Offshoring – It Isn’t Bad At All !!!!!!

There has been a lots of debates over off-shoring and I think it will continue till it becomes a way of life and is accepted by one and all. Yes, I do believe that it will happen eventually like everything including globalization (remember GATT – General Agreement on Trade and Tariff). Isn’t offshoring – an offshoot of GATT. Well that’s for another time but I am tempted to say that developing countries had been cautious about the buzz of globalization but it had, in atlease India’s context, as a whole appeared to be hoax to a large extent. The problems are there but they are not a threat. I am quite optimistic that there may be problems linked to offshoring too but it will never be a threat to the developed countries’ economies.

Infact, what I think and is ratified, then and again, by the law makers who refused to pass any sanctions against offshoring, is that Offshoring has actually brought more opportunities to the developed countries. I collected this information and am presenting it here: (I have been jotting down the points for some weeks now, the source of this information remains diverse from discussions with friends and the Internet.)

The developed countrie’s economy gains from offshoring in terms of:

Ø Cost savings to businesses – (very obvious – that’s synonym with offshoring)

Ø The cost saved from offshoring is deployed in other avenues which generates more business or brings more competitiveness

Ø Increased exports (leaving apart a few things (including printers/softwares and other accessories), the one thing that offshore partner needs to have is the computer. Who provides these things to it – the US multinational companies like Dell, Intel, HP etc. So these companies get more business and hence bring more prosperity to their countries)

Ø It is always debated that offshoring involves migrating the low end jobs but this also means that the persons who are affected by offshoring are more likely to have new skill and move up the ladder. This again helps to create a skillfull resource pool and probaly higher productiviy.

Ø In many of the developed countries (unlike US but like Japan), the aged populatin is increasing so this means the shortage in their working population. The offshoring will be a “killer” solution to this problem.

Ø Offshoring don’t come with tough labour laws

I think this debate will continue till some other phenomena pre-occupies us and I hope that it is not the WAR(s) not even the ones against the so called “rogue” states…but again that’s for another time...

I may have to travel back to India this week but I have started liking Brussels, more because I am here with my fiancee hmmm…. But Brussels is definitely is good city….thats for another time… J

The Economist's Glossary

Hi There!!!!!!!

Ever wondered how this world evolved – the trees, plants, animals and we human beings?
Well, don’t be scared I am not going to discuss anything like that ;-)) but what I am going to delve into is – what I call – The Economist’s Glossary!!!!!!

More than anything, the most difficult “readings” in this world, I found, are those involving medical and economic terms. I will leave “medicology” (my own invention-so don’t use this term officially) for later and discuss the word EBITDA (?? :-0 ??)

EBITDA stands for Earnings before Interest, Taxes, Depreciation, and Amortization. As the name suffests, it is the earning excluding expenses from depreciation, interest, taxes and amortization.

Let us now see what each term in the acronym means:

Depreciation is the decrease in the valus of the physical asset, which is caused by deterioration, or wear and tear of equipment, and obsolence. Let us assume that the value of asset at the time of investment (I) is C. After 1 year, the cost is C1 and the depreciation D will be calculates by the equation

Ø C1 = C + I - D

Amortization is a term that refers to the gradual paying off of a debt in regular installments over a period of time. "Amortization" arises from a Latin term that means "to deaden," and a dictionary definition includes the phrase "gradual extinguishment." Hmmm…why? Well because, a part of the payment goes toward the interest cost and the remainder of the payment goes toward the principal amount -- the amount borrowed. Interest is computed on the amount owed "and thus will become progressively smaller as the ending balance of the loan reduces."

Now that’s getting interesting – let’s take an example to understand the real meaning of amortization.

Ø Take a mortgage loan for $100,000 at 6.5 percent for 30 years. The monthly principal and interest payment is $632.07. For the first month, you owe interest for $100,000, which equals $541.67. The remainder of the payment -- $90.40 -- goes toward principal. In other words, your debt is reduced $90.40.
Ø "Next month, you only owe interest on $99,909.60, so $541.18 goes to interest and $90.89 goes to principal," Edwards says. "Month after month, your interest portion will decrease a bit and your principal reduction will increase. This process continues until your 360th payment contributes $3.41 to interest and $628.66 to principal."
Ø If the loan above amortized for 15 years instead of 30 years, the monthly principal and interest would cost $871.11. In the first month you still would pay $541.67 in interest because the amount of the loan is the same and the interest rate is the same. But you would pay $329.44 in principal with that first payment because you're paying off the loan quicker.

Interest is a surcharge on the repayment of debt (borrowed money). Fraction by which the balances grow is called the interest rate. The original balance is called the principal.

Tax is an involuntary fee paid by individuals or businesses to a government. Taxes are most often levied as a percentage, called the tax rate, of a certain value, the tax base (how much ncome
and assets one has, earns, spends, inherits, etcetera).

Well, one should not think that EBITDA is a better idea of how profitable the company really is. This is a debatable topic as there are different views from different investors.

Oops, it’s time to go and eat something……feeling HBEML (Hunger Before Eating My Lunch) ;-))

Learning Vs. Viewing Vs. Listening

Well, today I came across a very good quote, it is from an ancient Chinese scholar:

If you tell me a thing, I will listen
If you show me a thing, I will see
If you let me experience a thing, I will learn

How true!!!!

I have realized this very often that even if you know a thing, sometimes reading it in a book or experiencing it in my "day-today" life leaves more impression on me. What say?