# Why did outsourcing to India take off?


I just finished reading “The World is Flat” by Thomas Friedman. He makes
many arguments in the book, many of which I agree to, although I think
he is quite a little bit too optimistic about technodeterminism and the
whole world becoming equal and happy. One of his starting thoughts,
which I quite liked, is (paraphrased) “Fifty years ago, if you were
given the choice between growing up a genious in Shanghai or a dumb kid
in Poughkepsie, which would you choose? Poughkepsie, because there you’d
have the best shot at a nice life. You’d work for some factory, find a
wife, have some children… Today? Shanghai! The sky’s the limit for smart
people in Shanghai (ideally), but the dumbo in Poughkepsie would loose
his job to an Indian”…

(Of course, would you rather be a smart kid in Sierra Leone? No…, didn’t
think so. Not flat enough yet.)

He also gives a fascinating account of how it came to be that the
outsourcing to India grew so incredibly fast. It all started with the
Y2K problems, when millions of lines of code had to be combed by
mid-level software engineers in a short timespan. American just didn’t
have enough coders, and these were relatively simply tasks, so they were
outsourced to India. At around the same time is the dotcom-bubble,
during which companies thought that the internet would just keep growing
at an amazing speed, and literally threw money after anything with .com
in their name. This included companies lying fiberoptic cables to
connect the world, including the US and India. The bubble burst, and US
companies had to downsize or went burst. The fiberoptics companies went
bankrupt, and the bank got their cable; it sold it for close to nothing
to other companies.

As US companies were downsizing, they had to send a lot of Indian
software engineers home. However, they also needed to get the same
amount of work done, but cheaper. So they thought, why can’t Rajiv, who
did the work while he was in the States, do the same while he is in
India - or maybe a little cheaper. So this combination of gaining a
level of trust in the industry during the Y2K reprogramming, supercheap
fiberoptics because of the dot-com burst, and US companies wanting to
downsize, with Indian programmers that had US experience and contacts;
it all came together and resulted in the current wave of outsourcing.

I thought it was fascinating. I knew it had happened, but never really
asked why.

Much more in this book too, but I’ll stop here. Two quick facts: All the
reservations for JetBlue (or was it WestJet? Hm) are done by Mormon
stay-at-home wives in Salt Lake City. And UPS claims that 2% of the
worlds GDP at any time is in one of their trucks. Hm.

Stian