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The slippery fundamentals of the fight against outsourcing

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The slippery fundamentals of the fight against outsourcing

[vc_row][vc_column][vc_column_text]Even while the US Congress sees the introduction of two more Bills seeking to put an end to the practice or at least limit it significantly, considerations involving cost, pricing, market and talent put a question mark on the wisdom of the proposed legislations

By Sujit Bhar

After the H1B scare, now there is the scare of an Outsourcing Prevention Act from the US. As far as India is concerned—simplifying it as much as possible—these are likely to affect, basically, two categories of workers. The first is technical, hence highly educated, people going to the US for specialised jobs; the second is people who have been pulling even blue collar jobs out of the US, assisted by US companies who see sense in the cost-benefit analysis.

If we forget the Trump ethos for a while, and also disengage from Bernie Sanders’ ideas of why outsourcing should be stopped, looking only at the general American perspective instead, we observe some very interesting developments of late.

We will be pitting this American perspective, not only against an Indian perspective, but also against the world perspective.

As per the US 2017 General Schedule (GS) Pay Scale, as published by the Office of Personnel Management, the pay scale, escalated in ten steps, would be US $ 23,171 per annum.

The GS Pay Scale is the predominant pay scale within the US civil service and is an indicative salary for the majority of white collar personnel (professional, technical, administrative and clerical) positions. And this is actually a huge section of federal civilian employees—as per late 2004 readings, this comprised 71 percent of federal civilian employees.

We are considering the lowest of the GS grade, which is GS-1, and we are taking a simplistic view.

If we consider the general US dollar-INR exchange rate prevalent as of February 6 (rounded off at 67) we see that US $23,171 per annum translates to Rs 15,52,457. This is the lower end of GS. At the absolute higher end, GS goes up to $134,776. That is the ceiling, so to say.

Without comment we present here the Sixth Pay Commission’s recommendations (mostly adopted) for top level government employees (S-16 and above). Feel free to compare from the table below:Sixth-Pay-Commission-Revised

In the US, the GS Pay Scale does not refer to tech-specific jobs, which means they are not specifically H1B. Hence this will fall in the ambit of the second act on general outsourcing.

The World Picture

Regarding tech jobs, we put this in the backdrop of the world picture. Around the world, one general finding (late 2016) shows that 51 percent techies existed in the $60,000-80,000 bracket, while only eight percent in the $120,000-140,000 bracket. That is the worldwide trend.

This tells us two things. The first is, if the new act on H1B raises the minimum rate to $130,000, it will be extremely lucrative for techies around the world to gravitate towards the US. The second is that when majority of the world of techies, as talented, exist in the $60,000-80,000 range, sensible companies would want to gravitate towards that cost level.

Regarding non-tech jobs, the following can be the reading. According to the Census ACS survey, the median household income for the United States was $55,775 in 2015, the latest data available. 2016 Census ACS data (including 2016 national household income numbers) will be released in September of 2017. For argument’s sake, we assume that the median of 2015 has remained unchanged.

Since this covers all white collar jobs, including tech, what justification does any American company have to live in this high overhead ecosystem?

Beyond H1B

Let us consider another set of available data (Link: http://www.statisticbrain.com/outsourcing-statistics-by-country/ ), outside the H1B environment. The US has outsourced 53 percent of manufacturing jobs, 43 percent of IT Services, 38 percent of R&D, 26 percent of Distribution and only 12 percent of Call or Help Centres.

And here are the top reasons as to why companies outsource.

  • Reduce or control costs: 44%
  • Gain access to IT resources unavailable internally 34%
  • Free up internal resources 31%;
  • Improve business or customer focus 28%;
  • Accelerate company reorganization / transformation 22%;
  • Accelerate project 15%; Gain access to management expertise unavailable internally 15%;
  • Reduce time to market 9%.

What does that mean? The top two reasons for outsourcing are cost and access to IT resources. Will the possible new legislations be able to create a level playing field for US companies, vis-a-vis companies from other countries?

With even the median household income in the US staying beyond levels that can be attained any time soon by countries outsourced to, cost will never be attained in the manufacturing sector. If we consider the internal consumption of the US, it will not be able to support the huge production capacities needed to be set up for manufacturing to become cost-effective.

Let us consider a typical manufactured article, such as, say, Barbie dolls. If America exports, it will lose the pricing wars from countries like China and even Bangladesh (textiles) and India (IT and pharma). Where will the excess production of Barbie dolls be targeted towards?

If we consider IT, there aren’t as many good-talent techies available in the US to support the fundamental political principles of Trump and Sanders. Which, in turn, will mean a compromise on quality. If Windows 11 came with, say, a plethora of incurable bugs, where will the market be? Debugging is a time-consuming, repetitive job that many Americans just might not like, to put it mildly.

So, if 53 percent of the outsourced manufacturing jobs and 43 percent of the outsourced IT services jobs are to come back into the US again, the US has to set up massive facilities within the country and then somehow create the huge market capable of gobbling up the huge production that will ensue.

We do not wish to term Sanders’ idea as ‘ludicrous’, as Tim Worstall has written in Forbes, but we certainly wish Sanders and Trump all the luck in their respective ventures.

Related read: Will the H1B Bill help or hurt the US?[/vc_column_text][/vc_column][/vc_row]

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Google announces country-specific domain names for its search page

This transition to a centralised domain may help Google optimise AI performance in delivering relevant search results.

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In a significant move aimed at unifying its search experience, Google has announced plans to phase out country-level domain names, such as google.ng for Nigeria and google.com.br for Brazil. Instead, the tech giant will redirect users globally to a standardised domain, google.com. This decision aligns with Google’s ongoing effort to enhance search functionality and accessibility, building on the improvement in local search capabilities introduced in 2017.

In a recent blog post, Google explained that it will begin redirecting traffic from these country code top-level domains (ccTLDs) to google.com. This transition will be implemented gradually over the coming months. Users may be prompted to adjust their search preferences during this process, as the company works to streamline the user experience.

“Historically, our approach to delivering localised search results relied on ccTLDs,” Google stated. “However, our capability to offer localised experiences has evolved significantly, making these distinctions unnecessary.” The company reassured users that the core functionality of its search platform will remain unchanged and that compliance with various national regulations will continue.

This initiative reflects Google’s commitment to improving how search results are tailored to individual users without the need for separate country-specific domains. While the official rationale emphasises enhancing global user experience, some industry experts speculate that the change may also be motivated by a desire to better integrate artificial intelligence (AI) into search results, potentially leading to reduced operational costs.

Google employs AI Overviews, a tool designed to aggregate information from a broad range of online sources to provide concise responses to user inquiries. This transition to a centralised domain may help Google optimise AI performance in delivering relevant search results.

Overall, as Google implements this shift, users can expect a more unified search experience. While changes in browser addresses may occur, Google emphasises that the way search operates and its compliance with national laws will remain consistent. This strategic shift signifies Google’s ongoing efforts to adapt to the evolving digital landscape and user needs globally.

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In HUL vs HCL defamation case, Delhi HC orders take down of Lakme sunscreen ad disparaging Derma Co

Honasa, in its plea to the Delhi High Court, argued that HUL’s claims are misleading and disparage competitors, damaging their reputation. In retaliation, HUL filed a countersuit against Honasa in the Bombay High Court, escalating the corporate feud.

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A legal showdown between Honasa Consumer Ltd. (HCL), the parent company of Mamaearth, and Hindustan Unilever Ltd. (HUL), which owns Lakmé, reached the Delhi High Court this week, with both FMCG giants filing defamation lawsuits against each other. On Thursday, the court ordered HUL to pull its current Lakmé sunscreen advertisements, prompting the company to agree to revise its campaign by removing references to “online bestseller” and altering the depicted packaging colours.

The dispute centres on Lakmé’s recent “SPF Lie Detector Test” campaign, which HCL alleges unfairly targets its Derma Co. sunscreen by questioning the efficacy of rival products.

In the ads, HUL claims that some “online bestseller” sunscreens, marketed as SPF 50, provide protection closer to SPF 20, based on in-vivo testing data from the past decade. While no brands are explicitly named, visuals juxtaposing yellow bottles—resembling Derma Co.’s packaging—against Lakmé’s sparked Honasa’s ire.

Honasa, in its plea to the Delhi High Court, argued that HUL’s claims are misleading and disparage competitors, damaging their reputation. In retaliation, HUL filed a countersuit against Honasa in the Bombay High Court, escalating the corporate feud.

The controversy erupted when Ghazal Alagh, co-founder of Honasa, took to LinkedIn to criticise the FMCG sector’s lack of competitive drive, suggesting that legacy brands like HUL have grown complacent. Her comments were seen as a direct jab at Lakmé’s campaign, which challenges the SPF claims of newer sunscreen brands dominating online markets. “The industry needs fresh competition to shake things up,” Alagh wrote, igniting a public spat.

Lakmé’s campaign asserts that some top-selling sunscreens falsely claim in vivo testing—a method involving live organisms like humans or animals—while delivering subpar protection. In a social media statement, Lakmé doubled down, saying, “Certain online bestsellers advertise SPF 50, but their in-market samples test closer to SPF 20.”

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Sensex and Nifty jump nearly 2% as US suspends additional 26% tariffs on India until July 9

Foreign Institutional Investors (FIIs) had sold equities worth ₹4,358.02 crore on Wednesday, signaling caution, but Friday’s momentum suggested a shift in sentiment.

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Indian stock markets staged a robust rally on Friday, with the BSE Sensex skyrocketing 1,310.11 points, a 1.77% gain, to close at 75,157.26. The NSE Nifty followed suit, climbing 429.40 points or 1.92% to settle at 22,828.55, breaching the 22,900 mark during intra-day trading. The surge came on the heels of a White House announcement suspending additional tariffs on India for 90 days until July 9, offering a reprieve amid global trade tensions.

The US decision, detailed in recent executive orders, pauses levies that President Donald Trump had imposed on April 2, targeting India and roughly 60 other nations. Those duties threatened Indian exports ranging from steel to shrimp, raising concerns about competitiveness in the US, the world’s largest economy. The temporary suspension sparked optimism among Indian investors, propelling gains across major sectors.

Leading the charge among Sensex constituents were heavyweights like Tata Steel, Reliance Industries, Power Grid, NTPC, Kotak Mahindra Bank, and Adani Ports. However, not all stocks joined the rally—Asian Paints and Tata Consultancy Services lagged behind, unable to capitalize on the upbeat mood.

Vinod Nair, Head of Research at Geojit Investments Limited, attributed the market’s buoyancy to the tariff relief. “The unexpected pause on US tariffs provided a much-needed breather amid global uncertainties,” Nair noted. He added that while a major IT firm’s recent results fell short of expectations, its robust order book signaled potential growth in the latter half of FY26.

The Indian markets’ performance stood in stark contrast to global trends, where fears of a US-China tariff war cast a shadow. On Friday, China escalated its trade spat with the US, hiking tariffs on American imports to 125% in response to Washington’s 145% levies on Chinese goods.

Asian markets reflected the unease, with Tokyo’s Nikkei 225 plunging nearly 3% and South Korea’s Kospi slipping, though Shanghai’s SSE Composite and Hong Kong’s Hang Seng bucked the trend with gains. European markets traded lower, while US indices had closed sharply down on Thursday, with the Nasdaq tumbling 4.31%, the S&P 500 falling 3.46%, and the Dow Jones shedding 2.50%.

Back home, the rally followed a lackluster Wednesday, when the Sensex dipped 379.93 points to 73,847.15 and the Nifty fell 136.70 points to 22,399.15. Thursday’s market holiday for Shri Mahavir Jayanti gave investors a pause before Friday’s surge. Foreign Institutional Investors (FIIs) had sold equities worth ₹4,358.02 crore on Wednesday, signaling caution, but Friday’s momentum suggested a shift in sentiment.

Elsewhere, global oil prices edged up, with Brent crude rising 0.32% to $63.53 a barrel, reflecting ongoing volatility in commodity markets.

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