-Jayan CM
The US president-elect Obama's announcement to bring outsourced jobs back to the United States resulted in an anticipated rush of concern from Asian outsourcing companies. It's no secret that the Obama has an intense dislike for offshore outsourcing and has been quite candid on his position during the election campaign and reiterated that he may bring in tough measures like tax cut to companies that outsource job.
At outsourcing conference in Malaysia, this was the hot topic. The chief executive officer of ‘Zeltran’ a business process outsourcing firm stated that ‘there were two camps among his peers. Some companies were scared, but the majority thought there would be no or very little real action possible by Obama on this. "And if there was, the US is going to find it a very expensive exercise. What always counts at the end of the day is: the bottom line.
Putting an end to outsourcing can be suicidal because most of the companies will have to bare the cost which can be devastating. If he stops providing tax breaks for companies that are shipping jobs overseas and give those tax breaks to companies that are investing in the US. The impact on companies will be their inability to manage their costs, which will lead to squeeze approach on their costs, resulting less job opportunities and incurring low business themselves. Obama's oratory is suggestive of the "only buy American".
The Republican Party on the other hand airs a different opinion, they say 'let business be business". Their approach is being optimistic and view outsourcing as a healthy practice. The party cites that let the companies reap the cost advantages of offshoring which will provide a positive effect for the business community in US.
Secondly till such time the economy regains market outsourcing should remain cautiously optimistic, because the US economy will need to manage their businesses optimally and therefore will depend increasingly on outsourcing to meet the demand.
Why outsourcing is necessary to US Business
Obama need to realize that for US, outsourcing is important to maintain economical stability. Taking into account the cut-throat competition in every business, it has become a necessity for US companies to outsource their time-consuming and labor intensive jobs to others so that they can concentrate more on areas of their core competencies.
“Most of the tech companies have large number of open jobs today that are not being filled due to lack of technical resources. Moreover, US companies have realized that outsourcing improves competitiveness. US companies have to decide what is the most effective model to do business,” Nasscom President, Mr Som Mittal,
Another important factor that cannot be overlooked is that companies need profit to increase their shareholder's stake. And if it is through outsourcing they are able to do it then let it be so. Otherwise, money will go out of the country directly into foreign investment which is worse than outsourcing.
India's Infosys Technologies brushed off concerns that Obama as US president could mean a drop in outsourcing work. Kris Gopalkrishnan chief executive officer of Infosys, stated that similar promises were made during the previous presidential campaigns but nothing materialized.
Outsourced Service
Over the years, there has been a change in the type of work that developed-country firms have been willing to outsource. There has been a shift from outsourcing of clerical type work, to more skilled, professional type of services.
Outsourcing statistics show that it is in the Information Technology that most jobs are outsourced, this is around 28 percent. This is followed by human resources by 15 percent, sales and marketing by 14 percent and financial services by 11 percent. The remaining comprises of other different processes. These figures may vary depending on the study and the point of view, the idea is to depict the outsourcing market.
Why outsourcing cannot be stopped?
Most of the US companies feel that outsourcing has risen up in recent times due to increasing cost of production, labor cost, taxes and other many direct or indirect expenses. Since the economies of Asian countries are improving, European and U.S. companies look for outsourcing their jobs to these nations to cut their costs.
According to GlobalLogic CEO Peter Harrison ‘People were just overreacting as while parts of the outsourcing industry may have funneled jobs out of the country, most companies have actually added jobs as a result of this trend’.
One need to understand that companies outsource is because to stay in business if not to enrich their shareholders. Outsourcing is cost effective and that is what encourages large business houses to choose companies abroad over US-based providers. As such US companies have little choice but to ship jobs overseas to cut costs and remain competitive. As of now outsourcing has been a survival tool for the US, which allows it to understand the competition it face.
Ganesh Natrajan, Chairman, Nasscom, feels Obama will do nothing that will disturb the success of these companies and come in the way of current outsourcing. “Ban on outsourcing; is just not going to happen’. So you have to realize and take different measures to create jobs in United States.
Before applying brakes on outsourcing, Obama will have to find ways to produce products or services in surplus that the rest of the world wants to buy. Rhetoric is one thing, trying to develop a plan to come out of this recession is another.
The US president-elect Obama's announcement to bring outsourced jobs back to the United States resulted in an anticipated rush of concern from Asian outsourcing companies. It's no secret that the Obama has an intense dislike for offshore outsourcing and has been quite candid on his position during the election campaign and reiterated that he may bring in tough measures like tax cut to companies that outsource job.
At outsourcing conference in Malaysia, this was the hot topic. The chief executive officer of ‘Zeltran’ a business process outsourcing firm stated that ‘there were two camps among his peers. Some companies were scared, but the majority thought there would be no or very little real action possible by Obama on this. "And if there was, the US is going to find it a very expensive exercise. What always counts at the end of the day is: the bottom line.
Putting an end to outsourcing can be suicidal because most of the companies will have to bare the cost which can be devastating. If he stops providing tax breaks for companies that are shipping jobs overseas and give those tax breaks to companies that are investing in the US. The impact on companies will be their inability to manage their costs, which will lead to squeeze approach on their costs, resulting less job opportunities and incurring low business themselves. Obama's oratory is suggestive of the "only buy American".
The Republican Party on the other hand airs a different opinion, they say 'let business be business". Their approach is being optimistic and view outsourcing as a healthy practice. The party cites that let the companies reap the cost advantages of offshoring which will provide a positive effect for the business community in US.
Secondly till such time the economy regains market outsourcing should remain cautiously optimistic, because the US economy will need to manage their businesses optimally and therefore will depend increasingly on outsourcing to meet the demand.
Why outsourcing is necessary to US Business
Obama need to realize that for US, outsourcing is important to maintain economical stability. Taking into account the cut-throat competition in every business, it has become a necessity for US companies to outsource their time-consuming and labor intensive jobs to others so that they can concentrate more on areas of their core competencies.
“Most of the tech companies have large number of open jobs today that are not being filled due to lack of technical resources. Moreover, US companies have realized that outsourcing improves competitiveness. US companies have to decide what is the most effective model to do business,” Nasscom President, Mr Som Mittal,
Another important factor that cannot be overlooked is that companies need profit to increase their shareholder's stake. And if it is through outsourcing they are able to do it then let it be so. Otherwise, money will go out of the country directly into foreign investment which is worse than outsourcing.
India's Infosys Technologies brushed off concerns that Obama as US president could mean a drop in outsourcing work. Kris Gopalkrishnan chief executive officer of Infosys, stated that similar promises were made during the previous presidential campaigns but nothing materialized.
Outsourced Service
Over the years, there has been a change in the type of work that developed-country firms have been willing to outsource. There has been a shift from outsourcing of clerical type work, to more skilled, professional type of services.
Outsourcing statistics show that it is in the Information Technology that most jobs are outsourced, this is around 28 percent. This is followed by human resources by 15 percent, sales and marketing by 14 percent and financial services by 11 percent. The remaining comprises of other different processes. These figures may vary depending on the study and the point of view, the idea is to depict the outsourcing market.
Why outsourcing cannot be stopped?
Most of the US companies feel that outsourcing has risen up in recent times due to increasing cost of production, labor cost, taxes and other many direct or indirect expenses. Since the economies of Asian countries are improving, European and U.S. companies look for outsourcing their jobs to these nations to cut their costs.
According to GlobalLogic CEO Peter Harrison ‘People were just overreacting as while parts of the outsourcing industry may have funneled jobs out of the country, most companies have actually added jobs as a result of this trend’.
One need to understand that companies outsource is because to stay in business if not to enrich their shareholders. Outsourcing is cost effective and that is what encourages large business houses to choose companies abroad over US-based providers. As such US companies have little choice but to ship jobs overseas to cut costs and remain competitive. As of now outsourcing has been a survival tool for the US, which allows it to understand the competition it face.
Ganesh Natrajan, Chairman, Nasscom, feels Obama will do nothing that will disturb the success of these companies and come in the way of current outsourcing. “Ban on outsourcing; is just not going to happen’. So you have to realize and take different measures to create jobs in United States.
Before applying brakes on outsourcing, Obama will have to find ways to produce products or services in surplus that the rest of the world wants to buy. Rhetoric is one thing, trying to develop a plan to come out of this recession is another.
