Net Benefits Of Offshoring

September 17, 2005

The political debate on offshoring focuses on the supply side – loss of UK and US jobs to foreigners. But balancing these losses are advantages to consumers – cost reductions and better service, as the example below illustrates.

First, the theory, in a Georgetown Public Policy Institute report on outsourcing IT in the New Economist:

In summary, most studies find the extent of job losses from services offshoring relatively small in the aggregate, but somewhat concentrated in a few industries and occupations. The job losses stem from both a direct impact of offshoring, which displaces some workers, plus an indirect impact through the productivity enhancements that it provides. However, there are still unanswered empirical questions, including the just-mentioned productivity effect.

Hmm, that’s pretty definitive!

Anyway, here’s my experience. A German friend (yes, I do still have some) is soon to celebrate a Very Special Event. She has 9 year old Dell PC, so it’s time for a processor box upgrade. I’ve never had a bad experience with Dell desktops, so checked out the Dell UK and Dell Germany websites, selected configurations, and called them.

Dell UK patched me through to an Indian salesperson who in fewer than 10 minutes figured out a price and delivery from UK to Germany. Only problem was the choppy VOIP connection.

The shipping cost from the UK to Germany was high, so I called Dell Germany. Navigated their German IVR system using my very basic German, and got connected to a salesperson in Eastern Europe who spoke perfect English. The VOIP was better than the UK service. In a 10-minute transaction, I fixed the specification, payment (amazingly easy) and shipment. Pricing was very good and beat the UK, so I confirmed the order. The only hard part was reading the subsequent German language emails confirming the order and Dell’s customer satisfaction survey. But Babelfish came to the rescue.

So, here’s the equation:

  • UK and Germany lose 2 jobs – only a problem for Germany since UK has full employment
  • I can order in the country in which I want the product delivered, and work in English
  • India and Eastern Europe gain 2 jobs, growing their economies, increasing their own imports, and adding to their political stability (only China plans on making war on its customers).
  • Dell gets keener prices, so I buy more (1Gbyte RAM, 160Gbyte HDD).

Looks like a net plus to me.

For the avoidance of doubt, I have no friends, family or neighbors working for Dell and have never had any business dealings with them except as a consumer.

Brit Free Trade (Not)

September 17, 2005

The Brits have quietly abandoned Free Trade. That’s bad news for the world’s economy.

Here’s how the Brits taxed an item we just imported from the US:

Value of shipment: $100

Value Added Tax: £12.66 ($22.79 at current rates)

Customs clearance Fee: £13.50 ($24.30)
(This is charged by the Brit delivery service Parcelforce, so may be a scam by them and/or a Brit customs)

So on a $100 import from a most favored trading partner, Brits pay about 47% tax and other charges. This high level is new – possibly a Blair stealth tax.

Lousy economics and lousy politics.

Fixing The BBC

September 17, 2005

Blair is said to be shocked by the anti-Americanism of the BBC’s coverage of Katrina. If so, he has a solution right to hand – convert it to subscription funding.

The report:

Tony Blair was shocked by the BBC’s coverage of Hurricane Katrina’s devastation of New Orleans, describing it as “full of hatred of America”, Rupert Murdoch, chairman and chief executive of News Corporation, revealed on Friday night.

Mr Murdoch, a long-time critic of the BBC who controls rival Sky News, said the prime minister had recounted his feelings in a private conversation earlier this week in New York.

I’m inclined to believe the report – the BBC’s web coverage was very duplicitous & that’s where it’s on its best behavior because it’s monitored by the blogosphere.

The BBC is no more America-hating than the New York Times, but unlike the NYT it uses Brit criminal law to force its funding from every Brit TV owner.

This is easily solved. The Blair government has to decide by December 2006 on what terms, if any, the BBC’s forced-funding should continue. A long and no doubt heavily manipulated process of consultation is in process.

The politics are interesting:

1. The BBC execs know that they won’t stay fat and happy on voluntary funding, so they’re fighting tooth and nail to keep the taxation model.

2. Blair has been sandbagged by the BBC, so would be delighted to make it pay its own way.

3. Brown, who is slated to take over from Blair before the next election (likely 2009) is an unknown quantity. But he’s a friend of America, so probably lines up with Blair.

4. Blair’s Labour party however contains many unreconstructed socialists, and they defend the BBC as the last of the nationalized industries.

5. The many other broadcasters that compete, or wish to compete, with the BBC want to see its forced-funding eliminated.

6. The Brit people don’t count – they are being “consulted”.

My suggestion is that Blair extends the BBC charter only until 2010, using the cover that by that date the switch to digital will be well under way. From that date, the BBC funds itself the same way its (by then) hundreds of competitors do – commercially. If its as popular as it claims, that will be easy.

All Blair has to do is get Brown on board – these modified monarchies can be useful sometimes!