Dell and Others Outsourcing Work
Thursday, March 23rd, 2006
By George Leong, B.Comm. for Profit Confidential
A trend that is happening and picking up in strength is the outsourcing of American jobs to foreign countries. In the tech sector, there has been a significant shift to transplant support and programming jobs to tech-rich labor pools in countries such as India, which have a strong and thriving IT sector and an abundance of cheap tech skills ready to farm out to U.S. and other countries.
On Monday, Chairman Michael Dell of Texas-based Dell Inc. (NASDAQ/DELL), the leading PC maker in the world, announced that Dell would double the number of its employees in India to 20,000 within three years. Now the news should not be a surprise to you as it is deemed necessary by the large multinational corporations, especially those in technology.
The reality is the cost of labor for skilled IT jobs is significantly lower in India compared to that of the United States, especially in the lower level tech support jobs. For Dell, the company currently employs 10,000 call center workers in four call centers in India, a product testing center for corporate customers and a global software development center.
Dell is also looking at further lowering its cost structure and expand its sales in India by setting up a manufacturing center in India.
The market drove up the shares of Dell on the news simply because it will boost margins and this is what investors want to see. Unfortunately, those impacted will be American workers. But, Dell has little choice. In order to compete effectively, it must lower costs. Its PCs and products are relatively cheaper than its competitors and for this to continue, costs must be reduce.
This is why Dell and many other global companies are shifting jobs to low cost skilled IT workers in India and elsewhere the workforce is available and cheap. There is little choice. Dell and other companies would surely rather keep jobs in the United States, but it cannot. Corporate survival these days and going forward is all about saving money and improving margins.
Wall Street wants this, as do the shareholders and potential investors. You may not like the trend and I do expect this to ramp up going forward, but it is inevitable and will happen whether you like it or not. In the world of business, employees are only a number that can be discarded.
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George is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. His trading advice on stocks and options is also found on his daily trading site, Daily Profits. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services.
