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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: mishedlo who wrote (28384)3/19/2005 7:51:48 PM
From: arun geraRead Replies (1) of 306849
 
Mish:

Interesting blog. Just some observations from my experience watching outsourcing trends:

1. The ratio of wages on the high end jobs is not 30:1. It is closer to 5:1. And the ratio will go down further as US wages decline a little and offshore wages increase (more of the latter). The biggest factor would be the weakening of the US dollar against the overseas country.

2. The high end worker overseas takes 1-2 years to start to reach the quality and productivity levels of a US worker of similar capabilities. This is more due to cultural expectations and working styles rather than inherent capability.

3.Young overseas companies take about 5 years to achieve the cohesion and teamwork found in similar sized US companies. The largest companies take 1-2 years to match world standards, and 5-10 years more to start setting some benchmarks themselves.

3. Accounting for higher infrastructure costs, the ratio of US vs offshore pricing is more like 2:1.

4. Offshore resources with 10+ years solid experience in world class technology development are scarce.

5. Americans are very adaptable and have efficient working styles. There is great waste of labor oversees as it is relatively cheap. In a way, that is bad for the US worker, as there is still some more efficiency improvements that can be extracted from an overseas worker. The consolation is that the overseas worker is already working long hours and may be burning himself out. An overseas worker serving US companies works more hours than a worker at a typical US corporation.

6. The high end overseas worker is also high end consumer, buying the kinds of goods US corporations want to sell.

7. Outsourcing takes the bargaining power away from US employees into the hands of US employers/owners/top managers who benefit for a short period by being an early outsourcer, then slowly that advantage goes away. Outsourcing reduces costs of products and services. Unless the demand for these goods and services increase with the fall in their prices, only monopoly companies will be able to keep the pricing power. So I see further consolidation in the US industries.

8. The biggest costs for US residents are taxes (10-20 percent), housing and utilities (20-30 percent), healthcare(5-10 percent), transportation (5-10 percent), higher education (2-5 percent). All these costs (except cars) are rising and coincidentally, they are all for services being produced in the US. Maybe these should be the targets for outsourcing.... Otherwise, the wages will not rise enough to match inflation.

-Arun
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