011 Why Western managers are incentivised to outsource overseas and why this is bad for society

Summary: I met with a partner of an accounting firm recently who said that his partners had concluded that most of the accounting work that is not face to face with their customers can be done anywhere in the world. With this realisation, his firm looked at a map of the world to find the cheapest place where all this non face to face work could be done, whilst maintaining the required levels of quality. They picked a city in India, which was miles from most of the normal Indian outsourcing destinations. Why? To help prevent his expensively trained accountants from leaving for other jobs with other western financial institutions that were doing the same thing. He now has PhDs doing accounting due diligence work which is both technically difficult and mind bogglingly boring. He is able to charge his European clients the Western rate for doing this, but able to pay his Indian PhDs a mere €8,000 per year. His is happy, as his profit margins are high and his Indian PhDs are happy, as the income is sufficient for them to afford a nice house, with a driver and a maid. Eventually, he agreed, this situation would have to end. This is the story why.