It's all over but the backpedaling.
A little over six months ago, I used this space to highlight the findings of a survey produced by consulting firm DiamondCluster International
A large part of the outsourcers' dissatisfaction stemmed from promises of cost savings proving illusory. Expectations of saving 80% on employee costs were turning out to be the pie-in-the-sky fantasies we've often argued they were -- or were destined eventually to become. The reason (I'll repeat myself here): "Simple economics dictates that the cost savings, even were they as real as promised, could not last. It's the law of supply and demand, folks. When no one's hiring in Mumbai, you can find cheap, talented labor in abundance. After everybody, his brother, and his Aunt Polly start hiring Mumbai coders, though, guess what? There's competition for the best workers, and those workers start demanding higher wages."
Welcome to the inevitable
According to a column in last Wednesday's edition of The Wall Street Journal, those inevitable wage pressures are starting to bite. The demand for high-skilled Indian employees among outsourcee giants such as Infosys
Already, wages for Indian workers ranging from call center operators to programmers to engineers are increasing at rates of 15% to 30% per annum. The Journal cited a McKinsey & Co. report showing that salaries for entry-level software developers had risen more than 50% over the past five years. Salaries for project managers had more than doubled. And this trend looks unlikely to end any time soon. On the contrary, the McKinsey report suggested that within four years, formerly worker bee-rich India could face a deficit of as many as 500,000 skilled workers. That would certainly create a "seller's market" for labor and ensure that the cost of hiring qualified employees continues to rise.
The moral of the story: Global outsourcing will not, in fact, ruin America. The trend will end, and it won't take an act of Congress or a demagogue on CNN to achieve it. Outsourcing will end as soon as it becomes economically illogical to continue it, and not a moment sooner.
The only question remaining is this: When that happens, whatever bugaboo will Lou Dobbs latch onto to replace his obsolete reports on "Exporting America?"
Fearless of the flames, Foolish writers dauntlessly carry on the outsourcing debate in the following articles:
- Dell Plays the Patriot Card
- Is the Offshore Sun Setting?
- How Dangerous Is Outsourcing?
- Outsourcing Dons Pajamas
- Outsourcing to the Heartland
Fool contributor Rich Smith owns no shares in any company mentioned above.