BPO Backlash - Printable Version
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BPO Backlash - Guest - 02-18-2004
<!--QuoteBegin-rajesh_g+Feb 17 2004, 03:39 PM-->QUOTE(rajesh_g @ Feb 17 2004, 03:39 PM)<!--QuoteEBegin--> 1. Kerry's 57 Heinz factories..
Does anyone know if any of Heinz's division outsource to India. He's in trouble if they find that he's (or his wife) are (to use his term) closet 'Benedict Arnold' <!--emo&:o--><img src='style_emoticons/<#EMO_DIR#>/ohmy.gif' border='0' style='vertical-align:middle' alt='ohmy.gif' /><!--endemo-->
BPO Backlash - Guest - 02-18-2004
<!--QuoteBegin-rajesh_g+Feb 17 2004, 03:39 PM-->QUOTE(rajesh_g @ Feb 17 2004, 03:39 PM)<!--QuoteEBegin--> India should just keep low, hire good PR firm(s) and get the message across in an efficient way.. So far I have seen some good points to counter this negative propaganda..
Rajesh_g: Nice list, I'll add that India/Indians should focus on quality rather than cost of the service. Somewhere I had read that Indian IT companies beat other nations in terms of the number of certifications such as Six Sigma, ISO or others. Would be nice to have a comparative study on this.
BPO Backlash - Guest - 02-20-2004
From Wall St Journal:
<b>Despite the Outcry, Mankiw Was Right About Outsourcing
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->White House economist Gregory Mankiw has exposed one of the great rifts in the current U.S. political debate. It isn't Republicans vs. Democrats; it's economists vs. everybody else.
Mr. Mankiw's misstep was saying that <b>outsourcing of jobs to foreign countries is a form of trade and is good for the U.S. economy</b>. Even Democrats of the economic persuasion such as former Clinton Labor Secretary Robert Reich and former Council of Economic Advisers Chairwoman Janet Yellen were quick to come to his defense.
But Republicans and Democrats of the noneconomist ilk are having none of it -- even after Mr. Mankiw apologized for seeming insensitive to workers who have lost their jobs. Rep. Richard Burr -- a Republican running for the Senate in North Carolina -- usually attaches himself to President Bush like shrink wrap. But on Friday, Mr. Burr called on the president to fire Mr. Mankiw.
Mr. Bush seems to be siding with everybody else (there are more of them). Last week he lamented the fact "there are people looking for work because jobs here have gone overseas." While he has publicly defended Central Intelligence Agency Director George Tenet -- who has overseen one of the greatest intelligence failures in American history -- he has yet to muster a word of support for Mr. Mankiw, who only said what most economists believe.
The great divide runs deep these days. Noneconomists look at each month's U.S. Labor Department report and see an economy that can't seem to produce an adequate number of jobs.
Something is badly amiss, they fear. Surely all those Indians in Bangalore, who process payrolls and fix computer glitches, have something to do with it.
Economists look at the same report, and see the opposite. With each passing month, the U.S. economy is producing ever more output using roughly the same number of workers. American productivity -- output per worker -- is booming. The new economy, it seems, is alive and well.
Productivity is an abstract concept that can't be directly observed or measured. But it is the secret of progress: the reason we don't spend our days gathering nuts and hunting squirrels. Fewer people producing more goods and services has been the key to the U.S. economy's surprising success throughout history. "Outsourcing" work, so Americans can concentrate on what's truly important, is just part of the process.
Sure, in the short term, higher productivity may mean fewer jobs. But in the medium and long term, it doesn't. My friend and fellow columnist E.J. Dionne of the Washington Post disputed this argument last week, saying that in the long run we are all dead. I don't know what E.J. has planned, but I hope to be around 20 years from now. If productivity growth continues at a healthy rate of 3% or more for those two decades, the U.S. economy will double in size, produce far higher living standards, and be in better shape to finance the costly retirement of the baby boomers. <b>Any effort to stop outsourcing or block trade will slow productivity growth and threaten that rosy future.</b>
That's easy for me to say, of course, because I still have a job. And I'm not running for office. Candidates for the presidency have to do a different sort of calculus. Roughly 2.5 million jobs have disappeared since the recession began. Moreover, job losses seem to be concentrated in "battleground" states, where the election of 2004 may be determined. Those who have lost their jobs, or those afraid of losing jobs, don't want to hear about what the world will be like in 2024.
That's why the Economic Report of the President, in a nod toward election-year politics, emphasizes creating jobs rather than boosting productivity. The report's official forecast calls for more than three million new jobs between now and Election Day -- and a precipitous falloff in productivity growth as a consequence. Let's hope that forecast is wrong. It would be far better to have slower job growth and keep productivity booming. We can wait an extra year to get to full employment, if the result is two decades of rising living standards.
President Bush might try embracing Mr. Mankiw's argument, rather than running from it. A new poll by the Business Roundtable suggests American voters have a better understanding of the true nature of the U.S. economy and American business than many of the politicians who pander to them.
On this one, the economists are right. Fire Tenet. Keep Mankiw.
BPO Backlash - Guest - 02-20-2004
<b>Outsource Debate Resounds In India
February 19, 2004
By MICHAEL ONEAL, Chicago Tribune </b>
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->BOMBAY, India -- The increasing debate about white-collar U.S. jobs moving to India is alive and well - in India.
The growing election-year backlash against outsourcing drew standing-room-only crowds last week at an international conference put on by the country's leading technology trade association.
"When the Dilbert cartoon introduces an Indian character called Asok, you can see what the impact has been," said Arun Kumar, managing director of Hughes Software Systems, as he introduced a program on how Indian companies might respond.
"This is certainly something we should be concerned about," said Nandan Nilekani, chief executive of Infosys Technologies, one of the nation's largest outsourcing companies.
<b>Indians worry that a protectionist sentiment, fanned by election year rhetoric and sluggishness in the U.S. job market, will result in legislation restricting the kind of outsourcing work that has driven India's tech boom.</b>
U.S. Sen. Christopher Dodd, D-Conn., revealed plans for such legislation while he was in his home state on Tuesday.
State measures limiting the export of government jobs have drawn sharp attention. A recent move in the U.S. Senate to curb federal job outsourcing has caused more anxiety.
<b>Indian executives see the backlash as more than a little ironic. The rise of India's high-technology sector, they point out, is a direct result of the country's economic liberalization in 1991, a program launched with U.S. government support.</b>
In recent years, India's deep pool of low-wage, highly skilled, English-speaking "knowledge workers" has proved irresistible for U.S. companies looking to cut costs.
The Internet and other communication advances have made the shift possible. And as Indians take on more valuable work, such as product design and research, tech executives there are certain they can compete worldwide with the likes of IBM Corp. and Accenture.
Indian companies are reinventing the way programming is done, said Arvind Thakur, president of NIIT Technologies in Delhi, India.
By breaking what is widely considered a highly intuitive creative process into repeatable steps that can be done by less-skilled engineers, India is trying to create high-quality software factories, not unlike what the Japanese did with the assembly line.
India, Thakur said, has the opportunity to "assume the mantle of global leadership" in software services. U.S. executives routinely say they find the quality of work in India to be as good as or better than the work done at home. That's partly because even low-level employees who answer phones in call centers are likely to have college degrees.
The draw is strong enough that the number of companies putting their own operations in India has increased sharply, as positive results flow in from such pioneers as Motorola Inc., General Electric Co. and Intel Corp.
By next month, according to the National Association of Software and Services Companies in India, the nation's software and services sector will post total revenue of $15.57 billion, up from $5.54 billion in March 2000.
During the same period, the industry's employment has grown to 813,500 from 284,000.
The group estimates that exports of software and services - mostly to the United States - will rise to $12.20 billion in March from $3.96 billion in 2000, despite the sharp downturn in the U.S. economy. If growth trends hold, the association predicts that exports could reach $40 billion or more by 2009.
By itself, the industry represents only 3.8 percent of the country's gross domestic product. But the tech boom's effect on India's economy and psyche is much more profound. Consider Bangalore, a city of 6 million in southern India. It has been the country's Silicon Valley since firms such as Texas Instruments Inc. and Motorola put electronics plants there in the late 1980s.
There's no vacancy this month at the Leela Palace, a 254-room, five-star luxury hotel that was completed 2Â½ years ago. There are no rooms anywhere in town. Hundreds of buses ferry thousands of young technology workers to and from their jobs.
Mahatma Gandhi Road, with its neon signs and shopping malls, looks like a small but no less crowded version of New York's Times Square.
As you enter the Leela, a welcome sign announces job interviews for Siemens and Infineon Technologies AG, along with a reception for new Dell Inc. employees. Intel's Indian operation is across the street.
Despite the opulence, poverty is overwhelming and always nearby. On the other side of a wall enclosing the lush pool and gardens at the Leela lies a barren field where poor neighborhood children play cricket. Cows and goats sift through a smoldering pile of garbage, scavenging for food.
But the tech boom is fueling hopes that India's economic resurgence finally can begin to address the country's struggle with squalor. Other industries are showing vast improvement, too.
Tata Motors, the nation's largest carmaker, has begun exporting to the United Kingdom. Bajaj Auto, a maker of scooters and motorcycles, is staging a similar renaissance.
"If you believe in the free market as a way for the economy to become more productive," said Nilekani of Infosys, "then if India booms, it's good for everybody."
BPO Backlash - Guest - 02-20-2004
<b>As jobs vanish, U.S. is an agricultural colony</b>
By Pat Buchanan
Sen. John Edwards did not win Wisconsin, but he closed a huge gap with John Kerry with astonishing speed in the final week.
The issue propelling Edwards was jobs, the lost jobs under George Bush, and Edwards' attribution of blame for the losses on NAFTA and the trade deals for which John Kerry voted in Congress.
Edwards has plugged into an issue that could cost Bush his presidency. Indeed, Kerry's sudden conversion into fiery critic of trade deals for which he himself voted suggests that he senses not only his vulnerability on Super Tuesday, but his opportunity in the fall.
For a precise measure of what this issue is about, one can do no better than to consult Charles McMillion of MGB Services. Each February, McMillion methodically pulls together from the Bureau of Labor Statistics his grim annual index of the decline and fall of the greatest industrial republic the world had ever seen.
Since Bush's inauguration, 2.8 million U.S. manufacturing jobs have simply vanished. By industry, the job losses are heaviest in computers, where 28 percent of all the manufacturing jobs that existed when Bush took office are gone, semiconductors where we have lost 37 percent, and communications equipment, where jobs losses have reached 39 percent in just three years.
One in three textile and apparel jobs has disappeared, and the losses continue to run at the rate of 100,000 jobs a year. This helps to explain Edwards' rout of Kerry in South Carolina.
With the markets soaring, the Bush recovery is being called a jobless recovery. Not so. We are creating millions of jobs overseas -- even as we are destroying manufacturing jobs at a rate of 77,000 per month in the United States.
Consider: Last year, we bought $958 billion worth of foreign-manufactured goods and our trade deficit in manufactures alone was more than $400 billion, more than $1 billion a day. Millions of foreign workers now labor in plants that manufacture for America, doing jobs that used to be done by American workers.
Not so long ago, Detroit was the auto capital of the world and the United States was the first nation in the production of TVs.
We don't make TVs anymore. Our trade deficits in cars, trucks, TVs, VCRs, automatic data processing equipment and office machines added up last year to $218 billion. We retain a trade surplus in airplanes and airplane parts, but, because of the competition from Airbus, that is shrinking.
After airplanes, our No. 1 export in terms of a trade surplus is . . . soybeans. Corn is next, followed by wheat, animal feeds, cotton, meat, metal ore, scrap, gold, hides and skins, pulp and waste paper, cigarettes, mineral fuels, rice, printed materials, coal, tobacco, crude fertilizer and glass. Airplanes aside, the United States has the export profile of an agricultural colony.
To neoconservatives of the Wall Street Journal school, these trade numbers are yardsticks of their success at creating a global economy and measures of their triumph in championing NAFTA and the World Trade Organization. To the Old Right, however, manufacturing was a critical component of American power, indispensable to our sovereignty and independence, and the access road for working Americans into the middle class.
Seeing the devastation of NAFTA and its progeny, sensing rising opportunity in the industrial Midwest, Democrats are jumping ship on free trade. <b>Bush, if he does not temper his enthusiasm for these one-sided trade deals, may just go down with it. If he does, one prays he will at least ensure the neoconservatives have first been locked securely in the cargo hold.</b> <!--emo&:roll--><img src='style_emoticons/<#EMO_DIR#>/ROTFL.gif' border='0' style='vertical-align:middle' alt='ROTFL.gif' /><!--endemo-->
PAT BUCHANAN is a syndicated columnist and former presidential candidate.
BPO Backlash - Guest - 02-23-2004
The truth about offshoring
That's what N. Gregory Mankiw, chairman of President Bush's Council of Economic Advisers, recently found out when he inadvisably spoke the truth: Free trade is good for America.
Outsourcing gains "that take place over the Internet or telephone lines are no different than the gains from trade in physical goods transported by ship or plane," Mankiw, who is on leave from his job at Harvard University, told Congress. "<b>When a good or service is produced at lower cost in another country, it makes sense to import it rather than to produce it domestically.</b>"
Mankiw was restating for the 21st century the economic law of comparative advantage, which essentially says that nations should play to their strengths. No serious economist would disagree. But Mankiw sooned learned a lesson: Better to cloak what you say in fuddy-duddy academic argot than to be clear and controversial.
Soon a typical Washington tempest began swirling. Democrats seized on Mankiw's remarks as a way to paint Bush's advisers as out of touch, especially when jobs in America's information technology industry are seen as vulnerable to offshore outsourcing in China and India.
Last week, <b>presidential candidate John Kerry railed against "Benedict Arnold CEOs" who are "shipping American jobs overseas." Fellow contender John Edwards is even more hostile to free trade</b>. <!--emo&:angry:--><img src='style_emoticons/<#EMO_DIR#>/mad.gif' border='0' style='vertical-align:middle' alt='mad.gif' /><!--endemo-->
Remarks likening CEOs to traitors may play well in the primaries, but how close are they to the realities of technology companies that must compete globally?
Consider what would happen if Congress restricted companies from shifting jobs overseas. Because rivals in Europe, Japan and Korea could employ cheaper workers in developing nations, they'd have a leg up on U.S. firms. Foreign investors would recognize that rising protectionism makes U.S. companies less competitive and would choose to take their yen and euros elsewhere, driving down the U.S. stock market, shrinking available capital, and eventually leading to more unemployment than if Congress had done nothing.
It is true that America has lost jobs in the last three years, and the technology sector has been harder-hit than many others. But the job loss has not been as huge as some politicians and news reports would have you believe. America's unemployment rate currently is around 5.7 percent, not especially high by historical standards, and among the lowest in the world. It's certainly the envy of France (9.3 percent), Germany (9 percent), and Canada (6.8 percent).
Just as candlemakers and farriers lost their jobs a century ago, free trade results in temporary disruptions. But in the long run, free trade is vital to a society's overall health. In the 1990s, developing countries hostile to foreign trade experienced average growth rates of negative 1.1 percent per year, while developing countries that embraced freer trade enjoyed growth of positive 5 percent annually.
And let's not forget that U.S. workers in the information technology industry often benefit from outsourcing. The German company Siemens, which makes electronic and electrical products, employs 65,000 people in this country. Sony Electronics employs 2,000 people in just New Jersey, while Belgium's Agfa-Gevaert Group, one of the world's leading imaging companies, writes paychecks to over 5,000 people in the United States. Spain's Terra Lycos employs 418 people in the United States to run Web sites such as Lycos.com, Hotbot.com, Gamesville.com, Tripod.com, RagingBull.com and Wired.com. And those are only a few examples.
Mankiw put it not so gracefully albeit succinctly: "It is natural to ask what new jobs will be created in the future. Policy makers should create an environment in which businesses will expand and jobs will be created. But they should not try to determine precisely which jobs are created or which industries will grow. If government bureaucrats were capable of such foresight, the Soviet Union would have succeeded as a centrally planned economy."
The next act in this political drama will take place Wednesday, when Federal Reserve Chairman Alan Greenspan is set to testify before the House Budget Committee. Look to him to recite unemployment figures and discuss offshore outsourcing, but not to be snared in embarrassing missteps. Unlike Mankiw, Greenspan has been around town long enough to appreciate the difference between political reality and the truth.
BPO Backlash - Guest - 02-23-2004
Edwards: <!--QuoteBegin-->QUOTE<!--QuoteEBegin-->"Let me tell you what would be good for this economy: to outsource the Bush administration," he said.<!--QuoteEnd--><!--QuoteEEnd--> <!--emo&--><img src='style_emoticons/<#EMO_DIR#>/biggrin.gif' border='0' style='vertical-align:middle' alt='biggrin.gif' /><!--endemo-->
BPO Backlash - Guest - 02-25-2004
George F. Will: 'Ideal economy' has its tradeoffs
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->John Kerry says offshoring is done by "Benedict Arnold CEOs." But if he wants to improve the health of U.S airlines, and the security of the jobs and pensions of most airline employees, should he not applaud Delta saving $25 million a year by sending some reservation services to India?
Does Kerry really want to restrain the rise of health care costs? Does he oppose having X-rays analyzed in India at a fraction of the U.S. cost?
Recently, Indiana Gov. Joseph Kernan canceled a $15 million contract with a firm in India for processing state unemployment claims. The contract was given to a U.S. firm that will charge $23 million. Because of this 50 percent price increase, there will be $8 million fewer state dollars for schools, hospitals, law enforcement, etc. And the benefit to Indiana is ... what?
<span style='color:blue'>(fyi: Dan Burton is from Senator from Indiana - wouldn't rule out a link here)</span>
When Kernan made this gesture he probably was wearing something wholly or partly imported and that at one time, before "offshoring," would have been entirely made here. Such potential embarrassments are among the perils of making moral grandstanding into an economic policy.
BPO Backlash - Guest - 02-25-2004
From Red Herring (subcription site)
<b>Top 10 trends: Outsourcing backlash</b>
<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><i>Once popular with cost-conscious IT execs, outsourcing has been shown to be full of security holes.
December 19, 2003
In October, global outsourcing nearly flat-lined the hospital at the University of California at San Francisco. To save money, the school had been sending out thousands of patient medical records for transcription. Halfway across the world, a woman in Pakistan had taken on some of the work. Things seemed to be working well for both â and neither knew about the other because of three subcontracts in between. That changed when the womanâs subcontractor in Texas did not pay. The Pakistani worker contacted UCSF and threatened to release the confidential patient information over the Internet if they did not help her collect, according to the San Francisco Chronicle, which broke the story.
<span style='color:red'>(there's always a Paki to screw up isn't it?Â <!--emo&:furious--><img src='style_emoticons/<#EMO_DIR#>/furious.gif' border='0' style='vertical-align:middle' alt='furious.gif' /><!--endemo-->Â Well, that's why they are called Pakis! )</span>
With that, outsourcing suddenly shifted from an unqualified business no-brainer to a risky financial liability.
IT outsourcing was once essentially limited to software programming and staffing call centers. No longer. Now outsourcing tasks cover everything from storing sensitive financial, tax, and medical records to handling mission-critical database files. With the specter of financial blackmail looming, an outsourcing backlash may emerge in 2004. Security concerns, compounded with the fear of jobs lost to foreigners, as well as the wake-up call that outsourcing does not equal fast and easy cost savings, will lead companies to rethink their practices.
âThere are many wrong reasons for outsourcing,â says Lily Mok, a senior consultant at People 3, a New Jersey-based human resources and IT research division of Connecticut-headquartered research firm Gartner. Companies may think they are saving money, she adds, but high costs are involved at the outset, namely related to infrastructure set up.
Offshore IT outsourcing took off during the late 1990s, with Y2K coding. Since 1999, outsourcing has grown an average of 23 percent per year, according to Gartner data. The outsourcing industry now employs 170,000 in India, where it has been the most successful. Revenues there reach more than $2 billion annually, according to market research firm IDC.
But trends can be deceiving. âA reality check is warranted. Offshore outsourcing will not be applicable to all enterprises, all IS roles, or all IS professions,â says Diane Morello, an analyst at Gartner.
Outsourcingâs downside is in the spotlight, especially for firms that failed to thoroughly appraise the costs and risks at the outset. One example of an outsourcing gig gone wrong: Dellâs recent decision to stop sending U.S. technical support calls for two of its corporate computer lines to Bangalore, India. Because the offshore call center workers could not answer customersâ technical questions, Dell faced numerous complaints and had to route calls back to U.S.-based call centers.
In 2004, a presidential election year, the U.S. government could be a key player in curtailing offshore outsourcing. With unemployment and the economy as hot topics, political opposition to issuing H-1B visas, which allow foreigners to enter the U.S. for training, has been mounting. According to an annual report released by the Department of Homeland Securityâs Office of Immigration Statistics, the number of H-1Bs issued to workers in the high-tech industry dropped 74.3 percent, from 105,692 in 2001 to 27,199 in 2002.
In defense of struggling U.S. employees, some states have nixed outsourcing government contracts. In one highly publicized move, Indiana governor Joseph Kernan shut down a $15.2 million deal with the Indian company recruited to upgrade the Indiana state computers processing, ironically, unemployment claims. New Jersey has passed a bill to prevent government contracts from being outsourced overseas.
One proposal is the offshore development hybrid model, which enlists trusted U.S. development firms as intermediaries in the offshore development process. âOffshore development is here to stay, but companies are looking for ways to mitigate the risk,â says Robert Northrop, a Design and Development Director with technology consulting firm Tallan. With the hybrid model, the per-hour cost is greater than regular offshore development, but the risk is much lower, because locals with experience in the offshore market are heading up development.
How much does outsourcing really save companies? According to a November 2003 report by People 3, only 21.1 percent of companies surveyed reported a cost savings of greater than 20 percent due to IT outsourcing, while 18.4 percent did not achieve any cost reductions, and 9.2 percent actually had an increase in costs from outsourcing contracts.
âMany companies often neglect to factor in all costs associated with managing outsourcing engagements, which average 4.5 percent of the total contract value and can be as high as 15 percent,â says People 3âs Ms. Mok. The report states that âthe word on the street is that companies can save as much as 40 percent by outsourcing some or all of its IT capabilities. The true savings, however, are not always as promising as one would expect.â Because of the high costs and risks associated with offshoring, some companies are opting to nearshore outsourcing, giving work to neighboring countries instead of going overseas.
Though it once glittered as a savior of IT savings, outsourcing certainly isnât gold.
BPO Backlash - Guest - 02-25-2004
<b>Outsourcing controversy gets some VC input</b>
By Matt Marshall
Venture capitalists are finally starting to weigh in on the outsourcing controversy, with Silicon Valley's Vinod Khosla firing the opening salvo.
He and others are responding to the rising rhetoric of Democratic presidential candidates John Kerry and John Edwards, and others playing on voters' fears.
Edwards wants to rewrite the North American Free-Trade Agreement (NAFTA). Massachusetts Senator Kerry decries the ``Benedict Arnold CEOs'' who send jobs out of the country.
The media joined in the chorus, with CNN commentator Lou Dobbs crossing the line into advocacy last week, blasting free trade for having ``mindlessly led us to this point'' of ``exporting our wealth at an alarming rate.''
Calling for protectionist policies is an easy way to win votes in an election year but could be poisonous in the long-run: The U.S. economy depends on, and has benefited from, free trade. Silicon Valley's success in particular has been built on the free flow of investment, ideas and expertise. We have exported cutting edge technology products to other parts of the world and drastically reduced the costs of manufacturing those products with the input of labor all over the world.
Worried about retaliation
Venture capitalists are concerned that foreign countries could retaliate against protectionist measures by the United States and erect their own barriers to U.S. imports and investment.
Khosla, one of area's most successful capitalists with Kleiner Perkins Caufield & Byers, carries a lot of weight.
Speaking in Bangalore, a center of India's outsourcing boom, Khosla told Reuters that India should use the World Trade Organization to make sure that outsourcing falls under global rules about free trade. ``The WTO is about free trade,'' he said. ``It's important that some of these things that are important to us be part of those agreements.''
Khosla did agree with a proposal introduced Feb 12. by Senate Minority leader Tom Daschle to minimize the negative effects. The proposed law requires U.S. companies to give a 90-day notice when outsourcing jobs. It's ``a very good idea because it allows people who are affected in the United States to make alternative plans,'' Khosla said.
Khosla's comments follow a visit by U.S. Trade Representative Robert Zoellick to India last week, where Indian officials told Zoellick that a U.S. backlash against outsourcing could hamper Indian support for agreements on free trade.
90 percent savings
Tony Sun, venture capitalist with Venrock, agrees with Khosla. Given the politically charged nature of the debate, Sun says he wants to be careful about what he says. He sides, he says, with Alan Greenspan, who on Friday warned that protectionist cures could cause more harm than good if foreigners retaliate.
Sun continues: ``Protectionism is not good for the country in the long term, it has never been good, no matter how expedient in the short term.'' Sun believes U.S. workers should train for higher value-added jobs, especially in sectors that are difficult to outsource. Biotech is one such area, because of the deep expertise needed. ``We need to get away from the mindset that we can coast on our innovation,'' Sun says.
Sun has seen the writing on the wall. He invested in a San Jose company, Anda Networks, that claims to have reduced costs by about 90 percent by shifting employees to Wuhan, China. Anda provides Internet access to companies.
According to Chief Executive Charles Kenmore, Anda paid an average $125,000 to its 22 valley electrical engineers three years ago. That included benefits, and each worker had an average five years telecommunications experience.
Since then, Anda has let go all but eight of its employees here, and hired 60 engineers in China -- each paid an average $17,000, with similar education, but with more relevant experience -- seven years on average.
Their base salary is $13,500. Kenmore said part of the savings comes from hiring directly, and not contracting with an outsourcing firm. ``This model holds promise,'' says Kenmore.
BPO Backlash - Guest - 02-25-2004
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->How much does outsourcing really save companies? According to a November 2003 report by People 3, only 21.1 percent of companies surveyed reported a cost savings of greater than 20 percent due to IT outsourcing, while 18.4 percent did not achieve any cost reductions, and 9.2 percent actually had an increase in costs from outsourcing contracts. <!--QuoteEnd--><!--QuoteEEnd-->
I heard one of our execs say that the benefits from outsourcing accrue over some time. Initial costs in training, cultural acclimatisation, etc. add upto a lot of costs and people do tend to benefit less - thats what IBM figured out, he said. But it does lead to cost-savings. On the other hand, there does seem to be a lot of hype over the amount of cost-savings.
The reality - like in everything else - is somewhere in the middle. It would be interesting to see a breakdown of these companies in terms of the number of man-years involved in outsourcing.
BPO Backlash - Guest - 02-25-2004
Article on "Always-On"
<span style='color:red'><b>Outsourcing created jobs that the pols ignore </b></span>
The talk on why and how the US needs to act about the outsourcing is getting interesting by the day . The economist, consultant , corporation, angry-laid-off-programmer and now even the presidential candidates ....every one has an interesting and rational opinion on dealing with the spoil sport. My comments are purely an Indian point of view on what we see, read and hear on the happenings , and hopefully it adds to the confusion.
Just arguing that it has not happened in the past even when the manufacturing was faced with completion from Japan and now just about every country in South & South East Asia doesn't seem to wash any more. Seems more concrete evidence is needed to prove that the net effect to the US worker will be positive this time around too .
The argument usually goes "But this is high tech services, the well paid jobs are on the danger list , if they go then America will soon have nothing left". Revisiting the by now standard counter "Studies do show that America gains more than India thru off-shoring ". But this isn't the same as creating jobs . True. "The US consumer has saved billions through technology out-sourcing by the financial services industry"..... But jobs are still disappearing by the thousands daily . True Again.
Wired suggests the American economy will create new innovative jobs, but what they will be ...too early to say .
The answer to this question may indeed be difficult ,
as it is hard to predict what jobs the US will retain and create more of as India & China emerge worthy competitors in just about every field, call centers to space .
All I can offer in defense of two main accused .."The people here will definitely eat more Big Macs and drink Coke with their new found wealth ", ... but we all know that this won't create too many jobs in US.
They are also sure to watch more Hollywood films and travel to US on business and pleasure in greater numbers . More may be able to afford the prized US education for their children , and I believe over a 150,000 Indian & Chinese already do each year , poor as they are . Some may join those rich enough to afford your excellent medical facilities, others may just want to buy an apartment in New York or own a ranch in Colorado to wind down . All this should create real jobs, but may be not be the type a laid off programmer wants. May be the fellow doesn't know a thing or two the steel worker does.
The rate at which such jobs may be created may well astound Americans , as an Indian on an average now earns around a $500 p.a. while the Chinese just about double, to the American's $38,000. If the magic of disposable income is working to propel these economies by 8% -10% p.a. , it may add a fraction to the US & European economies too, after all we are a fat 2.3 billion and growing .
One thing is for certain, the protectionism won't work for the American people the way it is explained, nor the politician will be able to deliver on the election promises .
A multi-polar economic world order is already in place where no country now has the power to demand a bigger share of the pie without growing it, or following commonsense economic policies. The G-20 have successfully blocked US & EU in the WTO on issues like agriculture. The Chinese retaliate hard when their interests are harmed, and the Indians turn adamant on opening up more, if markets that were open till very recent are blocked .
Politicians are the same every where. Good at doing only the easy ones. The services trade, both off-shoring and the right of a person to deliver services on site is the next contentious frontier to be resolved at the WTO .
The speed and the rationality with which these issues will be sorted out should be pointer to how painless the transition to a more balanced development path for the world will be .
BPO Backlash - Guest - 02-26-2004
Help Not Wanted
<i>Jobs: Where did they go? Offshoring's a problem, but there's a bigger culprit.
BPO Backlash - Guest - 02-26-2004
Bank of India to outsource IT to Hewlett-Packard
Reuters, 02.25.04, 5:21 AM ET
BOMBAY, Feb 25 (Reuters) - State-run Bank of India <BOI.BO> said on Wednesday it had awarded U.S. giant Hewlett-Packard (nyse: HPQ - news - people) a 10-year contract, worth over $150 million, to manage its information technology infrastructure and applications.
Balu Doraiswamy, president of Hewlett-Packard India Pvt Ltd, said the all-encompassing outsourcing contract was HP's largest in the financial services sector in the Asia Pacific region.
The contract involves implementing and managing Oracle (nasdaq: ORCL - news - people) data warehousing and a core banking product, developed by India's Infosys Technologies <INFY.BO>, across 750 branches that account for 80 percent of the bank's business.
The contract also includes managing the entire IT network of those branches, supplying and maintaining the hardware, besides setting up a disaster recovery site and call centre support.
Bank of India, the country's sixth-largest commercial bank, has over 2,500 branches. Chairman M. Venugopalan said the bank planned to have its key 750 branches covered by the new software applications within two-and-a-half years.
Copyright 2004, Reuters News Service
BPO Backlash - Guest - 02-26-2004
What Goes Around . . .
By THOMAS L. FRIEDMAN
Published: February 26, 2004
I've been in India for only a few days and I am already thinking about reincarnation. In my next life, I want to be a demagogue.
Yes, I want to be able to huff and puff about complex issues â like outsourcing of jobs to India â without any reference to reality. Unfortunately, in this life, I'm stuck in the body of a reporter/columnist. So when I came to the 24/7 Customer call center in Bangalore to observe hundreds of Indian young people doing service jobs via long distance â answering the phones for U.S. firms, providing technical support for U.S. computer giants or selling credit cards for global banks â I was prepared to denounce the whole thing. "How can it be good for America to have all these Indians doing our white-collar jobs?" I asked 24/7's founder, S. Nagarajan.
Well, he answered patiently, "look around this office." All the computers are from Compaq. The basic software is from Microsoft. The phones are from Lucent. The air-conditioning is by Carrier, and even the bottled water is by Coke, because when it comes to drinking water in India, people want a trusted brand. On top of all this, says Mr. Nagarajan, 90 percent of the shares in 24/7 are owned by U.S. investors. This explains why, although the U.S. has lost some service jobs to India, total exports from U.S. companies to India have grown from $2.5 billion in 1990 to $4.1 billion in 2002. What goes around comes around, and also benefits Americans.
Consider one of the newest products to be outsourced to India: animation. Yes, a lot of your Saturday morning cartoons are drawn by Indian animators like JadooWorks, founded three years ago here in Bangalore. India, though, did not take these basic animation jobs from Americans. For 20 years they had been outsourced by U.S. movie companies, first to Japan and then to the Philippines, Korea, Hong Kong and Taiwan. The sophisticated, and more lucrative, preproduction, finishing and marketing of the animated films, though, always remained in America. Indian animation companies took the business away from the other Asians by proving to be more adept at both the hand-drawing of characters and the digital painting of each frame by computer â at a lower price.
Indian artists had two advantages, explained Ashish Kulkarni, C.O.O. of JadooWorks. "They spoke English, so they could take instruction from the American directors easily, and they were comfortable doing coloring digitally." India has an abundance of traditional artists, who were able to make the transition easily to computerized digital painting. Most of these artists are the children of Hindu temple sculptors and painters.
Explained Mr. Kulkarni: "We train them to transform their traditional skills to animation in a digital format." But to keep up their traditional Indian painting skills, JadooWorks has a room set aside â because the two skills reinforce each other. In short, thanks to globalization, a whole new generation of Indian traditional artists can keep up their craft rather than drive taxis to earn a living.
But here's where the story really gets interesting. JadooWorks has decided to produce its own animated epic about the childhood of Krishna. To write the script, though, it wanted the best storyteller it could find and outsourced the project to an Emmy Award-winning U.S. animation writer, Jeffrey Scott â for an Indian epic!
"We are also doing all the voices with American actors in Los Angeles," says Mr. Kulkarni. And the music is being written in London. JadooWorks also creates computer games for the global market but outsources all the design concepts to U.S. and British game designers. All the computers and animation software at JadooWorks have also been imported from America (H.P. and I.B.M.) or Canada, and half the staff walk around in American-branded clothing.
"It's unfair that you want all your products marketed globally," argues Mr. Kulkarni, "but you don't want any jobs to go."
He's right. Which is why we must design the right public policies to keep America competitive in an increasingly networked world, where every company â Indian or American â will seek to assemble the best skills from around the globe. And we must cushion those Americans hurt by the outsourcing of their jobs. But let's not be stupid and just start throwing up protectionist walls, in reaction to what seems to be happening on the surface. Because beneath the surface, what's going around is also coming around. Even an Indian cartoon company isn't just taking American jobs, it's also making them.
BPO Backlash - Guest - 02-29-2004
Came via email...
<b>The Prez Candidates need De Bono's hats</b>
William Mougayar in his blog "America needs a plan..."
suggests a rational approach to the outsourcing dilemma . Hope some one in the White House reads it. I may venture, if the powers now residing in the Whitehouse, intend to do some thing, they must do it a bit differently this time.
The world trade till now has been a fine mess. Each nation has had its own motives and holy cows, and there has never been a holistic internationalist approach to speak of by those who saw themselves as world leaders in political & economic matters . Rational economics has applied to only to a small segment of the manufactured goods trade and has been totally absent in agriculture & services. One fine day WTO comes along, again was never intended to sort the jumble. Seems to be coping with the situation commendably, given the scope and complexity of the problems. The task made more difficult by the entrenched positions and a wholly self serving mindset of members, at times illogical to the extreme, and in contradiction to the past say.
The off shoring argument that America faces is just a sub-set of the right of nations and peoples to export services, via off-shoring or being present there physically, so the term "services mobility ". It is not there yet, but will soon be on the WTO agenda once the agriculture issues are sorted out.
The rest of the world justifiably has problems with a unilateralist approach as is being advocated by the presidential aspirants. The rest of us are how ever quick to realize that this could be well true of any other dominant power or power aspirant of the day. The ruling deity, despite the power to shape a common future has never really tried to be a thought leader in the international sense, finding innovative ways to growing the pie & sharing. In other words , tried a globally inclusive approach, be it politics or economics. Self interest based easy solutions that eventually lead to confrontation have always got the better of finding common interests and devising creative, out of the box solutions, and may be classified ad . an extension of what easily sells at home.
Though politics is not the discussion here, but those who profess politics do practice economics. And one may need to present some evidence on the mind set that rules. Some examples from the past. While the West concentrated it's energies on countering the Reds, the non-aligned movement was ignored if not ridiculed, but seems is stronger than ever and has even spawned the a formidable and contrarian trade G-20 (with China, India & Brazil the fastest growing economies as members) to the clubbish G-8.
Not to mention the Kyoto Protocol fiasco. China is all set to become the largest green house gas producer within 3 decades and India will surely follow in quick time. The effects , if the theory is true are already visible & will only aggravate . Indonesia, Brazil, & Pakistan are all large populations, and will surely throw in their might too in melting the polar caps. Seems we got to wait till inevitability forces us all to rationality
The lesser developed nations after decades of aid, free market advise & World Bank finally see a hope of improving the lot of their desperately poor billions via agriculture and services exports. Sixty percent of India is still rural with average land holding of less than a hectare. Has to no way out but to urbanize very soon, and urban unemployment already is tens of millions, under employment almost universal.
China is the real growth engine today accounting for more of the world growth pie than any one else. The growth sure is real this time around , but the problems it faces faced are growing rapidly too. The uninvited it seems have barged into the economic party and are making some splash. Do they face a temporary ejection?
As US grapples with off shoring job losses, Uncle Sam presses the world to let it's high charging lawyers, consultants and accountants to practice in their countries, who say they don't really need them. If one assumes that about 30% of the US IT industry revenues come from overseas , now one of the hardest hit by off-shoring, one can say the world has been supporting the industry ( and quite a few American jobs), for quite some time. Though the US may loose IT market share in percentage terms, the growing markets of China & India are sure to absorb more technology imports for quite some time to come. And there is proof that outsourcing is not a one way street, HP has recently won a $125m outsourcing deal from Bank of India & Ericsson a $250m contract from Bharti Telecom.
The prosperity brought about by off shoring in India & China will definitely add jobs in many unintended places. The US entertainment, hospitality, education and medical sectors are sure beneficiaries as Chinese & Indians can afford more of these. A lot of the jobs created should pay well too.
To accelerate the real benefits of the services revolution, labor mobility issues need to be tackled in good time We all must accept the idea of hosting more "visitor workers" as a necessity, inevitability and in enlightened self interest. As is the practice in the labor short Gulf countries for long .
And with some imagination the US may even be able to use the policy to turn the tables on the protagonists. Apart from teachers, professors, nurses and assorted PhDs there are quite a few worker types the US needs. Reasons, to improve the quality of life of it's citizens and keep more jobs in the US. One could even hypothesize a scenario where US may even be able to bring back some of those jobs lost a long forgotten time ago.
Well earning Arabs & Singaporeans have access to Indian & Philippine maids, while the better earning Americans & Europeans have do without them. How nice would it be find the home cleaned, children minded and food cooked by a 24 hour live-in help who would be grateful to receive a $1000 for it all . After all, the more educated programmers from Bangalore who are stealing the jobs earn much less, and have to pay rent and food. Even the lowly Chinese & Indians have much better access to a variety of domestic help, compared to the Americans .
If the concept of a "visitor worker" earning less than US minimum wage ( but still a lot more than what they earn in home countries) is accepted and visas liberalized, a lot of low paying , tedious jobs that Americans don't want to do any more and so lie vacant i.e. household help, workers in mom & pop stores and restaurants etc. will be filled up, improving the quality of life for Americans, saving many a small businesses and help alleviate unemployment in the supplier countries.
Till such time the "visitor worker" is seen as a sound economic and racially non threatening proposition , it may be foolish to talk about extending the idea to bring back to America jobs takes as gone for ever. This may require opening up of a small percentage of the jobs that face competitive pressures be filled by the lesser paid contractual visitor workers to keep services like airlines flying & the big manufacturing from crossing over to Mexico wholesale, or whole plants being dismantled and reassembled in India & China. If not for the barely alive terminally suffering corporation, it could be tried for the chapter 11 candidates and the long defunct big steel and ship-building as a start . The only people who may have a real quarrel with this approach would logically be the Koreans, Chinese & Indians who basically stole them quite a few years ago. But then stories of getting swamped by imaginary armies of immigrants are hard to tackle for the politicians, and the unions must do their act too.
If the idea of a visitor worker is not sound , practical, or both then US could do the reverse, send your prisoners to be locked up here, the old to spend their last days in a balmy Goa, and open up cheap campuses for your students where the dollar goes 5 times farther . Daily help is cheap and so are doctors, nurses, teachers and professors . It would lighten the deficits and the money could be put to better use if the politician may. We will be grateful for the jobs and our government usually puts the surplus $s earned right back into US treasuries, if that is any consolation.
BPO Backlash - Guest - 03-01-2004
Delta Air, General Electric Say Creating Jobs Abroad Helps U.S.
Feb. 23 (Bloomberg) -- Delta Air Lines Inc. created 1,000 call-center jobs last year in India. Hiring by Delta and other foreign employers is spurring the country's economy to the second- fastest growth rate in Asia behind China.
Atlanta-based Delta says the move also helped the U.S. economy. The Indian operations saved $25 million in 2003, enabling the No. 3 U.S. air carrier to add 1,200 positions for reservations and sales agents at home, North America reservations director Debbie Siek said Friday. ``No Delta employee lost his or her job as a result of outsourcing,'' she said.
General Electric Co., which has created 20,000 jobs in India since 1997, and economists including Stephen S. Roach of Morgan Stanley & Co. also say such moves can benefit the U.S. over time. Yet any case they make for economic advantages of so-called outsourcing is turning out to be a tough sale this election year.
Democratic Party lawmakers cite the international shift in labor as showing that President George W. Bush has failed to revive the U.S. economy after the loss of 2.3 million jobs in three years. Members of Congress including Senator John F. Kerry, who is vying to be Bush's opponent in November's election, have threatened to cut tax breaks for companies that move work overseas.
``A lot of this talk is the equivalent of saying we want to be inefficient,'' Robert McTeer Jr., president of the Federal Reserve Bank of Dallas, said in a speech Saturday in Fort Worth, Texas. ``If we just want jobs, we should outlaw bulldozers and just make people use shovels.''
Among U.S. companies assigning work to Asia are Oracle Corp., the world's No. 3 maker of business management software, Hewlett-Packard Co. and AIG Life Insurance Co. In Europe the list includes Siemens AG, Germany's biggest electronics maker. U.S. software engineers earn an average $75,000 a year, according to the Labor Department. In India, they make about $12,500, says Tata Consultancy Services, a unit of Tata Sons Ltd. in New Delhi.
The debate intensified in the U.S. on Feb. 9, when Gregory Mankiw, chairman of the White House Council of Economic Advisers, said ``outsourcing is just a new way of doing international trade'' that may help the U.S. economy ``in the long run.'' A White House economic forecast he presented to Congress that day said that ``when a good or service is produced more cheaply abroad it makes more sense to import it than make or provide it domestically.''
A unit of management consultant McKinsey & Co. estimated last August that every dollar of U.S. labor cost assigned overseas will generate $1.12 to $1.14 in additional value for the American economy by making goods and services cheaper and companies more competitive.
`Real Blow' to Workers
The Communications Workers of America called Mankiw's remarks ``outrageous'' and ``a real blow to millions of working families who are facing the worst job outlook in decades.'' Union President Morton Bahr made the comments in a Feb. 17 statement posted on the Washington-based, 700,000-member group's Web site.
Mankiw's comments drew criticism from Republican lawmakers as well, including Speaker of the House Dennis Hastert. Mankiw apologized for leaving ``the wrong impression that I praised the loss of U.S. jobs.'' Bush unveiled a $503 million job-training program on Feb. 12 and said such action is needed because ``there are people looking for work because jobs have gone overseas.''
Kerry, who is leading the Democratic Party's race to become Bush's official opponent, promised ``to repeal every tax break and loophole that rewards any Benedict Arnold CEO or corporation for shipping American jobs overseas.'' He didn't mention specific companies or executives as examples.
``It's the political season, and it's no surprise that opponents of the administration would jump on'' Mankiw's comments, the Fed's McTeer said in his speech. He called the movement of jobs abroad part of a ``creative destruction'' process that ultimately benefits the U.S. economy.
The political rhetoric does ignore the economic reality, said Robert Reich, former labor secretary for Democratic President Bill Clinton and now a visiting professor at the University of California at Berkeley.
``Mankiw and the administration stated the economic theory correctly,'' Reich said in an interview Wednesday. ``The problem is that theory is of little solace to workers who are losing their jobs or are in danger of losing their jobs.''
Morgan Stanley's Roach said in a newsletter to clients Feb. 17 that the ``basic conclusion of the theory of free trade is inarguable.''
Roach added that ``international competition lowers costs and prices, thereby boosting the purchasing power and standard of living of consumers around the world.''
For Bush and his Democratic rivals for the presidency, the rub lies in what Roach calls ``that ever-elusive long run.'' Voter concern that the assignment of computer programming, accounting and medical research to operations in developing economies -- coming after decades of factory-job losses -- has Democrats and some Republicans vowing to halt the transfer of work overseas.
Job losses are also an issue in Europe, where companies such as Siemens, Germany's biggest electronics maker, are reassigning work to Asia. Britain's Department of Trade and Industry plans to study the movement of call-center jobs outside the country amid reports that banks and insurers will relocate as many as 100,000 positions to lower-wage countries such as India.
``We'll see this trend increasing,'' said John McFall, chairman of the British Parliament's Treasury Committee and a member of Prime Minister Tony Blair's ruling Labour Party, in an interview Thursday in London. ``The important thing for British industry is to get a slice of the action in India and China, to share in their economic growth.''
Per-capita gross national income was $890 a year in China and $460 a year in India in 2001, a fraction of the $34,280 for the U.S., according to the World Bank. The figure was $22,730 for France and $25,120 in the U.K., according to the bank. India's economy expanded at an 8.4 percent annual rate in the 12 months through last September, second in Asia only to China's 9.9 percent for 2003.
French President Jacques Chirac hosted a roundtable discussion on French industry with company and labor representatives Friday in the Elysee Palace in Paris.
``The state needs to ensure that France and Europe really begin to think about the departure of industry to other regions,'' said Yvon Jacob, head of France's Mechanical Industry Federation, after the meeting. His organization includes 6,800 companies that employ 600,000. ``The greatest threat facing industry today is the global shift that is taking place.''
Telstra Corp., Australia's largest telephone company, said it has outsourced information technology services to several companies in India. The company wouldn't provide statistics on the number of jobs it has transferred, but it cut its payrolls by 6.9 percent in 2003, it said this month.
General Electric, the world's biggest company by market value, has added almost 100,000 jobs outside the U.S. over the past decade, said Peter Stack, a company spokesman, in an interview Thursday.
General Electric's U.S. workforce has held at around 160,000 and median wages have increased an average 4.5 percent annually since 1993. ``We've added to the quality of jobs in the U.S., and we've done that by investing heavily in high-quality, high- technology jobs,'' Stack said.
Adding employment overseas benefits the company's fortunes as a whole, he said. ``When we sell effectively to international markets, it grows our business, and that benefits our workers here,'' Stack said. General Electric's net earnings rose 6 percent last year to $15 billion, or $1.49 a share, from $14.1 billion in 2002.
The Securities and Exchange Commission ruled Friday that General Electric must permit shareholders to vote on a proposal by the International Union of Electrical-Communications Workers of America's pension fund to require the company to study the risk of damage to its brand name by moving jobs outside the U.S.
Corporate executives and economists say there's little the government can do to stop or slow the trend without hurting the U.S. economy and making American businesses less competitive.
Estimates of how many U.S. jobs may be affected range from 3.3 million over 15 years, according to a November 2002 study by Cambridge, Massachusetts-based Forrester Research Inc., to 6 million over a decade, projected last September by securities firm Goldman Sachs Group Inc. in New York.
A. T. Kearney Inc., a management consulting group owned by Plano, Texas-based Electronic Data Systems Corp., said in a 2002 report that U.S. banks, mutual fund companies and other financial services concerns planned to relocate 500,000 jobs, or 8 percent of their workforce, offshore over five years.
`Very Low' Numbers
David A. Wyss, chief economist at Standard & Poor's, said it isn't possible to measure how many Americans have been affected so far. He estimated a few hundred thousand positions. One million people change jobs every week in the U.S., according to Federal Reserve Chairman Alan Greenspan.
``The numbers are really very low'' compared with the movement of jobs during the 1990s, said Gail Fosler, chief economist of the Conference Board, a New York research group.
Michael Dell, chief executive of Dell Inc., the world's second largest personal computer maker, said there won't be a wholesale movement of U.S. jobs abroad because American productivity is still much higher than in the low-wage countries. Dell is based in Round Rock, Texas.
``That puts a damper on a wholesale movement,'' he said Jan. 6 at a conference hosted by Needham & Co. in New York. ``The U.S. workforce doesn't have quite as much to worry about as the popular press might make it seem.''
Among the companies that have moved jobs overseas in recent years are Oracle, which transferred more than 2,000 software development jobs to India; Hewlett-Packard Co., which assigned 1,200 customer service jobs to India; and AIG, which established a processing center in the Philippines.
Oracle said it plans to set up a client support center in Romania to take advantage of low wages. Siemens is shifting U.S. and European computer programming jobs to China and India.
McKinsey Global Institute, a research unit of New York-based McKinsey, found in an August 2003 paper that benefits for companies that contract work to lower-wage countries include reduced costs, contributing to profits and global competitiveness; creation of new export markets because providers in low-wage countries must buy U.S. telecommunications equipment and services; and flexibility to reassign U.S. employees to other work.
McKinsey estimated that every dollar in U.S. labor costs moved overseas leads to the creation of $1.45 to $1.47 of net additional value for the world economy. The low-wage country keeps 33 cents of that and the rest comes to the U.S., McKinsey said.
In a December 2003 paper, Catherine L. Mann, a former Federal Reserve economist now at the Institute for International Economics, a non-partisan research group in Washington, argued that the ``globalization'' of information technology and computer- related jobs increased U.S. productivity between 1995 and 2002 and added 0.3 percentage point to the economy's average annual growth, boosting Americans' living standards.
Limiting such job movement will ``put the entire prospect for robust and sustainable U.S. economic performance at risk,'' she said.
The Business Council, whose members are chairmen or chief executive officers of major corporations, found in a survey of 70 Fortune 500 CEOs published Wednesday that 54 percent reported moving jobs overseas.
``We are looking at taking some software work to India and China, frankly because we're having trouble getting enough high- quality people here in the U.S. because the education system isn't producing them,'' said Rockwell Collins Inc. Chief Executive Clayton Jones in an interview Thursday at the Business Council meeting in Boca Raton, Florida.
Fed Weighs In
The move would involve 50 to 100 software engineers out of a total of 4,000 at the Cedar Rapids, Iowa-based maker of aircraft cockpit instruments, Jones said. ``Our primary motivation is to get the talent,'' he said, ``and if it's a little less expensive,'' so much the better.
In testimony before the House Banking and Financial Services Committee Feb. 11, Fed Chairman Greenspan said that while some workers have experienced hardships as a result of outsourcing, the shift will ultimately benefit the U.S. economy. Fed Governor Susan Bies and regional Fed bank Presidents William Poole made similar points last week.
``Over the long sweep of American generations and waves of economic change, we simply have not experienced a net drain of jobs to advancing technology or to other nations,'' Greenspan said in a speech Friday in Omaha, Nebraska. ``Moreover, real earnings of the average worker have continued to rise.''
`Out of Touch'
Opponents of moving work offshore, such as Paul Craig Roberts, former assistant secretary of the Treasury during the Reagan administration, say that times have changed and that today's migration of service-industry positions isn't likely to provide the benefits that some economists say it will.
``It is not your father's traditional foreign trade,'' Roberts said in an essay published by NewsMax.com. ``Goods are not being traded. Offshore production is not a case of the U.S. making good X and trading it to China for good Y. It is a case of the U.S. ceasing to make good X in the U.S. and making it in China instead.''
Democratic presidential candidates have floated several responses. Kerry said he will propose a new tax break for manufacturers that produce goods in the U.S. and conduct a 120- day review of all U.S. trade agreements.
What Democrats Want
Senator John Edwards of North Carolina said he would ask Congress to pass a 10 percent tax credit for companies that keep jobs in America and would create a venture capital fund to bring work to the areas that have suffered the most.
U.S. Senate Minority Leader Tom Daschle joined fellow Democrats Feb. 12 in introducing a bill requiring companies to give employees three months' notice of firings if they're replaced with workers outside the country.
Legislation that restricts job movement will hurt the U.S. economy, executives including Hewlett-Packard Chief Executive Carly Fiorina say. In a report issued last month, she and executives from seven other technology companies urged tax reductions and better schools to improve the competitiveness of U.S. industry.
``There is no job that is America's God-given right anymore,'' Fiorina said at a press conference in Washington about the report.
The Fed's McTeer also cautioned against political moves to curb sending jobs overseas. ``If we are lucky, we can get through the year without doing something really, really stupid,'' he said Thursday in response to questions at an education conference in League City, Texas.
BPO Backlash - Guest - 03-01-2004
<b>30 Little Turtles
By THOMAS L. FRIEDMAN
Published: February 29, 2004
Indians are so hospitable. I got an ovation the other day from a roomful of Indian 20-year-olds just for reading perfectly the following paragraph: "A bottle of bottled water held 30 little turtles. It didn't matter that each turtle had to rattle a metal ladle in order to get a little bit of noodles, a total turtle delicacy. The problem was that there were many turtle battles for less than oodles of noodles."
I was sitting in on an "accent neutralization" class at the Indian call center 24/7 Customer. The instructor was teaching the would-be Indian call center operators to suppress their native Indian accents and speak with a Canadian one â she teaches British and U.S. accents as well, but these youths will be serving the Canadian market. Since I'm originally from Minnesota, near Canada, and still speak like someone out of the movie "Fargo," I gave these young Indians an authentic rendition of "30 Little Turtles," which is designed to teach them the proper Canadian pronunciations. Hence the rousing applause.
Watching these incredibly enthusiastic young Indians preparing for their call center jobs â earnestly trying to soften their t's and roll their r's â is an uplifting experience, especially when you hear from their friends already working these jobs how they have transformed their lives. Most of them still live at home and turn over part of their salaries to their parents, so the whole family benefits. Many have credit cards and have become real consumers, including of U.S. goods, for the first time. All of them seem to have gained self-confidence and self-worth.
A lot of these Indian young men and women have college degrees, but would never get a local job that starts at $200 to $300 a month were it not for the call centers. Some do "outbound" calls, selling things from credit cards to phone services to Americans and Europeans. Others deal with "inbound" calls â everything from tracing lost luggage for U.S. airline passengers to solving computer problems for U.S. customers. The calls are transferred here by satellite or fiber optic cable.
I was most taken by a young Indian engineer doing tech support for a U.S. software giant, who spoke with pride about how cool it is to tell his friends that he just spent the day helping Americans navigate their software. A majority of these call center workers are young women, who not only have been liberated by earning a decent local wage (and therefore have more choice in whom they marry), but are using the job to get M.B.A.'s and other degrees on the side.
I gathered a group together, and here's what they sound like: M. Dinesh, who does tech support, says his day is made when some American calls in with a problem and is actually happy to hear an Indian voice: "They say you people are really good at what you do. I am glad I reached an Indian." Kiran Menon, when asked who his role model was, shot back: "Bill Gates â [I dream of] starting my own company and making it that big." I asked C. M. Meghna what she got most out of the work: "Self-confidence," she said, "a lot of self-confidence, when people come to you with a problem and you can solve it â and having a lot of independence." Because the call center teams work through India's night â which corresponds to America's day â "your biological clock goes haywire," she added. "Besides that, it's great."
<b>There is nothing more positive than the self-confidence, dignity and optimism that comes from a society knowing it is producing wealth by tapping its own brains â men's and women's â as opposed to one just tapping its own oil, let alone one that is so lost it can find dignity only through suicide and "martyrdom."</b>
Indeed, listening to these Indian young people, I had a dÃ©jÃ vu. Five months ago, I was in Ramallah, on the West Bank, talking to three young Palestinian men, also in their 20's, one of whom was studying engineering. Their hero was Yasir Arafat. They talked about having no hope, no jobs and no dignity, and they each nodded when one of them said they were all "suicide bombers in waiting."
What am I saying here? That it's more important for young Indians to have jobs than Americans? Never. But I am saying that there is more to outsourcing than just economics. There's also geopolitics. It is inevitable in a networked world that our economy is going to shed certain low-wage, low-prestige jobs. To the extent that they go to places like India or Pakistan â where they are viewed as high-wage, high-prestige jobs â we make not only a more prosperous world, but a safer world for our own 20-year-olds.
BPO Backlash - Guest - 03-01-2004
<b>BPO -Serving America and the West with Pleasure</b>
BPO Backlash - Guest - 03-02-2004
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->BPO -Serving America and the West with Pleasure<!--QuoteEnd--><!--QuoteEEnd-->
Well written article by Hari Sud (remember him posting at other forums) - but have a minor point he states sticks out:
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->India has to thank America for its benevolence for making it as its back office. <!--QuoteEnd--><!--QuoteEEnd-->
I don't think America is being benevolent by making India it's back office. There are other nations around which has cheaper labor more readily available.
It's all business, no benevolence or malevolence being in play here.
India is a for lack of better term "US friendly" nation with a middle class market bigger than the entire Europe! Can any US corporation can ignore that?
In India we have all these call centers equipped with Compaqs and Dells made in USA. IT powerhouses are using hardware and software from Intel, Microsoft, Sun, IBM, Cisco kept cool by Carrier air-conditioners. Indians watch news on CNN, CNBC and relax to Hollywood movies along with syndicated shows like 'Simpsons', 'Sienfield', or the cable channels such as HBO, Discovery etc. Youngsters wearing Nike, Reebok, Levis eat out at Dominos, McDonalds, TGIF, Ruby Tuesday, Baskin Robbins while washing down gallons of Coke, Pepsi, RC Cola, Tropicana! Ford cars are being finaced via US institutions like Morgan Stanley, Merrill Lynch, GE (Consumer). Indians vacation to distant places flying on those Boeings, using Samsonite baggage packed with P&G soaps or shampoos, Revelon stuff, Kodak cameras.
A question: how many of those calls being answered by those Indian call center guys are generated in India itself?