The death of outsourcing?

One typical concern that faculty have about online education is over establishing that the work being submitted by the student in the class is indeed the work done by that very student.  After all, it is not like when they come to the physical classroom in order to take the test, right?

Students, too, could ask a similar question.  How can they be sure that the instructor is who they think it is?  An old joke of mine, in online classes, is that I hire another Sriram, who lives in India, who gets my work done for a third of what I get paid and that I retain that remaining two-thirds for doing no work at all.

In my regular classes, too, I tell them we are only a few years away from me hiring a Sriram, who lives in India, and whose lectures I will be able to project as a hologram in the classroom.

My silly humor, yes, when we discuss outsourcing, which is a classic contemporary example of an economic geography topic.  As one who loves humor, even if my own jokes are absolutely lame, I have shown them this Onion video, which is one heck of a satire on outsourcing and American life.

But, as with many, many, Onion videos and text-based satire, real world developments make the satire seem like a documentary, like in this case of "Bob":

a software developer working for a large U.S. critical infrastructure company hired a Chinese firm to do his job so he could spend time surfing Reddit and watching cat videos.

You see how visionary that Onion video was?

"As it turns out, Bob had simply outsourced his own job to a Chinese consulting firm. Bob spent less that one fifth of his six-figure salary for a Chinese firm to do his job for him," Valentine said.
He had FedExd his RSA token to the Chinese firm so that the company could log in and work using his credentials. Meanwhile "Bob" was typically in his office at the company from 9 a.m. to 4:30 p.m. watching cat videos, reading stories on Reddit and spending time on eBay, Facebook and LinkedIn, the blog post said.
At 4:30 p.m. most days, he would send an end of day update to his managers.
"Evidence even suggested he had the same scam going across multiple companies in the area. All told, it looked like he earned several hundred thousand dollars a year, and only had to pay the Chinese consulting firm about fifty grand annually," the blog post said.
Bob's superior's had rated his work as excellent quarter after quarter.

See, "Bob" was efficient in so many ways!

Inexpensive qualified labor in some other geographic areas is what companies tap into via outsourcing.  It is one thing for the company to do that, and another for "Bob" to execute those cost savings on his own, while operating on the company's dime.  I suppose soon we can expect an additional line in employment contracts: "You are prohibited from contracting out the work to which you have been assigned."

Economic geography also tells us that the outsourcing advantages are never static--areas that are able to draw in the work will, theoretically, become economically developed and, therefore, economic activities will transition to some other low-cost area.  We do not even need an Onion video to understand that; a Wall Street Journal video will suffice:

Theory also suggests that the more activities go hunting for low-cost solutions, well, the high-cost location might become attractive enough to bring back some of those activities that exited in the first place.  Sure enough, that, too, is happening, reports the Economist:

Jeff Immelt, Mr Welch’s successor, calls outsourcing “yesterday’s model”. He has returned production of fridges, washing machines and heaters from China back to Kentucky. Having shipped much of its IT work outside America, the conglomerate is now shifting it back and taking on hundreds of IT engineers at a new centre in Michigan. And GE is not alone. As our special report this week explains, bringing jobs back to the rich world is as much in vogue these days as sending them to China was a decade ago.

Yep, China is getting to be too expensive.

India, thanks to its muddled political economy, chugs along as a lower-cost option for US to outsource operations, but its outsourcing well could start drying up soon:

General Motors plans to shift almost all its IT (much of which had also gone to India) back home to Detroit. These days the main reason why companies want to expand their presence overseas is to be close to consumers in fast-growing new markets, not to exploit low wages as part of an offshoring strategy.

How about India's advantage with call centers?

For many firms, sending call centres overseas has turned into a nightmare. “We just can’t get the accents right,” confesses one Indian outsourcing executive. As with manufacturing, the advantages of outsourcing services are falling. For an American firm, the gap between the cost of employing an Indian software programmer and the cost of a local one will fall to under 20% by 2015, predicts Offshore Insights, a Pune-based advisory firm. All this could add up to the “Death of Outsourcing”, says a paper by KPMG, whose consultants have long advised Western firms on sending work overseas.

Outsourcing is dying.  "Bob" played the game a tad too long, instead of calling it quits when he was ahead!