OutsourcingAmerica

Nat Yogachandra

Rochester, New YorkMarch 29, 2004

The Big THREE

China has drove down the cost of manufacturing

Wal*Mart is driving down the cost of retailing

and now …….

India is driving down cost in services

Hip Surgery, Heart Surgery –

US$10,000 only

No need to wait

Price includes round trip air –ticket plus a few weeks vacation for full

recovery.

India Woos Medical Tourists

Private heart surgery in England is $50,000

The same cost applies to joint replacement, neurosurgery and cancer treatment

The Maharashtra State government is now working with the British Medical Services

A clinic recently opened in Mumbai

More 1040s prepared in India

20,000 in year 2003 100,000 – 150,000 in year 2004 Ernst & Young said to have sent

about 7,500 tax returns last year A U.S. tax preparer during peak

season makes $3,000/month An Indian CPA would make $300/

month Saving $50,000 for every 100 returns

ship to India

Jobs - Going, Going, Gone

2003 2007Custom software development

20% 47%

Software maintenance 18% 47%IT Documentation 13% 47%IT telephone support 9% 40%Remote network monitoring

3% 39%

Software reengineering 8% 36%Systems management 5% 25%IT administration and operations

3% 24%

Work - fraction of the price

Hourly Cost to operate a Call Center

Kansas City, Missouri = $12.47

Mumbai, India = $4.12

Kansas City, Mo

Mumbai, India

Equipment $0.39 $0.56

Labor $10.00 $1.50

Profit (mark up) $2.08 $2.06

Total cost $12.47 $4.12

Salary Structure

Country Cost per yearIndia $8,000Canada $36,000Ireland $28,000China $9,600Israel $25,000Philippines $7,000Ea. Europe $7,000Russia $7,000Mexico $7,000South Africa $18,000

India Vs the world

IT employee cost per year

Jobs overseas

Top 5 US Employers in India

General Electric: 17,800 Hewlett-Packard: 11,000 IBM: 6,000 American Express: 4,000 DELL: 3,800

GE Capital saves up to $340 million a year by moving tasks to India

Help Wanted – not in this country

Medical Processing insurance claims and

hospital bills Medical transcription and billing

Animation 3-D animation special effects Linear and nonlinear editing

Insurance Applications and claims processing Benefits administration

(source: The Wall Street Journal)

Help Wanted – not in this country

Digitizing Converting text, engineering drawings,

architectural designs and maps from paper to digital format

Desktop Publishing Page layout Advertising campaigns Typesetting and color separation

(source: The Wall Street Journal)

Help Wanted – not in this country

Telemarketing Customer-service management for

international banks, software companies and credit-card companies

Financial Financial analysis for wall Street banks

and insurance companies Accounting and bookkeeping Tax preparation

(source: The Wall Street Journal)

Spreading to major industries

Medical: 10 percent of U.S. jobs in medical transcripts have moved to India, Pakistan, Canada and other countries

Insurance claims processors: Between 10,000 to 20,000 jobs – claims-

adjudications jobs have moved overseas Architects: Major firms are exporting

drafting work. It is estimated a quarter of major firms are currently exporting jobs.

New Middle Class have Emerged Outsourcing is helping build a sizeable middle-class in India

India is buying more from America. (2003 export = $5 billion - 41% increase since 1998

Infosys – added 9,000 jobs last year, gobbling up jobs done in USA – 70 % revenue comes from U.S. companies

Infosys pays higher salary than industry standard

The company received 1 million resumes for about 9,000 jobs last year

United States IndiaGDP per capita $35,060 $480Typical salary for a programmer

$70,000 $8,000

Unemployment rate

5.8% 8.8%

Labor force 141.8 mill 406 millPopulation below the poverty line

13% 25%

India accounts for nearly 26 percent of total undernourished people in the world.

54 percent of population is

under 25 – 555 million people

U.S.A. Vs India

Origin of Outsourced Jobs

Americas 71 %

United Kingdom 14 %

Europe (non-UK) 9%Rest of the world 6%

British Government British government has committed to a free,

transparent and open market

British minister for energy and e-commerce, Stephen Timms said that Indian firms would boost the competitiveness of British industry

Recently an IT contract worth more than $200m had been awarded by Britain's National Health Service to two Indian firms, Tata consultancy and Mastek.

Companies Owned by Foreigners

Tasters Choice – coffee MP3. Com Jerry Springer show Dannon yogurt Yoplait yogurt Motel 6 Universal Studios Women’s Day magazine BIC pens, razors Club Med (vacations) Casual Corner – chain of stores Niagara Mohawk power utilities

companyWe live in a globalized world, and the products American use now can be owned by companies almost everywhere

Chrysler Holiday Inns Chicago SUN Times Ben & Jerry ice cream Snapple Britney Spears record label company

Toy Industry in the U.S.

American Icons

One after another ….

Are Made in China

Toy Industry in the U.S.

Labeled American-made, but racks, tiles and letter bags are made in China

Timer – Made in Taiwan

Playing pieces and Dice – Made in Britain

Rest made in America

Toy Industry in the U.S.

Bath tub finger paints are made in China

But, bath tub tints – fizzy water color tablets are made in the U.S.A.

Swan Lake Barbie and Happy Birthday Barbie are made in Indonesia

The plastic Volvo that carries her and friends are made in China

Wal*Mart Empire

• With sales more than $245billion- largest retailer in U.S.A.

• More than 2,740 discount stores, Supercenters and Neighborhood Markets, and about 538 SAM'S CLUBS in the United States

• 1,300 stores in 10 countries (Argentina -11, Brazil - 25, Canada - 235, China - 34, Germany - 92, Korea - 15, Mexico - 623, Puerto Rico - 53 & United Kingdom - 267)

• Britain (purchased ASDA) Japan (purchased 34% in Seiyu)

• More than 80 percent of the 6,000 factories that supply Wal*Mart are in China

• If Wal*Mart were a separate country, it would rank as China’s fifth largest export market, ahead of Germany and Britain.

• Largest importer of Chinese goods. 10% of all Chinese imports into U.S.

Wal*Mart Empire

• Abandon the “Buy American” campaign

• Nearly 34 stores in China

• Sell Eel and Chicken feet and also sell M&Ms and sliced Pizza, Max Factor, Johnson & Johnson products and SONY TVs

• Pharmacy sells Tylenol and Chinese herbs and dried sea horse

• 500 stores in Mexico• Annual revenue more than $9 billion in sales• SONY built a Vega TV factory in Mexico to supply TV sets – taking advantage of NAFTA and to reduce tariffs• Local needs – uniform for the maids

• A Bangladeshi worker earns as little as nine cents/hour making shirts for Wal*Mart (USA today. August 14, 2001)

Changing of America Hollywood dominates the global movie making market

and swamps local products in many countries

Top actors and directors are often foreigners Some studios are foreign owned Many movies are shot abroad

A million or so immigrant arrive each year- since 1990, the number of foreign-born has risen by 6 million to just over 25 million

More foreigners are investing in the U.S.

At last count, nearly 4 million American directly work for European-owned companies

The Big THREE

China has drove down the cost of manufacturing

Wal*Mart is driving down the cost of retailing… and now

India is driving down cost in services

Challenges Ahead

U.S. Jobs headed to foreign soil

2000 2005 2010 2015

1.6

million

600,000

100,000

3.3

million

US trade deficit with China is now running at $150 billion a year – a record for any country

New countries, such as Honduras, Vietnam, Bangladesh are now building state of the art technology – replacing Mexico

Corporations are under pressure to deliver earnings

Outsourcing has become an irreversible trend

More Eastern European countries are aggressively promoting their business

What can we do U.S. still has a distinctive advantage U.S. has the biggest economy on earth,

enabling America to make technological bets

Establish long term plans to develop new frontiers of information technology as well as biotechnology and nanotechnology

Use cost savings on job creating activities and R&D

Build better educational system and job training to graduate the world’s best

A lousy Idea

Open homes for inmates

overseas

Thank You