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Giant Sighing Sound

Posted By Russ Roberts On April 28, 2004 @ 1:14 pm In Trade | Comments Disabled

That giant sighing sound you hear comes from the American people after hearing that some jobs will be left after India takes most of them. Here’s [1] the headline from today’s New York Times article (rr):

Send Jobs to India? Some Find It’s Not Always Best

Who knew? It turns out that for some (most? many? a few?) jobs, the lower wage in India doesn’t justify the productivity loss:

Bladelogic, whose client list includes General Electric and Sprint, outsourced work to India within months of going into business in 2001. But it concluded that projects it farmed out — one to install an operating system across a network, another to keep tabs on changes done to the system — could be done faster and at a lower cost in the United States.

That was true even though programmers in India cost Bladelogic $3,500 a month versus a monthly cost of $10,000 for programmers in the United States. “The cost savings in India were three to one,” Mr. Ittycheria said . “But the difference in productivity was six to one.”

The Times story is not the first [2] to point out that some companies are having second thoughts about outsourcing. But it does have a twist. The Times story focuses on Indian owners of American companies having second thoughts about contracting with Indians:

“For three years we tried all kinds of models, but nothing has worked so far,” said the co-founder and chief technology officer of Storability Software in Southborough, Mass. After trying to reduce costs by contracting out software programming tasks to India, Storability brought back most of the work to the United States, where it costs four times as much, and hired more programmers here. The “depth of knowledge in the area we want to build software is not good enough” among Indian programmers, the executive said.

If it sounds like “Made in the U.S.A.” jingoism, consider this: The entrepreneur, Hemant Kurande, is Indian. He was born and raised near Bombay and received his master’s degree from the Indian Institute of Technology in that city, now known as Mumbai.

I can’t figure out what to write about the presumption that it’s jingoism.

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[2] not the first: http://cafehayek.com/2004/04/index.html#a0001239718

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