Tutorial 4: a week beginning March 26, 2012

Q1. Read the following and answer the questions at the end. Be brief in your answers.

Outsourcing - America's pain, India’s gain
Publication: The Economist
Date: January 11, 2003
At least one corner of the IT world is booming again
SURGING revenues, strong profit growth, lucrative new contracts and a massive recruitment drive-can this really be the information technology (IT) industry in 2003? Yes, provided you are in India, where software firms are flourishing thanks to booming outsourcing business from some of the world's leading multinationals. Though the Indian outsourcing industry was heavily hyped a couple of years ago, its current strength reflects something of a recovery after a tough time at the start of the decade, when the bursting of the tech bubble and a slowdown in America led many big firms to freeze all technology spending, even when, as with outsourcing, it could cut costs.
Now that those firms are over their initial panic and focused on cost reduction, the appeal of outsourcing has soared, especially to low-cost offshore locations such as India. As a result, the export revenues of India's software services market reached $6.2 billion last year, up from under $500m in the mid-1990s.
The Indian outsourcing business grew out of a more basic industry providing Indian computer programming and code-writing expertise to American hardware and software giants. When Indian firms entered the outsourcing business serving firms of all sorts, a business then dominated by the likes of IBM and EDS, much lower labour costs held the key to its rapid revenue growth: over 50% a year in 1994-2001. The time difference also gave India a selling-point. Thanks to, say, the ten-hour time gap between America and India, American clients could offer 24-hour service by switching to Indian workers during the American night.
In 2001, as the dotcom, wireless and optical-networking businesses started to collapse in America and Europe, and IT spending slowed dramatically, Indian outsourcing revenues fell far below expectations, rising by only 20% in 2001, compared with initial expectations of 40%. This hit profits hard, as it coincided with an investment and recruitment boom designed to tap the expected rapid growth. 涌动的收入，利润强劲增长，利润丰厚的新合同和驱动器可这真的是信息技术（IT）产业在2003年大规模招聘？是的，只要你是在印度，软件公司是世界领先的跨国公司外包业务蓬勃发展的繁荣归功于。虽然印度外包产业被严重夸大了两三年前，其目前的实力，反映一些复苏的艰难时期后，在本世纪初，当高科技泡沫的破灭，并在美国经济放缓导致许多大公司冻结技术开支，甚至时，外包，它可以降低成本。
现在，这些公司有超过他们最初的恐慌，并专注于降低成本，外包的吸引力已飙升，特别是低成本的离岸地区，如印度。因此，印度的软件服务市场的出口收入达到62亿美元，去年，从5亿美元以下，在20世纪90年代中期。
印度外包业务的增长，一个更基本的行业，印度的计算机编程和代码编写专业提供美国的硬件和软件巨头。当印度企业进入外包业务的各种服务的公司，一个企业，然后由IBM和EDS等为主，劳动力成本低得多的召开，其快速的收入增长的关键：在1994年至2001年每年超过50％。时间差也给了印度一个销售点。感谢，比方说，美国和印度之间的10小时的时间差距，美国的客户可以提供24小时服务，通过切换到印度工人在美国的夜晚。
作为网络公司，在2001年，无线和光纤网络的企业开始收缩在美国和欧洲，和IT支出大幅放缓，印度的外包收入远远低于预期，在2001年只有20％的上升，比最初预期的40％ 。命中利润很难，因为它恰逢旨在挖掘预期快速增长的投资和招聘热潮。

Having misread the economic tea-leaves, the industry reacted with un-Indian decisiveness, bent on turning adversity into opportunity. For almost a year from mid-2001, they put a freeze on investments in software development centres and on recruitment. Instead, an aggressive marketing campaign was launched to boost the image of India as an outsourcing location the equal of anything on offer from such leading global outsourcing vendors as IBM, EDS and Computer Sciences-and far cheaper.
As big multinationals resumed their efforts to cut costs, Indian firms were thus well-placed to take advantage of the renewed outsourcing opportunity. Over the past year or so, much bigger contracts than before have been won by the five firms that are emerging as the dominant forces in Indian outsourcing: Tata Consultancy Services (part of the Tata family group), Infosys Technologies, Wipro Technologies (the global software services arm of the diversified Wipro), Satyam Computer Services and HCL Technologies.
Between them, these firms had a 40% share of India's outsourcing business last year. Tata's revenues should top $1 billion this year, with Infosys and Wipro not far behind. In the past year, Tata has won at least three outsourcing contracts each worth over $50m-from GE Medical Systems, Verizon and United Utilities. Infosys and Wipro now also have several clients with contracts worth at least $30-40m each. All are now busily hiring again.
This progress is increasingly at the expense of IBM et al, which have seen outsourcing revenue growth slow in the past year. These firms already have some operations in India, but are likely to ramp them up fast to reduce the cost advantage enjoyed by their Indian-based rivals. Indeed, buying a leading Indian outsourcer may be an option. A few months ago, EDS was said to be considering Satyam, the fourth-largest domestic firm, as a possible acquisition. Satyam said it was not for sale.
在误读经济的茶树叶，业界反应与联合国印度决断，一心想转危为机。将近一年，从2001年年中，他们把投资在软件开发中心和招聘冻结。相反，积极的营销活动推出推动印度的形象，作为外包的位置上提供平等的东西，从这些领先的全球外包服务供应商IBM，EDS和计算机科学和便宜得多。
作为大型跨国公司继续努力削减成本，印度公司，从而很好地放置采取的新的外包机会的优势。在过去一年左右，比以前更大的合同已赢得了五家公司是新兴的主导力量，在印度的外包：塔塔咨询服务公司（塔塔家族集团的一部分），Infosys科技公司，Wipro Technologies公司（全球软件服务手臂的多元化Wipro公司），Satyam计算机服务公司和HCL技术。
它们之间，这些企业去年对印度的外包业务的40％的份额。塔塔的收入应该超过10亿美元的今年，Infosys和Wipro也不甘落后。在过去一年中，塔塔赢得至少有三个外包合同，每个价值超过5000万美元从通用电气医疗系统，Verizon和美国公用事业。 Infosys和Wipro现在也有几个合同价值至少为30-40M每个客户。现在都忙着再次聘用。
这一进展是越来越多，已经看到在过去的一年外包收入增长缓慢，IBM等费用。这些公司已经在印度的一些行动，但有可能的增产快，以减少他们的印度对手所享有的成本优势。事实上，购买领先的印度外包可能是一种选择。几个月前，EDS公司，表示将考虑作为一个可能的收购，国内第四大公司，萨蒂扬。萨蒂扬说，它是不出售

Though demand for outsourcing seems certain to grow fast in the next few years, the Indian firms seem certain to face fiercer competition to win the new business. Already, they are trying to reposition themselves higher up the software value-chain. They are offering several new services, most notably IT consulting, not least because outsourcing deals in these areas are typically much larger and generate higher profit margins than the traditional bread-and-butter offering of software development and maintenance.
Passage from India
Just as the established global outsourcing firms are increasing their presence in India, so the leading local firms are becoming more multinational. In part, this is because customers need to be reassured that outsourced services would not be disrupted by, say, a nasty further deterioration in political relations between India and Pakistan. Less speculatively, they have been trying to meet client demands for global outsourcing for 24 hours a day by opening operations across America, Europe and the Asia-Pacific region.
At some point, the Indian firms may find themselves facing a choice similar to that now confronting IBM, EDS and others: move to a lower-cost location or become uncompetitive. Some day, China, Russia or the Philippines are likely to emerge as a seriously competitive threat to Indian outsourcing. The current thinking in India is that it has a window of three to five years before those countries match its value for money in outsourcing.
The leading Indian outsourcers reckon that the key to their long-term prosperity is bagging ever larger deals and moving ever higher up the value chain. To this end, they reckon the cultivation of strong personal connections with client firms at board level will be crucial. That, as much as chewing over the latest geopolitical hot potatoes, may be what has inspired Narayana Murthy, chairman and chief mentor of Infosys, and Nandan Nilekani, the firm's chief executive, to head off to the snowy slopes of Davos in the fourth week of January to mingle with the global corporate elite at the World Economic Forum. Alas, they may find that not many bosses of potential client firms, especially IT companies from America and Europe, will feel able to attend such a high-profile boondoggle, with their business as bad as it is. India's IT stars are exceptional indeed.
虽然外包的需求在未来几年的快速增长似乎可以肯定，印度企业似乎一定要面对激烈的竞争中赢得新的业务。目前，他们正试图重新定位自己了软件价值链的更高。他们提供一些新的服务，最显着的IT咨询，而不是因为在这些领域的外包交易通常是更大，比传统的面包和奶油提供软件开发和维护，产生更高的利润。
通过从印度
正如所建立的全球外包公司正在增加其在印度的存在，因此，领先的本地企业越来越多的跨国公司。在某种程度上，这是因为客户需要得到保证，外包服务将不会中断，也就是说，一个讨厌的印度和巴基斯坦之间的政治关系进一步恶化。少投机，他们一直在努力，以应付全球外包客户需求为每天24小时开放横跨美洲，欧洲和亚太地区的业务。
印度公司在某些时候，可能会发现自己面临着一个选择，现在面对IBM，EDS和其他类似：移动到成本较低的位置，或成为竞争力。有一天，中国，俄罗斯和菲律宾有可能成为一个严 重的竞争威胁到印度的外包。在印度目前的想法是，它有一个窗口前，这些国家的三至五年为金钱的价值外包相匹配。
领导的印度外包商估计，他们的长期繁荣的关键是套袋以往更大的优惠和更高的价值链中向上移动。为此，他们估计与客户公司在董事会层面的强有力的人脉关系的培养将是至关重要的。说，尽可能多嚼超过了最新的地缘政治的热土豆，可能会是什么有启发纳拉亚纳穆尔蒂董事长和Infosys的首席导师，南丹•尼勒卡尼，该公司的首席执行官，来领导了第四个星期达沃斯的多雪的斜坡一月在世界经济论坛与全球企业精英打成一片。可惜的是，他们可能会发现没有多少潜在客户公司的老板，尤其是IT公司从美国和欧洲，会觉得能够参加这样高调打了水漂，与他们的生意不好，因为它是。印度的IT明星们确实特殊。

a) Who benefits from the outsourcing of skilled white collar jobs to India? Who are the losers? b) Will US suffer from the loss of high skilled and high paying jobs to India? c) Should government do anything to stop the flow of white collar jobs out of US to India?

Question 2
Read Closing Case: Logitech (Dowling, pp.192-193) and answer the following questions.

QUESTION: Can Porter’s diamond help explain the choice of Taiwan as a major manufacturing site for Logitech? If yes, explain. If no, what theory can explain it?