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July - 2008 - issue > Editor's Desk
Outsourcing Debate
Pradeep Shankar
Thursday, July 3, 2008
Whether one likes it or not, the outsourcing debate is back. Some say it helps the economy and others say it hurts. It’s baffling. This being the election season in the United States, candidates will be debating about sending jobs overseas. McCain gives it a thumbs up, Obama a thumbs down. Bush Junior was for it, Kerry against. Even before we decide about outsourcing, we have enough conflicting information to sort through. We’re still trying to figure out the nuclear deal: It will have wide-ranging ramifications; it will help India meet its growing energy needs. Bewildering.

What’s the truth? Outsourcing is a continuing trend that started taking off in the 1980s. Telecommunications, healthcare, airlines, banks, computers, software makers, toys, and pharmaceutical companies—you name it—are all farming out call centers, payroll, accounting, legal services, and manufacturing to offshore companies.

Last month, Obama called on the Americans to make a choice: whether to give tax breaks to companies that ship jobs overseas, or to give tax benefits to companies that invest right here. If Obama’s stand is that American Corporations should not outsource to countries like India, then they could as well set up their own subsidiaries in India, just like what Microsoft, IBM, and Oracle have done, to leverage the advantages the country provides. In a way this will be good for India. Obama should know that there is not a single company on the S&P 500, which is not a global company. If Obama’s stand is to tax American Corporations that send work outside the national borders, to either their subsidiaries or third-party businesses, he will be doing more harm than good. The increasing cost structures of operating in the U.S. will eventually hurt them and Obama will be giving room for the downfall of these companies. If such a thing happens, it could again benefit India as large companies in India, which have the financial muscle, will move towards take over of such businesses.

Indian firms should take a re-look at Thomas Friedman’s ‘The World is Flat’ and analyze the windows of opportunity that the outsourcing game has opened up. If Reuters can cover the length and breadth of Wall Street from Bangalore, virtually nothing can be there to stop Indian firms from making products—be it processors, operating systems, enterprise software, or media content—for world markets.

Do let us know what you think.

Pradeep Shankar Managing Editor editor@thesmarttechie.com

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