Thursday, December 31, 2009

Will there be a Backlash in 2010 in USA against Outsourcing jobs to India?

For Indian outsourcing industry, 2009 was not a great year and it is perhaps understandable. The global economy suffered from severe recession. The US and European companies themselves suffered and it is natural that the impact was felt in the outsourcing industry in India.

How was 2009?
President Obama even before 2008 election did not hide his anti-outsourcing feeling. However, his anti-outsourcing stance was more rhetorical than practical and in the last one year, he did not take any deceive action to create any major obstacle. In fact, the Satyam Computer Scandal brought more worry than Obama being elected as the US president. Another problem was BBC reporting of Credit Card Fraud that created some media storm but did down quickly. In the end, recession was the main problem that did a lot of damage to the Indian outsourcing industry.

Economic Recession gone but where are the jobs?
Now, most experts would agree that the worst of the economic recession is gone in USA. At least, the stock exchange indicates that the worst is over. Large companies are not suffering the risk of bankruptcies. Rather, some large banks are paying back the bailout money to the US government. However, there is one big problem. Unemployment rate is still very high and there is no sign of job creation in the US economy at this moment. Thousands of people lost jobs in the 12 months of 2009 and there is hardly any indication that even half of the jobs will come back in 2010. Thus, at this moment, the economic recovery is perhaps more limited to the big companies than individuals.

High Unemployment Means Low Consumption
You don’t have to be a rocket scientist to realize that high unemployment figures in USA means that consumption will not increase significantly. US economy is based on consumerism. As long as the jobs are not coming back, people will be afraid to buy things like past. Now, there is some kind of grievance among US workers about outsourcing to India. It is nothing new but in a time of high unemployment, it is natural that more people think that outsourcing is the main villain. Such an attitude is surely a bad thing for the outsourcing industry of India.
It is not god even for US politicians either. They are under pressure to create jobs. Some politicians have found a new way to show that they are doing something. Ohio Governor Ted Strickland is one of them. He is trying to convince Tata Consultancy Services to create jobs in his state. The idea is that Tata needs to have some offices in the US and Ted Strickland is trying to act TCS to recruit more American workers instead of either sending the jobs to India or bringing workers from India under temporary Visa. Some other US politicians are trying the same formula. The catch word is ‘creating jobs’ for American people. If Ted Strickland becomes successful, then 1,000 jobs can be created by TCS in Ohio. I mean these 1,000 workers will be US citizens.

Indian companies recruiting in USA: Just eyewash?
Critics would say that it is nothing but eyewash. Creating several thousand jobs in a country like USA is literally a drop of water in a sandy desert. Perhaps they are right. However, you have to understand one thing. Companies like TCS or Wipro are much smaller compared to IBM and Accenture when you think of revenue and asset. IBM and Accenture are US companies that are rivals of Indian outsourcing companies.

Should Temporary Visas be reduced?
A very serious bone of contention in USA these days is temporary visas (like H-1B) granted to foreign skilled workers. The recession has made many skilled workers in USA unemployed. So, naturally, there is a growing call for reduction of temporary visas. Large companies like Microsoft are in favor of increasing visa caps but at a time of high unemployment, US politicians are coming under a lot of pressure to decrease H1-B visa cap. Now, perhaps the question is not whether temporary visas to skilled foreign workers be reduced or not. Instead, most people are perhaps thinking how and when to reduce it.

What about Globalization?
It is the Americans who for decades advocated for globalization, free market economy and capitalism. Now, they have to face the bad side of globalization. US politicians have to do a balancing act because US companies are getting big contracts in India. India is also a very attractive flourishing market for American companies. For example, right now, India is the largest market for small cars.

Indian companies unfairly criticized?
US companies send jobs to Indian workers to save money not to save Indian economy or create jobs. This is the thing that most critics of outsourcing forget. Indian companies are just like cheap contractors and because US companies want to save money they outsource jobs to Indian companies. That is why, it is really unfair to criticize Indian outsourcing companies. If any backlash happens in 2010 then it will be even more unfair.  

Cheap Products vs US jobs
This is the dilemma that US consumers don’t want to realize. They want very cheap products and services and then they complain about ‘lousy customer services’. One of the common complains against Indian workers is they don’t understand American accent that well. You cannot get cheap products and US jobs at the same time- this is the thing that US consumers have to realize.
In the end, I think that there would be some kind of backlash against Indian outsourcing sector. However, any action will become useless because in the end, it is the US consumers who are the root problem not cheap Indian workers. 


  1. You speak only of outsourcing to India...what about Poland and Israel? I know from personal experience how difficult it is to get quality work from outsourcing. The work ethic in these countries is vastly different from ours in the U.S. When 5pm comes around, work is over for them, while their American counterparts work well into the late hours of the night, just to keep their jobs. Is that fair?

  2. Being someone who has worked in outsourcing for over 10 years I agree with a to that is being said...hypercritical I know but i will explain

    A lot of outsourcing arrnagements do not run smoothly, incurring a lot of hidden costs on the client side

    In particular with India, there are a few good guys out there, but Indian businessman as a rule tend to be incredibly ruthless a lot of trials are done using the best well paid guys which will achieve good results, as soon as a deal is in place the cost cutting starts to try and make an extra few rupees on a deal per hour. I have seen this happen time and time again, which in turn is a very short-sided policy, projects constantly are delivered late and normally full of mistakes which need to be rectififed. Other the last 10 years with a dramtic wage inflation in India due to a stupid people trying to make large short term gains, they have essentially shot themselves in the foot

    The reason why India is loosing its grip on its hold on outsourcing is not really political, just large western org's want the job done right and quite frankly they now trust issues with a lot of Indian providers

    Also the IT market across Eastern Europe is booming (pls note I have worked in outsourcing various functions across the board) they costs are smaller and quality is a lot higher with people able to think 'out of the box' rather than just a body shop

  3. You know what..I see these pictures of happy East Indians while many of us here in North America are going to food banks to survive! Seriously..this is wrong.

  4. yes, there is a huge backlash - people with degrees and experience not working and 3 college classes (08-10) not working
    but it will take time to get enough politicians elected who see it the way we see it
    the Ds right now, think we just need to send black kids and illegal aliens to college and all will be fine
    the democrats have gone astray and no longer care about the working class

  5. If they want us to spend money we have to have it to spend. Too many good workers who are still paying for their degrees can't because they aren't worth the paper they're printed on all because of outsourcing. It has to stop or this country will turn into a huge cess pool.

  6. Anyone with half a brain knows the U.S is on the verge of financial disaster. Deficits, entitlement programs, wars, depression era level (real) unemployment. The IMF has openly called for an end to the U.S dollar as a world reserve currency in favor of SDR's - add just a few of these things up and come to your own conclusion. Remember, the U.S dollar is backed by nothing. Globalization has failed the American people. You guess what happens next.