Dependency Theory :

Dependency can be defined as an explanation of the economic development of a state in terms of the external influences--political, economic, and cultural--on national development policies. [Dependency is]...an historical condition which shapes a certain structure of the world economy such that it favours some countries to the detriment of others and limits the development possibilities of the subordinate economics...a situation in which the economy of a certain group of countries is conditioned by the development and expansion of another economy, to which their own is subjected.

There are three common features to these definitions which most dependency theorists share:

First, dependency characterizes the international system as comprised of two sets of states, variously described as dominant/dependent, center/periphery or metropolitan/satellite. The dominant states are the advanced industrial nations in the Organization of Economic Co-operation and Development (OECD). The dependent states are those states of Latin America, Asia, and Africa which have low per capita GNPs and which rely heavily on the export of a single commodity for foreign exchange earnings.

Second, the assumption that external forces are of singular importance to the economic activities within the dependent states. These external forces include multinational corporations, international commodity markets, foreign assistance, communications, and any other means by which the advanced industrialized countries can represent their economic interests abroad.

Third, the definitions of dependency all indicate that the relations between dominant and dependent states are dynamic because the interactions between the two sets of states tend to not only reinforce but also intensify the unequal patterns. Moreover, dependency is a very deep-seated historical process, rooted in the internationalization of capitalism. Dependency is an ongoing process: The success of the advanced industrial economies serve as a model for the currently developing economies.

Developed Economies :

The term developed country is used to describe countries that have a high level of development according to some criteria. Which criteria, and which countries are classified as being developed, is a contentious issue and is surrounded by fierce debate. Economic criteria have tended to dominate discussions. One such criterion is income per capita; countries with high gross domestic product (GDP) per capita would thus be described as developed countries. Another economic criterion is industrialization; countries in which the tertiary and quaternary sectors of industry dominate would thus be described as developed. More recently another measure, the Human Development Index, which combines with an economic measure, national income, with other measures, indices for life expectancy and education has become prominent. This criterion would define developed countries as those with a very high (HDI) rating.

Few Developed Countries are :

Australia

Austria

Canada

Czech Republic

France

Germany

Ireland

Japan

United Kingdom

Developing Economies:

Developing country is a term generally used to describe a nation with a low level of material well being. There is no single internationally-recognized definition of developed country, and the levels of development may vary widely within so-called developing countries, with some developing countries having high average standards of living.

Some international organizations like the World Bank use strictly numerical classifications. The World Bank considers all low- and middle- income countries as "developing". In its most recent classification, economies are divided using 2008 Gross National Income per capita. In 2008, countries with GNI per capita below US$11,905 were considered developing. Other institutions use less specific definitions. Countries with more advanced economies than other developing nations, but which have not yet fully demonstrated the signs of a developed country, are grouped under the term newly industrialized countries

Few developing countries are:-

China

India

Iran

Pakistan

Sri Lanka

Brazil

Bangladesh

Maldives

Nepal

bhutan

THE MYTH OF DECOUPLING

The decoupling hypothesis is the idea that business cycles in emerging market economies have become more independent of – or decoupled from – business cycles in advanced economies in recent years. Proponents of the decoupling hypothesis argue that emerging markets have achieved stronger growth in domestic demand, lowering the relative contribution of net exports to economic growth. Emerging markets have allegedly also managed to strengthen domestic policy frameworks and reduce external vulnerabilities, thereby increasing the scope for counter-cyclical policies to mitigate the impact of external shocks. Together, these developments would imply that emerging markets have decoupled from advanced economies.

The decoupling hypothesis runs against the idea that globalisation, through stronger trade and financial linkages across countries, facilitates the international transmission of country-specific shocks, thus leading to greater business cycle synchronisation. Since emerging markets have become more integrated into the world economy, we would expect greater business cycle synchronisation. Not surprisingly, the decoupling debate has been fading as the global crisis unfolded.

Surprisingly, it is now resurfacing. Some argue that emerging markets will emerge from the global crisis sooner and faster than advanced economies, as the former are now the so-called “new engines of global growth”. While it is still too early to get a good picture of the global recovery process, there is enough historical data to assess the decoupling hypothesis for the period before the outbreak of the current crisis.

Research on decoupling

The empirical analysis by Ayhan Kose, Christopher Otrok, and Eswar Prasad (2008) is perhaps the most prominent contribution to the debate. They decompose the real GDP growth rate in over 100 countries into three factors:

1. a global factor, which picks up fluctuations that are common to all countries,

2. an economy-type factor, which captures fluctuations that are common to countries within each of the three types of economies advanced, emerging, and developing, and

3. a country-specific factor.

These factors are estimated over two time periods, the pre-globalisation period (1960-1984) and the globalisation period (1985-2005). The findings offer a nuanced view of the decoupling hypothesis. During the globalisation period, the share of the variation in growth rates explained by the global factor decreased. At the same time, the share explained by the economy-type factor increased for both advanced and emerging market economies. Put simply, there has been decoupling between advanced economies and emerging markets, but stronger convergence of growth rates within both groups.

The results of this factor analysis offer another interpretation, however. Retrieving factors from real GDP growth rates ignores one important development that occurred during the second time period (1985-2005): emerging markets experienced a massive take-off in economic growth. As a result, trend growth rates in advanced economies and emerging markets have diverged significantly (Figure 1).

Figure 1. GDP growth rates and trends

Source: World Economic Outlook Update, IMF, 6 November 2008.

Because trend growth rates diverged during the second time period, it must be the case that the share of the variation in actual growth rates explained by the global factor has decreased, and that the share explained by the economy-type factor has increased. This result obtains regardless of the evolution of business cycle synchronisation. In fact, if we look at deviations of actual growth rates from trend growth rates in Figure 1, they appear to be very similar for both advanced and emerging market economies.

The bottom line is that any assessment of the decoupling hypothesis should not focus on actual growth rates, but rather on deviations from trend. Looking at actual growth rates can be misleading. Saying that China has decoupled from the US because China grows at 5% while the US experience an output decline of 2% is wrong. If the trend growth rate is 9% in China and 2% in the US, both countries are 4 percentage points below trend and their business cycles are therefore perfectly in tune. This is a hypothetical example, but it makes the point.

So, have emerging markets decoupled from advanced economies in recent years? The discussion above provides some guidance for the choice of an empirical approach. First, we should look at deviations of real GDP from trend. Second, decoupling is often thought to have occurred in recent years. Therefore, we should construct annual measures of business cycle synchronisation. Mink, Jacobs and de Haan (2007) have proposed a simple concordance

measure of business cycle synchronicity. This measure is computed as the product of the output gap of two countries, or two groups of countries, divided by the absolute value of this product. When two countries have coinciding output gaps, their business cycles are synchronous and the measure is equal to one. When one country has a positive output gap and the other country has a negative output gap, the measure is equal to minus one. The major advantage of this approach relative to factor analysis or correlation coefficients is that the measure varies year to year.

Using real GDP data from the World Economic Outlook database, I assess the degree of synchronicity between 34 emerging market economies and four groups of advanced economies: all advanced economies, the G7 group, the US, and Europe (Wälti 2009). The sample runs from 1980 to 2007. Synchronicity is assessed vis-à-vis all emerging markets together, geographical regions of emerging markets, and individual emerging markets. Figure 2 shows the evolution of the synchronicity measure between the group of all emerging markets vis-à-vis the four groups of advanced economies. Since the concordance indicator exhibits time variation, we also show the time-varying trend of synchronicity.

The comparisons are stark and will continue to have profound economic and investment implications for some time. China, India, and many other developing economies, though still desperately poor, grow at fantastic paces, while the rich economies of Europe, Japan, and America seem to plod. The developing economies possess youthful, eager workforces. The rich developed economies carry ever-aging populations. Clearly, global prosperity as well as investment opportunity lies as never before with the world's developing economies. But as always in economics, matters seldom fall to simple distinctions between winners and losers. On the contrary, marked growth, wealth, and demographic differences speak loudly to reciprocal needs between developed and developing economies, needs that should yield gains from trade and globalization and consequently create economic and investment opportunities in both the developed and the developing economies.

DEMOGRAPHIC IMPERATIVES AND RECIPROCAL NEEDS

Seen in one light, all the advantages would seem to lie with the developing economies. Rapid real growth at near-double-digit rates in China and India already fosters speculation about when they might "catch up" with or even "surpass" the major developed economies. Other developing economies may not report growth at such a breakneck pace, but they nonetheless are growing much faster than the United States, which has exhibited a real growth rate in the low single digits, or Japan or the European Union, either of which has hardly grown at all. Even more telling for the future are the demographic differences. Lengthening fife expectancies and declining birth rates may be raising the average age of populations the world over, but for a long time to come the developing world will retain the younger, relatively more plentiful workforce that it needs to sustain its rapid growth path, especially relative to the developed West and Japan.

The accompanying exhibit reviews the key indicator in these sorts of comparisons, what demographers call "dependency ratio." By calculating the number of workers available to support each dependent retiree, it highlights the relative burden on each economy's workforce. America, for example, presently has five workers on average to support each retiree. By 2020, even considering impressive, ongoing immigration flows, the country will have less than four workers per retiree, and by 2030, it will have less than three. Europe is even more extreme. Germany, for instance, has only three workers per retiree even now and by 2030 will have barely two. Japan is in still more difficult straits with less than three workers for each retiree today and less than two projected for 2030. By contrast, China, India, Brazil, and other developing economies (not included in this exhibit) face a much less burdened future. China, for instance, even with the tendency for Beijing's long-standing one-child policy to slow the growth rate of that country's labor force, will still have over five workers available for each dependent retiree in 2020 and by 2030 just under four. Workers in Brazil and India will carry even fighter relative burdens, with almost five and almost six workers available for each dependent retiree respectively even by 2030.

For all these clear advantages, matters are not entirely one-sided. For one, labor in the developed world is more productive than in the developing world. Years of investment in education, modern plant, equipment, and technology have given their relatively smaller workforces the tools with which to support a greater burden of retirees than they otherwise could. This greater productivity has also enabled labor in the developed economies to remain internationally competitive, despite their higher wage scales. . No doubt they will make such efforts. But this comparative story also goes beyond simple workforce and productivity measures. The trade

advantages implicit in these differences should give further advantages to each sort of economy. Indeed, the huge wealth,

Of course, Japan and the West eventually will lose much of this competitive edge. They already are in some industries, such as textiles, a pattern that will expand as the developing economies continue to invest in education and modern facilities and continue to increase their own labor productivity. The West and Japan will need to innovate continually just to keep a portion of theiknowledge, and demographic gaps seem to demand economic integration between the developed and the developing worlds.

On one side of the exchange, the developing economies clearly offer the rich economies of Japan and the West a much-needed supply of labor, a need that clearly will grow over time. To be sure, America, Europe, and even Japan can rely on immigration to meet some of their relative labor needs. But even in the case of the United States, with its great immigration heritage, the future labor shortfall will become so great that immigration sufficient to meet it would risk social unrest. The only way, then, these developed economies can satisfy the consumption needs of their large, retired populations without straining their meager workforces beyond endurance will be to tap the developing world's youthful and ample workforce, either through imports from the developing economies or through outsourcing or offshoring arrangements.

Meanwhile, on the other side of the equation, India, China, and these other developing economies desperately need the rich consumer markets of the developed world. Though these developing economies have grown fast, they remain desperately poor. They have such low levels of wealth and such low wage scales that their domestic markets simply cannot absorb the full output of their workforce and will likely remain inadequate in this respect for some time to come. Without the rich consumer markets of the West and Japan, these economies would have no place to sell their growing production. Their pace of growth would slow to that of their still meager domestic consumer markets. They would take decades to accomplish the development they enjoy yearly in the present environment. Clearly, the developing economies, however impressive their growth and their demographic fundamentals, depend on their overseas customers in the developed world about as much as the rich, aging economies depend on the output from the developing world's youthful workforce.

There is another crucial point of reciprocal exchange between the world's developed and developing economies. The aging populations of Japan and the West increasingly will need high-returning investments to support themselves in their retirement. Many of these better, more productive investments exist in the world's fast-growing developing economies and will continue to do so in coming years, provided, of course, they can continue to grow rapidly through access to rich consumer markets. That investment opportunity is something these developing economies offer the developed economies of the West and Japan. At the same time, the West and Japan have something to offer in exchange for these needed investment returns, something that the developing economies desperately need to realize their potential: a flow of financial capital to finance development and bring other necessary skills, such as management expertise, technological innovation, and of course, financial acumen.

ECONOMIC ADJUSTMENTS AND INVESTMENT STRATEGIES

As trade and investment patterns respond to these reciprocal needs, the economic landscapes of these various economies will adjust in ways that surely will provide signals for long-term investing. Opportunities will appear in both developed and developing economies according to their comparative advantages.

Matters are more straightforward in the developing economies. Their growth and the investment opportunities surrounding it will center one way or another on applying their labor resources to meet the demands of the developed world's rich consumer markets, as indicated through either exports, outsourcing, or offshoring. Since their comparative advantages lie with their abundant, relatively inexpensive workforce, those opportunities will center primarily on the more labor-intensive activities. And because these developing economies as yet also lack the sophisticated capital infrastructure that exists in the developed world or the general educational base, their economic effort will also tend to concentrate on less complex processes, what economists refer to as low-value-added activities. Of course, not all developing economies are alike. China, for instance, has acquired a dominance in manufacturing, India in services and technologies of a sort, and Brazil, for a third example, in materials and a range of manufacturing, too. But for all these differences, all the developing economies have in common the push toward low-value-added, labor-intensive activities.

The developed economies will need to relinquish direct competition in these areas, where increasingly their high-cost, relatively scarce labor supply will put them at a disadvantage. To sustain their position, they will have to cultivate the greater sophistication of their workforce and rely on the more advanced capital and technological infrastructure available to them. That effort should lead them toward processes that are capital-intensive instead of labor-intensive and that focus on more complex economic activities, what economists refer to as high-value-added. These might include precision machine tools, other specialized machinery, metallurgy, sophisticated services, and, of course, technology, not so much the manufacture of equipment as innovation and development. The world's economic portfolio, as a consequence, and accordingly an investor's equity portfolio would do best, then, to draw on such activities from the developed economies in a mix with the labor-intensive, low-value-added investments from the developing economies.

How Do Developing Economies Develop?

Economic growth in developing economies has generally been associated with the emergence and growth of some leading sectors. These leading industries have spurred the economic growth of countries both directly and through their effects and interdependencies with the rest of the economy. Moreover, these leading sectors have been changing over time, according to the specific historical contingencies, the stage of the industry life cycle or the initial specialization of the country.

The existing literature on growth in emerging countries has focused mainly on the identification of key variables that are relevant for linking the evolution of specific industries to the economic growth at country level, by highlighting the important role of firm learning, absorptive capabilities, Foreign Direct Investments, and government intervention. Relatively few empirical studies have focused instead on the dynamics of the industries that are responsible for the economic growth in terms of innovation, entry and exit, technological capabilities of firms, presence of spin-offs, role of venture capital. New empirical evidence across countries and industries on these issues is needed.

Economic growth in developing economies has generally been associated with the emergence and growth of some leading sectors. These leading industries have spurred the economic growth of countries both directly and through their effects and interdependencies with the rest of the economy. Moreover, these leading sectors have been changing over time, according to the specific historical contingencies, the stage of the industry life cycle or the initial specialization of the country.

The existing literature on growth in emerging countries has focused mainly on the identification of key variables that are relevant for linking the evolution of specific industries to the economic growth at country level, by highlighting the important role of firm learning, absorptive capabilities, Foreign Direct Investments, and government intervention. Relatively few empirical studies have focused instead on the dynamics of the industries that are responsible for the economic growth in terms of innovation, entry and exit, technological capabilities of firms, presence of spin-offs, role of venture capital. New empirical evidence across countries and industries on these issues is needed

INDIA’S IMPORT FROM U.S

India is heavily dependent on imports of electronic goods from countries like the US and to meet its domestic demand, a joint study by assocham and Ernst and Young on Tuesday said.

Citing reasons for imports, the paper said Indian industries spend little on research and development despite benefiting from 150 percent income tax exemption given on such activities. India had imported electronics goods worth USD 19.77 billion in the recent times, while the export earnings were USD 3.17 billion, the study said adding that more than 70 percent of electronics appliances demand is met through imports.

Indian electronics and appliances market is estimated to have a of less than market share of 2 percent of the global market, while production share is less than 1 percent.

OUTSOURCING AND OFFSHORING

Outsourcing is subcontracting a service, such as product design or manufacturing, to a third-party company.The decision whether to outsource or to do inhouse is often based upon achieving a lower production cost, making better use of available resources, focusing energy on the core competencies of a particular business, or just making more efficient use of labor, capital, information technology or land resources. It is essentially a division of labour. Outsourcing became part of the business lexicon during the 1980s.

Outsourcing involves the transfer of the management and/or day-to-day execution of an entire business function to an external service provider. The client organization and the supplier enter into a contractual agreement that defines the transferred services. Under the agreement the supplier acquires the means of production in the form of a transfer of people, assets and other resources from the client. The client agrees to procure the services from the supplier for the term of the contract. Business segments typically outsourced include information technology, human resources, facilities, real estate management, and accounting. Many companies also outsource customer support and call center functions like telemarketing, CAD drafting, customer service, market research, manufacturing, designing, web development, print-to-mail, ghostwriting and engineering.

OffshoringIt is outsourcing in which the buyer organization belongs to another country. Outsourcing and offshoring are used interchangeably in public discourse despite important technical differences. Outsourcing involves contracting with a supplier, which may or may not involve some degree of offshoring. Offshoring is the transfer of an organizational function to another country, regardless of whether the work is outsourced or stays within the same corporation/company. With increasing globalization of outsourcing companies, the distinction between outsourcing and offshoring will become less clear over time. This is evident in the increasing presence of Indian

outsourcing companies in the United States and United Kingdom. The globalization of outsourcing operating models has resulted in new terms such as nearshoring, noshoring, and rightshoring that reflect the changing mix of locations. This is seen in the opening of offices and operations centers by Indian companies in the U.S. and UK. A major job that is being outsourced is accounting and preparation of tax returns.

Multisourcing refers to large outsourcing agreements (predominantly IT). Multisourcing is a framework to enable different parts of the client business to be sourced from different suppliers. This requires a governance model that communicates strategy, clearly defines responsibility and has end-to-end integration.

Strategic outsourcing is the organizing arrangement that emerges when firms rely on intermediate markets to provide specialized capabilities that supplement existing capabilities deployed along a firm’s value chain. Such an arrangement produces value within firms’ supply chains beyond those benefits achieved through cost economies. Intermediate markets that provide specialized capabilities emerge as different industry conditions intensify the partitioning of production. As a result of greater information standardization and simplified coordination, clear administrative demarcations emerge along a value chain. Partitioning of intermediate markets occurs as the coordination of production across a value chain is simplified and as information becomes standardized, making it easier to transfer activities across boundaries.

Due to the complexity of work definition, codifying requirements, pricing, and legal terms and conditions, clients often utilize the advisory services of outsourcing consultants or outsourcing intermediaries to assist in scoping, decision making, and vendor evaluation.

Activities for outsourcing

Research and Development

The competitive pressures on firms to bring out new products at an ever rapid pace to meet market needs are increasing. As such, the pressures on the R&D department are increasing. In order to alleviate the pressure, firms have to either increase R&D budgets or find ways to utilize the resources in a more productive way. There are situations when a firm may consider outsourcing some of its R&D work to a contract research organizations or universities. Reasons why a firm could consider outsourcing are:

new product design does not work project time and cost overruns loss of key staff competitive response problems of quality/yield.

The key drivers for R&D outsourcing are emerging mass markets and availability of expertise in the field. In this context, the two most populous countries in the world, China and India, provide huge pools from which to find talent. Both countries produce over 200,000 engineers and science graduates each year. Moreover both countries are low cost sourcing countries. Other strategic drivers for outsourcing R&D are access to expertise and intellectual property, filling gaps in the capabilities of the R&D function, managing risk better, reducing the time to market, and focusing on the core competence or activities of the firm

Manufacturing

Often companies will develop and market products but leave the manufacturing to other companies that specialize in it. Thus a factory can do manufacturing for several companies and keep a large manufacturing plant operating at nearly full capacity when no individual contract could justify the expense of maintaining the infrastructure. An example of this would be Fabless semiconductor companies which do design etc but do not have their own, extremely expensive, fabrication facilities. Other examples would be companies that specialize in the tasks of procuring parts, assembly, QA, etc. and market this skills as their primary business to companies that outsource manufacturing to them.

E Commerce Industry

The first activity most e Commerece merchants outsource is product shipping or order fulfillment, because the set of skills required for this section of the business is complete opposite to the day to day activities of most internet retailers. There are hundreds of warehouses offering storage space and cheap hourly labor in the country, however order fulfillment for e-Commerce requires superior level of automation and product inventory tracking. Due to the vast number of SKUs this industry manages, the warehouse needs to be prepared to constantly update databases and provide access online for monitoring inventory and shipments in real time.

Information technology field

Outsourcing in the information technology field has two meanings. One is to commission the development of an application to another organization, usually a company that specializes in the development of this type of application. The other is to hire the services of another company to manage all or parts of the services that otherwise would be rendered by an IT unit of the organization. The latter concept might not include development of new applications.

Reasons for outsourcing

Organizations that outsource are seeking to realize benefits or address the following issues:

Cost savings. The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, cost re-structuring. Access to lower cost economies through offshoring called "labor arbitrage" generated by the wage gap between industrialized and developing nations.

Focus on Core Business. Resources (for example investment, people, infrastructure) are focused on developing the core business. For example often organizations outsource their IT support to specialised IT services companies.

Cost restructuring. Operating leverage is a measure that compares fixed costs to variable costs. Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable.

Improve quality. Achieve a step change in quality through contracting out the service with a new service level agreement.

Knowledge. Access to intellectual property and wider experience and knowledge.

Contract. Services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with internal services.

Operational expertise. Access to operational best practice that would be too difficult or time consuming to develop in-house.

Access to talent. Access to a larger talent pool and a sustainable source of skills, in particular in science and engineering.

Capacity management. An improved method of capacity management of services and technology where the risk in providing the excess capacity is borne by the supplier.

Catalyst for change. An organization can use an outsourcing agreement as a catalyst for major step change that cannot be achieved alone. The outsourcer becomes a Change agent in the process.

Enhance capacity for innovation. Companies increasingly use external knowledge service providers to supplement limited in-house capacity for product innovation.

Reduce time to market. The acceleration of the development or production of a product through the additional capability brought by the supplier.

Commodification. The trend of standardizing business processes, IT Services, and application services which enable to buy at the right price, allows businesses access to services which were only available to large corporations.

Risk management. An approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation.

Venture Capital. Some countries match government funds venture capital with private venture capital for startups that start businesses in their country.

Tax Benefit. Countries offer tax incentives to move manufacturing operations to counter high corporate taxes within another country.

Scalability. The outsourced company will usually be prepared to manage a temporary or permanent increase or decrease in production.

Criticisms of outsourcing Quality Risks

Quality Risk is the propensity for a product or service to be defective, due to operations-related issues. Quality risk in outsourcing is driven by a list of factors. One such factor is opportunism by suppliers due to misaligned incentives between buyer and supplier, information asymmetry, high asset specificity, or high supplier switching costs. Other factors contributing to quality risk in outsourcing are poor buyer-supplier communication, lack of supplier capabilities/resources/capacity, or buyer-supplier contract enforceability. Two main concepts must be considered when considering observability as it related to quality risks in outsourcing: the concepts of testability and criticality.

Quality fade is the deliberate and secretive reduction in the quality of labor in order to widen profit margins. The downward changes in human capital are subtle but progressive, and usually unnoticeable by the out sourcer/customer. The initial interview meets requirements, however, with subsequent support, more and more of the support team are replaced with novice or less experienced workers. Some IT shops will continue to reduce the quality of human capital, under the pressure of drying up labor supply and upward trend of salary, pushing the quality limits. Such practices are hard to detect, as customers may just simply give up seeking help from the help desk. However, the overall customer satisfaction will be reduced greatly over time. Unless the company constantly conducts customer satisfaction surveys, they may eventually be caught in a surprise of customer churn, and when they find out the root cause, it could be too late. In such cases, it can be hard to dispute the legal contract with the outsourcing company, as their staff are now trained in the process and the original staff made redundant. In the end, the company that outsources may find that it is worse off than before it outsourced its workforce.

Quality of service

Quality of service is measured through a service level agreement (SLA) in the outsourcing contract. In poorly defined contracts there is no measure of quality or SLA defined. Even when an SLA exists it may not be to the same level as previously enjoyed. This may be due to the process of implementing proper objective measurement and reporting which is being done for the first time. It may also be lower quality through design to match the lower price.

There are a number of stakeholders who are affected and there is no single view of quality. The CEO may view the lower quality acceptable to meet the business needs at the right price. The retained management team may view quality as slipping compared to what they previously achieved. The end consumer of the service may also receive a change in service that is within agreed SLAs but is still perceived as inadequate. The supplier may view quality in purely meeting the defined SLAs regardless of perception or ability to do better.

Quality in terms of end-user-experience is best measured through customer satisfaction questionnaires which are professionally designed to capture an unbiased view of quality. Surveys

can be one of research. This allows quality to be tracked over time and also for corrective action to be identified and taken.

Language skills

In the area of call centers end-user-experience is deemed to be of lower quality when a service is outsourced. This is exacerbated when outsourcing is combined with off-shoring to regions where the first language and culture are different. The questionable quality is particularly evident when call centers that service the public are outsourced and offshored.

The public generally find linguistic features such as accents, word use and phraseology different which may make call center agents difficult to understand. The visual clues that are present in face-to-face encounters are missing from the call center interactions and this also may lead to misunderstandings and difficulties. In addition to language and accent differences, a lack of local social and geographic knowledge is often present, leading to misunderstandings or mis-communications.

Public opinion

There is a strong public opinion regarding outsourcing (especially when combined with offshoring) that outsourcing damages a local labor market. Outsourcing is the transfer of the delivery of services which affects both jobs and individuals. It is difficult to dispute that outsourcing has a detrimental effect on individuals who face job disruption and employment insecurity; however, its supporters believe that outsourcing should bring down prices, providing greater economic benefit to all. There are legal protections in the European Union regulations called the Transfer of Undertakings (Protection of Employment). Labor laws in the United States are not as protective as those in the European Union. On June 26, 2009, Jeff Immelt, the CEO of General Electric, called for the United States to increase its manufacturing base employment to 20% of the workforce commenting that the U.S. has outsourced too much and can no longer rely on consumer spending to drive demand.

Social responsibility

Outsourcing sends jobs to the lower-income areas where work is being outsourced to, which provides jobs in these areas and has a net equalizing effect on the overall distribution of wealth. Some argue that the outsourcing of jobs (particularly off-shore) exploits the lower paid workers. A contrary view is that more people are employed and benefit from paid work. Despite this argument, domestic workers displaced by such equalization are proportionately unable to outsource their own costs of housing, food and transportation.

On the issue of high-skilled labor, such as computer programming, some argue that it is unfair to both the local and off-shore programmers to outsource the work simply because the foreign pay rate is lower. On the other hand, one can argue that paying the higher-rate for local programmers is wasteful, or charity, or simply overpayment. If the end goal of buyers is to pay less for what they buy, and for sellers it is to get a higher price for what they sell, there is nothing automatically unethical about choosing the cheaper of two products, services, or employees.

Social responsibility is also reflected in the costs of benefits provided to workers. Companies outsourcing jobs effectively transfer the cost of retirement and medical benefits to the countries where the services are outsourced. This represents a significant reduction in total cost of labour for the outsourcing company. A side effect of this trend is the reduction in salaries and benefits at home in the occupations most directly impacted by outsourcing.

Staff turnover

The staff turnover of employee who originally transferred to the outsourcer is a concern for many companies. Turnover is higher under an outsourcer and key company skills may be lost with retention outside of the control of the company. In outsourcing offshore there is an issue of staff turnover in the outsourcer companies call centers. It is quite normal for such companies to replace its entire workforce each year in a call center.This inhibits the build-up of employee knowledge and keeps quality at a low level.

Company knowledge

Outsourcing could lead to communication problems with transferred employees. For example, before transfer staff have access to broadcast company e-mail informing them of new products, procedures etc. Once in the outsourcing organization the same access may not be available. Also to reduce costs, some outsource employees may not have access to e-mail, but any information which is new is delivered in team meetings.

Qualifications of outsourcers

The outsourcer may replace staff with less qualified people or with people with different non-equivalent qualifications.

In the engineering discipline there has been a debate about the number of engineers being produced by the major economies of the United States, India and China. The argument centers around the definition of an engineering graduate and also disputed numbers. The closest comparable numbers of annual graduates of four-year degrees are United States (137,437) India (112,000) and China (351,537).

Failure to deliver business transformation

Business transformation promised by outsourcing suppliers often fails to materialize. In a commoditised market where many service providers can offer savings of time and money, smart vendors have promised a second wave of benefits that will improve the client’s business outcomes. According to Vinay Couto of Booz & Company “Clients always use the service provider’s ability to achieve transformation as a key selection criterion. It’s always in the top three and sometimes number one.” While failure is sometimes attributed to vendors overstating their capabilities, Couto points out that clients are sometimes unwilling to invest in transformation once an outsourcing contract is in place.

Productivity

Offshore outsourcing for the purpose of saving cost can often have a negative influence on the real productivity of a company. Rather than investing in technology to improve productivity, companies gain non-real productivity by hiring fewer people locally and outsourcing work to less productive facilities offshore that appear to be more productive simply because the workers are paid less. Sometimes, this can lead to strange contradictions where workers in a developing country using hand tools can appear to be more productive than a U.S. worker using advanced computer controlled machine tools, simply because their salary appears to be less in terms of U.S. dollars.

In contrast, increases in real productivity are the result of more productive tools or methods of operating that make it possible for a worker to do more work. Non-real productivity gains are the result of shifting work to lower paid workers, often without regards to real productivity. The net result of choosing non-real over real productivity gain is that the company falls behind and obsoletes itself overtime rather than making investments in real productivity.

Standpoint of labor

From the standpoint of labor within countries on the negative end of outsourcing this may represent a new threat, contributing to rampant worker insecurity, and reflective of the general process of globalization. While the "outsourcing" process may provide benefits to less developed countries or global society as a whole, in some form and to some degree - include rising wages or increasing standards of living - these benefits are not secure. Further, the term outsourcing is also used to describe a process by which an internal department, equipment as well as personnel, is sold to a service provider, who may retain the workforce on worse conditions or discharge them in the short term. The affected workers thus often feel they are being "sold down the river." Careers ImpactIndustry Impact

Security

Before outsourcing an organization is responsible for the actions of all their staff and liable for their actions. When these same people are transferred to an outsourcer they may not change desk but their legal status has changed. They no-longer are directly employed or responsible to the organization. This causes legal, security and compliance issues that need to be addressed through the contract between the client and the suppliers. This is one of the most complex areas of outsourcing and requires a specialist third party adviser.

Fraud is a specific security issue that is criminal activity whether it is by employees or the supplier staff. However, it can be disputed that the fraud is more likely when outsourcers are involved, for example credit card theft when there is scope for fraud by credit card cloning. In April 2005, a high-profile case involving the theft of $350,000 from four Citibank customers occurred when call center workers acquired the passwords to customer accounts and transferred the money to their own accounts opened under fictitious names. Citibank did not find out about

the problem until the American customers noticed discrepancies with their accounts and notified the bank.

By Country

The U.S.

'Outsourcing' became a popular political issue in the United States during the 2004 U.S. presidential election. The political debate centered on outsourcing's consequences for the domestic U.S. workforce. Democratic U.S. presidential candidate John Kerry criticized U.S. firms that outsource jobs abroad or that incorporate overseas in tax havens to avoid paying their "fair share" of U.S. taxes during his 2004 campaign, calling such firms "Benedict Arnold corporations". Criticism of outsourcing, from the perspective of U.S. citizens, by-and-large, revolves around the costs associated with transferring control of the labor process to an external entity in another country. A Zogby International poll conducted in August 2004 found that 71% of American voters believed that “outsourcing jobs overseas” hurt the economy while another 62% believed that the U.S. government should impose some legislative action against companies that transfer domestic jobs overseas, possibly in the form of increased taxes on companies that outsource.[ One given rationale is the extremely high corporate income tax rate in the U.S. relative to other OECD nations, and the peculiar practice of taxing revenues earned outside of U.S. jurisdiction, a very uncommon practice. It is argued that lowering the corporate income tax and ending the double-taxation of foreign-derived revenue (taxed once in the nation where the revenue was raised, and once from the U.S.) will alleviate corporate outsourcing and make the U.S. more attractive to foreign companies. Sarbanes-Oxley has also been cited as a factor for corporate flight from U.S. jurisdiction. Policy solutions to outsourcing are also criticized.

Outsourcing to the Philippines

Awarded as the top outsourcing destination for the years 2007 and 2009 , the Philippine government has implemented several laws that will grants tax holidays and other benefits to multinational companies who wish to setup operations in the country. It has export processing zones all over the country and is currently the host of several manufacturing firms including Texas Instruments, MOOG and Microsoft.

The country also boasts of a high literacy rate, thereby providing a large base of skilled workers. Also, most citizens are fluent in speaking English so foreigners do not have trouble communicating. Most outsourced work to the Philippines consists of customer support services, web development and website design.

Outsourcing – effect on developing economies

Global outsourcing in recent times has come into negative scrutiny by workers of the developed countries for all the wrong reasons. People in the developed countries

tend to blame outsourcing for their job losses, low paying jobs and a lot more. But little do they realize that offshore outsourcing is an inevitable phenomenon that has many viable benefits to the world economy as a whole.

Outsourcing Helps

Global outsourcing helps in creating newer international markets, promotes global citizenship, helps recognize global talent and in a larger sense helps in the development of economics of all the countries taking part in it. Evolution in world economies is bound to happen and outsourcing as a phenomenon is not new but has been going on since ages. The only difference can be seen in the pace and in the type of services being outsourced.

The cynical views of people on outsourcing that makes them see it as an enemy of their economy is mostly a very temporary view that is bound to change in the future as newer and better jobs are created.

Job losses due to Outsourcing

Job outsourcing overseas has come into much scrutiny in the recent times particularly among the US and UK technical workers. Total it outsourcing and along with that the white collar jobs has lead to large scale backlash.

But is it really justifiable to blame job losses merely on outsourcing? Before jumping to conclusions, one has to bear in mind that it's not outsourcing but the evolution in technology that has given rise to a situation when companies can actually think of shifting white collar jobs offshore. But it won't be practical to blame technology for job losses which is why outsourcing in itself that is the resulting implication of technology cannot be blamed.

People as of now are more worried looking at jobs getting lost rather than realizing that new jobs are getting created. According to Robert B Reich, former Labour Secretary, newer and better jobs will take the place of routine jobs as the US economy flourishes.

So ultimately it all comes down to the fact that outsourcing as a phenomena is to be seen as nothing but an evolution that is revolutionizing our societies and laying the foundation for a better world economy.

Many experts are of the opinion that software development outsourcing and other ITES outsourcing will only help improve the US and UK economies. Many IT outsourcing articles and whitepapers have been written to clearly demonstrate this. Most of these papers discuss the various issues and examples of IT outsourcing in the most comprehensive manner. The offshore business process outsourcing backlash on communities thus will only be a temporary one.

Impact of outsourcing on Indian economy

OUTSOURCING IN INDIA has experienced explosive growth with overseas companies getting everything from their customer support work to tele-radiology done here. It is one of the most discussed topics at present. Its impact can be felt in different areas and spread over several countries. 

The impact of outsourcing on economy is largely discussed. However, there are few people who are really interested or consider the impact of outsourcing on the society. If we talk about Indian society, then definitely one can notice and observe the change brought by the outsourcing services and institutions.  

Being world’s second most populated country, human resources are a boon by itself, in India. Just as the Gulf is renowned for its natural resource of crude oil, India is proud of the abundance and easy availability of its qualified and skilled professionals; who happen to be the key to success in several fields including Information Technology. 

Outsourcing can be both beneficial as well as harmful to the society. This industry, which booms in metro cities, has caught hold of what can be called as the jugular vein. Its role is somewhat restricted to the developed cities only and can be least found in the villages and remote areas of India. 

Outsourcing industry has improved Indian economy primarily by employing a large number of people and building and maintenance of infrastructure. It is because of the outsourced projects that people at large in India get opportunities to know and work in multi national corporations.

BPO companies also provide ample opportunities for women and as such help them in their liberation and liberalization. There is a good percentage of women workforce employed in the outsourcing companies in the cities. The role of women has consistently changed and they can better take care of their finances and their career. 

Meanwhile we are also losing on several cultural and traditional benefits. The outsourcing companies and projects emphasize on the foreign cultural values, the place from which the original project has been outsourced. The holidays, the work culture, day-to-day dealings and more tend to lay greater importance on the social norms that are not part of our system, our community. We are slowly adapting to the change, accepting the dominant culture and yielding to such values, which we have neither assigned, nor have they come from our own social domain.  

Nevertheless, people should appreciate the fact that more people are employed and loads of opportunities to learn new and exciting things working in BPO sector are available. If we resist the intrusion of the values and keep our professional lives at distance from our personal lives, it will serve better and help us in the long run.  

If we can get the best out of these two worlds, these two societies then its for sure the best associate oneself with. 

The impact of global recession on Indian IT

A slowdown in the US economy is bad news for India. • Indian companies have major outsourcing deals from the US. • India's exports to the US have also grown substantially over the years. • Indian IT companies with big tickets deals in the US would see their profit margins shrinking. The whole of Asia would be hit by a recession as it depends on the US economy. Asia is yet to totally has never been easy, and history has proved that. For India's sunrise BPO industry, it has not been an easy task being a young and happening spot. Young - in terms of age and also its average members being in the 19-21 bracket - and happening - for being in the midst of a lot of action. Apart from bringing economic independence to youngsters straight out of college, BPOs decouple itself (or be independent) from the rest of the world, say experts. Outsourcing market is suffering from the recession in whole world and India IT sector is highly dependent. Being young have also brought about a change in the way young India talks and thinks. From American accents to higher disposable incomes to branded clothes and accessories and an increasing US way of life, thanks to living life US time, young India seems to be more at ease with the American dream. outsourcing mainly 60% on US.

EXPORTS OF INDIA

Exports have boosted the growth of Indian economy substantially and Indian exports in the current year has earned nearly US $ 125 billion and is expected to earn US $ 160 billion for the next fiscal year. The major export products of India include leather, medical appliances, equipments, textiles and so on.

Leather Goods among Major Export Products of India:

India has developed over the years to become a key player in the export of leather goods and accessories among the major export products of India.

India exports numerous leather products for daily use like leather wallets, belts, key holders, folders, pouches, leather toys, handbags etc. Gift items made of leather such as Leather notebooks, decorated leather journals, key rings, rugs are quite popular in foreign countries.

A large number of small scale, medium scale as well as large scale companies in India are engaged in the export of leather goods, the list of such companies include:

Sharie International Islam International Indobest Falcon International Z.N.T International Balaji Impex Private Limited Paradise Noble Creations Asian adores The Lotus Handicrafts New Era Overseas

Medical Appliances among Major Export Products of India:

Indian medical appliances have made their mark in the foreign countries on account of superior quality and variety. Common medical appliances exported from India include absorbent gauze, sterile gloves, crepe bandages, gauze sponge, surgical face masks, surgical caps, surgical disposables. Export of specialized medical appliances have also gained importance among major export products of India and appliances such as baby incubator, automatic vertical autoclave, air ionisers, nelaton catheter, digital video colposcopes, digital imaging softwares.

A large number of small scale, medium scale as well as large scale companies in India are engaged in the export of medical appliances goods, the list of such companies include:

Nidhi Meditech Systems Coral Marketing Narang Scientific Works Private Limited Relique Technologies Surya Surgical Industries Chatterjee Surgical United Surgical Industries B. L. Lifesciences Private Limited Paramount Surgical Emporium, Delhi Magnum Medicare Pvt. Ltd.

Textile goods among Major Export Products of India:

Textile goods have gained prominence among the export products of India, designer garments for ladies as well as gents manufactured by the big houses in India have created huge demand in the International garment industry. The popular ladies garment include knitted tops, embroidered salwar, sequin work blouses, sarongs, floral t-shirts, beaded garments, poplin embroidered kurta, viscose crape printed skirt.

A large number of small scale, medium scale as well as large scale companies in India are engaged in the export of textile goods, the list of such companies include:

Kshethra Exports Mirza Fabric Private Limited Kanha Designs Pvt. Ltd. Knitco Fashionns Boom Buying Private Limited Revolution Exports Flying Fashions Subasri Textile Vipro Garments Kewal Impex Sudharshanaa Tex Macsam

Equipments among Major Export Products of India:

India caters to the need of varied equipments of the foreign countries, therefore the Indian equipment industry have grown in leaps and bounds and ranks high among the major export products of India like conveyor systems, hand pallet trucks, magnetic coolent cleaners, vibrating screens, EOT cranes, industrial magnetic conveyors, cantilever racks, steel rolling mill plants, hydraulic stackers, heavy duty pallet rack, pin pulveriser, agitator vessel, rotary vane feeders.

A large number of small scale, medium scale as well as large scale companies in India are engaged in the export of equipments, the list of such companies include:

Orton Engineering Private Limited A.S. Precision Machines Pvt. Ltd. Dewas Techno Products P Ltd. Metal Storage Systems Private Limited Yagnam Pulverizer Private Limited Elegant Engineers Metro Engineering Industries Jai Gopal Engineering Works Private Limited

CONCLUSION

For many years, the developed world encouraged the developing world to grow,

implicitly assuming, we suppose, either that progress for developing countries would be

beneficial to all, or that it would never be important enough to matter. For an

unfortunately long time, due to misguided policies, growth of developing countries was

indeed too slow to matter much for world markets. But in recent years, that has ceased to

be true, and many of those in developed countries suddenly find themselves threatened, or

perceived to be, by growth in the developing world. This concern is often attributed more

to “globalization” than to developing-country growth, but in fact the two go hand in hand.

Resistance to globalization in the developed world, now that developing countries are

finally themselves globalizing and growing, is bound at best to slow down the progress

that is finally being made in the developing world.