Random Ramblings about stuff I see going on in biotech, internet and the stuff I read.

Monday, April 30, 2007

Outsourcing...

I just read on Derek's blog that a commenter got on him about recommending an outsourced solution. The people in question were going to do work in India and the commenter was on Derek about, essentially, "Didn't that just cause you to lose your job? Why are you encouraging this?".

Dereks response of, 1 - that didn't cause me to lose my job and 2- You better learn to deal with outsourced competition as it is here to stay and free trade is a good idea.

I would just expand on this a bit, as we are seeing a bit of this in our industry as well.

We moved our manufacturing out of California for tax and cost reasons. Did we move it far enough? No idea, but will flat out tell you that we are always looking. There is the cost of moving a plant and starting up and disruption VS. the labor cost you have to bear. You have to do this math, and keep doing this math, or you will get your lunch eaten by a competitor who is doing this math. That is why they pay me and people like me and all the operations people. Costs matter to making a profit. Want to make a profit, make sure you watch your costs.

Derek's point that soon Indians will be griping about the next low cost place is wrong (he uses Pakistan and Bangladesh in his example). It is wrong because he uses the future tense. It is the present tense. Hyderabad for software development is no longer the cheapest high quality code writing place. We use a company there and I know what there cost increases have looked like. I also know the services they have started adding on to our work so that they break out of the "low bidder" hand cuffs. You have to be more than low bidder if you want to keep the work, and they have learned that. In addition, if you are trying to just make it as low bidder, you have to make sure and keep your employees dirt poor and in low demand. The second they get educated they will start asking to be paid and your costs will go up. As a side light to this "education" thing, they will also become a whole ton better as workers. Your quality will go up and you will be able to ask for more money from your customers. BUT - you have to accept that there will now be some other part of the world that is way cheaper than you.

I am with Derek on the whole free trade thinger. It is only by bringing everyone up to our standard of living that we can sell stuff to them and then hope to fight to bring jobs back here.

We have been fighting this boogy man for a lot of years. Wasn't Japan supposed to eat our Lunch (90's). You know...it sort of turned out that they weren't superman after all. They do some stuff better than us and some stuff not as well. The better stuff, they are kicking our butts at. The other stuff, we win. This is, I think, good and healthy.

2 comments:

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