jobs to India, last year saw his total compensation rise 19 percent to $18.9 million - even as the total return for his company's stock fell 16 percent.

That's proof that globalization hasn't gone far enough. China, India and other emerging markets offer shareholders a virtually unlimited talent pool from which to draw chief executives. With an increased supply of candidates, a truly independent corporate compensation committee would be easily able to hire superior leaders at salaries and benefits that are a small fraction of what their American counterparts in those fancy corner offices demand.

Several orders of magnitude separate the compensation of American and overseas chief executives; the Federal Reserve notes that while a typical American chief executive in 2004 got a compensation package 170 times greater than that of the average American workers, in Britain it was 22 times and in Japan 11.

But there are several benefits beyond the immediate savings. Major American corporations have been shifting their factories and labor force to China and India for some time now. It would make sense for the chief executive of an American corporation to come from, and be based in, those areas of the world where the potential for market growth is the greatest. It would be reassuring to have a chief executive who understood the local business practices, the country's cultural underpinnings and the language.

Also, given the importance placed on performing well in science and math in countries like China and India, it would be more likely that an offshored chief executive would have had a rigorous technical education instead of degrees in the "softer" management disciplines that are common at American business schools. Critics may question whether it is wise for an American company to have its chief executive in Bangalore or Beijing. But this is the thinking of a bygone era. More and more corporate chiefs say that they do not want their companies to be seen as American anymore. Cisco's chief executive, John Chambers, has declared, "What we're trying to do is outline an entire strategy of becoming a Chinese company."

Indeed, considering how the United States is perceived by the world these days, this is just smart marketing. And installing a foreigner from a developing country as chief executive would be a savvy move.

Other critics might point out that while a chief executive's compensation package may be eye-popping to the average person, in terms of his company's total market capitalization, it is really quite modest. This is an excuse, not a justification.

Current chief executive compensation creates what economists term a perverse incentive. An American chief executive, who is paid an average of $11.3 million annually, gets rewarded enough in one year to exceed the lifetime standard of living of 99.99 percent of the world's population. Even if he's booted from his job because of poor performance, he's set for life.

It is far better for shareholders to have chief executives whose compensation packages are based on the long-term performance of the company. Or in plain language, it is better to have a "hungry" executive instead of one who stays fat and happy even when the corporate ship capsizes into the troubled waters of bankruptcy.

In addition to perverse incentives, the current level of chief executive compensation creates opportunity costs. The money saved by hiring a cheaper executive can be invested in even more offshoring initiatives. A virtuous circle of shareholder profitability can be established.

Moreover, this would be a boon for management consultancies that can help companies scour the world for chief executives. McKinsey and Booz Allen, take note, and take outsourcing to its logical conclusion.

Lawrence Orlowski is an equity analyst. Florian Lengyel is the assistant director of research computing at the City University of New York Graduate Center.

[Jun 6, 2006] IBM to invest $6B in India

IBM has invested $2 billion in India in the past three years. The $6 billion investment announced today will go toward the cost of increasing its workforce, expansion of IBM's facilities in the country, and projects such as education and health that the company is working on with the Indian government, said Shanker Annaswamy, managing director of IBM India. IBM did not, however, say how many additional people it will be hiring in India. IBM's Indian unit is already the largest of any country outside the U.S.

As part of the investment, IBM is setting up in India the first in a new kind of IBM service delivery centers that deploy processes and technologies to automate IT services delivery, the company said. After the pilot is complete, the technologies will be rolled out across other IBM service centers. It is also setting up a Telecommunications Research and Innovation Center at its lab in India. The new center will serve as a key resource for IBM's telecommunications companies around the world, the company said.

[Jun 6, 2006] India's offshore outsourcing revenue grew 33%

India's exports of software and services such as call centers and back-office operations totaled $23.6 billion in the year to March 31, up by 33% from a year earlier, the National Association of Software Companies (Nasscom) in Delhi announced Thursday.

Preliminary estimates released by Nasscom in February had indicated that the growth in export revenue was 32%.

Nasscom is also upbeat about revenue growth in the country's software and services industry for the year ahead. The country's exports of software and services are expected to grow by 27% to 30% in the year to March 31, 2007, to a total of between $29 billion and $31 billion, Nasscom said.

The domestic market for software and services is also projected to grow by 20% on account of e-governance projects, and investments in IT by the health care and retail sectors.

... ... ...

Of the total exports in the year to March 31, exports of software and related services grew by 33% to $13.3 billion, while revenue from call centers and business process outsourcing grew 37% to $6.2 billion. Engineering services and product exports earned $4 billion, up by 27% from the previous fiscal year.

Revenue from software and services delivered in the domestic market grew by 25% to $6 billion.

The country's software and services sector employed 1.3 million as of March 31, of which 930,000 were employed in the export sector. Indirect employment by the software and services sector was 3 million.

[May 17, 2006] FBI Offshoring still a risky proposition - Computerworld Blogs

by Robert L. Mitchell

A few years back Boston-based FBI special agent Nenette Day busted a rogue programmer in India who had stolen the source code to SolidWorks Corp's CAD program. The sting, which took place in India, was a success in that SolidWorks was able to recover its software. If you think the perpetrator is rotting in jail, however, you'd be sadly mistaken.

The case is still dragging on in court, and it's unlikely that the defendant will ever serve jail time due to weak laws, Day says. In the SolidWorks case, which involved the theft of intellectual property valued at $750 million, the perpetrator is free, walking the streets and working in another programming job. He is unlikely to see any jail time.

Day provided an update on the SolidWorks case during a presentation last week at the CIO Forum.

SolidWorks was lucky. Once the source code goes out the door it could be posted on the Internet and at that point the damage is done. Prevention is key.

Nondisclosure agreements with offshore organizations won't help reduce this risk because they have no legal standing in other countries. The only way to contractually protect your intellectual property is to have the local outsourcer bind employees to an agreement under local laws, says Day. But when the laws are weak, she says, even these agreements provide little protection.

Day says before sending source code to a country companies should check what laws are available to protect them - and whether they've been successfully used by prosecutors. The prevalence of corruption in law enforcement can also stop a case. In many parts of the world, for example, it's not uncommon for police to refuse to help unless bribes are paid first.

To mitigate the risk of offshoring, Day says companies should use an offshore partner with tight security practices and release only portions of the source code at any one time so that the offshore programmers never have the complete program.

It's also important to work with an offshore partner who will be committed to working with local authorities to track down and prosecute any perpetrators, should a loss occur.

Still another way organizations are migitating this risk is by offshoring through a U.S.-based company like Gap International Inc. in Springfield, PA. The consulting company has a division in India where it hires local programmers as employees. While that still won't prevent a disgruntled employee from trying to steal trade secrets, you can bet that a company that can be sued in the U.S. is going to be very careful. I asked Rich Rothman, director, what would happen if just one disgruntled employee got away with a client's source code? "We'd be out of business," he said without hesitation.

[May 17, 2006] InformationWeek Weblog Chinks In Outsourcing's Armor. by Tom Smith

[May 08, 2006](Computerworld) The Seven Deadly Sins of Outsourcing by Judy Artunian

Outsourcing is a source of stress, struggle and angst for many IT managers, and no wonder: More than half of outsourcing agreements end up prematurely terminated, according to a study released last year by DiamondCluster International Inc., a Chicago-based consulting firm. That leaves a lot of companies far from outsourcing nirvana, but it doesn't have to be that way. We asked IT experts and veterans to talk about the bad decisions and faulty assumptions that can cause your outsourcing project to fall from grace. They came up with seven deadly sins.

1. Feeble governance

Vice: You assume that your organization will auto-matically fall into a smooth working relationship with your outsourcing vendor. Three months later, you encounter management snafus that seem to have come out of nowhere. One large retailer outsourced a project that was supposed to take six months, but 18 months later, the CIO was still waiting for results. Why? "There was no governance plan other than a target for the end date," says Atul Vashistha, chairman and CEO of neoIT Inc., a consulting firm in San Ramon, Calif. "If they'd had a governance plan with milestones in place, they would have realized early on that targets weren't being met."

Virtue: Before you sign with an outsourcer, nail down an organizational structure, establish methods for keeping tabs on the work being done, and spell out how you will manage the outsourced project on a day-to-day basis. "Your governance system should provide continual feedback to the organization regarding how the relationship is working, what value you are getting, how you are solving problems that have cropped up," says Michael F. Corbett, executive director of the International Association of Outsourcing Professionals in LaGrangeville, N.Y.

Build the management costs into your budget. The average cost to manage an outsourcing contract is 3% to 6% of the size of the contract, according to Julie Giera, an analyst at Forrester Research Inc. in Cambridge, Mass.

2. Overblown expectations

Vice: You choose an outsourcing company for its ability to meet your primary goal, but later the company falls short in other areas. For example, one of Europe's largest manufacturers was so eager to trim expenses that it negotiated an outsourcing contract purely on cost. As the project progressed, the manufacturer complained that the outsourcer wasn't innovative enough. How bad was it? Less than two years after signing the contract, the manufacturer terminated the agreement -- a move that carried a steep price tag in penalties and legal fees.

Virtue: Don't even approach a service provider until you have prioritized what you expect to achieve by outsourcing. If you're shopping based on cost, you may have to give a little on service level. Keep in mind that a cost-based contract might be appropriate for standard services like infrastructure management but not for specialized skills such as application development. "You don't necessarily want the cheapest brain surgeon," says Giera.

When considering vendors, look beyond the sales pitches. "People select suppliers based on marketing and size rather than a true capability evaluation," says Vashistha. He suggests that you focus on the location where the work will actually be done. Ask the vendor about its resource pool. Are its employees experienced in your industry? Do they have the appropriate technical skills? How much training does the vendor provide? Talk to clients that the vendor has served from that location for at least 12 months.

3. Blindly banishing projects

Vice: You have offshored critical areas of your business to overseas suppliers that are inexperienced in your field or otherwise ill-equipped to handle the task, and customers are up in arms. For example, after Dell Inc. outsourced its technical support to offshore providers, the company was inundated with complaints from U.S.-based customers who reported that they couldn't understand the service providers because of their accents. Dell had to move a chunk of its technical support services back home to Texas.

Virtue: Use common sense and send projects offshore only to countries where your industry is mature. India and the Philippines, for example, while good choices for services like health insurance data entry, are poor choices for jobs that require decision-making related to health insurance, says Vashistha. That's because in-depth knowledge of the field is still scarce in those areas. "Health insurance wasn't prevalent even 10 years ago in those locations," he says.

Keep in mind that offshore projects cost more to manage than projects that are sent to domestic outsourcers. That can make small projects especially costly to send offshore. "A lot of people look at the money they'll save per hour but ignore that they'll probably have a 20% to 25% increase in administration costs," says Rich Hoffman, president and CEO of Hyundai Information Services North America LLC in Fountain Valley, Calif.

4. Dumbly disowning projects

Vice: You've outsourced so much of IT that your outsourcer knows almost as much about your customers, your products and your industry as you do. According to Hoffman, the IT department of another major automotive manufacturer recently realized that it outsourced too aggressively and is now trying to rehire nearly 150 former employees who went to work for the outsourcer. "When they outsourced all of those people, half left because they didn't want to work for an outsourcer, and the other half ultimately got transferred by the outsourcer to other companies," he says. "So they lost all the people who knew their customers, products, the automotive industry and business processes."

Virtue: Don't outsource functions that require you to provide outsourcing vendors with strategic information about your company and your industry. Also, Hoffman advises keeping most of your internal help desk activities in-house and discouraging other business units from outsourcing customer-facing activities. You will have more control over which processes get outsourced if you insist on being involved in all discussions about outsourcing. "Run an analysis ahead of time, and get a consensus with business leaders about what must stay in versus what must go out," says Hoffman.

5. Bad assumptions

Vice: Your five-year outsourcing contract failed to take into account that technologies and business requirements would evolve within those five years. Now you can't move forward with new technologies. Giera notes that because of changes in server technology, for example, many companies will need fewer, but larger, servers down the line. If your contract is based on a per-server, per-month formula, you may not be able to change that without being penalized financially, she says.

Virtue: Write a contract that gives you the flexibility to reprioritize projects and resources without a major penalty.

"Technologies change so fast and the needs of clients change so fast, most parties should go into the contract expecting that after the first two years there is a pretty high likelihood that they'll have to renegotiate the contract," says Robert M. Finkel, an attorney at Milbank, Tweed, Hadley & McCloy LLP in New York.

Also, be sure the contact compels your outsourcer to keep costs in line as the market evolves. "Include benchmarking clauses every two to three years so that you can look at what's gone on in the market and make sure that the outsourcer is still competitive," says Giera.

6. Sloppy service levels

Vice: You've signed a contract that gives you minimal leverage on service levels. Now the outsourcer's poor service is interfering with your business, but you've got nothing to back up your demands for improvements.

Virtue: Define service levels in the contract and stipulate penalties for missed service levels. Having the service levels in hand not only helps ensure that you get the quality of service you expect, but it can also help when negotiating the contract's price tag. "It's hard to fix a price without knowing what the service levels are," says Finkel. But he says that it's not uncommon for vendors to want to wait until after the contract is signed before agreeing to specific service levels. That takes away your leverage and makes it less likely that you will reach a satisfactory agreement.

The penalties should escalate based on how frequently service levels are missed and how much the resulting disruption affects your business. "You shouldn't have penalties for one miss, but the penalties should get exponentially larger the more frequently a service level is missed," Giera says. And your contract can stipulate that you have the right to terminate or take back part of the service that the vendor is providing if the number or severity of the service-level problems reaches a certain point, Finkel says.

7. End-game myopia

Vice: You didn't include a transition plan in your contract. Now, as it draws to a close, your efforts to move to another outsourcer or bring the work in-house are stymied. An even worse case: Your outsourcing relationship ends abruptly. One of Giera's clients, a midsize manufacturing company, outsourced all of its payroll functions to a firm that suddenly went out of business. "My client couldn't pay its hourly workers on time that Friday. There were no provisions in the contract to get the data and employee records back, so they had to go to a manual payroll system," she recalls. The manufacturer ultimately spent eight months rebuilding its payroll system, including manually reconstructing tax, unemployment insurance and benefits records.

Virtue: To minimize disruptions to your business, make sure your contract calls for the outsourcer to be involved with the end-game transition. "Otherwise, what's the incentive for the vendor to help you?" says Finkel.

Your contract should stipulate that you may offer jobs to people on the outsourcer's staff who have developed knowledge critical to your company. You should also be able to buy at a reasonable price the hardware and software that your outsourcer is using on your behalf. In addition, be certain that the contract gives you usage rights to any software that the outsourcer develops for you.

And be sure to give yourself enough time to make the transition. "When you terminate an outsourcing contract, you'll probably need more time than you think," Giera says. "Specify in the agreement that you can extend the agreement with appropriate notice at your existing terms, conditions and price for up to 90 days."

Artunian is a freelance writer in Newport Beach, Calif. Contact her at jartunian@sbcglobal.net.

[Apr 17, 2006] Asia Times /New globalization battle threatens Asia By Joergen Oerstroem Moeller

The world is suddenly faced with a new economic policy dispute: national governments questioning the benefits and wisdom of cross-border mergers and acquisitions, versus the imperative of economic globalization relentlessly pushing such restructuring in the name of productivity and cost-cutting. The depth and importance of this battle is not widely understood, despite its obvious importance for the future of globalization.

The battle lines are visible both in Europe and in the US, and beginning to be seen in Asia. After the implementation of the single European market in 1993, the Europeans reaped considerable benefits from economies of scale, and restructuring of the continent's enterprises was the next logical step. A truly European industrial structure, it was argued, should replace the out-of-date structure tailor-made to individual national markets but not the large and now-single European market.

Consolidation got off to a promising start. A wave of mergers and acquisitions improving productivity swept through the individual European nation-states. But cross-border mergers and acquisitions - which promised the largest efficiency benefits - proved a harder nut to crack. Admittedly there have been some European cross-border mergers and acquisitions, but not nearly to the extent hoped for; and the apparent European lag in productivity compared to the US has been partly ascribed to the lack of European restructuring.

Recently, several proposed deals have run into crossfire from national governments in Europe - for example, the plan by Italy's ENEL to purchase France's Suez; a planned merger of German energy and environmental giant E.ON and Spain's Endesa; the Indian global steel giant Mittal's attempt to purchase Luxembourg-based Arcelor, itself one of the most prominent results of cross-border European mergers; a prospective union of Italy's Unicredito and Germany's HVB; and a merger between the Dutch bank ABN AMRO and Italy's Antonveneta. That's not to mention the French government's uproar last summer when rumors circulated that Pepsi planned to buy the French food giant Danone.

In the US, the China National Offshore Oil Corporation (CNOOC) was not allowed to buy the oil company Unocal. Chinese PC manufacturer Lenovo managed to get the green light to buy IBM's computer division, but only after a hard struggle. And now opposition has seemingly revived with the uproar over the State Department's purchase of 16,000 computers from a Lenovo/IBM wholesaler. An upcoming case is the French telecom giant Alcatel's bid for Lucent, where the delicate point is Lucent's defense and intelligence-related activities for the US government. A political majority in the US Congress threw a spanner in the works for what the Bush administration thought was a done-deal purchase by a Dubai-based company of a firm running US ports, when commentators and politicians began to question the wisdom of allowing container ports to be managed by a company based in the Arab Middle East.

A deeper analysis reveals three motives that threaten not only restructuring of global industry but globalization itself.

First, the fear of losing jobs and income has jumped from blue-collar workers (factory workers) to white-collar workers with a higher education. Globalization implies that no job is 100% safe. Education, skills and even performance do not protect jobs from outsourcing. Politically, that makes a difference, because white-collar workers have a potentially stronger political influence than their blue-collar counterparts. They know how to play the political game, because they form part of the political elite. Opposition from their side to globalization is thus far more dangerous for globalization than resistance from blue-collar workers and trade unions. White-collar workers used to be the elite troops of globalization. For them it was almost entirely beneficial: no risk of losing jobs, but considerable gains from lower consumer prices. Now, these professional workers suddenly realize that their jobs may also be in danger, and they are reacting similarly to the way the blue-collar workers and the trade unions did. If this trend continues, globalization may lose some of its most vocal supporters.

Second, governments worry about cross-border restructuring not because of the potential loss of jobs, which is manageable, but because of the potential loss of brainpower. After a merger, the purchasing company is not generally inclined to run duplicate planning staffs, strategic offices, research and development branches, financial headquarters, etc. These activities of vital importance for the future of the company must be concentrated in one or at least a few places to reap the benefits of interaction. And in cross-border mergers, it is highly doubtful whether the 'brains' of the purchased enterprise will stay in its original home country. Thus, the loss for this county becomes twofold. First, it loses the brainpower of the purchased company. Second, it loses the benefit of other companies either having or planning to establish brainpower to interact with the existing one now on its way out. Any ambition of creating an "industry cluster" or building up a high-performing group of enterprises can be swept away.

The government's position to fight to keep brainpower is logical - it cannot be brushed aside, labeled as old-fashioned protectionism pursued by people who don't understand the imperatives of globalization. It goes deeper than that. The coalition between white-collar workers switching their political view from staunch supporters of globalization to skepticism and governments strongly motivated to keep brainpower at home augurs a potentially formidable and acute threat to globalization.

The third motive is national security. After the end of the Cold War the most serious threat to developed, Western countries disappeared. Instead, terrorism, infectious diseases and international crime pose a threat against not the nation but the well-being of our societies. If and when a cross-border merger and acquisition is perceived as a security threat, the politicians slam on the brakes, and after having stimulated the awareness in the population over precisely this kind of threat, find it difficult or political inopportune to run any risks. This explains the Dubai case and also explains why the first reaction to the Alcatel/Lucent case was the raising of questions over national security, pointing out that Lucent is a provider of high-tech weapons and intelligence-gathering systems at the heart of the US defense system.

What are the implications for Asia of this new pattern of behavior? The new skepticism over cross-border mergers is emerging precisely at the moment when many of Asia's largest and most vibrant companies plan to go multinational, and many of them look at mergers and acquisitions as the right way to obtain the expertise and management know-how they need. CNOOC's failed attempt to purchase Unocal, in this light, may be considered an ominous sign. If the Europeans and Americans start to put the brakes on, Asia may end up as the big loser, finding its easiest route into the big leagues of multinational enterprises full of obstacles or, in the worst case, entirely blocked.

A warning shot has been fired. If the momentum of globalization is to be maintained, both business leaders and politicians must understand the underlying fear driving opposition to cross-border mergers and acquisitions. Even more, they must find ways to deal with that fear and anxiety to ensure an equitable distribution of globalization's benefits, as developed-country economies transition from a manufacturing base with threatened blue-collar jobs, to a service or IT economy with white-collar jobs under fire.

Joergen Oerstroem Moeller is a Visiting Senior Research Fellow at the Institute of Southeast Asian Affairs in Singapore, and an Adjunct Professor at the Copenhagen Business School.

[Apr 15, 2006] http://callcentermovie.com a good 12 minute film about call centers outsourcing. Some black humor and stereotyping but a couple of episodes are extremely funny.

Date: 4/6/2006, 6:26 pm, EDT
Name: callgirlONE
Email: jdadmirersinc@msn.com
Number: 129

While I work in a USA call center.... the callers where pretty true to form. Even poor Debbie.... who I don't answer calls from... seemed to be a person who must work with me somewhere in the building.
For those of you that didn't get the joke? Well you have either
A. not been outsourced yet
B. do not work in a call center
C. do not understand that somewhere in a land foreign to your heritage they are making movies of YOUR particular stereotype and laughing like hell.

GOOD JOB --

Date: 4/4/2006, 9:07 pm, EDT
Name: Srini
Email: sfosri@yahoo.com
Number: 123

Very creative and funny. Of course I am sure many realize its really a parody of a call center and the vision many Americans have of an Indian Call Center.

For those who are upset at this, realize that its really a movie playing to the stereotypes of Americans and Indians.

Date: 3/31/2006, 10:44 pm, EDT
Name: Saf
Email: saf2k6@rediffmail.com
Number: 112

Hilarious and Funny but pictured very seriously. The ending (Comp U Serve) was most punching than any other blockbuster movie. Well Done the whole Crew.

On flip side, somewhat gives negative feeling on call centre outsourcing market, if taken seriously.

However, Take it for FUN people! No serious intentions found.

Date: 3/27/2006, 3:46 pm, EDT
Name: Erik
Number: 100

This was a great movie. I work with customer support myself, and had a great laught watching this movie with my colleagues! We're all really looking forward to your next movie!

Date: 3/25/2006, 12:37 am, EDT
Name: Carlos
Email: tyrrany_of_the_mind@yahoo.com
Number: 94

'Blessed are those who can laugh at themselves, for they shall never cease to be amused.' -- Anonymous

Some of the best comedy comes from the worst pain. This film had me laughing so hard at points that it hurt. But some of the people posting on here just need to lighten up. Political correctness is the worst type of censorship there is no matter what country you come from or call your home. This was one of the things that used to make the United States such a great place: the ability to laugh at ANYTHING. Sadly, it is becoming a thing of the past. That's why it's a pleasure to see such a smart, witty, and well-made movie such as this one. Keep up the good work

Date: 3/23/2006, 11:45 pm, EDT
Name: Aisha
Number: 89

And just to add...I do not think it shows India in a poor light at all. They do customer service better than most Americans. Their English is better as well!

Date: 3/23/2006, 11:43 pm, EDT
Name: Aisha
Number: 88

I work in the call service industry. And from a customer service and supervisor perspective, working out of my home...this movie is DEAD ON. And hilarious. I loved it. Right down the customer attitudes and the things they said, it had me in stiches. Awesome.

Date: 3/23/2006, 6:56 pm, EDT
Name: Ziad
Email: ziadkhan@hotmail.com
Web: http://www.ziadkhan.com
Number: 86

I think this is a creative and funny project. I would like to suggest those who are offended to take it easy, when cultures evolve and societies grow, humorists and satirists play great role in shaping them up and helping them rise. These brave people are like doctors who diagnose, prescribe and and at times treat the rest. Chill guys and enjoy the show ..Ziad

Date: 3/22/2006, 11:01 am, EDT
Name: krishna
Web: http://k-cult.blogspot.com/
Number: 82

You guys are a talented bunch. But I do realise from watching this movie and other southasian american movies over the last few yrs that you need to cross the boundaries of just the usual disparities in culture between indians and indian americans. Its high time the audience be fed with something new and original. Thats how the film industry works. And moreover, you cannot go overboard and expect majority of your audience to laugh at their own habbits, accents and behaviour for too long. I assure you that your acting talents combined with some original breadth-taking scripts can produce some wonders. Keep up the good work. Go Southasia!

Date: 3/20/2006, 12:16 am, EDT
Name: Amitabh&Rekha4Ever
Number: 76

Does anyone know the meaning of the word "satire?" That's what this funny little short is -- a satire on the hysteria surrounding outsourcing. Folks in the US are up in arms about jobs being sent overseas -- and this short does a fine job of taking that scenario to the extreme (ie. the suicide hotline and the phone sex operator). The rest of you who are making this an attack on India, Indians, call center employees, etc. kind of need to get a sense of humor. A few guys get together and decided to make a funny short commenting on all of the craziness going on here -- not to start WWIII. So get some chai, eat a samosa, and chill out!

Date: 3/19/2006, 5:40 pm, EDT
Name: lazerx
Number: 74

Frankly, the movie wasn't very funny. Firstly, if you want to pick on a particular group find your own group I mean Indian americans and not Indians. Secondly, if you pick Indians then learn to talk in hindi (sunil) and poke fun at something sensible and not on a particular job that thousands of people slog at for their survival. It is a misconception that poking fun at indians would be okay for indian americans but you forget a weird dynamic of an oppressed class and oppressor (indian americans). Lastly, if you want to be a successful actor, writer or director, be a little more creative than picking on a particular race or culture or their accent. Maybe you take examples from other southasians such as manoj shyamalan and Jhumpa Lahiri who have set cleaner examples of their originality and talent in arts. I wish you guys the very best but its JUST NOT COOLl what you shown in this movie and in several OF your previous movies by using the indian culture as a tool to generate entertainment and also spreading a very wrong message to the rest of the world. U.S. is famous for such acts already wrt creating stereotypes of Blacks, Latinos and asians. Now you don't have to start one for Indians. My advice would be is to find another profession if you are continuing to use your skills in this manner in promoting stereotypes.

Date: 3/16/2006, 10:42 pm, EDT
Name: Old Friend from Mexico
Email: amigoviejo@playa.mx
Number: 68

Sunil Malhotra is an acting GOD! I love him! He's so funny and talented! Did you ever see "Where's the Party, Yaar?" He was so hilarious. And now this! Wow. Do you remember me, Sunil? I met you when you were on vacation in Acapulco. I was just a boy at the time, a mere 7 years old. But you were so nice to me, even then. And now you are a star. Wow!

Date: 3/15/2006, 1:18 am, EDT
Name: Don Taylor
Email: dontaylor01844@hotmail.com
Number: 65

Loved the movie! To all the Desi's whining and boohooing about "racist americans" - here's a clue: 'Stupid' is not a race. I work for a call center the is front-ended by india. Why is it that every indian I know messes himself when the slightest challenge arises? We let our trained phone monkeys use their real names and don't have them read scripts. The first comment out of customers mouths when they get hold of a US rep is "Thank gawd I got someone who will listen to me. That ass-monkey "Raj-ur" wasted 2 hours of my time, read from a script, and wouldn't ask for help". I see this dozens of times a day. They rarely comment on accents or anything cultural or racial. It's always centered on how incredibly inept your average indian is at doing anything other than reading scripts.

When we debrief the indian reps, they always say the same things: "Sir, I did the necessary and escalated the call. The customer has become irated." "Sir, the customer asked me something new. I have pooped myself and now must ask for an upgradation of the incident". "Sir, I am not prepared for this. I have a decent job that pays me a living wage solely because of who my parents are (the caste system is alive and well, and working for all the Kumars and Rajs of the world, thank you very much). My entire culture is built on graft and petty thievery. I graduated first in my class with a master's at age 21 in English studies, but I only learned by rote and cheated most the time. This is acceptable. I don't really give a f***, because if I screw this up, there are 10 other US companies that haven't figured out yet that they are throwing money away at a poorly thought out business fad. In the worst case scenario, I will work for my uncle selling turds door-to-door". Every day.

Americans don't yell at indians because of any deep-seated racism. They yell at you phone monkeys (you know who you are) because you do stupid things and don't listen.

Date: 3/14/2006, 5:35 am, EDT
Name: dksk
Number: 64

I am very disappointed to say some idiots like you are spoiling this country in the name of creationalism and freedom of press. Its as horrible to make a movie on the Mother India for money and fame as making a movie to show your moms in bad light for the sake of money...

I know you fools will not like it...But that's truth., We Indians will allways like t condemn ourself... and make a way for the others to do so..

Date: 3/11/2006, 1:54 pm, EDT
Name: Joey
Email: hybridartist@bodybuilders.com
Web: http://www.lmao.com
Number: 60

HAHAHAH i just saw the film IT ROCKED the whole scenario and satire etc. However I can understand why some Indians are annoyed about this video, due to the stereotypical connotations. I know how that feels because im Italian and your video had Tony Soprano (bad stereotype) in it lol. BUT I REALISE ITS A JOKE UNLIKE SOME PEOPLE.

But next time in promulgating your sentiments into a form of media like this you might want to be a little less repugnant in regards to the depiction of India. Your film shows India to a slummish nation which is very unsightly/ugly. I used to work for the Italian consulate in Delhi so i know first hand that there is some very beautiful places in India and buildings and infrastructure which is on par with the western world if not better. There are also ugly areas which are unsightly and full of despicable slums. My point being there is always 2 sides to a story. But the average mundane American cant decipher/ comprehend that concept so therefore thanks to your film they are bound to think India is a land of putrid slums.

lol@ comment 57 and his racism. Well i dont blame him because Indians are taking all his jobs because they are smarter harder working and they dont procrastinate unlike people like comment 57 and his cacophonous brethrin who are only capable of whining like pussies.

Anyway...thanks for the laughs and keep up the good work. Hope to see your next production!

Date: 3/9/2006, 11:27 pm, EDT
Name: Madhavi
Number: 54

I saw the movie - the link was passed on to me by a colleague of mine at work.

i must say that "as is" the storyline was quite funny. however, the facts need to be verified before you venture out to make movies like this. quite frankly, i find this movie to be exasperating. having worked in a call center myself, i really do know what happens in such places. after watching this movie, i am inclined to assume that you have certainly not worked in one. on a daily basis, one out of three calls that we take, deals with racism and abuse from international customers, some of who may have actually seen movies like these and have biases towards us Indians (some of whom actually do work hard to resolve customer queries and issues). i would advise you to sincerely do your research before you launch your next movie "OK Buddy!"

Madhavi.

Date: 3/8/2006, 8:23 am, EDT
Name: daveyjones
Email: na@na.com
Web: http://www.ru4real.com
Number: 49

Get real, guys! It's a gag movie and you would probably love it as it is. But if you think the movie portrays any reality, then it is a long way off.. Both lives in America and India are taken at their basest extremes.. It is very likely that the director is a moron from Chandigarh or the Noida region where u have all sorts or extremities... Neither is the portrayal of the American crowd as depicted... In fact it is more the image an Indian has from watching Hollywood movies.. (Lots of them) By depicting America as a sex crazy nation is all these morons from Chandigarh can do.. Get real, shill and take a pipe. Visit the US sometime for a realistic view...
You could have improved the situation by not showing any of the sexual innuendo.(if you get what I mean, weirdo)
Atleast life in South India such as BLORE, Chennai and other places I have visited are much more professional. Even the people are much more friendly than the northern morons.. These guys are frigging thugs..

Date: 3/7/2006, 8:37 am, EDT
Name: Yann
Email: yann_lefevre@stream.com
Number: 44

You guys are brilliant !!!

I worked in call center for years, and that s the exact situation.
You can find a lot of similarities between your movie and call center in general.
Be sure that the only person having bad critics and a lack of vocabulary are all probably Managers, Team leader, but not agent, because that s our life...

Date: 3/3/2006, 3:08 pm, EDT
Name: Arun
Email: hukomukhohangla@rediffmail.com
Number: 32

Hey Amyn Kaderali!!! Manish Goyal!!! Sunil Malhotra!!!

1. Did you ever work in a call center? Or at least, have you been to one ever? Doesn't look like! The environment showed in the movie does not depict a call center at all. There is that silly guy speaking in all languages handling all sorts of calls regarding survival, sex and support sitting with huge telephone sets, with his boss(!) hanging around with... (?) Was that really a call center? I've been a call center employee for long in different organizations and I don't remember being allowed to take food, forget spilling eatables on the workstations. Nor do I remember using multiple phones to answer various calls in different domains at the same time!

2. Why were the bullock cart or the shabby buildings shown out of context? I don't know the nationality of the film-makers, but it seems they were more interested in buying laughter on cheap comedy by portraying out-of-context scenes in third world countries which are booming in the BPO business!!!
If you believe that the third world countries like India are all about bullock carts and shabby buildings and dirty roads, then wake up guys! You are lagging far behind with regards to information about the shiny progress of these upwardly mobile countries!

The cultural gap between the West and the countries offering call center support is a well-agreed-upon fact, which is already considered by companies offering offshore business. So why laughing on the accent or the choice of words? It's not that call center employees try to ape the western crooks! It's just for the convenience of the customers that these poor people are told to facilitate the customers with an environment which they can understand! And they try as much they can! What's the fuss all about?
It shows that Indians are capable of understanding them, or at least they try; but it's not the other way around!

Comedy is good! Sarcasm and satire is even more enjoyable, provided they are made in a sensible manner, right?

[Apr 15, 2006] Indian Outsourcer Says Big Profits Will Continue - New York Times By STEVE LOHR. Infosys plans to hire another 25,000 employees over the next year.

...Infosys is the first of the major technology outsourcers to report its annual results and to present its outlook for the current year. The view from Bangalore is all blue sky.

The company plans to hire another 25,000 employees over the next year, increasing its payroll by nearly 50 percent. Infosys said its revenue should increase by 22 to 30 percent this year, and its profit should rise by 26 to 28 percent.

Perhaps more significant, and surprising to most analysts, Infosys said it does not anticipate lower profit margins this year.

The Indian technology services companies like Infosys, Wipro and Cognizant have operating profit margins that are two to four times the level of their American rivals like I.B.M., Accenture and Electronic Data Systems.

Industry analysts closely track the profit-margin trends of the Indian companies for signs of an erosion of their competitive edge. That advantage comes mainly from lower labor costs because the wages of software engineers in India are one fourth or less the salaries of American engineers.

If profit margins start to decline, that would raise doubts about the optimistic long-term growth prospects that seem to be assumed in the stock prices of the leading Indian companies. Their shares typically trade at price-to-earnings multiples of 35 to 45 times earnings.

Some industry analysts warn that margins will fall soon. "The profit margins of these companies are utterly unsustainable," said Rod Bourgeois, an analyst at Sanford C. Bernstein, who has a hold recommendation on Infosys and other Indian outsourcers. "And this should be the inflection year for the Indian firms."

The forces squeezing margins, analysts say, include regular wage increases in India of 10 to 15 percent a year, high turnover, and more competition from American companies that are hiring and acquiring in India to narrow the cost advantage enjoyed by the Indian outsourcers.

I.B.M., for example, has increased its Indian work force to an estimated 35,000. Accenture has hired aggressively and now has 18,000 workers in India, and plans to reach 34,000 in a couple years. Electronic Data has 3,000 Indian workers and plans to hire another 2,500 to 3,000 this year. In addition, Electronic Data made a bid this month for Mphasis, an Indian outsourcing company with 11,000 employees.

... ... ...

Infosys executives said that it should be able to maintain its profit margins by improving efficiency and by moving steadily into higher-value services like consulting, where it could charge more.

[Apr 03, 2006] The Third Industrial Revolution by Hans F. Sennholz. This guy is a really pretty primitive offshorist ;-)

A third Industrial Revolution is now making its appearance in the United States and other industrial countries. And just like the first two, it is bound to introduce many changes and force millions of people to make painful adjustments. It is an "information revolution" that greatly expands the scope of tradable services and tends to move many service jobs offshore to India, China, and other industrial newcomers where labor is much cheaper. Defined by its consequences, it may also be called the "offshoring revolution."

The term "offshore" was first used in the United States for any financial organization with its headquarters outside the country. A mutual fund with its domicile in the Bahamas is an offshore fund. The term then broadened to cover the movement of industrial jobs from high-cost countries to places where costs are lower. By now, in the third revolution, ever more service jobs are likely to go offshore. Surely, jobs that render personal services cannot go offshore; my barber shop cannot go to China. But new technology has made many jobs marketable which therefore may go where labor costs are lower. The services of accountants and computer programmers are suitable for electronic delivery and, therefore, may go offshore. According to a recent McKinsey study, 11% of US jobs are at risk of being sent offshore which is likely to become a major political concern in the future.

[Mar 09, 2006] Merger signals outsourcing business changing - Computerworld

(INFOWORLD)

The merger on Thursday of American consultancy Darwin Partners Inc. with Suzoft, an offshore Chinese high-tech company, proves that the outsourcing business model is changing.

On the front end, Darwin Partners offers subject matter and domain expertise to the financial service, high-tech and health care industries.

On the back end, Suzoft does software design and development, engineering, localization and quality assurance work.

The two companies have agreed to a share swap, with no group of owners cashing out or one acquiring the other, said Frank Robinson, CFO at Darwin. "Both parties have agreed to put their companies together to create something unique."

What Robinson calls unique is actually a fairly new trend in the outsourcing business model, with offshore companies trying to move higher up the value chain, according to Barry Rubenstein, an analyst at IDC.

The offshore companies need upfront business and IT consultants with vertical expertise in order to get beyond application maintenance and development. "They want to get into system architecture services that are geared to increased revenue," said Rubenstein.

Darwin Partners and Suzoft will operate as separate legal entities, with Suzoft being a subsidiary of Darwin Partners. Both companies each employ about 400 people.

[Feb 28, 2006] Report offers tips to protect your job from offshoring - Computerworld

One surprising conclusion of the report is that it's not just lower-skilled jobs that are moving offshore: High-level research is also moving from Europe and the U.S. to India and China, as improvements in graduate education systems in those countries increase the number of qualified researchers.

While it's clear that the trend for offshoring is growing, it's hard to find reliable data about either the number of jobs sent to developing countries or the number of resulting jobs lost in developed countries, the ACM said.

In the U.S., job data supplied by the federal government is "not very helpful," the ACM said, adding that consulting firms supply most of the available information. The consultants' figures indicate that offshoring may affect between 12 million and 14 million jobs in the U.S., with annual losses totaling between 200,000 and 300,000. However, not all of these are IT jobs: call centers and business processes that make heavy use of IT may also be offshored.

According to estimates, about 20% of U.S. companies are offshoring work, while that figure is just 5% for European businesses.

[Feb 23, 2006] Dubai wants IT business as well as U.S. ports - Computerworld Dubai wants IT business as well as U.S. ports It's encouraging companies to set up operations in the United Arab Emirates by Patrick Thibodeau

The United Arab Emirates, which is currently at the center of a controversy over whether outsourcing the management of six U.S. ports to a company based in the Persian Gulf should be allowed, wants to do more than manage ports: It wants Dubai, its capital, to become a major IT outsourcing destination.

Dubai has been building a modern infrastructure and clearing away all taxes and visa hurdles to encourage companies that set up operations there, said Mehtab Ali Sayed, director of marketing at the Madar Research Group LLC in Dubai. They are positioning themselves against India, he said.

Many U.S. IT vendors already have offices in Dubai, mostly to support regional customers. Among them is Sierra Atlantic Inc., a Fremont, Calif.-based provider of offshore IT services, which opened an office in Dubai in August.

Compared to India, it is expensive, said Sierra CEO Raju Reddy, who noted that labor can cost 50% more than in India, where the company has the bulk of its operations. Moreover, there is not sufficient local talent in Dubai, he said.

But Dubai will nonetheless be an important base for supporting customers in the region, as well as delivering high-end architectural and design services, said Reddy.

Because of issues like costs and the limited labor pool -- the UAE's population is about 2.6 million -- Dubai has barely made a ripple in the global and competitive outsourcing world. And despite its handsome office parks and zero taxes, it faces challenges. The contentious move by the state-owned Dubai Ports World to acquire London-based Peninsular and Oriental Steam Navigation Co. for $6.8 billion, allowing it to take over operation of half a dozen U.S. ports, illustrates the UAE's efforts to diversify its economy.

But the port deal -- which would allow Dubai Ports World to run the ports of New York, New Jersey, Philadelphia, Baltimore, New Orleans and Miami -- could also prove to be a problem in its efforts to become an IT outsourcing hub if it fails.

If there is a reversal of a major business deal, I would assume that will cause people to take a cautionary view with where and how they can do business, said Jane Siegel, director of the Information Technology Services Qualification Center at Pittsburgh-based Carnegie Mellon University's School of Computer Science.

While the UAE is considered an ally, the port takeover has met with vocal opposition from House and Senate members upset about plans to allow a company from a hostile region to manage the U.S. ports. The White House has said it won't allow the deal to be blocked.

While routine IT support isn't going to get the attention the port agreement is receiving, you can make the case that if they are handling anything that involves strategic or sensitive data transaction, that that could be a concern, Siegel said. Even then, she said, it's not on par with scenarios envisioned by some in Congress if Dubai manages U.S. ports.

If the port management deal goes through, it could establish Dubai as a credible place to do business with from the U.S., said Jeff Perdue, associate director of Carnegie Mellon's IT services center. It could have a halo effect.

Despite the limitations of the UAE's labor pool and the geopolitical risks, firms focusing on the Middle East and West Africa see Dubai as an excellent location for basing regional operations, said Atul Vashistha, CEO of NeoIT Inc. in San Ramon, Calif. Vashistha said Dubai wants to establish itself as the Singapore of the Middle East.

Rita Gunther McGrath, an associate management professor at Columbia Business School in New York, has been advising Ireland on attracting foreign investment. She said Ireland sees the UAE as a potential rival.

McGrath, who has been to Dubai, described it as relatively friendly country that's high-tech and with an appetite for modernity.

[Feb 14, 2006] Downsizing outsourcing - Computerworld

FEBRUARY 14, 2006 (NETWORK WORLD) - A recent cover story in Business Week proclaimed we have entered an era in which global outsourcing is quickly becoming a prerequisite for multinational corporations. The article described how corporations of all sizes are outsourcing to providers in India, China, Eastern Europe and elsewhere to satisfy their business needs. Yet escalating competition is also fundamentally changing the outsourcing industry.

For instance, IBM recently announced a 5% decline in its fourth-quarter Global Services revenue. That same day Wipro Ltd., a leading offshore outsourcer, reported that it is having trouble matching the margins of its India-based peers, despite a 25% rise in its net profits.

There is no question the profit margins of IBM, Wipro and other outsourcing companies are being strained by rapidly expanding their global operations while fending off intensifying pricing pressure. But there is an even more subtle problem with the fundamental structure of today's outsourcing business: customer downsizing of outsourcing contracts.

Numerous industry studies have reported that the size of outsourcing contracts has been dropping for the past two years. IBM experienced a 32% drop in major, or strategic, signings in the fourth quarter of 2005. This contraction is due to corporate disenchantment with the rigidity of mega-outsourcing contracts and the high percentage that fail to meet business and service-level objectives.

To avoid the risks associated with traditional outsourcing, corporations are reducing the scope and duration of these agreements. They are also relying on more providers to perform more-specific tasks, rather than be at the mercy of a single outsourcer for everything. This is a trend that I began calling out-tasking a decade ago, and it is even more common today.

[Feb 12, 2006] Two interesting papers:

[Jan 18, 2006] India firms grow by leaps while adding new services - Computerworld

Wipro Ltd., which today, as part of its quarterly earnings, said its workforce had reached 51,000 - an increase of 30% from a year ago.

The news from Infosys Technologies Limited, which earlier this month said it added 14,200 employees last year, was even better. The Bangalore-based company's workforce now totals 49,422, a 40% increase from a year ago.

And Satyam Computers Services Ltd., due to report on its most recent quarter on Friday, had 22,482 employees at the end September. In that quarter, the most recent for which data is available, the Hyderabad, India-based company reported a gain of 1,977 employees, or about 23%, over the previous quarter.

Those gains come as the offshore firms seek to expand into relatively new areas, such as infrastructure outsourcing -- remote management of mainframes, storage, networks and help desk support. The hardware typically remains at the client's U.S. site, but the workers are elsewhere.

[Jan 17, 2006]InformationWeek Weblog Readers Take Us To Task For Outsourcing Coverage By Mitch Wagner

We've received quite a bit of feedback to our recent outsourcing coverage, and two of our reporters' trips to India to write firsthand about companies there.

Jim Ball of Ball 5 Enterprises in Olney, Md., set the tone for many indignant readers, writing: "I, along with all of those now unemployed because of outsourcing to India, have absolutely no interest whatsoever in reading about all those folks that are enjoying the jobs we all once held."

My colleague Paul McDougall's blog entry on automation stirred quite a bit of heat from readers. Paul writes that automating IT, like outsourcing, is a way that companies are cutting costs, but much of the reader comment focused on India and offshoring.

A reader signing himself as "Puddleglum" wrote: "If the Indian productivity secret were technology, we could -- and would have to -- adopt it to compete. But India's productivity secret is low costs enabled by the misery of its common people. We will be forced to match it, child brickmaker for illiterate child brickmaker, or go out of business."

A reader signing his name as "Jon" writes: "I suspect that Mr. McDougall is currently employed somewhere outside of India, in what he thinks is a secure job. But plenty of people in India and China can write, too. So watch out!"

Bob Clabaugh writes in the same comment thread: "Outsourcing is a very scary thing; what happens when all of our technology is in the hands of countries that could very easily become our enemies (read China)?"

But Trinidad Marroquin made a key point in response to those concerns: "Outsourcing can also be viewed as building capacity. By teaming up with other organizations (offshore or not) that can do something better than you can (i.e., IT support) while you focus on your core business is crucial. "

And that's lost in many discussions of outsourcing. Outsourcing doesn't just cut costs, it creates wealth. Yes, it's awful to be an American who loses his job to outsourcing. But American money saved by outsourcing is being used to pay for investments in new business, and being shared with investors--and those investors are you and me; these days most Americans own corporate stock.

Money flowing to India gets used to buy consumer and business goods and services, and some of that money back to America. Globalization is, in the long run, good for everyone; it creates wealth, and reduces poverty. Also, it makes it less likely that the lowest of the low will become terrorists. And globalization is inevitable: Even if we could build a wall around the United States and prevent outsourcing, we'd soon find our industries unable to compete with the bigger world around us. America isn't the world leader because it's inevitable; we're the world leader because of hard work, brains, and natural resources, and those three things are not in short supply in the rest of the world.

Still, outsourcing brings problems. Reader "Jon" is right; Paul's job--and mine--are at risk to outsourced labor. A couple of the best reporters and editors I've worked with in my career were Indians, born and grown up in India; they were fluent in speaking and writing English, and understood technology quite well.

So I worry about my job being outsourced. My solution is to keep up to date and try to stay ahead of the wave. In today's world, you have to keep moving, and learning new skills, both in technology and in dealing with other people. Your job is always at risk. Outsourcing to India and China doesn't really change that risk; anybody who's been in the workplace for more than five years was already at risk of losing his job to somebody younger than he is, with more recent skills, willing to work harder for less money. The only way a workplace veteran can compete with a kid fresh out of college--or an IT staffer in India, China, or eastern Europe--is by breadth of knowledge and experience. If your workplace doesn't value experience--get out now, before you're thrown out.

Puddleglum's comments are off-base; India's IT competitiveness isn't fueled by the country's poverty; IT workers in India live far better than their neighbors do. IT work isn't keeping Indians down, it's lifting them up.

And Bob Clabaugh, too, is off-base. What happens when we outsource technology to countries, like China, that are more likely to become our enemies? They're less likely to become our enemies, that's what.

Our ongoing series on India and outsourcing continues today, as my colleagues Aaron Ricadela and Ron Anderson conclude their trip and report in. They describe companies such as Infosys and Microland, contrast conditions faced by Indians in the IT industry and outside it, discuss the difficulties Indian human resources managers have in recruiting staff, and outline Indians' efforts to keep its IT industry booming nd share the wealth with less fortunate countrymen....

Also, McDougall is back with a blog entry describing how India creates jobs for Westerners

While outsourcing brings benefits, the problems created by outsourcing are real. How can they be mitigated

[Oct 4, 2006] The True Cost Of Off-the-Shelf by Paul M. Ingevaldson

Paul raise important questions about race to the bottom that IT is engage it. IT ignorant manager are danger for the corporation and I agree that "Misinformed business executives and timid CIOs have allowed these look-alike systems to proliferate. On the surface, it always appears easier to install an outside package and not have to deal with the problems associated with customized development. Cost overruns, missed deadlines and unfulfilled expectations are no fun. It's a lot easier to be wined and dined by the ERP vendors and be convinced that this is the best way to accomplish your objectives. "

July 31, 2006 (Computerworld) In the early days of IT, we would never suggest to users that they should adjust their operations to the requirements of the software that we were developing. It was always the other way around. We wrote software so that it worked exactly as the users requested. After all, the users were the clients, and IT was trying to automate their departments, not make life easier for itself.

Somewhere along the way, this whole theory changed. It may have started with the rapidly escalating cost of custom development, or with one too many missed deadlines or busted budgets. It may have started with the onset of ERP systems that established best practices for the entire organization. It may have happened when companies realized that they had outsourced so much of their IT operations that they no longer had competent development staffs.

Regardless of the origins of this change, the state of the art today is that users must bend their requirements to conform to off-the-shelf packages. The result: In his controversial article in Harvard Business Review a few years back titled "IT Doesn't Matter," Nicholas G. Carr told us that because so many companies use identical software, IT no longer provides any competitive advantage (see "Get Over Yourself," May 12, 2003).

Isn't it ironic that the very systems that are promising great value to companies are causing IT to be less strategic? Is this really what business wants?

Misinformed business executives and timid CIOs have allowed these look-alike systems to proliferate. On the surface, it always appears easier to install an outside package and not have to deal with the problems associated with customized development. Cost overruns, missed deadlines and unfulfilled expectations are no fun. It's a lot easier to be wined and dined by the ERP vendors and be convinced that this is the best way to accomplish your objectives.

Unfortunately, IT doesn't do a good job of explaining to the business the shortcomings of these new systems, the hardships encountered when users really need IT to make a strategic change, or the true cost of supporting and implementing off-the-shelf software today and into the future. Ask any CIO about the cost of outside support for one of the major ERP systems.

But perhaps more important is the cost of opportunities lost by using software that everyone else uses. If you have custom software, you can usually accommodate a new requirement at a reasonable cost. With an off-the-shelf package, this is often impossible. If a strategic initiative can't be accomplished because of the shortcomings of the packaged system, then the cost could be incalculable. This is the true cost of off-the-shelf. You must learn to use the software the same way most everyone else uses it.

I wonder if Dell could have developed its logistics system under this type of constraint. I wonder if FedEx and UPS could have revolutionized the shipping industry when faced with this type of scenario. I wonder if Cemex in Mexico could have become a high-tech cement producer using this approach.

Call me old-fashioned, but I think that there are still opportunities for companies to differentiate themselves through creative approaches to the marketplace that require the development of innovative IT systems. Perhaps, for example, Web services will enable companies to develop a much more customized software suite than is currently available through local installations of packaged enterprise systems. By skillfully interfacing some disparate elements, a creative CIO may be able to achieve some competitive advantage.

This opportunity may already be lost, however. The significant outsourcing and offshoring that companies are doing may deprive us of the talent needed to customize a Web services system or develop unusual systems.

Perhaps the dire predictions of the demise of internal IT have scared off the good developers. Perhaps Carr's thesis has become self-fulfilling, and IT is destined to subside to the role of a utility.

I'm reminded of the story about the head of the U.S. Patent and Trademark Office who submitted his resignation in 1899 because "everything that can be invented has been invented." Although probably apocryphal, it does serve to emphasize the danger of second-guessing the innovative mind. I think IT has a great opportunity to bring new and exciting ideas to business that will enable companies to develop innovative processes and products. I think our brightest days are still ahead of us.

But we can't be afraid, and we must be able to do some customized development that will give our companies that elusive competitive advantage.

Paul M. Ingevaldson retired as CIO at Ace Hardware Corp. in 2004 after 40 years in the IT business. Contact him at ingepi@aol.com.

[Sep 27, 2006] Strategic IT talent Offshoring not the answer by Dan Tynan.

Nice example of biased reporting. If database administration is commodity then anything else in corporate It is commodity too. And this myth about dual shore we already heard.

September 27, 2006 (InfoWorld) It's been a common refrain for years, growing to a chorus in the election year of 2004. As technology workers rail against the exporting of IT jobs to India, China, the Philippines and beyond, their would-be bosses bemoan an ever-shrinking IT talent pool.

Who's right? Well, both are -- but not for the reasons you might expect.

Offshoring has had less of an effect on IT jobs than many people commonly believe, says Dice.com CEO Scot Melland. In part that's because the overall percentage of IT jobs that has been exported is relatively low, according to Melland. Those jobs are mostly commodities: help desk, database administration and some application development. Higher-end, more strategic jobs are still kept in-house and continue to be in great demand.

Another reason: Offshore is rapidly becoming "dual shore," as Indian-based outsourcers expand their U.S. operations. For example, Mumbai-based Tata Consultancy Services says it plans to hire 1,000 stateside employees in 2006. As the earth grows flatter, global companies find themselves in desperate need of project managers who can communicate with clients on one side of an ocean while managing employees on the other side.

Hiring to fill a niche

If there's a talent gap, it's at the high end, says Harry Wallaesa, founder of tech consultancy The W Group.

"I think the talent gap exists at the really innovative technical positions that are driving new business models and helping companies compete on a different level," Wallaesa says. "They're not the ones whose jobs get outsourced."

The shortage lies not in the number of tech-savvy workers but in the types of skills and experience they possess. IT needs have become so granular that it's difficult to find people who fit a particular niche, says Jim Lanzalotto, vice president of strategy and marketing at Yoh, a $367 million talent and outsourcing company based in Philadelphia.

"The talent gap is really a 'specificity gap,' " Lanzalotto says. "Five years ago companies were looking for anyone with any experience in CRM. Today they want a CRM project manager with experience in a particular industry, such as manufacturing or pharmaceuticals. When you get that precise, you start to develop supply issues."

Lauren Barker, manager of staffing at USi, an ERP managed services provider, says her company's biggest challenge is finding .Net consultants. It's not easy to find someone with the right mix of technical, business, and communication skills.

"It's easy to find developers who make $60K or $70K to do coding," Barker says. "It's much harder to find a senior principal consultant who is able to travel to a client's office, articulate what our developers will be able to do for them, then come back here to develop the project."

A touch of gray

On the other hand, as baby boomers retire, companies face the opposite problem. "Twenty years ago, you couldn't get enough mainframe guys," Yoh's Lanzalotto says. "Now companies can't find them at all. It's not a cool technology, but it's something companies still need to have in place."

Federal and state governments, with their combination of aging workforce and legacy applications, will be especially hard hit, Dice's Melland says.

"If you're a tech professional in the D.C. area with an active government security clearance, you can basically write your own ticket," Melland says. "Agencies have had to slow down certain programs or shut them down entirely because they can't find people qualified to do the work."

As a response to the looming shortage of workers with knowledge of legacy apps, IBM user group SHARE launched the zNextGen initiative to offer career guidance and mentoring to young IT professionals. Its goal is to attract 20,000 new techies to the mainframe by 2010. Meanwhile, the Computing Technology Industry Association has joined forces with American Association of Retired Persons to create the Alliance for An Experienced Workforce. Its aim is to encourage the graybeards to stay on as consultants and part-time workers until a new generation of mainframe wonks arrives.

Bottom to top

The talent gap reaches the very top of the IT org chart, says Paul Groce, who heads up the CIO recruiting practice at Christian & Timbers in New York. But it's not due to a lack of tech savvy.

"There's no less [technology] talent today at the CIO level than there was 10 years ago," Groce says. "The difference is that CEOs are demanding a different type of CIO for the future. Very few of today's CIOs are trained to be general managers. That's where the talent gap is."

Groce says his company was engaged by a major corporation that needed to replace a CIO. The corporation has internal candidates with excellent technology backgrounds, but the CEO wanted to look outside for someone with more business experience.[ another Dilbert style CEO hiring binge --NNB]

"He wanted a CIO who had the skill sets to grow within the company and eventually manage a P&L," Groce says. "It's a shame the CIO had not trained and prepared a suitable replacement."

If anything, the talent gap is only likely to grow wider, Dice's Melland says. Post-9/11 restrictions on foreign worker visas, coupled with a dearth of tech-trained college grads and the retirement of the boomer generation, will drive more companies to seek expertise overseas. [ Whom are they trying to deceive ? --NNB]

"We seem to be headed into an era of not having enough highly skilled people at the same time we have this need for these people," Melland says.

Slashdot Globalization Decimating US I.T. Jobs

by BWJones (18351) * on Monday October 02, @12:09AM (#16272613)
(http://prometheus.med.utah.edu/~bwjones/ | Last Journal: Tuesday September 26, @11:57AM)
Of course most folks who are actually working in IT could have told you this. I know a number of folks at companies who experienced several rounds of layoffs. They have survived the layoffs, but they are also currently doing the job of two to three employees now versus prior to the layoffs. Morale is low, pay has not kept up with the cost of living increases, the cost of health care or inflation. Productivity is still there, but burnout is likely in these individuals. Other people I know that did lose their jobs ended up going back to school and getting out of IT entirely which I suspect is not an isolated situation and would lead to skewed unemployment statistics.

The thing that worries me is that this is not an isolated employment sector, and I predict that we are in more trouble than we might know. Historically we have relied on our research and development to keep this country on top technologically, but over the last five years or so, we have been reducing the amount of funding we spend on research and development, particularly in the biosciences. For example, if you were to look at NIH grant paylines, five years ago the payline was around 33%. Next year it is predicted to be anywhere from 10-14% meaning the likelihood that a researcher will obtain funding has been cut by more than half. In fact, research and education spending on the whole is down under the current White House administration. So, if we are supposed to rely on education, technology and research and development to keep our edge as a country, we are already in trouble, especially when one considers that even if we were to turn things around tomorrow, we have likely done enough damage that it will take a decade to recover.

Re:In more trouble than most realize...

(Score:5, Interesting) by TheUglyAmerican (767829) on Monday October 02, @01:27AM (#16273329) Disclaimer: I am an IT manager who sets up and runs IT groups in India. So I'm the "bad guy" I guess.

1. Outsourcing is not new. And the reaction by the IT industry is not new. The garment industry was outsourced, the steel industry, to a degree the automotive industry. It happens. The people directly impacted don't like it but as long as it make economic sense, outsourcing will happen. Adapt to survive and thrive.

2. Isolated protective measures to limit outsourcing will ultimately fail. If you put restrictions on US companies that increase their costs while overseas competitors have no such restrictions, US companies will be at a competitive disadvantage ultimately hurting their growth and their employees.

3. Outsourcing is not easy in the IT industry. I can point to as many failures as successes. Not every company in the US that needs IT resources will be candidates for outsourcing. Not every job will end up overseas. In fact even though my entire IT organization is in India I'll soon be looking for a Systems Engineer in the US because I'm not happy with what I find in India.

4. Salaries for IT candidates in India are increasing very rapidly (think Silicon Valley, 1999). Given the inherent inefficiency of dealing with people great distances away, the economics of outsourcing are getting worse.

5. Decimation means to kill off 10%, not 90% as some posts have said. From Wikipedia: The word decimation is derived from Latin meaning "removal of a tenth." So the article is correct, this is decimation.

6. I could be wrong on any or all of the above.

Re:In more trouble than most realize...

(Score:2) by N3WBI3 (595976) on Monday October 02, @09:38AM (#16275919)
(http://tim.timriordan.com/)
1. Outsourcing is not new. And the reaction by the IT industry is not new. The garment industry was outsourced, the steel industry, to a degree the automotive industry. It happens. The people directly impacted don't like it but as long as it make economic sense, outsourcing will happen. Adapt to survive and thrive.

But you could (not that we do) put tariffs on the garments and steel that 'American' companies try to send back here from the nations they outsourced to. Thus if an American corporation decides it wants to make its garments in vietnam they would have to consider that while they can run slave labor wages, with little or no environment regulation they might have to pay for it before they can send their crap to Wal-Mart. With information that's a little harder to do.

2. Isolated protective measures to limit outsourcing will ultimately fail. If you put restrictions on US companies that increase their costs while overseas competitors have no such restrictions, US companies will be at a competitive disadvantage ultimately hurting their growth and their employees

And if their employees are in India why should this bother me? I would not put any American company in a situation where they are treated any worse than a foreign company but I would not treat them as well as an American company.

3. Outsourcing is not easy in the IT industry. I can point to as many failures as successes. Not every company in the US that needs IT resources will be candidates for outsourcing. Not every job will end up overseas. In fact even though my entire IT organization is in India I'll soon be looking for a Systems Engineer in the US because I'm not happy with what I find in India.

You dont need every job to go for it to *&^% can the industry, if 10% of the jobs go you now have a downward pressure on wages and benefits. You make it harder for that 10% and the 90% who are working to keep up with inflation let alone actually grow in their careers.

4. Salaries for IT candidates in India are increasing very rapidly (think Silicon Valley, 1999). Given the inherent inefficiency of dealing with people great distances away, the economics of outsourcing are getting worse

Then they will start moving to Africa (http://www.corpwatch.org/article.php?id=11824).

5. Decimation means to kill off 10%, not 90% as some posts have said. From Wikipedia: The word decimation is derived from Latin meaning "removal of a tenth." So the article is correct, this is decimation.

That is not the common use, look at the dictionay not wiki:

decimate /dsmet/ Pronunciation Key - Show Spelled
Pronunciation[des-uh-meyt] Pronunciation Key - Show IPA Pronunciation
-verb (used with object), -mated, -mating.
1. to destroy a great number or proportion of: The population was decimated by a plague.
2. to select by lot and kill every tenth person of.
3. Obsolete. to take a tenth of or from.

6. I could be wrong on any or all of the above.

Well at least you got that much right ;)

Re:In more trouble than most realize...

(Score:1) by Ixne (599904) on Monday October 02, @09:49AM (#16276047) 1. Outsourcing is not new. And the reaction by the IT industry is not new. The garment industry was outsourced, the steel industry, to a degree the automotive industry. It happens. The people directly impacted don't like it but as long as it make economic sense, outsourcing will happen. Adapt to survive and thrive.

And look what that's wrought in those industries: there are now less than a handful of US-owned steel companies. My wife's father worked for a US Steel company before it was bought by a foreign company. Now he works for a Russian-owned steel company. And consider: US car companies buy foreign steel, while companies like Toyota buy American steel. What does that tell you? I don't think I need to more than mention what's going on in the auto industry.

Your "adapt to survive and thrive" sounds an aweful lot like "That's the way it is, live with it." That attitude never survived anything. With an attitude like that, the US will become a nation of fast-food and Walmart employees.

2. Isolated protective measures to limit outsourcing will ultimately fail. If you put restrictions on US companies that increase their costs while overseas competitors have no such restrictions, US companies will be at a competitive disadvantage ultimately hurting their growth and their employees.

Sort of like in China?

Re:In more trouble than most realize...

(Score:2) by plumby (179557) on Monday October 02, @08:43AM (#16275445) There is a significant difference between the two -

Outsourcing without offshoring is usually a positive strategic choice, and a result of businesses moving non-core activities to firms more focussed on that activity and likely to be more efficient/effective at that activity. For instance, most large firms outsource their catering to an external provider. It may have some effect on the overall job market, but usually just means that your role gets moved to a more specialist employer. As this is a move based largely on specialist people being able to do the job better, costs should stay cheaper.

Offshoring, on the other hand, is almost always negative and tactical and little more than a race to the bottom on simple employee cost (usually as a result of poor employment regulation/health and safety/general standard of living etc in the target country). Eventually, however, increased demand for jobs in that country will force wages up, and the only option is to move on to the next cheap economy.

Re:In more trouble than most realize...

(Score:2, Insightful) by bitmonki (787780) on Monday October 02, @06:01AM (#16274647)
2. Isolated protective measures to limit outsourcing will ultimately fail. If you put restrictions on US companies that increase their costs while overseas competitors have no such restrictions, US companies will be at a competitive disadvantage ultimately hurting their growth and their employees.

Wrong attitude for businesses to take, seems to me -- competing on cost alone results in a race to the bottom, which is what we seem to be experiencing. I've worked with Indian teams, in person, and they are *exactly* like everyone else I've ever worked with, i.e., 10% were essentially unproductive, 10% were utter joys to work with -- sharp, organized, capable, motivated and could communicate well -- the remaining 80% were somewhere in between.

Over the last 20 years I've watched as American business management seemed to forget about delivering the best product, and focused on maximizing profits instead, as if the two could be entirely separated. Stupid, and it will take probably at least a *generation* to fix that.

Re:In more trouble than most realize...

(Score:2) by testadicazzo (567430) on Monday October 02, @07:54AM (#16275149)
(http://www.glenstark.org/)
Well, one thing seems to be improving at least: the quality of discourse on offshoring.

I want to raise a counterpoint to your point 2: 2. Isolated protective measures to limit outsourcing will ultimately fail. If you put restrictions on US companies that increase their costs while overseas competitors have no such restrictions, US companies will be at a competitive disadvantage ultimately hurting their growth and their employees. I'm not sure I agree with this, although I think that protective measures would have to be carefully thought out. What you are ignoring, is America is a HUGE consumer nation, and through this and other mechanisms has a tremendous impact on the strategies of other countries. I don't see the "we can't compete with other countries" as a valid argument. I have a hard enough time understanding the argument that I find it difficult to argue against. What's the competition? What's the metric for who's winning? Is it who's economy is biggest? I'd rather have a smooth and well functioning economy than a big one, but maybe I'm unusual...

Anyway, I see offshoring production (be it intelectual or labor oriented) as having 3 pretty significant problems.

1. Is ethical, since offshoring is basically the practice of maintaining a slave class, just not within the borders of own country. Okay, I'll grant you that's something of an overstatement in the case of India, where conditions seem to be improving as money flows there. But in the case of China, Malaysia, and other sweatshop countries where we get our cheap clothing from it holds quite true.

2. The second issue is, if you keep offshoring everything, what the hell are people in the U.S. going to do? You'll have a 2 class system, the wealthy and the service industry. The wealthy will enjoy a tremendous standard of living, which they can afford because goods (shipped in from mesa-slaver countries overseas) are insanely cheap, and so's labor, since no one can get a decent manufacturing job. And the service sector will be a kind of second class system.

I think anyone with open eyes can see this process taking place. Gated communities are, imo, a symptom of this.

3. Is tightly coupled to 2. I think it is desirable for a country to have many opportunities for its citizens. So if you are someone who enjoys manual labor, who enjoys intelectual labor, who enjoys servicing people, who enjoys producing art, you should be able to find a job doing what it is you love. This, more than just raw wealth, has a greater impact on overall happiness, but unfortunately does not get calculated into "standard of living" indices.

So I think some kinds of legislation to mitigate these points could be worked out. In broad strokes, what I think is needed is some kind of penalization on the flow of capitol to, and the flow of goods from, countries whos working conditions are poorer than ours. Hourly pay wouldn't be a good indicator, but pay as a ration of the cost of living in that country would work (yes, some thought would have to be put into this formula). More important, things like safe working conditions, sane work weeks, and espcially child welfare laws should rank heavily into the system. It wouldn't have to be a binary system where yes we trade, no we don't, rather a system that indexes how much we tax transactions to and fro, based on an index computed once or twice a year, based on compliance with a set of guidelines ideally provided through the U.N.

Not that it would fix everything, but it ought to help. Does anyone know of a good existing proposal out there?

Readers Don't See a Workforce Crisis

September 04, 2006 (Computerworld) I have been in IT for 25 years, and I can understand why younger people are not entering the field ["Workforce Crisis," Management, July 3]. All you hear is "outsourcing, outsourcing." Why go into the field when that threat is always hanging over your head? I know profitability is key, but Americans cannot live as cheaply as the people in India.

L. Puckett
Systems analyst
Albuquerque

There is no reason to believe that baby boomer IT workers won't simply be replaced with cheap offshore labor -- workers who work long hours for low wages and don't need flexible work arrangements or flexible benefits, or even any of the simple securities afforded Western workers. The "boomer crunch" myth doesn't have any traction outside of technical college recruiting offices.

Keith Tyler
Seattle

We have heard these same scare tactics for years. If you look at the history of IT worker shortages, you will find that the reasons are always the same. Technology has a boom-and-bust cycle. Our free economy will take care of any worker shortages if companies pay for skills and treat workers fairly.

Bill Stutters
DBA
Denver

The so-called lack of IT talent does not exist. There are hundreds of thousands, if not millions, of unemployed or non-IT-employed IT people in the U.S. Because of the rash of outsourcing to other countries, many people with IT skills now work at McDonald's or Wal-Mart or drive taxi cabs. Others can't get a job at all because they are overqualified for everything they apply for.

David Somner
Freelance contract programmer
Hollywood, Fla.

The real reason why computer science and IT enrollment is down at schools, why average retirement among IT workers is at a young 63 and why there is a coming crunch in IT workers is simply this: IT jobs are not enjoyable anymore. With the crash of the dot-coms and the merger of many large companies into even larger companies, IT positions have become little more than bureaucratic form jobs, reporting to some MBA who resents his IT people being paid so much and is eagerly waiting to shovel the work overseas.

Students in college aren't stupid; they know that IT is not where anyone places any value. They'd rather be doing something cool and fun and that has an impact.

Personally, I can't wait to take my three degrees in computer science and retire, or at least go do something I enjoy. Because company IT certainly is not it anymore.

Edward Reasor
Senior architect
Tampa, Fla.

Frankly, I can't feel too sorry for U.S. companies suddenly facing the prospect of labor shortages because older workers are leaving the workforce [" 'Perfect Storm' on Horizon for U.S. Labor Market," Computerworld.com, July 10]. I am one of those older workers, and I and many of my generation would like to work until close to 70 years old. But having been laid off in 2002, partly because employers could find cheaper labor in H-1Bs and younger workers, I have been functionally unemployed for over four years. Even companies where I would have been an excellent fit were not interested and took "a different direction." Age discrimination? Maybe.

Jim Woods
Independent consultant
Glendale Heights, Ill.
jlwoods1@hotmail.com

Come on, guys. A highly skilled profession has been destroyed by allowing millions of unskilled individuals to replace the skilled workers ["New Recruits Still Scarce," Special Report: Careers, July 17]. And you wonder why nobody wants into it?

Thanks to the greed of companies thinking to balance their balance sheets with foreign workers armed with paper degrees but totally devoid of any kind of expertise, everybody is jumping off the U.S. IT ship.

Dario A. Giraldo
Senior technical support engineer
Progress Software
Houston
SrConsultant@technologist.com

The article "New Recruits Still Scarce" cites several initiatives meant to encourage more workers to join the IT field, such as helping students who are currently taking computer science courses complete their studies, or targeting K-12 students with free software, classroom speakers and age-appropriate curricula. But the best way to turn the trend around is to stop the proliferation of H-1Bs and L-1s and to put an end to offshoring. We need to make IT a career worthy of consideration again and bring the pay back to where it was before we fell victim to the "Benedict Arnolds of Industry."

Ken Ward
Business analyst/project manager
DaimlerChrysler
Beverly Hills, Mich.
wrk13@dcx.com

Resource Investor - Commentary - All Rotten Eggs for Bernanke

India in the international press has been getting rave reviews of late. There was a time whenever international journalists wrote about India it was confined to snakes, sadhus, holy men, dust, heat and bride burning. It was the country where people had no food, where girls were killed in their infancy to save the dowry and where children were sold because their parents had no money to feed them.

During last five years this has changed, which is kind of surprising, since all these things are happening even today - though on a lesser magnitude, thank God. Today foreign journalists sing an entirely different tune: that of India having "arrived." They glorify India for its software proficiency, for its role in stealing the jobs of Western clerks and service professionals and for being an Asian tiger.

Nothing can be further from the truth. It is true that India has achieved some success in software industry, it is true that the country generates hundreds of thousands of code writers and programmers, the fact is the all the software exports from the country even today amount to nothing more than 1% of the global IT industry turnover.

Indian BPO companies employ almost half a million people today, but none of them have a guaranteed job. Their jobs depend on the wish of the U.S. companies and the politicians. In every western country there has been some political backlash against the job outsourcing to India, even though, according to a report of McKinsey, for every dollar of work outsourced to India, the U.S. gains $1.12-$1.14.

John Kerry, the Democratic candidate in the U.S. elections had made a lot of hue and cry about it, and other politicians have done the same in other countries. They are not to be blamed; the general population itself is not happy. Many Europeans and Americans abuse Indian call center workers on the telephone. Many say "I don't want to talk to you, pass me to someone who can speak my language."

According to a report published recently, the BPO industry analysts have seen the phenomenon of "racist" clients grow in recent years, as customers in the U.K. and the U.S. become increasingly sensitive to the political issue of jobs outsourced to India. The report states, "The issue of xenophobia cannot be resolved from India-end: there must be a battle against it in the countries responsible."

There can only be one end to this problem: let it last while it last. Sooner or later, the U.S./Western companies may cut down on outsourcing work to India either due to economic considerations or due to rising political pressure. And when that happens, India will be soaked in a sea of tears. After all those Americans/Europeans who have lost their jobs to Indians still have their social security, can still move around in minivans, and can still afford deluxe health treatment. No sacked Indian worker will have such privileges.

And this is the industry on which entire Indian economy is pinning its hope.

Coming to the mismanagement of the economy, the gold bugs complain about budget and trade deficits in the U.S. They talk of U.S. trade deficit with China alone reaching beyond $200 billion; they talk of how these days it takes five dollars of debt to create one dollar of growth. All of this is true, but let me tell them what Indian politicians and economists have done in this glorious land of Vedas and holy rivers. Recent official data showed the country's deficit for April and May stood at Rs 777.40 billion during the first quarter of 2006-2007, accounting for 52.30% of the projected figure of Rs 1486.86 billion for the entire fiscal.

Of course like his U.S. counterparts, the Indian Finance Minister is unfazed. "We should be able to be within our target," Chidambaram said when asked if huge spending plans threatened government finances. "It is good that spending is happening. We are not unhappy about it. Increased spending will mean more money in the system," Chidambaram said, even as the international rating agencies and multilateral institutions cite India's large fiscal deficit as a barrier to sought after double-digit economic growth.

Just as in the U.S. the politicians don't wish to confront the population by telling people in their face that they are living beyond their means and need to curtail their spending, the politicians in India don't wish to tell the people to reduce their oil consumption. Neither do they increase the prices, fearing the backlash of opposition parties and a loss of votes during the elections. So the government goes on selling petrol and diesel at much cheaper price even as the international crude price goes on rising.

Yet another parallel. Budget deficits are a fact of life, virtually in every country where the politicians are either corrupt or inefficient, often both, as is the case in India. The risk here in India however is that the borrowed funds are used for non-priority and unproductive expenditure. More money is spent on doling out compensation to the relatives of the dead people in a train accident than is spent on improving the infrastructure so that accidents could be minimized or avoided. Such expenditure, goes without saying, only fuels inflation and reduces funds for critical public investment.

Peter Schiff accuses the U.S. government of camouflaging the inflation figures. He has been tirelessly highlighting how the government has been fiddling with the core CPI basket, and how it has been hedonically adjusting the prices and transforming a 5% increase into a 3% decrease based on a subjective assessment of quality improvement. My word, if Peter was observing Indian politics and governance closely, his attack would be even more scathing.

In India the government doesn't even show the true deficit in the budget. According to an article by A Rangachari, "the budget is insulated from the effects of oil price increases by issuing special oil bonds to the oil companies to cover partly under recoveries of cooking gas and kerosene subsidies payable by the Government (Rs 73,500 crore in 2006-07 and Rs 40,000 crore in 2005-06) and these are not shown as expenditure in the budget."

The gold bugs often joke about comments by the U.S. Finance Secretary or the Fed Chairman, poking fun at their inane comments; all I can say is they ain't seen nothing yet. They ought to listen to Indian politicians on a daily basis if they wish to have the best of financial buffoonery. Take for example the present Finance Minister; though he is worshipped by the media here and abroad, he keeps coming out with statements which only can result from a serious foot in the mouth disease. During May 2006 when gold was on its path to scale glorious heights, this FM had a string of meetings with officials to find out if international gold price was going up because of hoarding by Indians.

Even a child knows that Indians can't hoard that much gold to influence the international price. Even an Economics junior understands that India, even though the largest buyer of gold in the world, is basically a "price taker" and not a "price maker."

Recently the same Finance Minister urged various sectors of business and industry to replicate the success achieved in the information technology industry - without realizing that Indian success in IT was a matter of luck, simply because when the boom came two decades back, Indians were the only people who spoke English and were willing to work at a tenth of the salary given to an American programmer. More luck came their way when the Y2K scare pushed more and more work to Indian shores.

Fortune doesn't favour every time, and such a success is impossible to replicate in other fields. In fact India is not even likely to keep its software advantage beyond another decade. As more and more countries gear up their younger lot is catching up fast with Indians. China is doing everything to beat India at its own game. Millions of people are learning English in China , thousands of students are coming to India to study software technology and dozens of Indian companies are setting up shop in China to teach them everything about IT and ITES. Reason enough why recently the doyen of Indian software industry Narayan Murthy predicted that China could catch up with India in the IT industry in five years.

"I do think China is running very fast to catch up with India. Chinese are much more determined than we are. And already we are seeing visible signs of progress by China in our industry," said Murthy.

His own company, Infosys, has major plans to expand operations in China. It is right now using China as a development centre for their global clients. In phase-II, they will enhance our focus on the market opportunity in China from multinational companies. In phase-III, they will focus on the Chinese companies. As anybody can understand, by the time all these phases phase out, the doughty Chinese would have seized the software advantage.

While I don't wish to approve of the actions of Bush, Bernanke & Co., I wish to highlight the fact that most of the governments are mismanaging their finances and playing with the future of their populations. No doubt Bush, Bernanke & Co. are to be blamed but let us not spare other charlatans either.

Meanwhile, the presence of so many bogeymen simply means extra bullish factors for gold. When people around the world ultimately lose their faith in fiat currencies, they will realise that all are worse than one another, and that there is only one currency which can't be debauched by the governments, bureaucrats and politicians: gold.

Incidentally this will also prove the veracity of good ole ' Greenspan's words: "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value."

Copyright ╘ 2006 Shailendra Kakani. All rights reserved.

"So in addition to being rigid and slow, outsourcing also proved costly and an impediment to serving customers well."

When Diebold said Wednesday that it will take over--or more precisely, take back--an Oracle ERP implementation and some additional IT-related functions, resulting in a financial charge and an end to its contract with Deloitte Consulting, it didn't explicitly point fingers or assign blame.

It's not a stretch, however, to read between the lines and conclude that outsourcing failed in this case. Or at least, outsourcing failed to meet the company's expectations. Diebold said in a statement: "This decision is designed to provide the company with more control and flexibility over its IT operations as well as the ability to accelerate its remaining ERP deployment."

Of course, outsourcing proponents often contend that hiring out IT gives companies the flexibility to focus on "core functions" (a position that presumes IT isn't a core function) and greater speed in deploying systems and achieving business goals. But Diebold is saying, in effect, outsourcing wasn't fast enough and didn't deliver the expected flexibility.

"Regaining direct control of our IT operations and ERP implementation will allow us to expedite the process of realizing the long-term benefits of an enterprise-wide information system," Diebold CEO Thomas Swidarski said in the company's statement. "This strategic decision is critical to achieving the operational improvement targets we have set as well as positioning us to be more flexible and responsive in meeting the needs of our customers."

So in addition to being rigid and slow, outsourcing also proved costly and an impediment to serving customers well. I've argued previously in this space that we will see more companies express dissatisfaction with outsourcing as they turn over more functions to third parties.

What can we learn from Diebold? Efficient, effective IT is as much a part of a company's financial success as quality products, good customer service, and strong financial controls. That's not to say that outsourcing doesn't or can't work, or that there's no place for outsourcing. But the view that IT is a function that any third party can come in and take over, on a plug-and-play basis, is naive and dangerous. It can also be costly: Diebold will incur a 7-cent-per-share quarterly charge to terminate its contract with Deloitte.

What's your view? Is this one in what will be a long line of failed outsourcing efforts? Or is this an isolated case where reality couldn't meet expectations? Please weigh in at my blog entry.

Tom Smith

tsmith@cmp.com

www.informationweek.com

Information Week Editor's Note: Analyzing The Outsourcers

As a researcher at InformationWeek, I have the opportunity to read a lot of research. Most of the outsourcing research that passes through my E-mail pertains to job loss or the employment implications of outsourcing on IT careers. In fact, with the release of our National IT Salary Survey, there was an article devoted to just this topic. But the goal I've been tasked with is to determine how successful outsourcing partnerships are, and which outsourcing vendors are truly helping customers meet goals and save money. And it was you, the readers, who set this goal. We've had many requests to revisit our Analyzing the Outsourcers research, last conducted in November of 2004.

Back then, InformationWeek Research conducted a survey of more than 300 IT professionals, all customers of various outsourcing firms. We asked those IT professionals about their outsourcing plans, spending plans, and satisfaction with their providers.

We've just started fielding an updated version of this research and would like any and all customers of outsourcing vendors to sign on and weigh in about your partnerships.

While most would consider data two years old to be ancient history, some of the results from the previous wave of this research are still thought-provoking:

Now it's your turn. Check out my blog and tell me about your organization's outsourcing successes and challenges. Even better, participate in our 2006 Analyzing the Outsourcers research. Not only will you be heard by your vendors, but you'll also get a free copy of the results.

Lisa Smith

LCSmith@cmp.com

www.informationweek.com

IT Professionals Association of America, Inc - Daniel Drezner On Outsourcing...

U of Chicago professor Dan Drezner has a long article supporting outsourcing in Foreign Affairs. Once again, we're wrong and those pink slips we got - imaginary. Now Dan is a nice guy - and someone I've debated with before. But it is clear to me that Dan needs to get out of Hyde Park more often. His argument is based on the theory of comparative advantage, with dashes of faith mixed with a pinch of skewed statistics (Dan, for crying out loud, STOP using statistics from McKinsey Global Institute - the research arm of one of the world's great outsourcing firms. It's like citing Japanese gov't statistics to justify whaling.)

The greatest mistake Drezner makes is the assumption that only low-value jobs will go abroad. "The parts of production that are more complex, interactive, or innovative -- including, but not limited to, marketing, research, and development -- are much more difficult to shift abroad." Difficult? If so, then the financial analyst positions that JP Morgan-Chase outsourced last September, and the design unit Intel is building in India prove that it is not as difficult as Drezner would have you believe. In fact he fails to state why these jobs should remain, given the vast pool of highly educated talent in India and China. This is also news to India which is predicating its future growth on these industries in the hopes that they can take over in place of the low-value added jobs like call-centers that will shift to even cheaper places eventually.

To quote this article by Paul Craig Roberts, former Assistant Treasury Secretary under Reagan, (http://www.businessweekasia.com/magazine/content/04_12/b3875614.htm) "For comparative advantage to work, a country's labor, capital, and technology must not move offshore. This international immobility is necessary to prevent a business from seeking an absolute advantage by going abroad." Roberts believes that there is no longer any reason for differentials to exist in the cost of production of goods and services - the very basis of the comparative advantage theory. In layman's language, that means that there is a global price for a service, say will writing, and in such a global market the cheapest lawyer will win - and chances are, the winner will not be your kid in her second year of law school.

Roberts' point is that when the theory was being formulated by David Ricardo in 1817, there world was quite different than it is today when it comes to processes and communications. He argues, as we have, that information technology has changed the dynamics of economics in ways that cannot be adequately accounted for in 18th and 19th century theories. The bottom line is: if a radiologist can read your x-ray in Bangalore for $5, and it costs $50 at the local lab down the block - how can the American radiologist compete?

Drezner would say that he cannot, and that he must retrain for something else where America has a comparative advantage. But where? The only profession we seem to have a comparative advantage in is free-market oriented economists.

danieldrezner.com Daniel W. Drezner Critiquing one critique

Critiquing one critique

Scott Kirwin posts his critique on why I'm wrong on outsourcing. It boils down to:

1) I'm relying on the outdated theory of comparative advantage, which according to Paul Craig Roberts, no longer applies when capital and technology are mobile.

2) I'm relying too much on statistics from the McKinsey Global Institute to support my case because it's "the research arm of one of the world's great outsourcing firms. It's like citing Japanese gov't statistics to justify whaling."

3) I'm underestimating the extent to which better-paying jobs can be outsourced.

I've dealt with the "death of comparative advantage" argument in the past or rather, Noam Scheiber has.

However, it's worth pointing out that the current direction of capital flows bears no resemblance to what either Roberts or Kirwin fear. The U.S. currently runs a massive capital account surplus, which finances both our budget and trade deficits. When restricted to foreign direct investment, the overwhelming majority of U.S. outrward FDI goes to other OECD countries. This objection is the reddest of red herrings.

On relying too much on MGI data because they're big into outsourcing, hey, I'll relinquish MGI data if Kirwin and others renounce the use of data from Gartner, Forrester, Deloitte, etc. [You're being flippant!--ed. Here's a more substantive response.] All of these firms are equally into outsourcing but still put up overhyped guesstimates about projected job losses. As I pointed in the Foreign Affairs article, these firms also have a strong incentive make outsourcing a business fad. Think their job loss numbers might be exaggerated a tad?

On the future of better-paying jobs, Jacob Kirkegaard of the Institute for International Economics points out that the Forrester study that got everyone hyperventilating in the first place points out that most jobs projected to be lost are below the US average wage.

Certainly the data to date don't support Kirwin at all. According to Kirkegaard:

Computer programmers engaged in relatively simple tasks (when compared to other software occupations) have seen a sustained job loss since the end of 1999, while more advanced software occupations have increased their employment since the beginning of 1999. This is an indication that indeed low-skilled tasks within the software sector may be migrating out of the United States, but higher-skilled tasks remain. Such a trend of technological destruction of US IT jobs, where increasingly standardized tasks are either automated or offshore outsourced, may also be present in other IT occupations.

[E]xcluding management occupations, of the 12 IT occupations that earned more than $50,000 in 2002, 75 percent increased their employment from 1999 to 2002. IT jobs earning more than $50,000 expanded by 184,000 from 1999 to 2002, of which computer software engineers earning approximately $75,000-a-year accounted for 115,000 jobs.

etc by Noam Scheiber the answer is actually attempt to mislead the reader by useless syllogistics. More exactly attempt to play with the "comparative advantage" term and try to pretend being a great economist due to this particular ability.

WHAT ON EARTH IS CHUCK SCHUMER TALKING ABOUT?: Today seems to be first-rate economist day on The New York Times op-ed page. You've got Paul Krugman writing about the dangers of runaway deficits. You've got Joe Stiglitz writing about the failures of NAFTA. And you've got Chuck Schumer and Paul Craig Roberts rethinking the theoretical underpinnings of free trade. Oh, wait. Chuck Schumer and Paul Craig Roberts aren't actually first-rate economists. And boy does it show in their piece.

Schumer and Roberts point out that one of the assumptions underlying the theoretical case for free trade is that "factors of production" (like capital and labor) aren't easily transported across borders (a phenomenon known as "factor immobility"). They further point out that, thanks to information technology, this assumption no longer holds--to take their example, a "New York securities firm plans to replace its team of 800 American software engineers, who each earns about $150,000 per year, with an equally competent team in India earning an average of only $20,000." As a result, they conclude, the theoretical case for trade has been invalidated. QED.

At this point it's worth pointing out that so-called factor immobility is NOT, in fact, one of the assumptions underlying the theoretical case for trade--at least not the way Schumer and Roberts seem to think it is. To see this, let's back up for a second. At its broadest level, the point of free trade is to expand the size of the global economic pie by eliminating production inefficiencies, which arise when one country tries to produce everything itself using only the "endowments" of capital and labor (i.e., machines and workers) it has within its borders. Now, there are two ways you can eliminate these inefficiencies: When it's not so easy to move machines and workers across borders, countries can specialize in the goods they produce most efficiently, which they then trade with one another. (We'll be more precise about what we mean by "most efficiently" in a second.) When it is easy to move machines and workers across borders, you don't have to specialize (at least not by country) and trade, because every country already has access to the most efficient machines and workers.

Put differently, you can either trade machines and workers (which is basically what you're doing when you're outsourcing), or you can trade the goods these machines and workers make. But, as a theoretical proposition, the two scenarios are EXACTLY THE SAME: They both maximize productive efficiency. Indeed, one of the great accomplishments of international trade theory, post David Ricardo, was to prove mathematically that trade in goods accomplishes the exact same thing, efficiency-wise, as trade in machines and workers. (It's been a while, but we seem to remember that this falls out of the so-called "Heckscher-Ohlin" theorem--which holds that countries export the good whose production is intensive in the factor they have an abundance of. Hey, this stuff either turns you on or it doesn't ...)

Schumer and Roberts, it turns out, have hopelessly confused ends and means. The end we're striving for here is production efficiency. Trade just happens to be the way you get there when work isn't easily outsourced. In that sense, suggesting that outsourcing undermines the case for free trade is a bit like saying natural immunity to the flu would undermine the theoretical case for a flu vaccine. True, natural immunity would make the flu vaccine unnecessary as a practical matter. But it wouldn't do anything to the theoretical case for a flu vaccine--which is that vaccination is the best way to bring about immunity when people don't naturally have it. Likewise, being able to outsource everything (which will never happen) would make trade unnecessary as a practical matter, but it wouldn't do a thing to the theoretical case.

Not that any of this directly answers the basic question Schumer and Roberts pose, which is: Will there be any more white-collar jobs left in this country once information technology makes it possible for the Indians and Chinese to do them for us? But here, too, Schumer and Roberts whiff badly.

The key conceptual mistake they make is their misunderstanding of the principle of comparative advantage. Here's the relevant graf:

The case for free trade is based on the British economist David Ricardo's principle of "comparative advantage"--the idea that each nation should specialize in what it does best and trade with others for other needs. If each country focused on its comparative advantage, productivity would be highest and every nation would share part of a bigger global economic pie. [Emphasis added.]
Um, not exactly. Comparative advantage, though frequently confused with absolute advantage, is actually a concept about relative relationships, not absolute ones. What the principle of comparative advantage actually implies is that each nation should specialize in what it does best relative to all the other things it could be doing and then trade with others for other needs. At its most basic level, comparative advantage is about opportunity cost: The country with the lowest opportunity cost of producing a good (i.e., the cost of producing that good in terms of other goods) should specialize in production of that good.

But what is the situation is that Indian costs are $5 and $20 ? The key problem is wage disparity here.
Let's take the example of software, since it seems to be on everyone's mind. Suppose that the only two goods in the world are T-shirts and computer software. For the sake of simplicity, let's say it costs us $10 to produce a single T-shirt, and $100 to produce a computer program. And let's also say it costs the Indians $5 to produce a single T-shirt, and $95 to produce a single computer program. In other words, the Indians can produce both T-shirts and computer programs more efficiently than we can.

Does that mean that the Indians will produce everything and that we'll produce nothing--and that, before long, the Indians will own us and the only kind of rice you'll ever be able to get in the United States is basmati...? (Sorry, we get a little carried away with this stuff sometimes.) The answer is, emphatically, NO. The reason is that it's still in both countries' interest to specialize in the good they have a lower opportunity cost of producing. In this case, we can produce 10 T-shirts for every computer program. The Indians can produce 19 T-shirts for every computer program. Since it only costs us 10 T-shirts to produce a computer program versus the Indians' 19, we should specialize in production of computer programs and trade them to the Indians for T-shirts (which will be cheaper for us when acquired through trade than when produced locally). They, on the other hand, should specialize in production of T-shirts and trade them to us for computer programs (ditto on the logic).

Obviously, the real world isn't quite this neat. And, even if it was, the fact that we could one day find ourselves in a situation where our comparative advantage lies in a low-value good like T-shirts rather than a high-value good like software isn't exactly comforting. Still, as long as we enjoy a comparative advantage in enough high-value goods--which will be the case as long as our workforce remains incredibly well-educated and high-skilled relative to India's and China's, which should be our top policy priority and which, even if it wasn't, is going to be the case for decades (when was the last time you checked the literacy rate of India?)--then all the doom and gloom you hear from people like Schumer and Roberts is way overstated.

There are real globalization-related issues we need to address--most importantly, the dislocation caused when whole industries cease to be efficient, and the speed with which we allow that to happen. But the theoretical foundation of the case for free trade isn't one of them.

posted 9:00 p.m.

[DOC] OUTSOURCED SOFTWARE DEVELOPMENT PRODUCTIVITY

The result that outsourced software development projects have the same productivity as in-sourced ones has many implications for research and practitioners. In general this means that cost savings should not be expected from higher specialization and presumably higher productivity from software development services offered by an outsourcing provider. If the outsourcing provider has access to the same resources as the client at the same market costs, in-sourcing may be a better option and this is consistent with prior research (Earl, 1996). This would also indicate that software development outsourcing will only lead to significant cost savings when the outsourcing provider has access to significantly cheaper labor, which is consistent with the conclusion of prior research that "an external developer must have a considerable cost advantage over an internal developer in order to have the larger net value" (Wang et al., 1997). This would help explain the rapid growth of offshore outsourcing, which has access to significantly labor cost advantage, enough to overcome the additional transaction costs involved with outsourced software development.

[PDF] Intellectual Property Protection and Offshore Software Development ...

[Feb 14, 2006] ITPAA Stories: Is Offshoring Good For India?

Copyright 2005 by Rabindra P. Kar.
Permission is hereby given to reproduce this article electronically or in print, without charge, on condition that: (a) The article is reproduced in unedited form. (b) The author is acknowledged.
=============================================================================
In recent years, there has been a vigorous, sometimes acrimonious, debate about whether offshoring (also referred to as "outsourcing") is positive or negative for the United States, and the other developed Western economies. Underlying this debate is an unspoken assumption "" that offshoring has been very good for the developing countries where the jobs have moved. India is widely regarded as the prime beneficiary of this phenomenon. Consequently, it seems like a rhetorical question to ask whether offshoring is good for India. (Read More)

If we consider the recent past, since the early 1990's, the general consensus is that offshoring has been a big positive for India. It has been a big factor in changing India's image from a land of poverty and social "backwardness", to a potential economic superpower. It has spawned an Information Technology industry with exports of more than US $10 billion annually. It has greatly slowed, if not reversed, the "brain-drain" of educated and talented Indians to the West. Of course, there have been negatives too. The sudden influx of companies and jobs into a few urban areas, notably Bangalore and New Delhi's suburbs, have overwhelmed their existing poor infrastructure leading to impossibly-congested roads, and water and electricity shortages. The huge inflation in land and housing prices in urban areas have hit the common man hard, because the average Indian's income is puny compared to what the noveau-riche techies earn. On balance though, the offshoring wave has benefited India, both psychologically and economically. At least so far.

Can India ride this wave to economic stardom in the next generation? Long-term, is offshoring good for India?

The central premise of this article is that while offshoring has been good for India in the short term, the long-term negatives will outweigh the positives. Since that is both a counter-intuitive and controversial assertion, the rest of this article will deal with the pitfalls of offshoring as a driver of India's socio-economic destiny.

Let's start by looking at offshoring's employment potential. Estimates in the US press, of the number of jobs currently outsourced to India, range between 400,000 to 700,000. The most highly publicized outsourcing estimate, by Forrester Research [2004], predicted that 3.3 million US jobs would be offshored by 2015. Even if (a big "if") India got a big majority of them, that amounts to at most 2.5 million jobs. If, in the same period, the European Union, Japan, Australia and Canada combined, outsourced twice as many jobs as the US, that would total 7.5 million jobs, in 2015.

Now consider that India's population in 2015 will be nearly 1.2 billion people, which implies an adult workforce of 300 million or more. Thus even the optimistic predictions are that no more than (7.5M / 300 M) 2.5% of India's workforce will be employed in offshore services. Yet today, both India's Central government and many "progressive" state governments are obsessively focused on attracting offshore work "" spending precious resources to create technology zones, offering tax incentives, and lavishing time and attention on pitches to multinational corporate executives. If India's population were similar to South Korea or Taiwan (in the tens of millions), providing offshore services could have been a big part of its future employment plans. But a nation containing one-sixth of humanity cannot achieve prosperity by taking jobs from other nations with much smaller populations. That is simply not a long-term, sustainable strategy.

A more subtle problem with the offshoring boom, is that it is giving urban Indians unrealistic expectations and distorted goals. The middle-class in India and China now believe that as the jobs move to Asia, they will be able to enjoy the consumption-heavy living standards of middle-class Westerners "" two cars, a big, single-family centrally air-conditioned home; all the electronic gizmos that their hearts desire, and so on. Their dreams of gizmos galore are achievable, since electronic goods keep getting cheaper and more plentiful. But there are some huge obstacles in the way of the other expectations "" namely population size, population density, energy constraints, and environmental limits.

First consider the effects of widespread automobile ownership. If just one-third of China and India's combined population could afford the US norm of one car per adult, that would be 800 million more cars in these two countries alone. With the world now struggling with oil at over 60 dollars per barrel, what would the price of oil be then? If the 200 million cars in the US produce such damaging levels of pollution and global-warming, can our planet withstand a three or four-fold increase in automobiles?

We have to recognize that living standards are not merely a function of national income levels. They are bound by the limited natural resources available within a nation's borders. India's population density is 9 times that of the US. Hence the average Indian can never enjoy the 2,500 sq ft single-family home, with a front and back-yard, that is so commonplace in American suburbia. Indians may think that they will be able to buy a bigger home if their income rises. But if the average income in a city or region doubles, the price of good housing often more than doubles.

It isn't just housing that's resource-constrained. Clean water and energy are very finite resources, at least in the forseeable future. To achieve a living standard comparable to the West, Indians will need access to much more fresh water and electricity per capita. India's water situation is precariously dependent on the monsoon even at the present levels of consumption. As for electricity, India's massive fossil fuel dependence throws it between the devil (of pollution from coal-fired plants) and the deep blue sea (of high oil prices and coming oil shortages).

The bottom line, is that money earned from offshoring cannot significantly raise the living conditions of the average Indian, but it definitely raises expectations. The yawning lifestyle gap between the small techno-savvy class and the rest, simply creates resentment and frustration, not progress.

Despite its population and limited natural resources, India is NOT doomed to poverty and shortage. If India's awesome collective brainpower is directed towards developing and utilizing technologies and strategies appropriate to India, it could dramatically raise its own living standards and that of much of the world. The areas of intense focus should be:

(a) Renewable, low-polluting energy sources: India should be investing a lot more in the development and deployment of solar, wind and waste-biomass power. Consider solar power. Being a tropical country it gets much more solar power per square metre per year, than Europe or Japan. Moreover, since Indians have not become "used to" central air-conditioning, even current levels of solar-panel efficiency generate enough electricity for the average Indian home. Or consider hybrid (gas-electric) automobile technology. Given its huge oil-import bill, India should be concentrating R&D and manufacturing on hybrids. Instead, Indians are taking pride in the plethora of foreign car models now seen on Indian roads, compared to the 1980's.

(b) Water purification and conservation technologies: Most Indian rivers have undrinkable water, because raw untreated sewage is dumped into them by towns and villages upstream. Sewage treatment is not a "sexy" technology, but it is far more important to India's well-being than software or automobiles. Most Indians have neither toilets nor showers. But the fortunate few that do, are unaware or unconcerned with installing devices like low-flow shower heads, or dual-action flush tanks.

(c) Biotechnology and pharmaceuticals are making great progress in India, but how little of it is oriented towards the diseases that affect the poor majority of Indians. India doesn't need better cholesterol-fighting drugs. It needs vaccines against malaria, cheap medicines against dysentery, cures for intestinal parasites. But most of all India needs cheaper and simpler contraceptives. If India's population growth is not controlled, the current economic boom will make no long-term difference whatsoever.

Unfortunately, India's dynamic private sector companies are doing very little in the areas mentioned above. Instead, the lure of foreign investment, and the great offshore services boom, has them focused on products and competencies that serve wealthy, consumerist Western markets. After struggling to gain political independence after 150 years of colonial rule, India is "willingly" surrendering its economic independence to the agendas of Western corporate shareholders.

The final irony of the offshoring saga is that it is pushing Indian industry headlong into, what I call, the great intellectual property (IP) trap. Indians are swallowing self-serving Western "advice" that "strengthening" IP protections will encourage research and innovation. In truth, the Western patent regime is completely dysfunctional. Huge companies like IBM and Microsoft are granted thousands of patents each year, not because they have made so many big "intellectual strides", but because the US patent office, deluged with applications, grants patents to minor improvements that are both obvious and trivial. Worse, a large number of "IP law firms" have come out of the woodwork, to profit from aggressively (sometimes abusively) enforcing these patents. This IP regime does not encourage innovation, but stifles it, because individual inventors and small companies cannot afford expensive lawyers to defend themselves against predatory patent litigation.

Since R&D in developing economies like India, China, Brazil and others, is often 5 "" 20 years behind the "cutting edge", almost anything developed independently in these countries will run afoul of some Western patent. If the developing world honours all the patents filed in Western countries, their precious resources will be sucked dry paying royalties, or they will remain in permanent technological bondage. (Look at it from another angle - how much in royalties did the Western world pay India for inventing the zero?) Indians know in their hearts that IP protection is a game stacked in the developed world's favour. They know that no country becomes a great power by playing by some other great power's rules.

But the CEO's and chairmen of India's budding companies "" the Wipros, the Infosys', the Ranbaxys, are not going to speak up in India's interests, because they fear that would be the end of their "partnerships" with Western multi-nationals. How could Indian Business Process Outsourcing (BPO) firms bid for offshore contracts from GE or Intel, if they don't sign on the dotted-line with regard to intellectual property? And what happens when they win the BPO contracts? Thousands of smart, educated Indians then become the intellectual slaves of a foreign company, for a fraction of the wages they pay their own employees. Every line of software code, every engineering drawing, every new molecule, every revolutionary idea now becomes the property of a Western country. Naturally, these advances will be duly patented or copyrighted. What an irony that future generations of Indians will be forking over royalties to Americans or Europeans for the intellectual output of their own countrymen. And that will be offshoring's enduring "legacy" to India.

================================About the author =================================

Rabindra Kar was born in Bombay, India, and now lives and works as a computer software developer in Austin, Texas. He has been an activist on work-visa and offshoring issues since the early "˜90's. Rabindra holds a Bachelors degree in Electrical Engineering from the Indian Institute of Technology, Bombay; a Masters degree in Computer Engineering from the University of Notre Dame; and an MBA from Portland State University, Oregon, USA.

Don't Outsource Program Management - Computerworld

Today's IT organizations are developing fewer large programs in-house and buying more outside. This is increasingly due to necessity. After budget-squeezing, downsizing and outsourcing, many firms no longer have enough staff (or the right skills) to deliver on a grand scale.

When corporations need to undertake large programs, their IT organizations often outsource the majority of the tasks. It may be tempting to also outsource program management, but this function is critical to success and should never be outsourced.



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