When Will Companies Lift Their Veils on Outsourcing?
Being a journalist, I have to dig out information from the deep. After all, I am supposed to give my readers the complete picture in terms of facts and balanced coverage. It becomes difficult when buyers of outsourcing services hide information and service providers toe the line. I understand that organizations do have the right to keep some information undisclosed due to competitive reasons, but the scale to which it is practiced only enhances the mystery behind outsourcing.
Here’s how a typical conversation with an outsourcing buyer goes:
Journo: What’s the size of the deal?
Customer: Sorry, we cannot tell you. Our policies don’t allow us to reveal this information. All I can tell you is that it’s over a million dollars. (Okay)
J: What’s the duration of the deal?
C: It’s a multiyear deal. (So smart of me that I understand it as more than one. No one signs a deal lesser than that))
J: How many outsourcing engagements do you have?
C: Well, we have multiple providers.
And then comes the request: “please don’t mention the company name–just mention that we are a financial-services company.”
Isn’t this similar to reading a headline in the Wall Street Journal–“Large Investment Collapses, Another Bank to Buy Them Over”
I strongly feel that outsourcing is a practice still ridden with a lot of guilt and stigma. That’s why companies don’t face up squarely to it as far as the media is concerned. Clothed under respectable terms like globalization, it becomes more palatable a commodity.
Even companies like IBM want to stay politically correct in the eyes of American citizens who look upon outsourcing as the ‘big bad practice of displacing honest Americans and giving away their jobs to the Chinese and Indians.’
Time and again, the economic advantages of outsourcing have been proven. And so has been its role in rendering Americans jobless. Why doesn’t the world see the right sides of the equation? Both the media and the people who outsource are to blame for this. The media have not done enough to unveil the myths behind outsourcing and the latter is only contributing to make it more mystical.
Okay, now for some numbers. The U.S. has lost a record number of some 1.2 million jobs in 2008, considered one of the worst years of unemployment. If outsourcing is to be blamed as a major reason for this, what percentage of the jobs lost should be fairly attributed to it, assuming there are 10 other reasons for it?
Twenty five percent would be a strong reason, 15 percent would be significant, 10 percent would still be an important reason, 5 percent would be a non-trivial reason, and so on.
In 2008, outsourcing accounted for a mere 0.7 percent of the jobs lost. Is that too high to bring a country down? Someone’s math is seriously wrong here.
| Jobs Cut Reasons | ||
| December | Year-To-Date | |
| Market Conditions | 41853 | 322611 |
| Closing | 7500 | 173407 |
| Restructuring | 23232 | 158256 |
| Cost-Cutting | 16155 | 145191 |
| Demand Downturn | 14514 | 124015 |
| Merger/Acquisition | 41356 | 123115 |
| Bankruptcy | 15316 | 62101 |
| Voluntary Severance | 282 | 25031 |
| Fluctuating Sales | 4973 | 23233 |
| No Clear Reason | 165 | 22024 |
| Relocation | 175 | 9419 |
| Outsourcing | 427 | 8975 |
| Order Cancellation/Reduction | 7502 | |
| Reorganization/Consolidation | 7123 | |
| Competition | 3578 | |
| Rising Costs | 2512 | |
| Government Regulation | 2271 | |
| Technological Update | 400 | 1324 |
| Labor Dispute | 1261 | |
| Legal Trouble | 891 | |
| Funding Loss | 135 | |
| Firing | 18 | |
| TOTAL | 166348 | 1223993 |
Source: Challenger, Gray & Christmas
Neal, or should I say, Avishnikar (or some other Indian name)?
When you say, “It will be great for everyone if it works out, and an interesting challenge to put the genie back in the bottle if it doesn’t.” Please tell me just HOW great it will be for all the American who have lost their jobs? Tell me how great it will be for their kids whose parents can’t help them go to college? Tell me how great the economy will be when this happens to enough people that everyone stops buying things – oh wait! – this has already happened!
This recession has been a long time coming. It is easy to blame the housing bubble, or the financial firms, but there is no good, specific reason why the bubble had to burst now, or even that the bubble had to burst rather than come in for a soft landing. Look at housing prices in Japan. Relatively speaking they went FAR higher than prices have here, yet they landed software and are on their way back up again.
The problem is that, along with everything else, people are loosing jobs year after year after year (due to offshoring).
Let’s take a closer look at the chart you posted.
Market Conditions – analyze this in a bit more detail and it could EASILY translate to: Employment Market Conditions are such that people are less expensive to hire in India so we moved our call centers there.
Restructuring – our company is restructuring to lower cost so we closed our call centers in the US and moved the work to India.
Merger/Acquisition – We are being bought or buying someone else and are transitioning all the call center work to their/our site in India and closing the call centers here in the US.
Cost cutting – same argument.
That’s 749,173 or 61.2% of the total – and I could EASILY have included more in that picture.
I may be not 100% accurate here, but, the sad thing is that I guarantee I am also not 100% incorrect. Companies will do anything they can to avoid getting labeled as companies that offshore and move jobs overseas and yes, relabeling the reasons those jobs were moved is well within my expectations of what they would do.
The mainframe applications were developed in the 70’s and 80’s, the PC apps developed since then and the merger of the 2 technologies continue. During this time there have been many paradigms that have come and gone; many technologies, companies and products that have been replaced resulting in an industry that is less than stable. Now we turn this mosh-pit over to young Indian professionals who are generally treated with less respect than their European and American counterparts, who have less of an incentive to do a committed job (rarely stock options or bonuses), and who have less of an understanding of the culture and language.
The underlying assumption is that they will do a better job than the engineers that preceded them; engineers who went to the same US Universities that most Indians would love to attend. Clearly they have youthful energy, are less cynical, and possibly more disciplined. It will be great for everyone if it works out, and an interesting challenge to put the genie back in the bottle if it doesn’t.
Deone – Very nice…this blog is posted in “Vent those feelings” section …i just noticed…i think you did right by expressing it.
BTW – Writers point of view is always theirs and not necessarily a hard and fast rule to be believed or followed.
However the facts are given by Challenger, Gray & Christmas…the most authentic source of data on Jobs.
Very Interesting. So there is some other side to the story. I am an IT professional, QA by trade, for almost 20 years. In the last 5 years, I have been ‘outsourced’ from a job at least 5 times. This is understandable, if the companies (those big bad Financial wolves) are getting similar or better services for less money. However, and I say this carefully, however, I find that the services rendered, especially in QA/Testing, are sub-standard, even with all the fancy facilities being built on foreign soil. The training of most of these ‘practioners’ is rote, meaning they have a narrow focus on their jobs, and the lack of English skills is disturbing. I often find sometimes humourous, sometimes completely erroneous statements coming from these workers. I am accused of ‘rudeness’ when I offer a correction.
I have actually been told that it doesn’t matter (in QA, ot IT generally) if proper English is not used, or words are misspelled.
Hence, there is a greater impact on a sector in IT, specifically in QA/Testing, that is directly related to job loss in the US, for these services.
One certainty – many of these companies will continue to undermine their own operations by reducing the quality, not just the cost, of the services they render to their customers. It won’t last. I, now, can employ an off-shore group of twenty people, at 3 dollars an hour, to perform testing. If they did a good job, OK, then they win.
But they butcher the language, they can’t write for beans, they are not familiar with cultural specifics – example, in the article above, there is a statement in the first paragraph “service providers toe the line.”…the correct word is ‘tow’ as in towing a line, which comes from a reference in nautical lore.
I am sorry, for I’ve lost the job I love, and not even because I am unqualified. I am over-qualified, if only because I can spell.
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Laws of Statistics
92.78% of ALL statistics are made up…..Hummmm make that 92.79 (I forgot to include the one I just *calculated*.
LAW #1 – When reflecting a *positive* trend (i.e. Jobs created in a given month) the percentage is to be INFLATED (sample – stats: 320,003 jobs created – Reality: 27,000 minimum wage paying jobs, 500 mid-level jobs, 3 high paid job).
LAW #2 – When reflecting a *negative* trend (i.e. Jobs outsourced in a given year) the percentage is to be DEFLATED (sample – stats: 8,579 jobs moved to China and India – Reality: 124,308 transferred to China, 115,505 to India, 78,305 to Indonesia, 32,522 to Philippines, 17,344 Brazil, 5 to Ireland – Total jobs lost in 2008, stats: 1.2 millions. Reality: 3+ millions as reflected by the *total collapse* of the US economy).
LAW #3 – Use a *multitude* of confusing factors to minimize the risk of *angry feelings* due to *negative* trend statistics by curtailing the **blameworthy** factor (i.e. Outsourcing), and place it in the middle of the list (not at the top and not at the bottom where it can be spotted too easily).
LAW #4 – Use a *natural* factor that can be finger pointed as the major factor for the *negative* trend, a factor that no one can put to trial and give it the maximum responsibility (i.e. Market Conditions). This factor must be placed at the **top** of the list.
LAW #5 – Use *precise* numbers. It’s more impressive and more believable (i.e. no round numbers such as 120,000, use 119, 914 instead). It send a message of hard work and dedication to the *legitimacy* of the message to feed to the public.
LAW #6 – As an “entrée”, serve up an appetizing article prepared by the Media.
And there you have it. A very palatable *Statistics dish* served with the right seasonings.
Great Insights!