Obama vs. Outsourcing

Posted by: Mehul Srivastava on May 06, 2009

While American companies are up in arms about U.S. President Barack Obama’s new tax plans, Indian companies are just plain confused.

Take, for instance, his fixation on Bangalore. Talking about the old tax code which he intends to reform, On May 4, Obama described it as one “that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York.” (For more, see this story from India’s Economic Times, a BusinessWeek content partner.)

Great stuff. But what does it actually mean?

To figure that out, one needs to keep in mind the difference between outsourcing and offshoring. Offshoring is when a U.S. company sends jobs that once existed within that U.S. company overseas to a subsidiary of its own – for instance, if an IBM coding engineer’s job gets moved to Bangalore, but the new employee is still an IBM worker. Outsourcing is when a U.S. company pays another company altogether for doing that job - much of it ends up in India, but a grocery store in Kansas could outsource its book-keeping to a firm in Topeka.

The difference matters, especially since the way this tax code revision is written, it could, theoretically make off-shoring slightly more expensive for U.S. companies, with the extent of the increase depending on the tax rates of the country the jobs go to. (For countries like Ireland, which the president mentioned, the corporate tax is as low as 12.5%. In India, the corporate tax for foreign companies can actually be higher than the U.S.’s – as much as 44% in some cases. )

But its impact on outsourcing? As far as tax experts - and the Indian IT industry has a lot of them – can figure out? Nada. Zilch.

The change, as best as I can understand from speaking to both U.S. and Indian tax experts, will reverse a Bush-era policy where U.S. companies were able to “defer” paying corporate tax on income earned overseas until they brought it back to the U.S., either as dividends or as retained profits on their balance sheets. They got a tax credit for whatever tax they paid overseas already, and paid the difference to the U.S. Government.

Now, if the change goes through, U.S. companies must pay U.S. corporate tax immediately, but will continue to get that credit. Keeping in mind that companies spend a lot of money figuring out loopholes and deductions to keep their tax rate low, the difference between U.S. and Indian corporate tax rates is pretty low already – no more than a few percentage points.

So first, the offshoring company continues to save a huge amount of money due to wage differences, and then, it pays a marginal amount of extra tax because of this change. That’s not going to be enough to stop offshoring, at least to India. After all, IBM didn’t hire nearly 75,000 employees in India to save tax dollars – it hired them because they cost as little as 1/5th or 1/6th of their American counterparts and often produce the same quality work.

Instead, says Rosanne Altshuler, a co-director of the Washington, D.C.-based Tax Policy Center, this change to deferrals policy might just encourage companies to merge with foreign multinationals, or move their headquarters overseas so that they fall under a different country’s territorial tax system. “This takes the former U.S. MNC’s foreign income out of the reach of the U.S. Treasury,” she says. “I don’t see how the change will increase jobs at home.”

As far as outsourcing goes, which arguably has resulted in a large number of jobs being created in India instead of the U.S., the impact is even less. The U.S. subsidiaries of Indian companies like Infosys or TCS do have some earnings in the US or from non-India based operations but the bulk of the earnings – which add up to billions of dollars a year – are generated in India. So far, there is nothing in the Obama budget or even the statement from Monday that affects Indian outsourcers directly.

So why single out Bangalore? Well, for one reason, U.S. voters have always responded to the fear that the best American jobs could flee overseas, where wage differences are tempting and the young, trained labor pool is virtually limitless. Nobody ever lost a popularity contest by calling outsourcing or offshoring bad names.

The other reason? Well, it’s just likely that Obama isn’t done yet. He had made outsourcing an election issue, and has brought it up repeatedly since he got elected. Even after this bill is done, he has promised further tax reforms, where there could be a more direct attack on outsourcing.

For now though, Indian outsourcing giants are waiting to see what’s next. So far, they’ve heaved a sigh of relief.

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Reader Comments

taptamus

May 6, 2009 11:24 AM

Sorry to say, US is getting afraid of Globalisation, which they created.

Hughes

May 6, 2009 11:44 AM

Sadly, Obama's tax policies will likely hurt job creation, create an incentive to move corp. centers overseas, increase foreign ownership of US firms, and, over time, slowly reduce federal revenues.
It will take a long time to see the full effects, and even longer to correct them.

Asterix

May 6, 2009 11:56 AM

Perhaps its a good time to send American junk food giants packing out of India for a start?

Anup

May 6, 2009 12:41 PM

Outsourcing is very good for USA. It gives Americans chance to do things they are good at and let rest of world do what we are good at. That is why this will never pass, American companies value our work too much to let it happen.

thevoice@voicedup.com

May 6, 2009 01:00 PM

In order to curb our ballooning budget deficit we have now turned to taxing our own multinationals. These U.S. firms will have a difficult time staying globally competitive if forced to pay taxes on foreign profits and this is primarily due to our monetary system being used as a printing press. The new tax plan may cause companies to move their business out of the U.S and deter new businesses from domiciling here. This plan will eliminate American jobs not create them. The current rules put our companies on equal tax footing with those overseas, since foreign governments do not tax as high as we do. Their overseas operations support jobs in the U.S. Obama believes the new plan will stem the ouflow of jobs from the US but the jobs arent moving overseas because of taxes but due to the low cost of skilled labor that exists overseas. Foreign governments may also offer subsidies to any U.S multinationals to continue to outsource their jobs, this mitigates the tax impact to the mutlinational.

As long as we keep printing money to bail out failing industries the value of our dollar and our purchasing power will continue to decrease while inflation ticks higher.

Sai

May 6, 2009 01:53 PM

What happens when Obama takes away the "Tax Deferral" benefit ?

Does it stop the American companies from sending jobs to their Indian subsidiaries - Hell no.

Does this have any impact on American companies getting work done by Indian Companies that are not their subsidiaries - Hell no.

Is this change going to create new jobs in the US ? Hell no.

Why is there so much hoopla about this change? This is political crap and makes insignificant economic sense.

gabe, san diego

May 6, 2009 03:18 PM

I am an European-American, Republican and US educated-MBA International Business(educated to believe in globalisation).

I strongly believe we should only have fair trade with countries that are economically close, almost equal to the States, and who have similar values (see not cheats and liars). Europe, New Zeeland, Australia, Canada, Japan, South Korea and a few others. Poor countries seem to benefit from globalisation more than the richer countries. Let rich countries have Fair Trade with rich countries, and poor countries trade with poor countries. It might seem narrow minded, but Canada will deal fairly with the US, compared with China for example (the list here is way to long to even bother). Now, globalisation might benefit richer countries in the long term, but has not yet been proven. Let American companies create jobs for Americans and Indian companies create jobs for Indians!

JOSE LUIS REVILLA ESCUDERO

May 6, 2009 03:18 PM

CHINA, ready to lead...?

I have spent the last month travelling around ASIA to try to find an answer to this question. Just now, when we are in the middle of a global crisis, with almost all foundations of economy in danger, I wanted to answer myself about the role that each country is going to take to lead the world out of this recession period.

I travelled to Hong Kong, Shanghai, Taipei and Seoul. I spent a certain time reading the local press, involving myself with their domestic issues, and watching and asking about the role of Hong Kong, China, Taiwan and South Korea in the future recovery process.

China latests are focused on the opening of Shanghai Stock exchange listings to foreign companies, but still with the limitation of doing it only with yuan currency, and still being not convertible.
Hong Kong, who belongs to China, but with a S.A.R. ( special administrative regime ) is deciding now its own future, since Shanghai and itself must now compete to become the financial centre of the "new" China.

Taipei celebrates that for the first time in six decades, a mainland company, China Mobile is due to acquire a 20% stake in a local communications carrier, breaking with this step, the so long disputes among these 2 asian states. Nevertheless, some old nationalists from Taiwan see into this movement from mainland, the challenge of a new adhesion process, similar to the one carried with Hong Kong.

And finally, Seoul is focused on recovery the way they best know. That is, working tough and smart to become again what two years ago it really was... an still unknown, but highly effective and productive capitalist economy.

So, the answer to my question was not easy, but I think I can clarify some things that really matters to a global economy world.

China strategy along the years has been to manufacture goods at a low work labour cost, and sell them mainly to the US and Europe. Now, with 1,3 billion people living in the mainland, they realise that their real market may be inside, may be domestic. But to go along with this change in the way exports are handled, is not an easy task... but you can see already some interesting movements, such as the recently signed collaboration with India, to get a chunk into the OUTSOURCING market, as well as, the already mentioned opening of Shanghai Stock index to foreign companies.
So the path seems to be built ahead, but still with critical issues such as if yuan will become the reference currency, if it will be flexible against other international currencies, or even maybe, if China and its allies decide to launch a takeover bid against dollar and euro world supremacy.

My opinion resides on the idea that in a not so long future, we will start looking at Shanghai index closings the same way we do it with Wall Street now.

If China converges into a more open performance, USA supremacy as the first economy in the world may be in danger.

China will try to joint Hong Kong current power and international presence, with Shanghai newest challenges. At the same time, it will break old and stupid disputes with Taiwan and even South Korea, to walk along a new asian world, capable of assuming the role of leading it.

India will have to decide if it goes alone in this new era, with its 1,1 billion people and therefore, their impressive economic and social potential... or decides to take part with the US or with CHINA. That decision is going to become critical for India in the very near future.

But, for sure, we do not expect China president to become a worldwide "prime time TV star" the same way the US does with its presidents. We will never know if China president has bought a dog called "Bob" to his daughters... we even won´t know if he has kids at home,... or if his wife is dating another men ...

We must expect a new role, focused on discretion, hard work, no discussions, but highly effective and consumer oriented strategies.

If the US unveils its secret CIA files, ... China will continue with its secrecy in domestic critical matters.
If the US continues fighting muslims in Afghanistan, China will stretch its ties in a peaceful way with its long time disputed neighbors, trying to consolidate its presence in Asia.
If the US continues with prime time interviews, China will present only specific topics of its politicians activities.

This does not mean OPEN economies vs CLOSED ones, but it means, to be focused on real issues and leave marketing or branding for others.


Jose Luis Revilla Escudero
President
WW Shares, Inc
www.worldwideshares.blogspot.com

prasad

May 6, 2009 03:50 PM

Mr.gabe, san diego -

I am trying to understand your comment. Are you saying the rich countries should only trade with rich countries and poor with poor countries! How do you do that? Being an MBA, I am sure you know what you are saying! I am taking a shot at understand your comment - may be you have to tax all the imports from poor countries to minimize any price advantage or simply ban all the imports from poor countries, right? Let us imagine its impact - immediate sky-rocketting prices for many products in developed countries, can't export any of the agricultural products, slumpting sales for companies like Boeing, Microsoft, Apple, HP, GE, GM,FORD....da..da..

I don't think what you have proposed is a solution at all...if I understood your proposition correctly.

However, I kind of agree with your sentiments --- you can't have a situation where millons of people in developed countries loose jobs every year..it will only end-up creating feeling of resentment...among the people of developed countries...

I think there should be level playing fiedl for all....no manipulation of currencies....no un-fair subsidies etc.

On the other hand, a few things like reducin the cost involved in producing a doctor,or an engineer or an MBA shold go down considerably in developed countries..so that you can attract more people to do study these courses..reduced debt for students will help them to work profitabily at lower salaries..etc..which inturn will help companies to retain high paying jobs in rich countries..

There are countless number of things that can be done in rich countries...however putting walls across the global trade might not be the right solution...!

GEM

May 6, 2009 04:17 PM

The line in this article, "they cost as little as 1/5th or 1/6th of their American counterparts and often produce the same quality work." It's not my experience that the 'quality of work' is the same at all.

But all in all, it looks like the biggest change is going to be that collectively, large corporations will be forced to pay their fair share of taxes, and what's wrong with that? Maybe the corporate CEOs whose salaries rose from 65 times the average worker's salary (20 years ago) to anywhere from 130 to 250 times the average worker's salary (today), well....maybe they need to take a pay cut. Ya think?

I work for a large corporation and I was on an IT project in the late 90's to establish a legal entity in Ireland and when I questioned why we were doing it, I was told that "it will save millions in taxes". During those same years the top brass changed over multiple times with 'leaders' coming in and staying for a few years, pretending to know what they were doing, collecting exorbitant salaries then leaving with sizeable bonuses. Meanwhile, hundreds of my co-workers here in the States laid off while jobs are outsourced to Mexico, China and India. While I believe it's good to expand and go overseas, and that a global company has a much broader view of the world, at the same time those "millions of dollars saved" didn't help any of my co-workers, but the top brass sure made out with big bucks.

Tim Burr

May 6, 2009 05:16 PM

I do not fault companies for doing what they can to lower their costs and increase their profits. I do fault the US government for too many years now, over Republican and Democratic administrations, for not "putting Americans," of all colors and backgrounds, first in incentives and taxes. It is beyond partisanship to say that the average American is getting screwed by American politicians who sell out on jobs leaving this country. That is not protectionist. We need much more common sense about new American job creation and a level playing field for taxes. There should be no special incentives to send jobs overseas. The past years have not really been about capitalism; they have been about oligarchy.

Don't blame India! And good for Obama! The answer is (paradoxically?) "both" in what needs to become a much more "exponentially green, GLocalized" world -- including America.

Jamie Khoo

May 6, 2009 05:56 PM

Just a quick reply to Gabe from San Diego:

Your kind of globalization only creates more space to build more buildings. It does not give the cost-saving function it serves now, so there might be trouble in getting the latest version of the Ipod/Iphone out because R&D will cost a lot more. Plus, there wouldn't be much reason to globalize anymore without such a function.

Besides, weren't you Americans the one who 'stole' businesses from mainland England a long time ago? Recall you history when you started selling cotton/agriculture products behind their backs to other continents. You were once in our shoes too... just because the very same system doesn't look too well for your career, don't hold it against us from TAKING your jobs away.. Its your MNCs that want to GIVE the jobs to us....

We don't cheat and we don't lie.... we only see loopholes in the system and take advantage of them, right? Just like your companies and their tax-loopholes, right?

to gabe

May 7, 2009 12:13 AM

if america has more people like gabe , it has more chance of becoming gabon than retaining its position as eco power.I hav'nt read a more ignorant opinion than this in recent times.

S. Baksi

May 7, 2009 01:07 AM

Why did Obama single out Bangalore? If Americans are afraid that their best jobs will fly away to other developing countries, then it simply implies - we've better talent than they do..!!

Dilbert

May 7, 2009 01:12 AM

To Gabe from San Diego. Where did you get your MBA mate? You don't seem to have learnt much.
You're proposing that the world should be divided into two blocks - "rich" countries and "poor" countries, and these two blocks should trade exclusively within themselves. Well, there are a few problems here.
For starters, "poor country" China practically owns the Americans. Besides owning trillions of dollars of American debt, China also has nuclear weapons and a strong army.
Secondly, yesterday's poor countries are today's rich countries. You include South Korea in your list, which was a filthy poor country not too long, selling cheap Hyundai cars. It did not become rich by trading with Somalia.
Thirdly, if the rich countries traded only among themselves, they would immediately collapse. They don't have the productive capacity to support their own consumption, and would not be able to afford their own products.
I could go on and on, but I'll let you chew on these for now. In the meantime, I suggest you get some experience on your resume, and retake the GMAT. Try go get into a better school this time.

pinki

May 7, 2009 01:41 AM

it may deficiting working of mnc in india and it may creat political unhealthyness in world

Bill Couture

May 7, 2009 01:59 AM

I'm flat out anti-globalization. I think we need higher tariff's. It may be true that "rich countries" don't produce enough for their own consumption, but that can be fixed. We should charge wage equalization terrifs with countries like Mexico, India, and China. Off shoring should be more expensive then domestic production.

Jamie Khoo

May 7, 2009 06:13 AM

Bill Couture:

There is a philosophy of the necessity of slavery. For first-world nations to live in more than adequate comfort, someone has to pay the price. This is evident in the concept of 'ecological footprint'. Every person has a maximum of 5.4 acres of ecological footprint, but an average person in the U.S. is using as much as 24 acres, while someone in Panama uses 4.2 acres, and one person in Tanzania uses 1.7 acres.

Do you see what I mean? For someone to live comfortably, someone else suffers. This means slavery in America wasn't abolished, it was merely moved to another place. If you were to make off shoring costs the same as producing domestically, you are violating this 'natural law'... This is why 'rich countries' will never produce enough without the devil's system of slavery! Not unless everyone works in a farm, you won't produce enough until you force certain individuals to work a farm

However, if all works and domestic production is cheaper than off shoring, this will equal less quality of life for those in the first world countries, because now everything will work at a slower pace, R&D won't be that cheap, and the speed of innovating new technology will drastically slow down.... Unless, of course, the cost for developing new products is passed down to the consumer.

This will then equal a higher price tag for everything... which would eventually cancel-out the positive effects of a closed-door policy!

The issue here is systemic. The real solution is like what China and Russia suggested: a one-world economy to redistribute wealth. That way, the jobs won't be concentrated in merely one place because pay rates will the equal.... BUT will MNCs start charging more for their products? No... because now developing nations can afford such products; their buying power is equivalent to those in the first world.

You think this is highly speculative? Its not... read

http://www.nytimes.com/2009/03/24/world/asia/24china.html?_r=1

@Gabe, San Diego

May 7, 2009 07:17 AM

No wonder America can't compete. It's amazing that people like you can get American MBAs without learning anything in school. The most basic tenet of international trade theory have it that productivity is maximized when trading partners are most dis-similar in comparative advantages so that the trading partners can complement each other. There are far fewer differences in comparative advantages between the US and Canada (the 2 countries are too similar) than there are differences in comparative advantages between the US and say, China. Thus the gains from intr-group trade within the rich group and poor group that you propose will lead to lower productivity and lower living standards for all.

Marc

May 7, 2009 08:27 AM

This is fun, reading all your comments. I guess we fellow Americans (including our president) have failed to realize one thing and that is people in developing countries are far more hard working, productive and efficient then we Americans, and that is why American companies have outsourced their jobs to them in the first place, not only for saving wages. I guess we all need to accept this fact.

submaplano

May 7, 2009 08:59 AM

If there are more job opportunities in India or China, why don't go there as Africans do going to Europe or Hispanics do coming to USA? If a Zambian worker can learn French or British English and a Hispanic worker can learn American English, why an American worker can’t learn Chinese?

Newbie

May 7, 2009 10:46 AM

Looks like after all the push towards free-trade and globalization, America and Americans are getting afraid of it. Yes, US can talk globalization with Mexico, Afganistan, Fiji, Nepal, Australia, Germany, UK and several other countries and actually win, simply because US is the world's third largest country by population. But when India and China come into the equation, the tables turn. US did not realize that it couldn't compete with a combined population of India and China that is eight times that of US. Critics can argue that in India and China atleast 600 million are below the poverty line. But many forget that the size of the middle class alone in India and China is three times bigger than entire population of US. Now America is creating artificial barriers to free trade. Anyway, India and China have nothing to worry as the future market is in these two countries. If IBM / CISCO / Nike / McDonald's wants to sells its products / services in India, it has to set up offices in India, tax benefits or otherwise. Period.

Someone Missed the Point

May 7, 2009 12:36 PM

Off-Shoring/Out Sourcing isn't happening because the other countries are better at doing things than U.S. Citizens, it's done because it is CHEAPER in the short run.

There are inherent costs that are never quanitified when functions are sent over-seas. Yes, you are getting rid of a payroll clerk, or an A/P clerk, or any tech/customer service job you can think of, but now a high paid manager has to spend hours fixing the work that is done over there. Or how about the US customer calling a US company for tech assistance. Yes, the hourly rate is cheaper but how many hours on the phone does it take to get a simple question answered.

There is no job ownership because of the loss of operational knowledge and pride in work that comes from watching a company succeed. An employee in India/China/etc.. is concerned about his paycheck and his company's profit, not the customer (out-sourcing business) over in the US.

time

May 7, 2009 02:22 PM

people try to get some experience from ground level, don't just thrown words by reading shit...

From India

May 7, 2009 03:45 PM

Current flows from high potential to low potential. Water flows from regions of high potential energy to lower potential energy.. it is nature's law and so will jobs flow from regions of high costs to regions of low costs. If the current flow is stopped by cutting the wire, power distribution stops and hurts society, if river flow is stopped, it again disturbs living. If job flows will be stopped, businesses in US will suffer as equally as businesses in Asia because the competitive power that businesses are getting due to cost potential difference is lost. It will hurt world economy even more than this recession.

If job flow should not be stopped then the only solution is to move US people to work in Asia so that their jobs are protected. Same standards of livig can be maintained in Asia at 1/5th of costs.

Infact, outsourcing is allowed to only countries that allow a fixed agreed US people to work in their premises in their regions. It should be a reciprocal arrangement.

Robin

May 7, 2009 06:15 PM

"After all, IBM didn’t hire nearly 75,000 employees in India to save tax dollars – it hired them because they cost as little as 1/5th or 1/6th of their American counterparts and often produce the same quality work."

I've got to disagree with this. The quality of work is inferior, but you can afford to have work done over 2 to 3 times until they get it right, as we generally average, when the cost differential is that great.

"This is fun, reading all your comments. I guess we fellow Americans (including our president) have failed to realize one thing and that is people in developing countries are far more hard working, productive and efficient then we Americans, and that is why American companies have outsourced their jobs to them in the first place, not only for saving wages. I guess we all need to accept this fact."

As someone who has worked with a variety of offshore Indian companies for the last 10 years on a daily basis, I need to tell you that you quite simply don't know what you are talking about. Yes, they are extremely hard working, but they have to be to make up for the poor quality of work. We keep sending it back until it's good enough, but we're not working with them for their quality. It's about price and only price, period.

PJL

May 7, 2009 09:37 PM

Lots of opinion in here. Fair trade should be fair trade, plain and simple. The US does not engage in protective tarrifs like many other countries we trade with, and our labor cost is considerably higher than many of our trading partners as well.

Should we want to remain competitive globally, we must do two things:

1.) Produce goods of top quality at an affordable price

2.) Ensure our markets are protected to an equal level of our competitiors.

How much does a Cadillac sell for in China these days?

sravan

May 8, 2009 12:45 AM

Here are my 2 cents.

Friends, let's not forget that we are human beings. It is the same case that Indians are also loosing their jobs due to the global recession.

It is time to realize that root cause is recession not the offshoring or outsourcing.

If the economy is as if 3 years back, we would not have talked about this now.

I would like to re-iterate that let us create jobs rather than blaming each other. I mean across the globe, everyone should be happy enough.

My apologies if i dont understand it better.

From Bangalore

May 8, 2009 07:24 AM

All the debate will continue till market will come up again. Statements made by Mr. Obama are populist and to make poor Americas happy who lost their job and fearing to loose their job.

I really doubt if he takes any decision which will make American companies less competative.

Rishi

May 8, 2009 08:58 AM

India/Outsourcing boom is in direct proportion to the decline of US businesses. After dot-com US tech businesses were starving to stay afloat and hence started outsourcing work to India to keep the company functional. Later other businesses follow the same path to save every penny they can. End result is the loss of quality, creativity, and growth. If you take a look at businesses who chose to outsource work to India, majority of them are worst off when they didn't outsorce. It is a business cycle. When things will improve, businesses won't worry much about saving pennies and outsourcing will die the natural course, just like hardly anyone buys Indian branded clothes or any stuff made by TATA in the US even if it costs pennies.

Scared

May 8, 2009 10:24 AM

I have been recruited by a KPO and yet to join.
Obama's decision has scared me too much.

Sandeep M

May 10, 2009 03:48 AM

There is always a question in my mind...what are the jobs that are outsourced?...Call center and back office or Medical Transcription....apart from IT. I think only IT is a white-collar job in USA...

I as an Indian will not do a call center job or Medical Transcription job for a domestic market as they will pay very less to me..

I think it is same for US also. Just think US has a shortage of more than 50,000 nurses and they cannot produce any jobs in that field. When asked to Mr. President about getting nurses from India or China, he said we would produce here in US. But when...

Maybe like this, there are a lot of jobs yet to be produced in US...but maybe the government in US is just like politicians. They only say for vote and nothing...

Actually, when we say the jobs that are outsourced are due to cost-cutting, it is the duty of the government to see that it is benefited to their citizens. For e.g. If Medical Transcription jobs are shifted abroad and the hospitals are saving something, they should give some benefits to those patients who cannot pay or those who do not have insurance coverage. That is a win-win situation and that the government only can take measures. If Mr. President thinks that stopping the jobs to be outsourced will work, he is wrong as it will again bring them to the same situation, as they were 10 years back. I think he can ask those organizations (either credit card companies, hospitals, etc) to give some benefits/discount to their customers/patients due to the savings that they are doing.

Sudhir

May 11, 2009 09:36 AM

When US companies stop operating out of USA due to this where is the question of paying the Tax.

Look at Cisco, IBM, Intel, Microsoft, Sun etc.

They only have head quarters for the sake of the name.
Their more than 85 % of the people/ business/infrastructure is based out of India/China or other geographies.

Companies are not patriotic who ever gives them the boost they live there.

What if tomorrow China welcomes all these companies to have their head quarters shifted to Chain with special-special status-quo and the liberty just to beat American’s where will our BIG-B stand ?

Companies are funded by share holders who are spread across all the geographies and not only in USA/UK.

I think it is the time for organization to apply reverse gear and move out of USA and shift their head quarters to India or elsewhere.

Don’t you think so????

Andybhai

May 12, 2009 12:57 AM

Folks

I think there is a huge problem and a lack of depth with President Obama's statements as well as all the different opinions expressed here..

a) US companies are not outsourcing IT jobs to India since last 5-10 years. Outsourcing of work whether its for IT services, software development, clothes and branded goods manufacturing, auto parts, consumer goods etc. has been happening for decades. Most multi nationals have multi geography R&D and manufacturing shops across low cost locations in the world. Some of these are locations where they run their own manufacturing or software development centers and in some cases they outsource to Indian/ US based services firms who will get the work done in India or other geographies where it makes economic sense.

2) US companies are also selling huge amount of goods and services in the low cost countries ( India, China, Eastern Europe, Brazil) which are considered emerging markets. In fact last 5-6 years most US companies have seen significant growth in these markets versus in US.

3) Without being biased either way, lets stop the talk about India/ Indians etc. US itself is made up of variety of cultures and if you see the IT, Software development, R&D teams of any large US firm its made of diverse cultures of people ( with origins from India, China, Brazil, Eastern Europe, Russia)-- there is nothing like an All American Fortune 500. So lets stop talking this bullshit.

Hence if the trend of outsourcing or offshore manufacturing/ development has to stop we are talking about supply chains of all the Fortune 500 companies to be reversed or re-engineered to now do manufacturing or IT development only within US. I dont think these firms can afford to do that only to save taxes.

Finally, have we thought about what happens if all the third world countries or emerging markets start building walls and stop American firms from selling into them?? China, India etc.. had protectionist governments in the past and in the recent years the opening of their economies has given our companies like Coke, Pepsi, Nike, Microsoft, HP, Dell, GM/ Ford, and others markets to sell more into..

I sincerely believe that Obama is a smart and passionate leader who wants to make a change and do something to reverse the downturn and low morale in America. But he is trying to be a populist leader y making nice sound bytes instead of going into the depth of issues and finding more effective strategies. Why are we not focusing on:

a) Making engineering, medical and business schools more affordable?

b) Provide families with tax breaks for sending kids to college- incentives to take higher education

c) Providing US workers better and affordable healthcare and medicare benefits.

d) Giving longer tax breaks to workers who have been laid off ( when they regain the jobs)

e) Allowing tax exemptions to companies to create jobs in low cost US locations ( Alabama, Iowa, Arizona)...

f) Helping US companies increase exports into emerging markets.. There are lots of smaller firms who do not have where-withall or know how or the infrastructure needed to sell globally and are struggling as their only market is US.

Finally as someone on this blog said, lets all realize that the world around us is changing. People in emerging countries have lived through tough times, in hunger and strife and hence they work harder and have minimalistic expectations, save more money than their counterparts in richer countries. The only way we will compete is if we get leaner, shed away our fat and expect the reality rather than blame countries or commmunities.

Recently US has started sounding like Russia of the 70s.. and its sad if we keep going this path..

Obama- hope u are the leader we all expected.

Tony P

May 12, 2009 06:21 AM

Problems abound when the situations is made to be racist, which it is not, it is neither protectionsim to state that a country needs to employ its own people to raise taxes. What is without doubt now being seen in the UK is that the large movement of jobs outside of the UK (across ALL sectors) is having a damaging affect both on tax raising and education. The UK is now suffering a the first reduction in University places in 100 years. The governement reduction in funding is directly attributed to the reduction in taxes and as a result of the UK employing in excess of 1 million Indians instead of UK workers. It is Illogical and naive to beleive that such a large displacement of finance and resultant taxes is healthy in any way other then for the senior executive of GE, Pfizer, Citicorp, etc,etc. Eventually a complete collapse in the local US or UK economies will result. As has been seen now in the last year you can see the result of a LEAK of monies from the these economies and its direct affect on the financial world. The Rich getter richer and the poor will become poorer in terms of money and lifestyle. The Offshoring or outsourcing of work to India helps only a very small number of ever richer Indians at the cost of many US and European workers.

Anks

May 14, 2009 02:42 PM


Several members of 'Anti-American Imperialism Forum', protesting against US President Barack Obama's "Bangalore to Buffalo" remark were today arrested when they tried to forcibly enter the Bank Of America premises in the Indian city of Bangalore.

Buffalo has buffaloes,Bangalore has brains

TIM K

May 14, 2009 05:05 PM

WE NEED I.T. AND MANUFACTURING JOBS IN OUR COUNTRY. I DONT CARE IF THE PIGS THAT RUN THESE CORPORATIONS GET NEW YACHTS THIS YEAR. WATCH AS THE MILITIAS IN THE US GAIN STRENGTH.. WITHOUT REFORM THERE WILL BE CHAOS

TIM K

May 14, 2009 05:05 PM

WE NEED I.T. AND MANUFACTURING JOBS IN OUR COUNTRY. I DONT CARE IF THE PIGS THAT RUN THESE CORPORATIONS GET NEW YACHTS THIS YEAR. WATCH AS THE MILITIAS IN THE US GAIN STRENGTH.. WITHOUT REFORM THERE WILL BE CHAOS

Offshore Lead

May 16, 2009 01:03 PM

I have worked with three off-shoring companies in my career and all three experiences have been ones to forget. The communication is bad, the quality of work is worse, and the logistical problems of dealing with someone half way across the world over complicates the whole project life-cycle. Everyone seems to be junior level, they are not anywhere near creative, you have to instruct them to do even the simplest thing like sort lists by alphabetical order, and I have high doubts that their university standards are up to par with ours - even though american business leaders claim different. Everyone short of the officers of the company dread dealing with the "Offshore Team". But they are cheap, therefore they will continue to be employed by my company.

Puneet Lamba

May 20, 2009 05:26 AM

I red through almost all of your valuable comments, and everyone does have a point, and I just feel that outsourcing can never stop in this money minded world, where all businessmen wants to make money. Certainly no one works for charity… Today the work is done out of India, tomorrow it might go to some other country.

Just to conclude… “What Matters is the Bottom Dollar”

So why worry, just enjoy with what you have, if need more then move around the world and do what can do and live your life.

Wish All the Writers above and all the Upcoming Readers a Happy Life.

Puneet

ChuckDaddy

May 27, 2009 06:06 PM

TIM K - Word up, care about the US. And penalize companies for outsourcing. They are taking just a huge chunk of our employment market and it is not right while our people are out of work!! Different countries are just that, let them create their own markets and generate their own work!!

Lets stop making other countries an option for the greedy top guys. Big angry boo to outsourcing and offshoring. I pray that obama does away with it all!!!

Why are you worried at all

June 25, 2009 10:30 AM

I have gone through all the expert comments, and reading those comments I felt each one of you is either enjoying this discussion or worried about US future and all of you are good economist.
All of you don't realize America is still the only SUPER POWER, and to become Super Power these developing counteries have directly or inderectly helped America to become so.
With the way globolization has reached in the political systems of the developed as well as developing country, any protectionist measure taken may not only impact the economies of both America and developing countries but also weaken America's super power tag.
So I will suggest Obama as well as all the Americans who are against Offshoring/Outsourcing to rethink the synergies produced that helped America to consolidate its position as world power and also helped part of the population of the developing counteris to live good life.

Doug R

July 31, 2009 01:58 AM

This author should of said the Indian employees make 1/6 the money and produce 1/100 the quality of work. They provide horrible service, take zero quality in their work and our difficult to work with. Look at the voice of the customer reports from these companies and they will tell the story.

Dan Longshore

August 20, 2009 09:04 AM

As a direct casualty of IT outsourcing it's high time the Federal Government step in and stop this hemorrhaging of US IT white-collar jobs to India. It has only hurt the US workers and provided no benefit to the middle class. Capitalism's life blood is its financials and intellectual property. Giving these out to another country, notably India, is giving away our country's most important assets. We have to bring it back, less we loose the true engine of Capitalism.

Jeff Kentfield

August 20, 2009 09:24 AM

DougR,

I thought I was the only who noticed this, but you're 100% on task. These workers are really a beast to deal with, the language, cultural barrier. It's just horrible. I also find a certain attitude prevalent in the workers that's steeped in a form of insecurity. This is really hurting the American workers who've been trying to make ends meet. Now it's a psychological battle not just financial that they have to deal with.

Abhi

January 28, 2010 05:55 AM

Why did the US Companies Outsource in the first place? FOR SURVIVAL! If they dont survive neither would the US Economy and neither would Mr. Obama...people talking about substandard quality in outsourcing..need to get their facts clear!

Ashik

January 29, 2010 11:44 AM

So after 6 months, the debate is reignited....The president has come up with the idea again. Any comments..

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BusinessWeek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies. Eye on Asia’s bloggers include Asia regional editor Bruce Einhorn, Tokyo reporter Ian Rowley, Korea bureau chief Moon Ihlwan, Asia News Editor and China Bureau Chief. Dexter Roberts, and Hong Kong-based Asia correspondent Frederik Balfour.

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