What’s interesting is that companies in these other countries (Japan, China, India) all eventually develop a stronger economy and start to push their own envelopes. Employees wise up and realize that the consumer is paying ten times what they are getting. They ask more from their employers, but they must apply the same sort of pragmatic compromise that we do. They must avoid pricing themselves out of a job for which there is a long waiting list of eager applicants. The providers (any company that provides outsourced product or services) also come up, because they can, and sometimes in response to their own increasing cost of business, to something just below that of their competition. This makes the cost of outsourcing much more expensive but still just a little more attractive than getting local workers. They need to balance their price increases with quality – if the quality isn’t commensurate with the rate then the consumer shifts in an attempt to get better quality even at a higher price. It’s a fascinating dynamic to watch international prices bounce off of these levels of tolerance as every provider tests to see just how far they can go without driving their business away.
You’ll find the same pattern with any company, domestic or foreign that sells over the internet. We all started this internet thing with the idea that building a website for "clicks" costs less than building a storefront with "bricks". The original promise of the internet was inexpensive goods to the consumer because the vendor had a lower cost of doing business. We could save thousands of dollars off the price of a car by buying online because the vendor didn’t need to pay for showroom, advertising, salesmen, etc. But then companies everywhere realize that their "click price" can be slightly lower than the "brick price" and people won’t complain. They temper their prices to avoid consumer backlash in the form of "I might as well just go to the store". If going to the store is just a little more painful than buying on the internet then people will shop at home and pay whatever the vendor wants. The vendor loves this because they can make a lot more profit this way. Many vendors take it to the next level – why not try to get even more profit? They charge more for clicks than bricks because they’re gambling that the consumer will willingly pay more for the convenience of shopping at home. (And somehow people seem oblivious to the notion that "Shipping and Handling" can sometimes be up to 50% of the cost of some low-cost items, thereby making the click price ultimately much more than the brick price. – But that’s a completely different blog…)
What’s really interesting (and coming back on topic from what seems like a freeform brain odysee in D-minor) is that "we" english-speaking providers somehow never see these dynamics in progress until we’re absolutely forced to accept them – and sometimes not even then.
In 1996 the price of oil was about US$20/barrel and Americans were having a party compared to many parts of the world. In 2004 the price was double that. Just four years later now, the price is well over $100/barrel. But, at least here in the USA, our driving habits haven’t changed drastically. Only now are people getting green, and trading in their SUV’s for hybrids, etc, but even that movement is still "fringe". What I’m saying is that it takes a Long time for this country to accept trends that are slow in coming but obvious in consequence. We do the same with jobs, with manufacturing, with buying on the internet, and dare I get even more political, with global warming. We tolerate situations until they are downright painful, and then we scream with feigned indignance that the conditions exist – as if we didn’t see them coming.