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One particular segment of the IT population is driven by exuberance and other irrational motivations to automate everything; and they have reaped a lot of bottom-line victories over the last few years. But their ability to continue to deliver is tapped out.
Thats not to say the demented utopia in which all value-added processes are conducted by computers interacting only with other computers isnt a sustainable model—for a minority of functions within a minority of organizations.
For the rest of the world, Automatopia is a delusional ideal in the service of a business model that has already crested and is now dissolving as precipitously as did the Soviet Unions business model.
Exuberant automators who never question ifa process should be automated, but only how or when, are able to feed their obsession only through the availability of cheap labor which, in turn, raises the incentive for more countries to create cheap-labor IT shops.
Driving out labor costs and some minor paper costs has delivered some cost benefits, though with some quality degradation.
As long as everyone is playing the same game, quality levels that are tanking dont affect market share, because the buyer comes to assume everyones quality (or lack of it) is the same.
That system is close to equilibrium, however. Far from being a good thing, equilibrium means there are only a few more cycles of juice left in what we anthropologists call “intensification” (doing the same thing but harder when returns arent growing).
The red flag signaling this end-stage is, well, a red flag.
Red China, which was building a market as an IT outsourcer by underpricing India, is itself losing some sweatshop contracts to cheaper sweatshops in Saipan, Malaysia and other Asian countries.
When U.S. executives feel free (or forced) to press slave labor providers to show more margin, theres little left to squeeze out in the labor or hard goods areas.