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Behind the Headlines: APA News Blog

Academic Version: Applying my personal experiences and academic research as a professor of Sociology and Asian American Studies to provide a more complete understanding of political, economic, and cultural issues and current events related to American race relations, and Asia/Asian America in particular.

Plain English: Trying to put my Ph.D. to good use.

September 13, 2005

Written by C.N.

Outsourcing to India Slowing Down?

Those of you who have been following the issue of labor outsourcing know that the country at the epicenter of the global economic phenemenon is India, which boasts cheap labor and a well-educated labor force. However, CNN/Money Magazine has an article that suggests India’s outsourcing boom may be ending soon due to rising wages and a developing labor shortage:

A new report from market research firm Gartner, Inc. warns that a labor crunch and rising wages could erode as much as 45 percent of India’s market share by 2007. Indian industry watchers acknowledge that the country’s outsourcing industry — its golden goose of the moment — is indeed facing a “serious” problem. . . .

More importantly, the Gartner report cautions that a host of emerging countries such as the Philippines, Malaysia, Vietnam and Eastern European nations including Hungary and Poland, are also starting to challenge India’s leadership in offshore business process outsourcing (BPO). . . Gartner estimates that India’s current 85 percent ownership of the BPO market share could dwindle to about 45 percent by 2007.

The article notes that four years ago, the average Indian call center employee earned the equivalent of about US$125 a month. These days, the average wage is about US$180 and that while this increase in wages is not a threat to India yet, if it keeps rising, India may soon experience what Ireland went through about ten years ago when it was the darling of the outsourcing world before wages got too high and companies moved their outsourcing to India.

Not terribly surprising, all in all. Capitalism does not care about this country or that country — it simply wants to find the lowest wages available. Today that is India and China. Years from now, it’s likely to be some other developing country — it’s only a matter of time.

Author Citation

Copyright © 2001- by C.N. Le. Some rights reserved. Creative Commons License

Suggested reference: Le, C.N. . "Outsourcing to India Slowing Down?" Asian-Nation: The Landscape of Asian America. <> ().

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