Some in the industry say outsourcing is not a winning strategy, according to a report in The New York Times.

Defining the phenomenon of outsourcing as the decision by any firm to turn over production or development of its products and services to another firm or setting up facilities in low-labor-rate countries, Sydney Harman, executive chairman of Washington-based Harman International Industries, told The Times that at present direct labor accounts for less than 5 percent of the total cost borne by companies such as his, as against as much as 15 percent a few years ago.

With the proportion of labor costs set to decrease further in the years to come, it would not make much difference whether a product was manufactured in “Indonesia or Indiana,” he was quoted as saying.

In such a situation, if a firm goes in for substantial investments to set up manufacturing and training facilities in a low-labor rate country such as India and China, it could well take between three to five years at least to make the investment work, he added.

When asked about the long-term implications of globalization, Harman said that the rise of China and India are major considerations, and that in the long run, a prosperous China and India can do an “awful lot” for the U.S.

(Compiled from news dispatches by Shaji Iype)