Even as the economies of the developed countries like the US recover, what is becoming clear is that it is a jobless recovery. Even as productivity reaches record levels, many jobs in services are migrating to lower cost countries. What China did to manufacturing in the 1990s, India is now doing to services. Offshoring has become the new word added to the vocabulary of CEOs hungry to cut costs.
Offshoring is not new. Call centres have been there in Ireland and Philippines for many years. Indian software companies have been providing outsourced countries for the better part of the last decade. What is new this time is that the shift is beyond answering phones and emails. Just as Y2K herald the coming of age of Indian software companies, the current slowdown in much of the developed world and the pressure to reduce costs is working well for countries like India. Aided by the Internet and high-speed telecom networks, enterprises are shifting business processes to countries with a lower cost base. From the early days of medical transcription to the current outsourcing of accounting, finance and legal functions, offshoring is moving up the value chain.
The impact of offshoring is at the economic core of the US. Wrote Business Week in an article on the rise of India: This deep source of low-cost, high-IQ, English-speaking brainpower may soon have a more far-reaching impact on the U.S. than China. Manufacturing — China’s strength — accounts for just 14% of U.S. output and 11% of jobs. India’s forte is services — which make up 60% of the U.S. economy and employ two-thirds of its workers. And Indian knowledge workers are making their way up the New Economy food chain, mastering tasks requiring analysis, marketing acumen, and creativity.
This trend is also causing heartburn and a backlash in some sections of the developed world. While there may be some limited (and largely unsuccessful) efforts to protect jobs in local communities, what is clear is that the offshoring is going to cause a fundamental rethink of education and training systems in the US.
2004: Offshoring will continue and accelerate. While India will be the biggest beneficiary, other countries in the Asian and East European regions will aim to catch up.
In one momentous week in early December, Time Warner Cable, Qwest and AT&T all announced plans to offer voice-over-IP services. Wrote News.com: The announcements signal a major turnaround in VoIP attitudes among phone service providers, who initially worried that all-you-can-eat pricing for Internet calls would undercut traditional long-distance service. Competitor Verizon Communications has said it plans to begin Internet phone services in early 2004, while SBC Communications is still conducting tests. VoIP has reached a tipping point.
Among one of the disrupters in this space is Skype, a p2p telephony service that allows users to make free phone calls over the Internet. Think of it as the Napster for telecom. Another innovator is Vonage. What is clear is that VoIP is yet another cold technology which reduces the overall cost of doing business.
2004: It will be interesting to see the combination of VoIP with WiFi and smartphones. Many new business applications centred around VoIP will come to the fore.
Tomorrow: Search, Linux
TECH TALK 2003-04+T