Pro: Not as Tempting

by Sabrina Siddiqui, intern, BusinessWeek, and a senior at the Medill School of Journalism at Northwestern University.

There is no doubt that over the last decade, India fortified its rule over the shared services and outsourcing (SSO) sector. Access to low-wage yet skilled workers allowed local global technology services giants Infosys (INFY), Tata Consultancy Services (TACSF), and Wipro (WIT) to employ tens of thousands of Indians to do work for such multinational corporate clients as Bank of America (BAC), Microsoft (MSFT), and Ericsson (ERIC).

But a recent study by Frost & Sullivan consolidates the idea that India's outsourcing has already peaked, and there are a number of factors to blame:

The Rupee Riddle. Earlier this year, the Indian rupee appreciated 8.4% against the U.S. dollar and touched 41.14 to the dollar, its highest rate in nine years. A significant reason for concern for the outsourcing sector, the upward value of the rupee continues to put a squeeze on earnings. By April, 2007, it had cut margins by about 2.5 percentage points.

Cost (In)Efficiency. Companies looking to outsource have long seen India as their most cost-efficient vehicle. But with wage inflation running 15% to 25% per year, India can no longer use the siren song of its labor being the cheapest. Competitors like China can offer their services at a lower cost, while firms like Infosys are stuck recruiting from outside the country, because the comparable Indian staff is growing too expensive.

That Age-Old Infrastructure. As much as the economy continues to boom, how long can it sustain its position when IT operations spend considerably on backup systems to fight regular blackouts? And the 300,000 engineering students who graduate each year may be short of the level needed to support modernization of infrastructure and industry growth. (Not to mention that the peculiarly accented "Doug Smith" on the computer help desk is a little too hard for U.S. callers to comprehend.)

So if you assume you're being rerouted by tech support to a call center in Bangalore, guess again. It seems India's grasp on the SSO market is at long-term risk, and it just so happens that your call might be answered by someone in Shanghai.

Con: Plenty of Spice Left

by Rafiq Dossani, Stanford University and Martin Kenney, University of California, Davis

Notwithstanding the occasional news stories about companies returning work earlier offshored to India, the logic behind offshoring and its financial impact (both on outsourcing firms operating in India and their American clients) remains intact. First, the logic: A fresh engineer costs $8,000, including benefits, on average in Bangalore. Even a "Google-quality", presumably equivalent to the best Google can hire anywhere (in fact, Google offers its India recruits the option of working in Silicon Valley if they so desire) costs $30,000. These wages are much lower than in the U.S. and will remain that way for at least a decadeespecially if the ambitious graduation targets of Indian education policymakers are realized.

Of course, there are problems in doing work long distance: Coordinating the work of global teams is costlier than coordinating such work locally. The intellectual property issues could be important. But offshoring is now tried and tested enough, and large corporations are deeply committed to it.

By 2010, many large multinational corporations like IBM (IBM) will have their largest workforces in India. This is creating a relatively rich ecosystem in a number of Indian cities, especially Bangalore.

Already, for a number of these firms, their Indian operations are being declared global centers of excellence, whose value goes well beyond just cost savings. Undoubtedly, some smaller firms have faced high initial costs, but even they, particularly the technology firms of Silicon Valley, have committed to Indian operations. Firms such as Infinera (INFNO) and HelloSoft have substantial Indian operations that are critical to their success. For them to retreat would require a major reorientation of their business strategy.

The appreciating rupee will, like rising wages, affect offshoring decisions. However, the Indian system integrators such as TCS, Infosys, and Wipro, which are also being squeezed by costs, have experienced profits rising at about 35% a year for the past decade and enjoy margins in excess of 20%. This provides ample room to absorb rising costs.

There can be little doubt that the Indian ecosystem is maturing. However, the growth of offshoring to India has not peaked.

Reprinted by permission from BusinessWeek.

Martha Crenshaw is a pioneer in terrorism studies, one of a handful of scholars worldwide who started investigating the subject long before Sept. 11, 2001.

Crenshaw, who joined CISAC this year as a senior fellow at FSI and a political science professor by courtesy, brings three decades of study to her current agenda of examining distinctions between so-called old and new terrorism, how terrorism ends, and why the United States is the target of terrorism.

"We are very fortunate to have Martha Crenshaw join CISAC as a senior fellow," said Scott Sagan, CISAC co-director. "Her detailed knowledge of the inside workings of terrorist organizations and her deep understanding of earlier counter-terrorist campaigns have brought much-needed historical perspective to contemporary policy debates after 9/11."

Associate professor of law Mariano-Florentino Cuéllar, who led the search that resulted in Crenshaw's hiring, said her "combination of attention to historical detail, interdisciplinary methods, and knowledge of institutional context has made her one of the nation's foremost scholars of terrorism. Her appointment is great news for CISAC and Stanford, where she will strengthen an already significant scholarly community working on homeland security and terrorism."

Coming to Stanford from Wesleyan University, where she was the Colin and Nancy Campbell Professor of Global Issues and Democratic Thought and a government professor, Crenshaw said she found the opportunity to join an interdisciplinary research center a welcome change.

"CISAC's and my interests merged perfectly," she said, as the center was looking to build its research expertise in terrorism. She said she looks forward to teaching graduate students in the Ford Dorsey Program in International Policy Studies as well as working with research colleagues at CISAC and across campus.

Crenshaw's terrorism studies began with a graduate seminar paper she wrote on actions by the FLN, or National Liberation Front, during Algeria's war for independence from France in the 1950s and 60s. She arrived at the topic the way many professors advise students to do--she noted in a study of Vietnam-era guerrilla warfare the comment that "no one has studied terrorism."

That seminar paper inspired her dissertation, which formed the basis of her 1978 book, Revolutionary Terrorism: The FLN in Algeria, 1954-1962, a case study in the strategic use of terrorism by a revolutionary nationalist movement.

Having written numerous articles and edited four books on terrorism, Crenshaw is now editing a book tentatively titled The Consequences of Counterterrorist Policies in Democracies. The Russell Sage Foundation supported the research, which Crenshaw said illuminates issues such as "the strength of executive power, effects of counterterrorism legislation on minorities, and unintended consequences of counterterrorism policies."

As a lead investigator with the National Consortium for the Study of Terrorism and Responses to Terrorism at the University of Maryland, a Department of Homeland Security Center of Excellence, Crenshaw is also researching why the United States is the target of terrorism, a study that could be especially useful in informing counterterrorism policy.

Crenshaw "trace[s] the evolution of anti-American terrorism over time--since the mid-1960s," she said, comparing groups that used terrorism to others with similar ideas that have not resorted to terrorism. Comparing case studies, she explained, allows her to "analyze incentives for the use of terrorism."

In "The Debate over 'New' versus 'Old' Terrorism," a paper Crenshaw presented at the American Political Science Association annual meeting in September--and which will be published as a chapter in an edited volume, she questions oft-heard claims that terrorism in recent years has taken on a new character to become more religious and lethal. She found the distinctions too hastily drawn and possibly dangerous.

"There is no fundamental difference between 'old' and 'new' terrorism," she said.

"Rejecting our accumulated knowledge of terrorism by dismissing it as 'obsolete'" would be a mistake that could lead to bad policy choices, she added. Before 9/ll, assumptions that "new" terrorism would forsake the "old" technique of hijacking and turn to weapons of mass destruction turned out to be wrong, she pointed out.

Crenshaw said researchers and policymakers should "ask why some groups cause large numbers of civilian casualties and others do not, rather than assuming that religious beliefs are the explanation for lethality."

On October 2 FSI Acting Director Michael A. McFaul commenced FSI's annual orientation gathering for the 2007-08 academic year. After introducing new faculty and staff, McFaul turned the orientation over to scholars from CDDRL, CHP/PCOR, CISAC, Shorenstein APARC, the Program on Food Security and the Environment, and the Forum on Contemporary Europe, all of whom presented new research and outlined projects for the upcoming year.

CISAC senior research scholar Paul Stockton began with a presentation on "The Politics of Homeland Security," and was followed by Jean C. Oi, FSI senior fellow and director of the new Stanford China Program, who spoke about the Stanford Center at Peking University. Kathryn Stoner, CDDRL associate director for research, presented on "Promoting Democracy." McFaul moderated a panel discussion Q&A and, after a short break, introduced the second panel of FSI scholars.

CHP/PCOR core faculty member Grant Miller presented research that examines if "what people want" interferes with sound health policy in the developing world . New FSI senior fellow Josef Joffe discussed how America is both "a model and a monster" in the European consciousness; FSE Director Rosamond L. Naylor reviewed some of FSE's projects on biofuels and food security, and highlighted what they would be working on this upcoming year. Joffe, Miller, and Naylor each answered questions from faculty and staff before McFaul adjourned the 2007 orientation.