epeon

Outsourcing Grows as a Business Strategy

Is this true? Is outsourcing to Indian and China the next giant wave? It certainly was true a decade ago, but is it true today?

In businesses that I have personal knowledge of, there seems to be a lot of discontent with Indian outsourcing. First, the exchange rates are not as favorable as they were. Secondly, the quality of the Indian technology is not what it was cracked up to be. Everyone in India has the title of engineer, but most of them are really IT people. In fact, most would be called IT techs, good for phone support but not a lot else. And, when you do get good Indian engineers they have to be trained and then you have a 30% turnover issue.

Finally, many companies are realizing that transferring core technologies to a third party will atrophy the support of that technology in the home company. And, this third party looks at you at just another client. They have no qualms about using that technology for other clients.

Of course, I could be wrong. But, look at WIT and INFY. Those stocks have not done anything for a decade. GE was the great outsourcer and their stock has not lit the world afire. Talk to GE people and many of them will tell you that they have invested a ton of money in India and it isn’t clear that there has been a good roi on it. Of course, since Jack Welch said it was great, I am sure that the paper trail will say it so.

As far as GM transferring more production overseas that hardly is typical. They have the burden of UAW labor rates and labor attitude. Any other company with that burden would have long ago been on the slag heap of bankruptcy.

So, I am not sold on this. I just don’t see it as the new wave.