"What
protests?" asked the visitor from Silicon Valley. I’d asked him how
big the protests were in his area, against outsourcing tech jobs to places like
India.
Maybe he was an exception. But I did find, on a recent trip to New York, that
the Indian media had been making a much bigger deal of this "backlash"
than the US media had. Most people I spoke to recalled much bigger protests in
the US when manufacturing had started moving to the Far East. Then, economic
realities and competition had their way, and now, every second product on US
shelves is Made in China. That’s a lot of jobs going offshore. But the West
reconciled.
Outsourcing in inevitable in an increasingly globalized, competitive,
freemarket world economy. It lets companies grow and change rapidly, focus on
core competencies, maintain flexible costs, and fill in for labor shortages. IDC
projects 9% growth in IS outsourcing spending, to $177 billion by 2004. Gartner
projects the global BPO market at $543 billion by 2004.
So many companies have outsourced to Indians, or set up captive units –
Amex, GE, BA, Dell, Citi, StanChart – that the process is irreversible.
And the job crunch is temporary. US Bureau of Labor Statistics project 168
million jobs in 2010, with a shortage of 10 million. While much of the shortage
is in industrial engineers, doctors and nurses, and government managerial cadres
(all of whom India can supply in plenty!), ICT will pick up again, reversing the
‘oversupply’ scenario.
Apart from sensationalism in the mass media, these jitters in India also
outline the fragility of our software exports industry, one built upon wage
arbitrage.
On one hand, with the state of the US economy, the pressure on billing rates
and margins is so severe and our resistance so weak, that we let customers
dictate pricing, an odd situation for a segment where we control a big chunk of
the supply and are heading for ‘superpower status’.
On the other, with an almost insignificant base of Indian-owned IPRs and
products, the long term stability of our tech industry, and its likely ‘superpower
status’, is in question. Would we have been as jittery, or our margins so slim
today, if a third of our revenues were coming from products? Would we have let
customers dictate product pricing?
A few, from Iflex and Infosys (banking) to smaller players like Eastern
Software Systems (ERP for SMEs) have shown that it can be done. But it’s for
the rest of the big boys to now invest into products and IPRs. Giving up after a
few years, as TCS did with E-X, isn’t quite the way. This is a long-haul
drive.