I been participating and following in lot of discussions (link1, link2, link3) on this matter mainly in VFXtalk forum. The above first link is dated back to 2007 and rest two are recent links. There are quite a lot of discussions happening within the industry and including recent VFX TownHall meeting which grabbed lot of attention in general media.
The reason for this post is that I have an alternative thought on this matter and I think death of outsourcing to India and China can only do good for them in long term. As of now these two big countries are madly serving west, not only in VFX but also in other areas like IT and BPO.
If for some reason one day, this whole outsourcing business comes to an end and all these Indian and Chinese businesses started to look into their own potential and start to create market for themselves then I think the possibilities are limitless for them . We should never forget how much the population of India and China constitutes the entire world population and also both these economies are growly at very high rates with no signs of slowing down.
I feel both India and China are too comfortable with serving western markets that they don't realize the potential of their own markets. Bottom line is that this outsourcing business is not only doing bad for west but also for the east.
Anyway I feel this whole outsourcing business is a cyclical phenomena. By that, I mean soon Indian or Chinese companies would be outsourcing to Philippines, Vietnam or buying out US companies. We shouldn't forget what happened to American brands like Jaguar , Land Rover and Hummer which were bought by Indian and Chinese companies. Same could happen with entertainment business as well. Already Indian companies like Prime Focus and Reliance have strong presence in Hollywood
The actual reason for this scare is overlooked most of the times. If you really study the trends then its obvious that it is the state of the industry not the outsourcing which creates all this emotional responses. This has been addressed by industry pioneer, Scott Ross in two fxguide podcasts. He not only mentions issues but also the solutions in the latest podcast. The first podcast is definitely worth your time and it is one of the best podcast I ever heard at fxguide.com
As a final note, I think we all like to live in our own mind bubble and we would like to ignore the changes happening around us but the time will make us adapt to the reality somehow.
A few alternative perspectives on this subject
VFX Solider, an entire blog dedicated to this issue