Indian Outsourcing Has Peaked

Their status as red-hot offshoring destinations notwithstanding, Bangalore, Mumbai, and the rest can expect a slowdown soon. Pro or con?

Pro: Not as Tempting

There is no doubt that over the last decade, India fortified its rule over the shared services and outsourcing (SSO) sector. Access to low-wage yet skilled workers allowed local global technology services giants Infosys (INFY), Tata Consultancy Services (TACSF), and Wipro (WIT) to employ tens of thousands of Indians to do work for such multinational corporate clients as Bank of America (BAC), Microsoft (MSFT), and Ericsson (ERIC).

But a recent study by Frost & Sullivan consolidates the idea that India’s outsourcing has already peaked, and there are a number of factors to blame:

The Rupee Riddle. Earlier this year, the Indian rupee appreciated 8.4% against the U.S. dollar and touched 41.14 to the dollar, its highest rate in nine years. A significant reason for concern for the outsourcing sector, the upward value of the rupee continues to put a squeeze on earnings. By April, 2007, it had cut margins by about 2.5 percentage points.

Cost (In)Efficiency. Companies looking to outsource have long seen India as their most cost-efficient vehicle. But with wage inflation running 15% to 25% per year, India can no longer use the siren song of its labor being the cheapest. Competitors like China can offer their services at a lower cost, while firms like Infosys are stuck recruiting from outside the country, because the comparable Indian staff is growing too expensive.

That Age-Old Infrastructure. As much as the economy continues to boom, how long can it sustain its position when IT operations spend considerably on backup systems to fight regular blackouts? And the 300,000 engineering students who graduate each year may be short of the level needed to support modernization of infrastructure and industry growth. (Not to mention that the peculiarly accented “Doug Smith” on the computer help desk is a little too hard for U.S. callers to comprehend.)

So if you assume you’re being rerouted by tech support to a call center in Bangalore, guess again. It seems India’s grasp on the SSO market is at long-term risk, and it just so happens that your call might be answered by someone in Shanghai.

Con: Plenty of Spice Left

Notwithstanding the occasional news stories about companies returning work earlier offshored to India, the logic behind offshoring and its financial impact (both on outsourcing firms operating in India and their American clients) remains intact. First, the logic: A fresh engineer costs $8,000, including benefits, on average in Bangalore. Even a “Google-quality” engineer, presumably equivalent to the best Google can hire anywhere (in fact, Google offers its India recruits the option of working in Silicon Valley if they so desire) costs $30,000. These wages are much lower than in the U.S. and will remain that way for at least a decade—especially if the ambitious graduation targets of Indian education policymakers are realized.

Of course, there are problems in doing work long distance: Coordinating the work of global teams is costlier than coordinating such work locally. The intellectual property issues could be important. But offshoring is now tried and tested enough, and large corporations are deeply committed to it.

By 2010, many large multinational corporations like IBM (IBM) will have their largest workforces in India. This is creating a relatively rich ecosystem in a number of Indian cities, especially Bangalore.

Already, for a number of these firms, their Indian operations are being declared global centers of excellence, whose value goes well beyond just cost savings. Undoubtedly, some smaller firms have faced high initial costs, but even they, particularly the technology firms of Silicon Valley, have committed to Indian operations. Firms such as Infinera (INFNO) and HelloSoft have substantial Indian operations that are critical to their success. For them to retreat would require a major reorientation of their business strategy.

The appreciating rupee will, like rising wages, affect offshoring decisions. However, the Indian system integrators such as TCS, Infosys, and Wipro, which are also being squeezed by costs, have experienced profits rising at about 35% a year for the past decade and enjoy margins in excess of 20%. This provides ample room to absorb rising costs.

There can be little doubt that the Indian ecosystem is maturing. However, the growth of offshoring to India has not peaked.

Opinions and conclusions expressed in the BusinessWeek Debate Room do not necessarily reflect the views of BusinessWeek, BusinessWeek.com, or The McGraw-Hill Companies.

Reader Comments

Justin Harper

Like the Iraq war, this should have never happened. The U.S. sold out its IT workers, and all that is left is to face the fact that U.S. industry does not have any loyalty to this country.

kevin

Justin Harper,
Why should a company have loyalty to a country? It is an entity to make money and amplify returns for investors.

Nationalism is anyway a farce, created by some to get rich using this propaganda on backs of others.

Dave

We as Americans should fight this. Our kids are hungry over here, and we try to feed the kids from other countries. If all Americans decide to be Americans and buy only American-manufactured products, all these outsourcing companies including GE will die. Consumers are always the kings. So be American and buy American.

Srini Dadi

The global economy has opened up India to the world, and with the increasing growth in India, the costs have escalated. With the U.S. market cooling down due to the credit and subprime issues, the investors are investing in Asian countries including India, resulting in further fueling of the Indian economy and inflation, and the rupee is gaining against the dollar. The major software vendors like Infosys and TCS are taking a double hit due to the rupee gaining and the increasing costs. However, these companies will be able to sustain these by renegotiating and also be optimizing the work flows. Hence there are more opportunities for these companies, and the trend will continue.

AKS

It's kind of unfair to folks out there in the Western world, but nothing much can be done about it now. This process is irreversible. I have lived/worked in both the Western world and India in the last 10 years, and things have come full circle.

When I started working 12 years back, my compensation in India could not even buy me a two-wheeler despite that I graduated from a top school, whereas had I been in the Western world, I could have gotten a car even before I could start my first job.

For all these years, the middle class in the Western world has enjoyed a good lifestyle whereas the guys in Asia got peanuts for the same work/level in "equivalent terms."

This difference in real economic well being is just being redistributed now. It will go on till we reach a point when it does not matter where one works as long as the job gets done at the right cost. If it's a low level job, maybe guys from the West will have to migrate to a place that supports the wage for that work and vice versa.

The current generation in the West will unfortunately get caught in the crossfire of this huge global redistribution of wealth.

By the way, I am currently working in India, and I am happy to be back here. Meanwhile, my compensation today is about 10 times my first compensation--still much lower than what I should get had I been in the U.S. (in real terms). It's all because of this redistribution of wealth.

D Phan

The global company goal is to maximize the stockholder value. It will invest where it can bring the most return for its capital. Toyota builds cars in the U.S. GM builds cars in Mexico. Even though it is an American company, the stock owners could be from all over the world. I remember Wal-Mart used to sell made in USA products. Look at its shelves now. Outsourcing is the result of globalization. The cost of doing business in Bangalore is increasing. Until the cost of doing business in the U.S. and India is the same, the capital will continue to flow west. Globalization comes with both benefit and cost. Protectionism will hurt our competitiveness and lower our standard of living. The only thing we can do is ensure the rules of the game are the same for everyone.

Tania

Companies that outsource have one plan in mind, to make more profits. They do not care that the Indian/Chinese people are poor. In fact, they are abusing cheap labor. Bell Canada is a company that uses India to service North American customers who then become frustrated on the phone, because the Indian people are not trained to think outside of the box.

Companies need to pay more attention to what they use cheap labor for, as it is not something to be proud of.

Samuel

India is going to remain a force as long as kids in the U.S. are afraid of math and science. College enrollment even in the U.S. suggests that enrollment in computer science is the lowest. In fact, a few schools have closed their computer science programs.

It's not sexy to be a math or computer science major at all in the U.S. There you have it as to why India will remain a force.

AKS

I keep hearing from folks in the West that Asia is only about cheap labor. That's not completely true. It's also about good quality labor. I don't think Accenture or IBM would come to India just for low cost and ramp up hiring like they are doing now. It's all ultimately about deriving value at a reasonable cost till the costs here go up substantially.

If one looks at the demographics, Asian countries have substantially higher younger populations that will enter the workforce and also be future customers--in contrast to retiring baby boomers of the West. So strategically it makes more sense to move stuff to Asian countries.

Also, due to limited opportunities and a huge population, it's always been a very competitive environment in this part of the world for even basic amenities. Hence, there is that extra drive in Asians to work harder to have a better tomorrow.

As for some Western companies moving voice-related stuff to India and their customers' insistence on speaking to Western folks, it's pure bad business decisions/execution by those companies. It does not make outsourcing per se a bad concept or folks in Asian countries bad workers.

Techie Tech

The only place to outsource is India, and over the next three years, outsourcing will only increase and improve. The reasons that have been given for the peaking of India (appreciating currency, salary increases, and infrastructure) are true of all other Asian countries and chief competitors of India.

Once ramping up is over, the companies that invested in people will get far more returns in India than anywhere else in the world.

Silicon Valley Techie

Companies will continue to outsource to India, because they are chasing the lowest labor cost. As the articles above state, tech graduates can be had for $8K a year salary. Even if they were not talented or skilled, it means a U.S. or global company can hire 10 of them instead of one U.S. graduate.

It also means that you will see fewer students in those fields here in the U.S. Why would someone go into $40-$80K of debt to compete for a job whose salary here would be well below the poverty level? U.S. students will not be able to compete with salaries that are 10 times lower than theirs.

It does mean that these companies will save on labor costs, but who will buy their products here?

The goal seems to be the elimination of the middle class in the U.S. You will have the poor and the ultra rich.

"Kevin" above asked, why nationalism? My response is, because it is about locale. People are basically tribal. Nations are just amalgams of this. If you do not care about the people you live around and they don't care about you, then you have no community. If you have no community and you have no pool for jobs, how can you support your own family?

Globalism is about enriching upper management and shareholders. It has nothing for workers--as there will be a constant search for the lowest possible labor costs. Third World countries that have universities, and pools of unemployed students will be targets for future growth worldwide.

Iran, for example, could be a prime candidate for this, if the geopolitical climate allowed it. They have a large pool of young people with college educations--but with few employment opportunities.

One has to wonder who the consumers of their services will be when they eliminate the workers and their earning potential. Who will be left to buy the low cost junk from Wal-Mart? Designed in India, built in China, with tech-support in India?

Perhaps the markets for that will have to switch to India and China, eh? And if so, why would citizens of either country shop at Wal-Mart? They will instead go to a business built and run by their own citizens--i.e. nationalism. Just look at how this has happened in online e-commerce. eBay failed in those markets and was forced to partner with native auction firms. Because people want to buy from their own national firms.

So perhaps the GEs, GMs, Oracles, and IBMs will be destroyed by their own greed, as their outsourced workers now will have all their IP, all their business process, and all of the manufacturing know how. As Lenin once said, "Capitalists will sell you the noose to hang them with"--or something to that effect.

Sean

Justin Harper: Wake up and smell the coffee.

Work tends to go where it is performed cheaply, all else being equal. This is as powerful as Newton's laws and the laws of fluid mechanics that demand fluids flow from high pressure areas to low pressure areas.

You can either accept and adapt or cry over spilled milk (which tends to flow to low pressure areas as well).

beedi

For the longest time, the West had been encouraging unrealistic incomes for work done. I've seen my colleagues get paid more than $80K a year, and they're only high school grads. The truth is that education--in addition to globalization--is a great income leveler. The truth is that unless the U.S. at large focuses on education, it will not understand how "value for money" also means "adequate compensation for quality of work." And yes, the truth hurts.

tiddle

For the crème de la crème of the India techies and scientists, I would not argue that they have the stuff to make the cut. But honestly, most of the Indian developers that I've worked with in the past and present, both in India and in the Western countries, are quite mediocre. A large number of them are like robo programmers. Now, as a company, would I still outsource there? Maybe. If it means it costs me less to hire three or four programmers in India than in the U.S., I would well consider it (in the hope that the three extra bodies might make up for the quality loss). But if India continues its current salary trend, it would not take long for me to pull back. It's a nightmare to coordinate the logistics, and a lot of Indians need to be micro-managed (unfortunately). I don't mean to sound degrading, but they might speak English, but sometimes I wonder if some of them understand fully what they speak. That's one of the main reasons a lot of US. customers don't want to talk to customer reps with heavy accents.

In terms of China, they crank out engineers, too, but they don't speak the language. And a lot of them suffer from the same robot-like thinking as the Indians.

But looking down at others does not mean the Americans have much to be proud of. If we continue ignoring the eroding education in U.S., these developing countries are going to catch up until living standard and salary are all equalized.

Guru

I am surprised at some of the comments opposing outsourcing. When the same free trade norms were helping boost some of the outsourcing economies, people were happy, because their pockets were being filled. Today the same global economy is helping other countries, and there are "foul" cries,

As someone pointed out rightly, it is not important where work is done; it matters more who is owning those companies.

Do you know that some CEOs get money from two sides? From holding shares and from outsourcing service providers.

I am aghast at the comment "some programmers are so mediocre." It is really surprising that some of the people see only the dirty side of something, and they think that is the complete picture. Mediocre are many programmers in many countries. That does not mean that is the case everywhere with everyone. Look at the number of startups and successful companies in Silicon Valley. They are started by so-called mediocre people.

I guess it would be better to look at what some giant corporations are doing to local business than to complain about the Indian workforce.

A Reader

Yes, Indian outsourcing has peaked--is that a question or a wish by many countries (as they would like to see)?

Just yesterday TCS signed a $1.2 billion deal. In all likelihood, in getting this deal it must have beaten IBM, Accenture, EDS, and CSC. Of course, $1.2 billion is not very big compared to the deals IBM signs, but for TCS it is the beginning of showcasing its global delivery capabilities.

What we have seen of Indian outsourcing is just the preview of the greatest show on Earth. The actual show hasn't even begun.

radhagirija

The Indian story is not just outsourcing anymore. It is globalization connected with availability of workforce. I am sure Western nations will adapt to it as they adapted to the labor movement from industries to IT.

For a company to provide value to shareholders, what counts is productivity. As long as India or China or some other nation can deliver high productivity, which in turn saves cost, work will move to those nations. Nothing to do with any nation.

The U.S. and Europe used to do all their work in house till the early 1990s, but India and China surprised them by delivering the same work at cheaper cost, and further improved the productivity.

As long as India can sustain the young workforce with quality education, work will move to India. Cost is just one factor. But a skilled workforce with high sustained productivity is the key.

Udai

It's not just about work getting done in the East and the West's being deprived of jobs. I also don't agree that "mediocre" can be attached to the East. There are mediocre people everywhere. You pay more, you get better. That's it.

There's a deeper issue here apart from savings by capitalist corporations. Any corporation would want to have a bottom line of profit of at least 10%. But does it produce enough to sustain that? If it doesn't, it dies and causes loss of jobs. Especially when Westerners are not ready to work for anything less that $75K to $80K even if they don't have a graduate degree. They think it's their right. And corporations have to sustain this. So they found a way called outsourcing. Once this started, others had to follow to maintain their competitiveness. Adding to this, the East is delivering a lot more than pricing advantage to this.

Now, where is this saved money going? It goes back to the West. In the form of money in the markets--salaries, expenditures, etc. So the West is surviving to some extent at least on money saved like this. And it means that if it didn't do this, it would have been in bad shape with smaller bottom lines.

experience matters

The "graduate degree" that's always being mentioned here is really overblown. The founders of Microsoft, Dell, Oracle, and many others are without degrees, yet they run enormously successful IT companies. In IT at least, what really counts is experience. The barrier to entry in software has always been low. You only really need to learn a database, programming language, and operating systems class to become a programmer. Assuming you have the other skills like basic math and English, you can learn these things in two or three semesters at a community college. Some have done it just by self study. Which is why you see many non-degreed workers in the field. What really makes for a prized and talented programmer is someone with five years work experience under his or her belt (degreed or not) who has worked on many projects or industries, and whose skills are up to date. I would hire someone with that kind of experience (even without a degree) in a heartbeat over some fresh graduate with a BS or master's in computer science with no experience at all. Plus the stuff they teach in colleges is usually way behind the times or is not applicable to the stuff used by businesses.

It isn't just a question of salary. It doesn't do my business any good if I'm retaining an inexperienced programmer with a low salary while my business is bleeding large sums of money due to lost revenues or missed opportunities because that software project can't seem to get off the ground or it keeps failing.

nicknguyen

I definitely see that an end will come to India's rise. Even though 1 billion-plus Indians are focused on IT, what known software is from India? None, zip, and duck.

know

What "known" software is from India? Take your pick of any known software-producing company. Indians are everywhere at Microsoft, Oracle, and Google--and not in small numbers.

Gonz

Dave
October 17, 2007 09:30 PM
We as Americans should fight this. Our kids are hungry over here, and we try to feed the kids from other countries. If all Americans decide to be Americans and buy only American-manufactured products, all these outsourcing companies including GE will die. Consumers are always the kings. So be American and buy American.

Dave: I would be more than delighted to purchase American-made products if they were "quality"-made products and non-union. Everyone one wants a better bang for the purchase, but Americans continue to manufacture inferior products that cost an arm and leg, no thanks to the unions.

Hemendra Rathi

Globalization. When India was not part of the globalized world, all were asking India to open its market for investment to improve the health and well-being of its citizens, and now that India has opened its doors and became part of the globalized world, people are asking it to stop the process. Why? Because there is increasing competition, and mediocre people are filtering out. India and China are not about low cost; they're about the market. The Western market is now stagnant, and the growth is in India and China due to their vast populations. Hence companies are investing there, and the investment is to make a profit and keep the shareholders happy.

India and China are not developing; they were developed before, ruined by the invaders, and now they are trying to achieve what they were. I guess there is nothing wrong in it.

sachin

Be practical. For the majority of software programming, you don't need rocket scientists, so the country that can provide the maximun number of software programmers at the minimal cost will survive.

Prak

While everyone talks about the impact of outsourcing on American workers and the American middle class, no one talks about its impact on "other Indians," who are not part of this bandwagon. Outsourcing has created a few super-rich in India. It has become impossible for workers in other industries to bear the impact of increasing costs. Those who have made money are using their influence to grab agricultural land belonging to poor farmers in the name of developing special economic zones. As someone said in one of the comments, globalization has created a few super-rich and many poor. The income gap between rich and poor in India is one of the highest.

The gains of outsourcing in India have gone to those who were traditionally at the upper echelons of the society. It would be interesting for someone to study the impact of outsourcing on Indians.

Jeevan

As the world becomes more flat, the human and natural resources combined with environmental regulations and external factors will finally decide the fate of the economies.

Alfred

It is incredible that those Westerners who export exploitation and benefit from cheap labor of developing countries are now complaining about the imbalance of international trade.

Parag

India has come a long way in developing its IT industry. We have so far bagged business based on our cost advantage, which has also suited the American companies. But with 15% to 20% salary hikes across the entire industry year over year and the rupee's appreciating, we have started loosing out on business to even cheaper destinations like China, the Philippines, etc. And I am pretty sure the American companies will not think twice before moving jobs to even cheaper destinations. What India really needs right now is to move up the value chain and provide value added-services to maintain the upper hand. The flagship IT companies of India, namely TCS, Infosys, Wipro, and Satyam need to start using their surplus cash to build products that would use cutting edge technologies and cater to the global market, rather than just working on outsourced projects. Because as nicknguyen rightly said: What known software is from India? None

Tom K

It has nothing to do with redistributing wealth or looking after the "poor" in other countries. You have to realize this is business, and in business it's all about keeping costs down. The lower your costs, the higher your return on investment. It's a classic entrepreneurial move.

I also disagree with Techie Tech, who states that the only place to outsource is India. There are larger outsourcing points, the most important one being Vietnam. Sure, India started it all, but the larger Asian countries are picking up and are already a source of competition for the country. It's only going to get tougher over the ensuing years.

There are also problems with outsourcing--cultural issues, language barriers, etc., and though I agree that the market in the U.S. is ultra-competitive (where grads are competing globally for positions in local companies), I don't think it's safe to completely rule it out either. Companies are hiring their own.

Look around you--it's all about globalization, and the time's come to realize it's not going anywhere, so we might as well fit it into our schedules and move on from there. There's been a lot of talk about India's elastic limit, but the fact is, it's probably going to remain dominant at least for the next decade, since it's going to take a lot of time and money to switch to anyplace else.

madhu

I came to the U.S. in 1990 from India. The very first week, I went around to various places with my uncle, including to his office in SFA, and met a lot of highly placed individuals (managers, vice presidents, etc.). After a week, I asked my uncle, "How the hell is this a developed country?" I see nothing but very mediocre people around. I told him that pretty soon Americans will be challenged by the Indians. He couldn't believe what I was telling him since he had come to the U.S. in late the 1960s, and he only knew about the old India. He laughed at me. Now he understands why I said that then.

The bottom line is, folks, in my 17 years here in the U.S., I have only come across a few intelligent people. Most of them are ignorant of what is going on in the world. Media is to blame for this ignorance. As a software engineer, I have seen only a handful of Americans who were good at what they were doing. Those were old timers. The current generation has lost it. I sincerely think Americans should go back to what they do best, manual labor. Oops, even there the Mexicans are beating them.

God help the USA.

raja tadvai

Hey, something will happen in Tier 3 and Tier 4 cities, but they need to be trained well enough in English to keep worries in check.

Modos

You cannot stop globalization. When Pepsi and Coke invaded the Indian soft drink market, India accepted it as part of globalization. Now all Indian soft drinks have vanished. But when it comes to IT, it is supposed to be the other way? Play with one rule.

Tom K

Mandhu, I completely disagree with what you're saying and also find it immensely insulting to the American intelligence. It's no wonder they hate the Indians who're "stealing their jobs." I'm British, and frankly, quite happy to see you haven't included us in your little rant.

Although outsourcing has taken quite a hold on the increasingly globalized world, I don't think it's affecting the job market as much as it did earlier. To that extent, many of my vendors are stating that America has become an extremely saturated market, and they will be looking more toward European shores and markets. And added to this piece of news is the fact that more and more local companies are hiring their own employees, to counter the cultural and language barriers they meet with offshore.
--Tom

Yindubiesan

I have come across so many articles and news stories from exuberant Indians, about how India will be such and such, pretty much like the statement of Madhu that "pretty soon Americans will be challenged by the Indians." I can agree with your statement if you were referring to "Americans" as "some American people" and "Indians" as "some Indian people." In terms of country-to-country comparison, it is almost funny to imagine that, in the next 50 years, India could have a chance to challenge America. From my experiences in the U.S. and my eye-witness observations in India, I'd say you can almost write off India for 50 years as far as being a big player of anything in the world, though the country tends to have a big mouth and lion-sized heart.

Sanjay

Tom K and Yindubiesan:

Do not underestimate the intelligence of Indians and India's potential. Just to give you some examples:

1. 30% of Silicon Valley companies are started up by Indians.
2. 50%-plus of American doctors are Indians.
3. 60% of NASA scientists are Indian.
4. We are the richest ethnic group in America, richer than whites and Jews.
5. Intel Pentium CPU is the basis of Intel. Intel Pentium CPU was created by Indians.
6. Microsoft is the core of American prowess. And 40% of Microsoft engineers are Indians. Without Indian engineers, Microsoft cannot be successful. Likewise with Oracle, Google, Cisco, and on and on.
7. Indians have the highest SAT scores, higher than any other ethnic group.
8. IIT is so tough that students who are not qualified for IIT are easily accepted by MIT or Princeton or Stanford.

Without Indians, the American IT boom and technology dominance would not be possible. I think India will be a superpower in 2020 to 2025. Stay tuned for the greatest show.
JaiHind.

Yindubiesan

JaiHind,
Are you sure that India will be a superpower in 2020? The rest of the world does not think so, particularly the American think tanks. Otherwise, there wouldn't be any of the closed-door hush-hush agreements between India and the Bush Administration that are going on right now. India, at maximum, is only considered a junior partner in the Americans' 21st century vision. "Superpower" for India in 2020? You've got to be kidding. No country in this world can be a superpower without first tilting the balance of the current world status quo.

Even assuming all your statements about Indians are facts, those stats only show that Indians, as individuals, are capable only in America. That rarely means anything about the future of India as a country, in Asia.

Isn't it a fact that one quarter of India's people are considered "untouchables" even as we speak at the start of 21st century? Isn't it true that the Indian government, even though it's elected, is the most corrupted and incapable in the world?

Rajeev

We in India seem to have mediocre programmers...the U.S. puts them in the White House.

Guru

Tom K,
What happened to Indian docs in the UK? I am sure locals were scared. Refer to your own statistics published a few days back. It says Caucasians with be in the minority in next 20 years.

Yindubiesan,
That is being said exactly to some others. You cannot compare 1-to-1 but in general. Many countries envy what India has achieved even though they were deprived of knowledge. They got most of the stuff indigenously. Examples: Space programs (many countries prefer to give satellite launch to India than any other country), missiles, LCA, entrepreneurship, to name a few. In fact, last year a group of 20 people from the U.S. education industry visited India to learn how so many make it to graduation. But I am sure they missed the most important point.

James

I have read that India is moving into manufacturing and that 40% of the largest companies will move there by the year 2012--putting them in direct competition with China.

The only thing that can stop India's growth is its infrastructure; it desperately needs to modernize.

joby thomas

India is a strong force to reckon with. Its youth will outpace all economies in the world. The median age of India is below 24 years old, which shows Indians' help is needed even for aging China to carry on. America needs India to contain China. America and others in the Western World think everything is great. The time has gone, and Indian diaspora in the USA is very strong. The governor of Louisiana is an Indian called Jindal. I look forward to an Indian-origin President of America. Jai Hind

yash

Hello, Yindubiesan--wake up and smell the coffee.

Instead of watching the stupid Fox, CNN, and CNBC, read some foreign news on the Internet. You will learn what is going on.

Just a few days back an analyst on CNBC (the so-called top business news channel) was saying that California had a bigger economy than China. Bigger than China? How dumb are these people? As Madhu said above, media is the root cause of Americans' ignorance.

On a PPP basis, the U.S. economy is $11 trillion, China is $7 trillion, and India is $4 trillion. If you include the underground economy, India's is expected to be close to $6 trillion. I can bet 90% of the people in the U.S. don't know these facts.

mike

Sounds to me like India has the know how and is starting its own companies. Give it some time, and it will be outsourcing to us. And vice versa. I am sure that it will equalize eventually.

Dave

Buying American-made helps us, nothing against India or China. What's wrong with keeping your country employed when you can? Check out the list at http://www.americansworking.com, where there are more American-made products than you might have thought. If you can buy some, that's great. If you can't, hey, it's still a free country.

Rakesh

Hello People,
The quality of debate is good in the beginning but degrades after Madhu's comments. It is better to have a healthy debate and understand the issue at hand than to blame each other over intelligence and superiority.

Globalization helps both the countries. If we talk about India, yes, a lot of jobs are created and also the West gets an opportunity to sell its goods in India and China as their income levels improve. There is always a mutual interest, or else no one would have gone for globalization.

John

There's a salient point here that hasn't been made about the outsourcing boom in India. A prosperous, democratic ally like India is critical for one very important reason: China. If anything, it is in the best interest of America to help strengthen and encourage India as an economic superpower to counterbalance the dangerous surge of China on the world stage. Lest we forget: China is still under a totalitarian regime that oppresses the basic rights of its people, and is also a looming military threat. Instead of fearing the consequences of trade between our two countries, we should remember that the same transfer of labor helped transform Germany and Japan into two of our most important allies, in politics and economics.

wayne

Wage inflation in India will reduce the benefits of American companies outsourcing to India. The competition is moving away from the cost benefit factor to the skill and efficiency factor. Americans always do well on that playing field. The company I work for has not been able to make outsourcing work at the IT project level. The upper management is disappointed that after six years they have not realized the benefits expected.

Another telltale sign is GE just unloaded their outsourcing company. One must ask why.

From my research and observations, IT outsourcing to India peaked in the 2006-2007 time period.

I have to make one more point directed at Sanjay. You are way off base. I don't have time to check others, but they are suspect as well.

We are the richest ethnic group in America, richer than whites and Jews.

You may want to check Forbes 400 and other census data regarding this one.

Indians have the highest SAT scores, higher than any other ethnic group.

Check SAT Averages by Racial and Ethnic Group, 2007 at this url

http://www.insidehighered.com/news/2007/08/29/sat

buddycat

India is going to remain a force as long as kids in the U.S. are afraid of math and science. College enrollment even in "the U.S. suggests that enrollment in computer science is the lowest. In fact, a few schools have closed their computer science programs.

It's not sexy to be a math or computer science major at all in the U.S. There you have it as to why India will remain a force."

I really don't think that this is the result of Americans being afraid of science and math. Wasn't it people from the U.S. who put a man on the moon? I am currently working on a B.S. in computer science and have an A.A. in computer application development, and I think that enrollment at colleges in computer science is down because people aren't encouraging their kids to go take computer science because they are afraid there will be no jobs in it due to outsourcing.

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