Cheaper by the dozen
April 24, 2007
Angry fix has already done it, and so have others more qualified than you and I. But its the season for Tharoor bashing, and I don’t want to be left behind. Wander your eyeballs, if you will, over the latest piece of Tharoorvianism to hit the mean streets.
Actually, I’m being uncharitable. I don’t have a problem with Tharoor as much as I have a problem with the sentiment he is espousing. In his latest column, he firmly takes up the cause of the call-centre crowd and tells the rest of the country to like, back off. Sample:
It has become fashionable of late, amongst our bien-pensant classes, to sneer at the success of India’s business process outsourcing industry the call centres and the like which have become the visible face of globalisation in our formerly protectionist land. Some 700,000 Indians work in the BPO business, which contributes an estimated $17 billion to the burgeoning Indian economy.
The call centre has become the symbol of India’s newly globalised workforce: while traditional India sleeps, a dynamic young cohort of highly skilled, articulate professionals works through the night, functioning on US time under made-up American aliases, pretending familiarity with a culture and climate they’ve never actually experienced, earning salaries that were undreamt of by their elders (but a fraction of what an American would make) and enjoying a lifestyle that’s a cocktail of premature affluence and ersatz westernisation transplanted to an Indian setting
He seems to find it heartening that nowadays the cybercoolies are the ones who have begun scheduling the trains, and the article is filled with stock cliches as regards the achievements of India’s tech-happy generation. Your standard globalization catch-phrases, things we’ve heard a million times before.
(He even ends it on a most embarassing cliche, the kind always employed to demonstrate the smaller canvas the world has become as a result of globalization : just throw in a couple of geographical locations as incongrous as possible and lean back because you’ve made your point. I quote : “Perhaps the next level of outsourcing will come when smart scientists in Bangalore farm out processes to young engineers in Dharwar to cater to the needs of consumers in Hubli”).
So maybe the call-centre industry is not just a glorified sweat-shop employing coolie labour to do the dirty work of the West. The stats can be made to prove this, and you will always get revenue figures thrown at you with venom when you try to bring this sunshine industry down a peg. But sometimes, I get the feeling that we’re missing the point.
The fact of the matter is we’re such a preferred destination because we’re so bloody cheap. Its a happy accident as a result of the globalization process, and make no mistakes about it, we’ve milked this advantage to the fullest. But we seem to be drifting towards a make-believe la-la land if we think that this will last forever.
The business process outsourcing industry is not so special, Mr Tharoor. India is trusted as a BPO destination simply because the work can be done at a fraction of the original cost. Our limitless talent pool and lower wage levels relative to that of the West is all that keeps this industry going. Technical knowledge might be a point in our favour, but it would count for naught if the costs of doing business in India would be higher than the profits to be made. In a world being built on the foundations of a knowledge economy, knowledge has ceased to become such a scarce resource. Cost is the primary factor.
Presuming that the boom in the industry continues, and the economy doesn’t lapse into one of its temperamental moods, the increasing demand for BPO services in India is bound to jack up its wage and price levels. While we may rule out the possibility that the wage levels in India would soon meet Western standards, what happens if another country emerges as a favourable destination now, and their costs of doing business with the West turn out to be lower than the West’s costs of doing business with India? All we need is a country with a seizeable talent pool of English-speaking labour adept at computer skills and willing to do business with the rest of the world. What happens if such a country emerges, and the entire industry decides to offshore again to the shores of a new paradise? I doubt that we could expect them to be conscientious enough to keep a mindful eye on the effects that such a move would have on our domestic economy.
The BPO industry arose and survives as a result of this cost difference. There is really nothing exemplary about it. Maybe I’m being a bit too harsh, but I think its time we stopped looking at it as the miracle drug to all our nation’s ills. It would be dangerous to treat it as a permanent fixture because, by its very definition, it is temprorary and impermanent. It is a cash cow, no doubt, but lets not treat it as anything more.
am very impressed…truly. actually i am quite proud of this one.(and you, of course)
i hope you get to do labour economics!!
what if i do labour economics under swapnendu? i’ll probably learn that trade unions are all balls and its best if we all liberalise as soon as possible.
one good thing about learning from swapnendu is that he’ll wean me away from MBA books and show me true economic literature.
I agree with a lot of your points there but it might not just be a happy accident as you point out. That would be doing the IT sector a disservice.But then a lot of jobs which are moved here are supposed to be cost saving. The fact is when one bunch of people graduate, you’ve a new workforce because of the high turnover rates in the industry the point i wanted to make is given that outsourcing is not a pill for the nation’s ills but it’s the item which seems to get the most press anyway. there’s no such thing as bad publicity right?
Kausha,
Fundamentally, what’s your point?!
kausha:
the publicity that the BPO industry in India gets is centred around the (mistaken) fact that it IS the pill to all our ills. shashi tharoor’s article is a case in point. the point i was trying to make is that its stupid to do so. the BPO industry is a happy accident by virtue of the fact that we’re a low-cost destination. yes, we are adept at the technological aspect, but let’s not make more of the matter than is due to it.
I entirely agree with Menon.
Also the one thing that bothers me about the whole BPO thing is that it doesn’t empower the workers with any important skills.
It doesn’t give them too much scope to grow, and when these companies do eventually up-and-away, they won’t be in a position to cope by any other means.
And it’s a matter of time before the Chinese start teach their children English.
I agree with menon and viv.Its cause of concern when we make it a matter of pride.The skill set requirement as far as outsourcing is’nt quite high.and the rise in cost of IT labour(100% rise in average fresher salary in last 5 years) is definitely not good news for the outsourcing lobby.
While we’re on the subject, since India has the cost advantage and the skills which most experts say will last 5-10 years before say the Phillipines or MExico or someone else becomes the next profitable destination. While outsourcing does get a lot of press coverage and it is trumpeted by our governments and industry heads alike, now even global players are involved in the game. They set up their development centres in India and are competing with the Indian players as well. But it brings me to my next point, Indian companies have already started to look to Europe and take advantage of near-shoring facilities for European countries about to gain accession to the EU. While the press might not make a big deal of it, in the IT and ITES space, lots of companies are strategically acquiring a footprint in the EU because they know that the outsourcing boom will not last forever.
@ Viv: The Chinese have a huge domestic market for services which already engulfs the revenue we put together from services which is a sizeable chunk of our GDP. The Chinese don’t really need outsourcing, they’re a big behemoth as it is.
p.p.s.
Maybe shahsi Tharoor has referred to BPO and Outsourcing as just low end technological work. But it’s not, because of the large number of law firms and market research companies which are indulging in high end research and benefitting from the outsourcing boom. thought i might point that out.
a little late but nevertheless.
i think one should also ask the question whom are these jobs going to? when we talk about BPOs creating jobs, we can’t help but admit that this sector creates jobs only for the typical english educated, elite, which is a monority. so in fact the inequalities are widening rather than disappearing. a recent paper that i read surveys the IT sector in bangalore and finds that a majority of its employees come from families who can afford private schooling. it’s given the Great Indian Middle Class an American Dream to live upto, but in terms of sustainability of employment it’s really transitory as most of you have pointed out by referring to upcoming locations such as Mexico, Phillipines, etc.
the point is what after that?
for the tharoors of the world, BPOs, malls, etc, are the visible face of globalisation. and increased consumer spending in the form of swanky cars or designer ware albeit by a miniscule section are the factors that can help them feel on par with developed western world. just another case of mistaken modernity.
For the Tharoors of the world, BPOs, malls, etc, are the visible face of globalisation. And increased consumer spending in the form of swanky cars or designer wear, albeit by a miniscule section, are the factors that can help them feel on par with developed western world.
Just another case of mistaken modernity.
Vibha,
I cannot tell you how much I agree with you on that.
Also, the abysmal condition of rural primary education means the gaps that you so rightly speak of will only widen when today’s children grow up to seek jobs.
kausha (can i call you that?)
i really don’t think that tharoor even chose to enter that zone which would require him to classify jobs as low or high productivity. he was probably just on a thomas freidman “world is flat” trip.
he belongs to a clan of writers who lack any depth of perception or understanding of the process of development and prefers instead to highlight a few successes and pass them off as a generalised outcome. and the media will continue to give him column space because after all they too have been one of the beneficiaries of liberalisation.
Vibha,
I shall restrict my contributions to this comment thread to saying “I agree I agree” at acceptable intervals.
@ Vibha: I agree with your point completely. I don’t think Tharoor’s argument would hold up even for economic analysis because the shifting of low-wage jobs(relatively) from the developed to the developing country, it will lead to income inequalities on both sides. it’s an accepted fact. whether, that is wrong politically, morally etc is open to debate. so, the fact that he points out that the whole of India is doing marvellously and it visible from indicators like more cars, mall etc is just the easily observable spectre of globalisation as you pointed out. but in defense of that one point of Tharoor’s,he sees better lives with this increased spending and malls etc. but globalisation does lend itself to all sorts of interpretation because it’s extremely easy to see the benefits and the disadvantages that arise from it.
about the minority, it is well documented. 11% of india speak english. 110 million, give or take a few. but the one statistic everyone loves is 56% are below the age of 25, the world is our oyster and the like. all this makes for good copy in the press.
p.p.s. you can call me Kausha:)
we seem to be thrashing the bush from every conceivable angle at this point of time, but it’s not so bad a thing.
“but in defense of that one point of Tharoor’s,he sees better lives with this increased spending and malls etc. but globalisation does lend itself to all sorts of interpretation because it’s extremely easy to see the benefits and the disadvantages that arise from it.”
@kaush, it’s really a bit hard to defend this particular view of tharoor’s, simply because it is so particularly insiduous. If one were to interpret the benefits of globalization in this light, in that if one were to say that malls and increased spending etc are tangible and acceptable advantages of the ‘g’ word, then it becomes easy to sit back and delude oneself into believing that globalization is working and blind oneself to the pertinent problems of a vast yet silent majority. with regards to your point about one seeing the various pros and cons of the ‘g’ process in different lights, i see nothing wrong with infusing a value judgement into the topic and saying that the needs of this majority do take precedence over the needs of the minority,as it were. this does not necessarily imply a complete denial of the wants and needs of this minority, but a recognition that the benefits appropriated by this minority is not necessarily beneficial for the others. this argument is not merely utilitarian, it stems from the fact that most of what is claimed to be the benefits of globalization is nothing but a service to the vested interests of a particular class at the exclusion of other classes (where class may be defined as that able to harness itself to the global machine).
the basic point i was trying to make is that we are simply kidding ourselves when we say that India became a BPO hub simply and only because of its talent pool. i still maintain that the fact that we are a low cost country had a lot to do with it. its a slightly bitter pill to swallow, but someone ought to jab it down mr tharoor’s throat. but i have no complaints whatsoever with the direction the discussion has taken!
@Pheno:
Fair points you’ve raised. But, if you say we were low cost, at the same time Mexico and
China’s costs were roughly the same, we got lots of outsourcing business because of our so- called ‘skill’ basically IT proficiency, english and better systems in place to benefit from the outsourcing boom. I agree that skill cannot be the only reason we’re doing so well but it cannot be discounted which will pretty much fall in place with what you’ve said.
I see your points about defending Tharoor’s insidious logic and the facts about spending and malls not painting a true picture. i know ‘trickle-down’ is a dirty word in economoics but subsidiary services and people who’re seeking jobs including administrative and staff jobs at these companies which are increasing operations and centres by the dozen, means they’re doing a bit better than they used to. Increased consumer spending is supposed to be a good thing and stimulate investment in the economy. it definitely has and the economy is doing well but you’ve made your point about the inequalities. like i said before trade theory tells you that inequalities get further aggravated with outsourcing and make sit worse, no arguments about that.
i don’t disagree with your value judgement and agree with the sentiment of it all. but i believe this IT boom, outsourcing and BPO has become the tagline of India’s visiting card. The other stories don’t get the PR like IT does. this sector has brand champions from Sharjapur road to Sillicon Valley. I know I’m shifting track here. But it’s always about sticking to your strengths. From completely wantng to break down the Uruguay round talks, we’ve become a country who is actual;ly pushing for more market openings in services and liberalisation worldwide, the IT sector in no small measure has a lot to do with it.
I would love to get into a long drawn debate of how globalisation works. Face to face with hara wala bottle kingfisher seems a better bet than the blogosphere!
@Kaush:
There’s a problem with the IT industry becoming the new ‘it’ industry. and there’s a problem with sticking to your strengths as you say.
If, like i said before, we delude ourselves into believing that there’s nothing going wrong with globalization, as an extension we come firmly to believe that the IT industry is the way to guarantee us success in the global arena. The IT industry benefits the economy, the economy expands, the IT industry expands even more, and it becomes the one stop destination for prosperity.
The problem is, who are the ones who would be most benefited by this? the ones able to get into the industry in the first place. i.e, the ones who have a secure level of education and already belong to a particular socio-economic condition. the rest will be marginalised further unless attempts are made to bring them up to a level playing field. if things are left as they are, and we continue to believe in the IT industry as the magic bullet, its only going to lead to further marginalisation. The beneifts of globalizatuion accrue to those who are able to harness the mechanisms of globalization.
People will counter me by saying that its the government’s job to ensure that these classes are able to harness the global machine. but its the very same people who seem to push for a further liberalisation of the economy, a process which would, in my opinion, lead to a further marginalisation due to the reasons specified above. All i’m saying is that all is not hunky-dory with the IT industry and the pace at which we seem to be moving; its imperative that we slow it down a bit and concentrate maybe on building a better safety net for the dispossessed before undertaking further liberalisation.
And yes, i’d take a hara-walla bottle any time!