Posts Tagged ‘outsourcing’

Amy Dean On Do Unions Matter?

Wednesday, March 9th, 2011

dean_icon_tag America is obsessed with the issue of trade unions again.  Labor unions have gained new prominence as Democratic legislators from Wisconsin and Indiana have left their states for the greener pastures of Illinois to avoid participating in votes to cut back or eliminate collective bargaining rights for public employees.  Thousands of protestors have taken up residence in the Wisconsin State Capitol to voice their anger at Republican Governor Scott Walker’s attempts to break the state’s unions.

Are labor unions relevant in the 21st century?  Amy Dean, an author, activist and social entrepreneur whose roots are in the American labor movement and who served 10 years as the President and CEO of the South Bay AFL-CIO Labor Council in the Silicon Valley, says the answer is a resounding “yes”.  Dean is also co-author of the new book, “A New New Deal: How Regional Activism Will Reshape the American Labor Movement.”  During her tenure with the AFL-CIO, Dean represented 90 separate unions with more than 110,000 members.

Dean points out that before President Ronald Reagan famously busted the air traffic controllers’ union in 1981, there was strong bipartisan support for organized labor.  Even Republican President Dwight D. Eisenhower acknowledged the impact of unions and said the interests of employers and employees were about mutual prosperity.  According to Dean, things have changed because the post World War II economy consisted of industries that were dedicated to building the nation’s base to assure this prosperity.  Unfortunately, that consensus started to break down by the mid-1970s until today, we have no agreement about how our economy should grow, what our obligations are to one another, and how we can compete optimally in a global economy.

In a recent interview for the Alter NOW Podcasts, Dean says that the building trades and entertainment industry are good models to look at for the next generation of employee organization.  In this system, as people move from job to job, they have a base wage through union membership.  Built into that base wage are healthcare insurance and a pension, again enabled by membership in a labor union.

Also, Dean asserts that unions are not the reason for outsourcing and that corporations are motivated by other issues.  In today’s economy, capital wants to locate where land-use policy is predictable, thanks to proactive regional efforts.  Companies want to be in areas that have good K-12 schools, open spaces, a high quality of life, decent affordable housing, a functional mass transit system, proximity to a world-class airport and the kind of knowledge workers that companies need to succeed.  Unfortunately, Dean says, unless Americans are prepared to deal with the issue of tax reform, there will be little conversation in America about any social agenda.

In today’s economy, capital wants to locate where land-use policy is predictable, thanks to proactive regional efforts.  Companies want to be in areas that have good K-12 schools, open spaces, a high quality of life, decent affordable housing, a functional mass transit system, proximity to a world-class airport and the kind of knowledge workers that companies need to succeed.  Unfortunately, Dean says, unless Americans are prepared to deal with the issue of tax reform, there will be little conversation in America about any social agenda,  Yet, these are the things that capital needs to be successful.

Read James Surowiecki’s take on the current state of labor unions in The NewYorker.

To listen to Amy Dean’s full interview on why unions matter, click here.

 
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The China Syndrome

Tuesday, July 6th, 2010

The unwinding of global imbalances signals the end of China's unfair advantage.  As global financial disparities start to wind down, China is likely to end up a winner because emerging-market economies have a definite advantage rooted in the way the global economy functions. Writing in the McKinsey Quarterly, Lowell Bryan, a director with McKinsey & Company, notes that “Saber-rattling Western trade negotiators frequently focus their attention on the ‘unnaturally’ depressed exchange rate of countries such as China, and this is a component of the structural advantage to which I refer.  But its roots run far deeper – all the way down to the fundamental issue that labor can’t be freely traded on a single global market, while capital and commodities can.  Any company sourcing its production or service operations in a lower-wage emerging market-country therefore can save enormously on labor costs.”

China’s recent decision to relax the informal peg of its currency, the yuan, to the U.S. dollar proves that the world must come to grips with a set of economic relationships that are currently unsustainable.  According to Lowell, “Their unwinding will have serious long-term implications for those executives’ strategic priorities, including where they locate operations and what customers they serve in which markets.  Equally important is the need for preparedness in case the unwinding process is sudden and abrupt.  While we surely seem to be headed toward a new global equilibrium, the transition to that future may not be smooth and gradual.”

The cost of labor in China and India is less than one-third of what it is in developed nations.  Additionally, Chinese and Indian productivity are at extremely high levels and tend to be in highly specialized fields – high-tech assembly in China and software development in India.  To take advantage of the cost savings, many multinational firms are locating production facilities in emerging markets.

2010 to be Marked by M&A in Outsourcing

Tuesday, February 2nd, 2010

India's economy is expected to grow at an eye-popping 7.5 percent this year.India is expected to grow at 7.5 percent this year, up from 6 percent in 2008 — a rate that is the envy of most of the world.  To buoy its economic prospects, the Indian Government has raised more than $100 billion over the last four quarters to finance a stimulus package, pushing the country’s debt to 50 percent of the total GDP.  One place that’s feeling the optimism is India’s IT industry.  As 2010 gets underway, recruiting will reach a peak with spikes in salary hitting pre-recession levels, according to advisory firm Gartner’s India regional VP, Partha Iyengar.

In terms of outsourcing, this year is likely to be characterized by an inflow of low-end projects off-shored to Indian vendors to achieve cost savings.  Speaking in an interview with Financial Express, Iyengar said that 2010 will also reveal consolidation in the software sector along with spiked IT spending by Indian firms.

Off-shoring is likely to witness what Iyengar calls a “back to the future syndrome”.  The next year will see industry growth pushed forward by cost savings, which is how the outsourcing sector initially began.  Most outsourcing projects are expected to be related to maintenance support and application development.

For global firms, outsourcing often provides 80 percent of a company’s cost savings.  Consequently, more low-end work will come in to India.  More complex projects are likely to follow in 2011.

Additionally, 2010 is likely to be marked by mergers and acquisitions.  Giants in the Indian outsourcing business like Infosys, TCS, and Wipro will make more acquisitions in Europe in order to acquire onsite capacity.  They will also expand to near-shore destinations to tap markets in Latin America, Eastern Europe and elsewhere.  Meanwhile, global firms, particularly Tier II firms that have not developed off-shore capacities, will make acquisitions in India and other top outsourcing countries.

Jacob Cherian is the India correspondent for AlterNow.  His work is featured on SourcingLine, a leading source of data and news about offshoring.

A Rebound in Offshore Activity Signals India’s Recovery

Monday, November 16th, 2009

call-centers-india_26A report by India’s Economic Times indicates that up to 11 multinational firms including Wells Fargo, Standard Chartered and Ingersoll Rand set up back office facilities in India during the 3rd quarter of 2009.

A research firm, Everest Group, says this bodes well for the overall business momentum in India picking up in 2010.  Two of the reasons cited for India’s resurgence are the depreciation of the Indian currency and the reduction in operating costs which have enticed outsourcing operations back.

Although there was movement of outsourcing projects to facilities in Latin America and Southeast Asia, India continues to dominate the scene in the third quarter.

The new numbers signal a shift away from the doldrums of the first part of 2009.  Many U.S. firms like GE and CitiGroup put expansion plans and capital projects on hold due to the deteriorating financial ratios.

Jacob Cherian is AlterNow’s India Contributor. He is a business writer for Offshore Advisor.

Downturn in Economy Triggers Outsourcing and Contract Work in India

Thursday, October 1st, 2009

genpact22With U.S. unemployment figures approaching 10 percent, it has affected parts of the tech industry with the chip and system design areas among the most affected (unemployment is 8.6 percent among American software engineers although the overall tech sector is faring better with an unemployment rate under five percent).  In response, it has led seasoned talent to eschew searching for a new job in favor of offering their services to the highest bidder, according to a new online report.

It’s also been a boon for countries overseas.  American companies now have access to highly skilled contract talent across the globe who can collaborate virtually.  India, especially, is reaping the benefits since approximately 64 percent of all outsourced computer-design projects went to Indian companies this year, up from 51 percent the previous year.  Trailing close behind was China, which raked in 33 percent.

Jacob Cherian is AlterNow’s India Contributor. He is a freelance business writer based in Kerala, India.  He has written about business outsourcing for Offshore Advisor.