Mantra: Outsource or Perish
It's really cost -- Low-Cost Countries
-- but guilt is assuaged by a view that American workers are
not as good as they once were.
The Indian Express
Saturday, July 03, 2004
Business
Outsource to India, China or perish: BCG
report
PAUL BLUSTEIN
WASHINGTON, JULY 2 A report by an influential consulting firm is
exhorting US companies to speed up offshoring
operations to China and India, including high-powered functions such
as research and development.
In blunt terms, the report by the Boston Consulting Group warns
American firms that they risk extinction if they hesitate to shift
facilities to countries with low costs. That is partly because the
potential savings are so vast, but the report also cites a view among
US executives that the quality of American workers is
deteriorating.
The largest competitive advantage will lie with those
companies that move soonest, the report stated.
Companies that wait will be caught in a vicious cycle of
uncompetitive costs, lost business, underutilised capacity, and the
irreversible destruction of value.
Boston Consulting, which counts among its clients many of the biggest
corporations in the United States, admonishes them that they have
been too reluctant rather than too eager to outsource production to
LCCs, or low-cost countries.
Successful companies ask themselves, What must I
keep at home? rather than What can I shift to
LCCs? the report stated. Their
question is not Why outsource to LCCs? but
Why not?
The report, released in May, has gone almost unnoticed amid generally
upbeat news as strong economic growth has begun fuelling an increase
in jobs, diminishing public debate about offshoring.
But the reports conclusions underline the intensifying
pressures on corporate America to shift jobs overseas. Although many
economists believe the trend will benefit the US economy overall by
improving productivity, and that new job creation will more than
compensate for the jobs migrating to China and India, the study
suggested that the movement of jobs abroad is likely, if anything, to
accelerate strongly in coming years.
Particularly troubling is the reports information about
confidential discussions with executives at Boston Consultings
client companies, many of whom conveyed low opinions of their
American employees compared with labour available abroad. According
to the report, not only are factory workers in low-cost countries
much cheaper but they quickly achieve quality levels that are
equivalent to or even higher than ... (the) best plants
in the West.
The report cited General Electric Co, Motorola, Alcatel and Siemens
AG as examples of companies that have set up research and development
centres in both India and China to leverage the
substantial pools of engineering talent that are based in the two
countries.
The report undercuts the view that R&D jobs in the west will
increase even as low-skill jobs migrate to China and India.
(LAT-WP)
URL: https://www.indianexpress.com/full_story.php?content_id=50222
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