The day labor and currency arbitrage vanish is the day that India BEGINS creating a culture of innovation in its software industry. And building that culture takes time.

That doesn’t mean that a business based on arbitrage isn’t the smart thing to do…just that true innovation is necessary to sustain the industry for the next few decades.

The day labor and currency arbitrage vanishes (and it will, all arbitrages eventually go away. There is no exception) Indian software firms will get into the high initial investment, high risk game of product development.

Since Legal outsourcing is relatively new, Indian IT is a better example. An industry essentially built on Y2K paranoia, most Indian firms are still handling rudimentary tasks for their corporate clients. However, there has been a steady (albeit slow and clumsy) movement up the value chain. The same programmer that was only handling testing for a software application in 1999 is now making minor enhancements and managing the application. Next, his team might get the opportunity to write the next version. Those that learn how to perform at this level can and are demanding higher salaries. Fortunately, their US counterparts are demanding even higher salaries for the same tasks (and will continue to do so for the foreseeable future).

This demand for better and better labor in the IT industry will get a response from the market…since it’s India, the response will be slow and clumsy. But as skills improve, we may even see [gasp] entrepreneurs developing their own software products.

are moving manufacturing operations to the US because between rising labor costs and other transaction costs,

A new report from CIBC World Markets finds that escalating energy prices might reverse some of outsourced manufacturing. [link]

Spot on. The cream of the crop of Indian-trained lawyers are going to work for “virtual Indian practices,” rather than doing the outsourced drone-work.

yes and no. It is the Indian middle level managers who will be hit really hard. The ones whose value addition is predominantly one of a post office – routing etc. At the higher end the value add is one of tech skills coupled with strong communication skills. Comms skills – an area where most Desi Managers are pretty weak as compared to their Western Counterparts. As early as 2004, the outsourcing arms of IBM / HPQ / MSFT had modelled moving a number of jobs to South Dakota / Montana. This is now coming to pass. Note : Call center jobs are McJobs and moving them around is relatively easy.

Many friends and ex-colleagues in Management positions have moved out of companies that focus on overseas customers to ones that are desi focused. The trend will accelerate whereby one gains experience working in western focused firms and then leverage that experience into desi focused firms.

Honestly, I don’t even see this as being an area of much growth. The article claims that Indians can handle US commercial law b/c it’s based on common law tradition. I suspect the work that these lawyers are doing is glorified paralegal work. It would take more experience to handle something tricky, and I don’t think that the two legal systems are so similar that an Indian lawyer can automatically do a great job in an American context.

Accounting is different because many accountants looking for work with multinationals are trained in American accounting standards from the start, and b/c accounting has a fair amount which is common. My cousin is studying accounting in India, and she’ll come to America to sit for her CPA. That’s the only certification she’s looking for.

What description are you referring to? Are you suggesting that there can be no lawyer in India named S.P. Raju? You must be a Northie.