XIMB organizes Insights- Where leaders speak
Talk on "Economics of Outsourcing"
 

One of the most happening economic events of the 21^st century has been the phenomenon of outsourcing business. We are cognizant to the fact that India, with its good quality yet cheap labour, has amply benefited from this. To most of us, outsourcing of business may seem to have an impact only in the Indian scenario, but in actuality, the affect of this phenomenon is as global as can be. It is quite clear, therefore, that most of us do not exactly have a clear idea of what this buzz on outsourcing is all about. To dispel some of the myths about outsourcing and present a much clearer picture, the campus of Xavier Institute of Management on the 19 ^th of September 2006 was graced by none other than the Vice President of Cognizant Technology Solutions, Mr. Siddhartha Mukherjee.

As Mr. Mukherjee was introduced to the audience, the welcome applause was aptly complemented by the eagerness to learn, exhibited on the faces of the young managers of tomorrow. The presentation stated thence. A legend of a manager himself, Mr. Mukherjee first gave a brief layout on how the entire discourse would go. Post presenting the agenda, he went on to talk about some of the popularly held beliefs about outsourcing, some of which were correct and some downright erroneous. According to him, the fact that quite a few people will lose their jobs is true. This is inevitable as the economic forces of demand for good quality labour together with the supply of cheaper alternatives for the same, elsewhere, rule supreme in today's global economic environment. However, the belief that these jobs will disappear couldn't have been farther from the truth. What many people forget while reaching this incorrect conclusion is that the process of outsourcing actually creates job opportunities elsewhere around the globe.

A fear most of the people in the western countries are grappling with is that wage rates there will decline due to the effect outsourcing. This, according to Mr. Mukherjee is true to a certain extent. He justified his statement by stating that this was a simple yet inevitable economic cycle. This kind of a thing is bound to happen as the demand for more expensive labour falls. Then again, one must not forget that the wage rate of the emerging economies will rise as well. A large chunk of paranoid westerners are from the United States, feel that the U.S. economic recovery is not having the desired affect of creating jobs. This is a wrongly albeit popularly held belief. According to Mr. Mukherjee outsourcing jobs offshore has nothing to with this lack of job creation, which by the way are finally on the rise, thus negating this wrong belief. Another fact most believe in is that the U.S. is becoming dependant on other nations. Mr. Mukherjee mentioned that there is nothing that can be done to prevent this simply because US, after all is also a part of the global environment. Moreover, some of the real advantages the developed economies possess has a great deal to do with culture, attitude, innovation and a wealth of upcoming infrastructure. The emerging world cannot possibly duplicate these that easily. Then again, one must not forget that it was the U.S. who pioneered this process of outsourcing business to reduce costs.

A popular misnomer is that world trade is not fair because of outsourcing. Arguing otherwise, Mr. Mukherjee sad that restricting offshore services will do nothing to make the world a fairer place. In fact growth in the wealth of the emerging economies will serve to rectify some of the trade issues of the developed nations. Trade of all types does cause dislocation in society in the short term, but it always has led to positive outcomes in the medium to longer term. Offshore services should be no different. There has so far been no compelling evidence otherwise. Global engagement has been proven time and again to be far more powerful than global isolationism. Not a single example exists in world history that points to an isolated economy that has been strong and vibrant, and there is no reason to believe that future will be any different.

Next Mr. Mukherjee went on to mention the benefits that derive for outsourcing. Primarily amongst these is that the outsourcing company and the government, as a whole get to concentrate on their core competencies. This process of outsourcing also reduces myriad risks. By reducing operating costs, it accelerates business transformation. On top of this off-shoring of services accelerates re-engineering benefits thus freeing internal resources for other value added tasks. Off-shoring promotes a much more effective and efficient global work culture where the world never goes to sleep, for the tyranny of time zone differences can easily be countered by this process.

In one interesting section of the discourse, Mr. Mukherjee actually proved that off-shoring of services actually creates more job opportunities everywhere. This is how it works out. When you outsource, your costs decrease resulting in lower prices and increased profits. This in turn has a positively cascading effect on increase in exports and thus wealth is created for newer investments, products and services finally resulting in the creation of newer jobs. Thus Mr. Mukherjee proved quite articulately how jobs will be created. He also mentioned that offshore service efficiencies will significantly impact overall job growth even in the U.S. and most other western nations. Using graphs and figures he pointed out some of the Fortune 500 companies such as G.E. and Microsoft that have benefited form outsourcing.

In the penultimate section of his discourse, Mr. Mukherjee mentioned how India was going to benefit from all this as the other countries where quality labour initially was cheap have started to raise the wages. Slowly yet surely, these nations such as Israel and Ireland are losing out to countries such as India as the prime outsourcing destination because of the availability of cheap labour for comparable quality of output.

Indeed what an enlightening session this was. In the end the return on time invested in the session was far greater than initially expected. Whatever doubts remained were promptly cleared by the question and answer session that followed Mr. Mukherjee's lecture. Finally when the event came to an end, the students left the auditorium with smiles on their faces and a lot of knowledge in their bellies.

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Submitted By:
Sumit Misra
Member, IlluminatiX
Media & PR Cell of XIMB
E-mail: media@ximb.ac.in
Website: www.ximb.ac.in/~media
 

Profile of Siddhartha Mukherjee, Vice-President, Cognizant

Siddhartha Mukherjee (Sid as he's popularly known) has more than 23 years experience in the IT industry, including more than a decade of experience in  leading and managing development centers and large projects in the US, Europe and Asia-Pacific regions. Sid's experience spans organizational strategy, customer relationship management, business development, delivery and operations management.

Currently, Sid is Vice President at Cognizant, the only IT services company on the NASDAQ 100 Index and the first and only offshore company on that Index. Sid joined Cognizant in 1996—two years of the company's founding—and has played a significant role in the company's growth since then. Currently, besides overseeing the Calcutta development center which has a staff strength of 2600 +, he is responsible for growing the APAC market for Cognizant.

Prior to joining Cognizant, Sid was with Tata Consultancy Services for over 14 years delivering large-scale projects and solutions marketing. Sid has traveled extensively across the globe and has executed large projects in England, Scotland, Australia, New Zealand, South Africa and the United States.

Sid has a master's degree in Economics from the prestigious Presidency College, Calcutta, India and an MBA in Business Management from the reputable from Xavier's Labor Research Institute (XLRI), Jamshedpur, India.
 

Source: By E-mail (September 19, 2006)

published on IndianMBA.com on September 20, 2006

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