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BPO Backlash - Guest - 03-03-2004

Just FYI to fellow IF members. Please be on lookout for some statistics that point out how many companies have implemented automated-customer-service systems. You know the ones where they say "ok what do you want to do?" and you are supposed to SAY "Pay bills". What kind of money are we talking about ?

Many thanks in advance..


BPO Backlash - Guest - 03-03-2004

Two Faces of Lou Dobbs

By James K. Glassman Published 03/02/2004

I wonder whether the friends of Lou Dobbs on the protectionist Left -- folks like Rich Trumka of the AFL-CIO and Rep. Sherrod Brown of Ohio -- know that, at the same time the CNN anchor is pushing for restrictions on trade practices like outsourcing and demanding that the President's top economic advisor be fired, he's also praising "George Bush [for] ushering in the greatest economic boom since Ronald Reagan in 1982."

Even more surprising, Dobbs is telling investors to buy shares of companies like Boeing and Washington Mutual -- both on his most-wanted list of firms guilty of "exporting America."

According to Dobbs's website (, Boeing and Washington Mutual are among more than 200 companies confirmed as "either sending American jobs overseas, or choosing to employ cheap overseas labor, instead of American workers."

Evildoers on the list also happen to the most innovative job-creators in America. A TCS study last week found that, over the past year, a portfolio of all 216 publicly traded stocks in what we call the Dobbs Rogue Fund increased 72 percent in value over the past 12 months, compared with 39 percent for the benchmark S&P 500.

I learned about Dobbs's comments on Bush and on the stocks last week when my spam-blocking software failed to deflect an e-mail that featured a picture of Dobbs and the headline, "Frankly, I am very concerned about you."

Uh-oh, I thought. Dobbs and I had tangled on his TV show last month on the issue of outsourcing or offshoring -- also known as trade. Now, he is worried about my health or sanity. In fact, it turned out to be a mass-mailing. He is "very concerned" about thousands of people because they aren't scoring enough profits in the stock market.

Meanwhile, Dobbs has been campaigning nightly against the practice of U.S. companies hiring the best-quality labor and capital at the lowest cost. The guy has an economics degree from Harvard, but he evidently missed the classes on Adam Smith and David Ricardo, who, 200 years ago, understood that trade benefits both parties in the transaction.

In an editorial last week, The Economist criticized demagogic presidential candidates and worried that, while trade is continually under attack, today's "bogus new condition…is proving far more potent in political terms than any of the others."

The Economist also noted: "The media are simply lapping it up. CNN's flagship business-news programme, Lou Dobbs Tonight, which you might expect to strive for economic literacy, has embarked on a rabidly anti-trade editorial agenda, with its host greeting every announcement of lost jobs as akin to a terrorist assault."

Actually, Dobbs only acts like an anti-trade zealot in public. In private, where he is appealing to subscribers to the Lou Dobbs Money Letter, a "private and confidential market report," he carries a different tune entirely.

In fact, it was the Money Letter (which "normally costs $199 a year, but "you can snap up a trial subscription…at just $99.95) that was the subject of the appeal, dated Feb. 28, 2004, which found its way to my e-mail box.

Dobbs is reluctant to give away too many of his stock tips, but he rhapsodizes about Boeing, which he counts among his "big wins" of 2003. (By the way, a chart shows that Boeing was up only 23 percent, which is six points less than the S&P; hardly a big win.) For 2004, he sees Boeing, "a huge winner." Why? In part, because "Boeing is a deeply idealistic company." Why it is included among the bad actors that are exporting America, he does not say.

In the e-mail appeal, he also praises General Electric and, especially, Washington Mutual -- both on the evildoer list. He writes, "We own Washington Mutual because of its leadership, innovation, its relentless building of shareholder value…. I could go on and on." No mention here about how Washington Mutual "ships American jobs overseas," in the parlance of the Dobbs show. (Full disclosure: I myself own shares of GE and Washington Mutual.)

As for the economic policies of the Bush Administration, which Dobbs decries to the masses practically every weeknight: again, the approach is quite different in the more exclusive subscription appeal.

"Investors," writes Dobbs, "often misled by the chronically liberal media, are making a huge mistake right now. They are underestimating the good that George Bush is doing for the economy….

"Listen to me, please, because this is news you won't ever hear on any TV station." (Certainly, not on the Dobbs CNN show.)

He continues, "George Bush had bad timing. The economy he inherited was a clunker. But the boom he has created is truly one he can take credit for. And it will likely propel him into a second term with a landslide vote of confidence." (Are you listening, Rich Trumka?)

Dobbs calls the impending boom "the Bush Bonanza." Why is it happening? "President Bush's business policy for 2004-2008 can be summed up in 4 words: Let Business Do Business!"

Does that include hiring software engineers in India if it will increase profits at home? Dobbs does not say, but the clear implication is that people who can pay up for his newsletter are worthy of the kind of "economic literacy" (in The Economist's words) that's lacking on the TV show.

The subscriber appeal mentions Dobbs's personal relationships with top CEOs, but the highest praise is reserved for Jack Welch, the retired leader of GE. "Long before I counted Jack as a friend," writes Dobbs, "I counted him in that rare group of great leaders."

I agree, but I wonder what Welch thinks of Dobbs these days.

In an interview in the March 8 issue of Business Week, Welch vigorously defends outsourcing, an endeavor in which GE has long indulged -- to the great benefit of its employees and shareholders. Bangalore, India, for example, is the site of the John Welch Research Center, which employs 1,400 researchers, one-third of them with PhDs.

Why, Welch is asked by BW, is this "good for America"?

"There is enormous intellectual capital that's being poured back into the U.S. by these ties," says Welch. "These engineers [in India] are making the engineers in Schenectady [N.Y.] -- where the numbers haven't fallen off - more productive."

An editorial later in the issue carries the headline, "Outsourcing: Stop the Hysteria." It concludes, "The Democratic Presidential candidates should knock off the rhetoric of economic fear and offer plans to deal with the reality of America's economic future. Voters deserve it."

TV viewers deserve it, too, but right now, Dobbs provides the economic reality only to his newsletter readers, who, for the privilege, have to pay $199 a year ($99.95 if you act now!).

BPO Backlash - Guest - 03-04-2004

My old company's experiences are nearly similar.

Lesson in India: Not every job translates overseas

SCOTT THURM, The Wall Street Journal
Wednesday, March 3, 2004

(03-03) 06:42 PST (AP) --

When sales of their security software slowed in 2001, executives at ValiCert Inc. began laying off engineers in Silicon Valley to hire replacements in India for $7,000 a year.

ValiCert expected to save millions annually while cranking out new software for banks, insurers and government agencies. Senior Vice President David Jevans recalls optimistic predictions that the company would "cut the budget by half here and hire twice as many people there." Colleagues would swap work across the globe every 12 hours, helping ValiCert "put more people on it and get it done sooner," he says.

The reality was different. The Indian engineers, who knew little about ValiCert's software or how it was used, omitted features Americans considered intuitive. U.S. programmers, accustomed to quick chats over cubicle walls, spent months writing detailed instructions for overseas assignments, delaying new products. Fear and distrust thrived as ValiCert's finances deteriorated, and co-workers, 14 times zones apart, traded curt e-mails. In the fall of 2002, executives brought back to the U.S. a key project that had been assigned to India, irritating some Indian employees.

"At times, we were thinking, 'What have we done here?' " recalls John Vigouroux, who joined ValiCert in July 2002 and became chief executive three months later.

Shifting work to India eventually did help cut ValiCert's engineering costs by two-thirds, keeping the company and its major products alive -- and saving 65 positions which remained in the U.S. But not before ValiCert experienced a harrowing period of instability and doubt, and only after its executives significantly refined the company's global division of labor.

The successful formula that emerged was to assign the India team bigger projects, rather than tasks requiring continual interaction with U.S. counterparts. The crucial jobs of crafting new products and features stayed in Silicon Valley. In the end, exporting some jobs ultimately led to adding a small but important number of new, higher-level positions in the U.S.

In February 2003, ValiCert agreed to be acquired by Tumbleweed Communications Corp., a maker of antispam software with its own offshore operation in Bulgaria. Today, the combined Tumbleweed is growing, and again hiring software architects in Silicon Valley with six-figure salaries, as well as engineers overseas. Without India, Mr. Vigouroux says, "I don't know if we'd be around today."

ValiCert's experience offers important insights into the debate over the movement of service jobs to lower-cost countries, such as India. Such shifts can save companies money and hurt U.S. workers. But the process is difficult, and the savings typically aren't as great as a simple wage comparison suggests. Some jobs cannot easily or profitably be exported, and trying to do so can risk a customer backlash: In recent months, Dell Inc. and Lehman Brothers Holdings Inc., for example, moved several dozen call-center and help-desk jobs back to the U.S., after employee and customer complaints.

Founded in 1996, ValiCert specializes in software to securely exchange information over the Internet. Banks use ValiCert's software to safeguard electronic funds transfers, health insurers to protect patient medical records. Although still unprofitable, ValiCert conducted an initial public offering in July 2000, in the dying embers of the dot-com boom. In two months, the stock doubled to $25.25.

In 2001, however, sales growth slowed, as corporate customers reduced technology purchases. ValiCert had projected that it would break even with quarterly revenue of $18 million, according to Srinivasan "Chini" Krishnan, founder and then-chairman. Quarterly expenses had grown to $14 million, but revenue was stalled at less than half that figure. Executives began considering shifting work to India. The "motivation was pure survival," says Mr. Krishnan, who left the company after the Tumbleweed merger.

India was a natural choice because of its large pool of software engineers. Moreover, both Mr. Krishnan and ValiCert's then-head of engineering grew up in India and were familiar with large tech-outsourcing firms.

Some, including Mr. Jevans, harbored doubts. The Apple Computer Inc. veteran says he preferred "small teams of awesome people" working closely together. Nonetheless, that summer, ValiCert hired Infosys Technologies Ltd., an Indian specialist in contract software-programming, to supply about 15 people in India to review software for bugs, and to update two older products.

With no manager in India, ValiCert employees in the U.S. managed the Infosys workers directly, often late at night or early in the morning because of the time difference. ValiCert also frequently changed the tasks assigned to Infosys, prompting Infosys to shuffle the employees and frustrating ValiCert's efforts to build a team there.

Within a few months, ValiCert abandoned Infosys and created its own Indian subsidiary, with as many as 60 employees. Most employees would be paid less than $10,000 a year. Even after accounting for benefits, office operating costs and communications links back to the U.S., ValiCert estimated the annual cost of an Indian worker at roughly $30,000. That's about half what ValiCert was paying Infosys per worker, and less than one-sixth of the $200,000 comparable annual cost in Silicon Valley.

To run the new office in India, ValiCert hired Sridhar Vutukuri, an outspoken 38-year-old engineer who had headed a similar operation for another Silicon Valley start-up. He set up shop in January 2002 in a ground-floor office in bustling Bangalore, the tech hub of southern India. The office looked much like ValiCert's California home, except for the smaller cubicles and Indian designs on the partitions. There were no savings on the rent. At $1 a square foot, it matched what ValiCert paid for its Mountain View, Calif., home offices, amid a Silicon Valley office glut.

Misunderstandings started right away. U.S. executives wanted programmers with eight to 10 years of experience, typical of ValiCert's U.S. employees. But such "career programmers" are rare in India, where the average age of engineers is 26. Most seek management jobs after four or five years. Expertise in security technology, key to ValiCert's products, was even rarer.

By contrast, Mr. Vutukuri quickly assembled a group to test ValiCert's software for bugs, tapping a large pool of Indian engineers that had long performed this mundane work.

But the Indian manager heading that group ran into resistance. It was ValiCert's first use of code-checkers who didn't report to the same managers who wrote the programs. Those U.S. managers fumed when the team in India recommended in June 2002 delaying a new product's release because it had too many bugs.

By midsummer, when Mr. Vutukuri had enough programmers for ValiCert to begin sending bigger assignments to India, U.S. managers quickly overwhelmed the India team by sending a half-dozen projects at once.

Accustomed to working closely with veteran engineers familiar with ValiCert's products, the U.S. managers offered only vague outlines for each assignment. The less-experienced Indian engineers didn't include elements in the programs that were considered standard among U.S. customers. U.S. programmers rewrote the software, delaying its release by months.

In India, engineers grew frustrated with long silences, punctuated by rejection. Suresh Marur, the head of one programming team, worked on five projects during 2002. All were either cancelled or delayed. Programmers who had worked around the clock for days on one project quit for new jobs in Bangalore's vibrant market. Of nine people on Mr. Marur's team in mid-2002, only three still work for ValiCert. "The first time people understand," he says. "The second time people understand. The third time it gets to be more of a problem."

In the U.S., executives lurched from crisis to crisis, as ValiCert's revenue dipped further. Each quarter brought more layoffs. By year end, the California office, which once employed 75 engineers, was reduced to 17; the India office, meanwhile, swelled to 45. Engineers "felt the sword of Damocles was swinging above their cube," recalls John Thielens, a product manager.

Executives knew they could save more money by exporting more jobs. But they were developing a keener sense of how critical it was to keep core managers in the U.S. who knew ValiCert, its products, and how they were used by customers. "Even if you could find someone" with the right skills in India, says Mr. Krishnan, the ValiCert founder, "it wouldn't make business sense to move the job."

Frustrations came to a head in September 2002, when a prospective customer discovered problems with the log-on feature of a ValiCert program. The anticipated purchase was delayed, causing ValiCert to miss third-quarter financial targets. The India team had recently modified the program, and the glitch prompted U.S. managers to question ValiCert's entire offshore strategy.

Relations had long been strained between the U.S. and Indian product teams. John Hines, the Netscape Communications Corp. veteran who headed the tight-knit U.S. product team, thrives on quick responses to customer requests. As his team shrank to six engineers from 20, Mr. Hines was assigned three engineers in India. But he viewed the Indians' inexperience, and the communication delays, as more a hindrance than a help. "Things we could do in two days would take a week," he says.

Mr. Vigouroux, who became CEO in October 2002, admits to a touch of "panic" at this point. ValiCert's cash was running low. "We didn't have a lot of time," he says. He conferred with Mr. Hines, who said he wanted to be rid of India, even if it meant a smaller team. Mr. Vigouroux agreed to rehire one engineer in California. When he learned of the decision, Mr. Vutukuri says he felt as if he had failed.

By contrast, Matt Lourie, who heads ValiCert's other big programming group, welcomed additional help in India. He was struggling to keep pace with customer demands for new features on his product and new versions for different types of computers.

At the same time, ValiCert executives were streamlining operations and changing how they divided work between California and India. They gave the India team entire projects -- such as creating a PC version of a program initially built for bigger workstations -- rather than small pieces of larger projects. U.S. managers began writing more detailed specifications for each assignment to India.

ValiCert also killed its three smallest-selling products to focus resources on the remaining two. To improve morale in the U.S., Mr. Vigouroux crowded the remaining employees into one corner of the half-vacant office and installed a ship's bell that he rang each time ValiCert recorded $10,000 in revenue. He made sure the India employees received company-wide e-mails, and conducted multiple sessions of monthly employee meetings so the India group could listen at a convenient hour. Engineering-team leaders began conferring twice a week by telephone, shifting the time of the calls every six months so that it's early morning in one office and early evening in the other.

Toward the end of 2002, Mr. Vigouroux began to ring the bell daily, as customers such as Washington Mutual Inc. and MasterCard International Inc. purchased ValiCert's software.

By early the next year, ValiCert executives believed the company had stabilized. Revenue increased to $3 million in the fourth quarter of 2002, up 27 percent from the previous quarter. Expenses declined, and the company neared profitability. Investors detected a pulse, and the stock rose to 46 cents on the Nasdaq Stock Market at the end of January, from a low of 20 cents in August 2002.

But with just $3 million in cash, ValiCert remained precarious. Mr. Vigouroux started meeting with potential new investors and began talks with Tumbleweed CEO Jeffrey C. Smith.

Tumbleweed also had been through significant layoffs and retrenchment, and in February 2003, the companies agreed to merge. The combined Redwood City, Calif., company's 150 engineers today are almost evenly divided among California, the Tumbleweed operation in Bulgaria, and the India office started by ValiCert. In Bulgaria, engineers write and test software, and scan millions of e-mails daily for traces of spam. In India, engineers test software, fix bugs and create new versions of one product. Last September, Tumbleweed released its first product developed entirely in India, a program that lets two computers communicate automatically and securely. Mr. Marur's team had worked on it for over for 18 months.

Core development for new products remains in California, where engineers are closer to marketing teams and Tumbleweed's customers. Since July, Mr. Lourie's U.S. team has grown to nine engineers, from six.

Tumbleweed's fourth-quarter revenue grew 69 percent from a year earlier, as its net loss shrank to $700,000, and cash increased by $2.4 million. Shares have risen five-fold in the past year.

Brent Haines, 36, is a new hire. He joined in October as a $120,000-a-year software architect, charged largely with coordinating the work of the U.S. and India teams. That often means exchanging e-mail from home with engineers in India between 11 p.m. and 3 a.m. California time, as Mr. Haines reviews programming code and suggests changes. Such collaboration requires extensive planning, he says, "something very unnatural to people in software."

"Nine months ago, people would have said (moving offshore) was the biggest ... disaster," says Mr. Thielens, the product manager. "Now we're starting to understand how we can benefit."

BPO Backlash - Guest - 03-04-2004

<b>18 REASONS TOM PETERS LOVES OUTSOURCING</b> <!--emo&:clapping--><img src='style_emoticons/<#EMO_DIR#>/clap.gif' border='0' style='vertical-align:middle' alt='clap.gif' /><!--endemo-->

l. "One Singaporean worker costs as much as three in Malaysia, eight in Thailand, thirteen in China, eighteen in India."

( Strait Times )

2. "The proper role of a healthily functioning economy is to destroy jobs and put labor to use elsewhere. Despite this truth, layoffs and firings will always sting, as if the invisible hand of enterprise has slapped workers in the face."

(Joseph Schumpeter, economist)

Outsourcing is good for the US! Outsourcing is bad for the US! The debate goes in even as 50 US senators plan to introduce a bill in the US Congress denying federal aid to companies that offshore work to cheaper climes. Here's management guru Tom Peters's take on the inevitability, pitfalls and matchless opportunities of outsourcing.

Peters has not tried to propound his views on outsourcing with lengthy discussions. He has put forward his observations, 18 of them, to explain his views.

First of all, he says "off-shoring" will continue; the tide cannot be reversed.

He rightly points out that service jobs are a bigger issue than manufacturing jobs, by sheer magnitude.

The automation of business processes, according to him, is as big a phenomenon in job shrinkage as off-shoring.

We are in the middle of a once every hundred years' (or so) productivity burst -- which is good for us ... in the long haul, says Peters.

Job churn is normal and necessary: The more the better ... in the long haul, he says.

He says the Americans' "unearned wage advantage" could be erased ... permanently.

One of the biggest challenges of the coming days is going to be the entry of 2.5 billion people from China and India into the global economy at an accelerating rate. The result is almost unfathomable, and will throw up exceptional challenges as well as amazing opportunities.

Outsourcing shouldn't be curbed as Peters feels that Free trade works. in his own words: "It makes the world a safer place ... in the long haul. The process is not pretty at times. (Sometimes long times.) Those who dutifully followed yesterday's rules yet are displaced must be helped when the rules change. Such help must not be in perpetuity -- it demands a sunset date."

Big companies are off-shoring almost exclusively in pursuit of efficiency and shareholder value enhancement. Big companies do not create jobs, and historically have not created jobs. Big companies are not "built to last;" they almost inexorably are "built to decline."

Job creation is entrepreneurially led, especially by the small fraction of "start-ups" that become growth companies (Microsoft, Amgen, FedEx et al.); hence entrepreneurial incentives including low capital-gains taxes and high R&D supports are a top priority.

Primary and secondary education must be reformed, in particular to underscore creativity and innovation -- the mainstays of high-value added products and services. Children should be nurtured on risk-taking, with a low expectation of corporate cosseting.

Future success rests upon ... excellence in Innovation. Hence, among other things, research universities must be vigorously supported.

National/global protection of intellectual capital-property is imperative.

All economic progression is a matter of moving up the "value-added chain." The good news: Technology change is so vigorous for the foreseeable future that those who can "seize the moment" have lots of room to play.

Worker benefits (health care, re-training credits, pensions) should be portable, to induce rather than impede labour mobility, says Peters.

Workers have the ultimate stake. And thus the ultimate personal responsibility. "Workers"/we/all must "re-imagine" ourselves -- take the initiative to create useful global skills, not imagine that large employers or powerful nations will protect us from the current (and future!) labour market upheavals.

Cheers <!--emo&:beer--><img src='style_emoticons/<#EMO_DIR#>/cheers.gif' border='0' style='vertical-align:middle' alt='cheers.gif' /><!--endemo-->

BPO Backlash - Guest - 03-05-2004

FWIW, CNBC in the US will be having special snippets on Outsourcing all day friday March 05,2004

BPO Backlash - Guest - 03-06-2004

The Senate today adopted an amendment by Sen. Chris Dodd to restrict the use of federal taxpayer funds to pay for work done by overseas workers.

As a stand-alone, Dodd's original bill introduced in the Senate on Feb. 12, 2004...

- as S.2094 and known as "The U.S. Workers Protection Act of 2004" -

...would have likely hung in Congressional hearings, would never have been voted on during this congressional session. It might have been dommed. As it was, there were no co-sponsors of the S.2094 bill.

Consequently, yesterday, Senator Dodd introduced - and fought vigorously for - this to be passed in the Senate (through roll call vote) as an amendment to Senate Bill S.1637. This afternoon, it passed 70-26!

The purpose of S.1637 - the bill amended by Senator Dodd's amendment - is to:

a.. amend the Internal Revenue Code of 1986 to comply with the World Trade Organization rulings on the FSC/ETI benefit in a manner that preserves jobs and production activities in the United States, to reform and simplify the international taxation international rules of the United States, and for other purposes.
S.1637 is a bill that is expected to be voted on - and passed - soon. It's been under consideration since its introduction by Senator Grassley (IA) last September. It is expected to be passed to meet our country's requirements to be compliant with WTO rulings. Non-compliance has resulted in our country having had to pay some very steep fines.

Dodd's staff has just confirmed that the wording and intent of the original stand-alone S. 2094 bill has not been compromised. The original intent was summarized to be:

1. To make permanent a one year restriction - set to expire in September of 2004 - barring federal agencies from privatizing federal jobs using contractors who employ overseas workers.
2. To prohibit federal agencies from awarding procurement contracts to companies that use overseas workers, on their own payroll or through subcontractors.
3. To require state agencies to prove they will not use services performed outside the United States before being awarded federal funds for state projects (to that agency) .

The original bill - S.2094 - is found at


Read on if you want more information!

a.. Dodd's original stand-alone bill - S.2094 - is found at
b.. Here's a link for a news article just out about the acceptance of this amendment today : .

Here's even more information on the bill amended and on Dodds' amendment to that bill!


S.1637(FSC/ETI) - the Senate bill now under further consideration and amended today as by Dodd's S.AMDT.2660


Title: A bill to amend the Internal Revenue Code of 1986 to comply with the World Trade Organization rulings on the FSC/ETI benefit in a manner that preserves jobs and production activities in the United States, to reform and simplify the international taxation rules of the United States, and for other purposes.
Sponsor: Sen Grassley, Charles E. [IA] (introduced 9/18/2003) Cosponsors: 8
Latest Major Action: 3/3/2004 Senate floor actions. Status: The committee substitute as amended agreed to by Unanimous Consent.
COSPONSORS(8), ALPHABETICAL [followed by Cosponsors withdrawn]: (Sort: by date)

Sen Baucus, Max - 9/18/2003 [MT]
Sen Cantwell, Maria - 10/21/2003 [WA]
Sen Chafee, Lincoln D. - 10/22/2003 [RI]
Sen Daschle, Thomas A. - 9/29/2003 [SD]
Sen Graham, Bob - 9/22/2003 [FL]
Sen Hatch, Orrin G. - 9/18/2003 [UT]
Sen Murray, Patty - 9/29/2003 [WA]
Sen Smith, Gordon - 9/24/2003 [OR]

Sen Kerry, John F. - 9/30/2003(withdrawn - 10/15/2003) [MA]



S.AMDT.2660 - Dodd's amendment accepted now to amend Senate bill S.1637(FSC/ETI), a bill now under Senate consideration

S.AMDT.2660 S.AMDT.2660
Amends: S.1637
Sponsor: Sen Dodd, Christopher J. [CT] (submitted 3/3/2004) (proposed 3/3/2004)
To protect United States workers from competition of foreign workforces for performance of Federal and State contracts.



Amendment SA 2660 proposed by Senator Dodd.

Sen Coleman, Norm - 3/3/2004 [MN]
Sen Kennedy, Edward M. - 3/3/2004 [MA]
Sen Corzine, Jon - 3/3/2004 [NJ]
Sen Mikulski, Barbara A. - 3/3/2004 [MD]
Sen Feingold, Russell D. - 3/3/2004 [WI]

Amends: S.1637
Sponsor: Sen Dodd, Christopher J. [CT] (submitted 3/3/2004) (proposed 3/3/2004)
To protect United States workers from competition of foreign workforces for performance of Federal and State contracts.



Amendment SA 2660 proposed by Senator Dodd.

Sen Coleman, Norm - 3/3/2004 [MN]
Sen Kennedy, Edward M. - 3/3/2004 [MA]
Sen Corzine, Jon - 3/3/2004 [NJ]
Sen Mikulski, Barbara A. - 3/3/2004 [MD]
Sen Feingold, Russell D. - 3/3/2004 [WI]

BPO Backlash - Guest - 03-08-2004

"If you're going to talk about competition, you should have no fear —
may the best man win."

Indians say they are doing exactly what the United States wanted, and
bridle at the new criticism as a double standard.

While Indian officials have decided that their best strategy is to let
American corporations fight the political battle in the United States,
they cannot resist the occasional rhetorical flare-up. "Those who
lecture about free trade," Mr. Shourie said, "should practice it."
By AMY WALDMAN, New York Times

India has finally arrived on the global economic scene. Unfortunately,
like a debutante suddenly told she is wearing the wrong dress, it is
not exactly the triumph India imagined.

In recent weeks, the outsourcing of white-collar service jobs to places
like this financial capital on the Arabian Sea has become the focus of
the American presidential campaign, the brunt of jokes on late-night
shows, the subject of angry Web sites, and the target of legislation in
more than 20 states and Washington.

Long caricatured in many American minds as home only to snake charmers
and poor people, India is now being caricatured as a nation of
predatory brains set on stealing American jobs.

The strong reaction to the shifting of jobs is spawning frustration in
India, a country the United States was cheering not so long ago as it
began to open a largely socialist, closed economy and enter the global
arena. It is also surfacing as a potential irritant in relations between
the countries. Indians say they are doing exactly what the United
States wanted, and bridle at the new criticism as a double standard.

"The U.S. is propagating capitalism — we don't really understand why
they are so scared," said Ravi Shankar, 36, an employee of Tata
Consultancy Services, India's largest technology services company. "If you're
going to talk about competition, you should have no fear — may the best
man win."

But now India's pride has become America's pain. Over the last decade,
riding technology advances, India's engineers and English-speaking
college Graduates have been taking on more work — from credit-card
complaints to software programming to research for American companies half a
world away.

The uproar over outsourcing shows no signs of abating, because
outsourcing itself is only likely to grow. India's success has both contributed
to and coincided with stagnating employment in the United States. Both
countries face elections this year. As a result, an issue that would
largely be confined to corporate America has become politicized and
emotional. "India has joined the ranks of other big job thieves — Japan,
China and Mexico," the Indian magazine Outlook wrote this week, citing a
"barely concealed racism" in Internet debates. Senator John Kerry, the
likely Democratic nominee for president, has called chief executives who
shift work abroad "Benedict Arnolds."

"Whenever such issues are taken up in competitive politics, the economy
suffers," said Arun Shourie, India's minister for disinvestment,
communications and information technology. He has spent the last two years
fighting to privatize India's bloated state-owned enterprises, facing
fierce political opposition along the way.

Indeed, the furor in the United States is highlighting India's own
ambivalence toward the economic reforms that began here in the early
1990's. The competitiveness of India's new industries stands in sharp
contrast to the high tariffs and red tape that still shelter many other parts
of the economy.

American officials have repeatedly expressed frustration at the
relatively low level of American imports to India. While total exports from
American companies to India grew to $4.1 billion in 2002 from $2.5
billion in 1990, the United States still has a trade deficit of about $9
billion with India. On a visit to New Delhi in February, United States
Trade Representative Robert B. Zoellick cited India's high tariffs — like a
38 percent applied agriculture tariff, which is three times as much as
America's. "We want to keep our markets open," he said, "but to do so
we need to be able to open markets abroad."

His comments were interpreted here as evidence that the Bush
administration would seek to use the reaction toward India as a lever to pry open
wider India's economy.

Mr. Shourie said that when India finally opened its agriculture
markets, it would affect "millions of people" — far more than are being
affected by India's success in information technology. "If the United States
feels we must understand their political compulsions," he asked, "why
is it that American politicians or trade negotiators sitting at the
table would not understand our political difficulties?"

He worries, he said, that the reaction in the United States will
strengthen the opponents of India's own economic reforms. "It gives a very
strong handle to persons in India who oppose opening up," he said.

Indians say that the beneficiaries of outsourcing are far fewer than
Americans realize. Well under a million people work in information
technology services. Most of India's population of more than a billion, still
largely rural, has never heard of outsourcing or benefited from it.
Unemployment in India — far higher than in the United States — is at its
highest level in decades, many economists say. Officially pegged at 7
percent, with more than 40 million registered job seekers last year, the
real unemployment rate is probably three times that, economists say.

Vivek Paul, vice chairman of the Bangalore-based Wipro Technologies,
calls it "perceptual amplification."

"If three million jobs have been lost in the U.S., and 100,000 jobs
created in India, every one of those three million thinks, `That's my
job,' " he said.

The danger is that anger in the United States will affect relations
with India that otherwise have only deepened in recent decades. There are
nearly two million Indian-Americans in the United States today — with
the highest income of any ethnic group — and India is the second largest
country for legal migration to the United States, after Mexico.

The United States now has more foreign students from India — more than
70,000 — than from any other country, and the information technology
industry itself seems to represent a sort of synergy, with many Indians
working in Silicon Valley, and innovation flowing both ways.

That spirit is showing strains. While Indian officials have decided
that their best strategy is to let American corporations fight the
political battle in the United States, they cannot resist the occasional
rhetorical flare-up. "Those who lecture about free trade," Mr. Shourie said,
"should practice it."

But not everyone here cheers India's new identity as what Babu P.
Ramesh, writing in the Economic and Political Weekly, called "one of the
prominent electronic housekeepers to the world." Indians say they face the
same forces churning the American job market. As the use of information
technology increases here, so, too, will the labor displacement that
America has experienced. And over time, many of the jobs that have come
to India could move on. As new competition emerges from other countries,
Mr. Paul of Wipro said, "we'll have to swallow the same medicine of

BPO Backlash - Guest - 03-08-2004

Small and Smaller
By THOMAS L. FRIEDMAN, The New York Times
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Jerry Rao wants to do your taxes.

Ah, you say, you've never heard of Jerry Rao, but the name sounds
vaguely Indian. Anyway, you already have an accountant. Well, Jerry is
Indian. He lives in Bangalore. And, you may not know it, but he may already
be your accountant.

"We have tied up with several small and medium-size C.P.A. firms in
America," explained Mr. Rao, whose company, MphasiS, has a team of Indian
accountants able to do outsourced accounting work from across the U.S.
All the necessary tax data is scanned by U.S. firms into a database
that can be viewed from India. Then an Indian accountant, trained in U.S.
tax practices, fills in all the basics.

"This is happening as we speak — we are doing several thousand
returns," said Mr. Rao. American C.P.A.'s don't even need to be in their
offices. They can be on a beach, said Mr. Rao, "and say, `Jerry, you are
particularly good at doing New York returns, so you do Tom's returns." He
adds, "We have taken the grunt work" so U.S. accountants can focus on
customer service and thinking creatively about client needs.

Mr. Rao's ability to service U.S. accounts this way is at the core of a
business revolution that has happened over the past few years. I
confess: I missed this revolution. I was totally focused on 9/11 and Iraq.
But having now spent 10 days in Bangalore, India's Silicon Valley, I
realize that while I was sleeping, the world entered the third great era of

The first era, from the late 1800's to World War I, was driven by
falling transportation costs, thanks to the steamship and the railroad. That
was Globalization 1.0, and it shrank the world from a size large to a
size medium. The second big era, Globalization 2.0, lasted from the
1980's to 2000, was based on falling telecom costs and the PC, and shrank
the world from a size medium to a size small. Now we've entered
Globalization 3.0, and it is shrinking the world from size small to a size
tiny. That's what this outsourcing of white-collar jobs is telling us — and
it is going to require some wrenching adjustments for workers and
political systems.

Globalization 3.0 was produced by three forces: First is the massive
installation of undersea fiber-optic cable and bandwidth (thanks to the
dot-com bubble) that have made it possible to globally transmit and
store huge amounts of data for almost nothing. Second is the diffusion of
PC's around the world. And third (what I missed most) is the convergence
of a variety of software applications — from e-mail, to Google, to
Microsoft Office, to specially designed outsourcing programs — that, when
combined with all those PC's and bandwidth, made it possible to create
global "work-flow platforms."

These work-flow platforms can chop up any service job — accounting,
radiology, consulting, software engineering — into different functions and
then, thanks to scanning and digitization, outsource each function to
teams of skilled knowledge workers around the globe, based on which team
can do each function with the highest skill at the lowest price. Then
the project is reassembled back at headquarters into a finished product.

Thanks to this new work-flow network, knowledge workers anywhere in the
world can contribute their talents more than ever before, spurring
innovation and productivity. But these same knowledge workers will be under
more pressure than ever to constantly upgrade their skills in this
Darwinian environment.

"We created a worldwide network which connected all the resource pools
on the planet, and suddenly we changed the rules of the game," said
Nandan Nilekani, C.E.O. of the Indian software giant Infosys — which last
year received nearly one million applications from Indian techies for
9,000 software jobs. You cannot wish away this new era of globalization,
he added. "It will not go away."

So now I wonder: when they write the history of the world 20 years from
now, and they come to this chapter — Sept. 11, 2001, to March 2004 —
what will they say was most important? The attack on the World Trade
Center and the Iraq war? Or, as Mr. Rao suggests, the convergence of PC's,
telecom and work-flow software into a tipping point that allowed India
to become part of the global supply chain for services the way China
had become for manufacturing — creating an explosion of wealth in the
middle classes of the world's two biggest nations, India and China, and
giving both nations a huge new stake in the success of globalization. I


BPO Backlash - Guest - 03-08-2004

Cross posting from another thread:



The Secret of Our Sauce

Published: March 7, 2004

Yamini Narayanan is an Indian-born 35-year-old with a Ph.D. in
economics from the University of Oklahoma. After graduation, she worked for a
U.S. computer company in Virginia and recently moved back to Bangalore
with her husband to be closer to family. When I asked her how she felt
about the outsourcing of jobs from her adopted country, America, to her
native country, India, she responded with a revealing story:

"I just read about a guy in America who lost his job to India and he
made a T-shirt that said, `I lost my job to India and all I got was this
[lousy] T-shirt.' And he made all kinds of money." Only in America, she
said, shaking her head, would someone figure out how to profit from his
own unemployment. And that, she insisted, was the reason America need
not fear outsourcing to India: America is so much more innovative a
place than any other country.

There is a reason the "next big thing" almost always comes out of
America, said Mrs. Narayanan. When she and her husband came back to live in
Bangalore and enrolled their son in a good private school, he found
himself totally stifled because of the emphasis on rote learning - rather
than the independent thinking he was exposed to in his U.S. school.
They had to take him out and look for another, more avant-garde private
school. "America allows you to explore your mind," she said. The whole
concept of outsourcing was actually invented in America, added her
husband, Sean, because no one else figured it out.

The Narayanans are worth listening to at this time of rising insecurity
over white-collar job losses to India. America is the greatest engine
of innovation that has ever existed, and it can't be duplicated anytime
soon, because it is the product of a multitude of factors: extreme
freedom of thought, an emphasis on independent thinking, a steady
immigration of new minds, a risk-taking culture with no stigma attached to
trying and failing, a noncorrupt bureaucracy, and financial markets and a
venture capital system that are unrivaled at taking new ideas and turning
them into global products.

"You have this whole ecosystem [that constitutes] a unique crucible for
innovation," said Nandan Nilekani, the C.E.O. of Infosys, India's
I.B.M. "I was in Europe the other day and they were commiserating about the
400,000 [European] knowledge workers who have gone to live in the U.S.
because of the innovative environment there. The whole process where
people get an idea and put together a team, raise the capital, create a
product and mainstream it - that can only be done in the U.S. It can't
be done sitting in India. The Indian part of the equation [is to help]
these innovative companies bring their products to the market quicker,
cheaper and better, which increases the innovative cycle there. It is a
complimentarity we need to enhance."

That is so right. As Robert Hof, a tech writer for Business Week,
noted, U.S. tech workers "must keep creating leading edge technologies that
make their companies more productive - especially innovations that
spark entirely new markets." The same tech innovations that produced
outsourcing, he noted, also produced eBay,, Google and thousands
of new jobs along with them.

This is America's real edge. Sure Bangalore has a lot of engineering
schools, but the local government is rife with corruption; half the city
has no sidewalks; there are constant electricity blackouts; the rivers
are choked with pollution; the public school system is dysfunctional;
beggars dart in and out of the traffic, which is in constant gridlock;
and the whole infrastructure is falling apart. The big high-tech firms
here reside on beautiful, walled campuses, because they maintain their
own water, electricity and communications systems. They thrive by
defying their political-economic environment, not by emerging from it.

What would Indian techies give for just one day of America's rule of
law; its dependable, regulated financial markets; its efficient,
noncorrupt bureaucracy; and its best public schools and universities? They'd
give a lot.

These institutions, which nurture innovation, are our real crown jewels
that must be protected - not the 1 percent of jobs that might be
outsourced. But it is precisely these crown jewels that can be squandered if
we become lazy, or engage in mindless protectionism, or persist in
radical tax cutting that can only erode the strength and quality of our
government and educational institutions.

Our competitors know the secret of our sauce. But do we?


BPO Backlash - Guest - 03-08-2004

<b>Bush Seeks to Use Backlash on Jobs As Lever on India</b>


The Bush administration hopes to use the American backlash against job outsourcing to press India into concessions in other trade disputes, but New Delhi is resisting.

U.S. Trade Representative Robert Zoellick challenged Indian officials to lower trade barriers as a strategy to help defuse the U.S. jobs-protection debate raging in Congress and American state capitals. To keep U.S. markets open to India, New Delhi "has to open" its markets, he said.

The U.S. wants India to reduce its agricultural and industrial tariffs and quotas, liberalize its government-procurement rules and stiffen its intellectual-property protection. These have been longtime U.S. goals, but the Bush administration is betting India might be more amenable to doing so if it will stave off American legislative proposals to limit the flow of U.S. jobs to India.

Last year, trade between the two countries totaled $18 billion. India, which is about the 19th largest trading partner of the U.S., had an $8 billion trade surplus with the U.S. last year, a 50% increase from five years earlier.

The U.S. Senate put more muscle behind Mr. Zoellick's warning on Thursday, when it approved a measure that would impose restrictions on government contractors to discourage companies from outsourcing American jobs overseas. The ban wouldn't apply to countries that have signed an international accord liberalizing government-procurement rules, but India and China haven't signed that pact.

The Bush administration hasn't backed any proposals to limit outsourcing of U.S. jobs, but still to be considered are dozens of bills in Washington and in state legislatures that further aim to hinder U.S. companies from outsourcing computer-programming, accounting and medical work to India.

For the moment, India is resisting the U.S. gambit and is threatening to increase its own pressure on Washington. Senior Indian officials led by Commerce Minister Arun Jaitley say that unless the U.S. ensures the free flow of service jobs abroad, India might try to stall resumption of global trade talks. Restarting the talks is a top Bush administration goal.

"I can't help but observe that this step has created an adverse environment in India with regards to the entire trade talks," Mr. Jaitley said last week. The Indian minister is a leader of the bloc of developing countries that helped torpedo world trade talks in Cancun, Mexico, last year.

Cutting agricultural tariffs and quotas would be difficult for India, Mr. Jaitley said, especially if the U.S. doesn't take steps to remove what he calls "trade-distorting subsidies" for American farmers.

Since it won independence in 1947, India has used trade policy to protect its hundreds of millions of subsistence farmers. Mr. Zoellick said India's tariffs on farm goods are as high as 112%, or more than 10 times the level in the U.S.

Mr. Jaitley stressed that India has been opening its long-shuttered economy. Recently, New Delhi slashed tariffs on consumer and industrial goods and raised ceilings on foreign investment in the banking and oil sectors. Still, after aggressively cutting tariffs on products such as cellphones and computers, overall industrial tariffs in India remain at 20%, compared with 3% in the U.S.

In the past decade, India has developed a substantial information-processing industry, with its success dependent on well-educated, inexpensive labor. U.S. information-technology businesses employ about 250,000 workers in India, either directly or in subcontracted work, based on economists' estimates.

Total world-wide revenue from India's exports of software and services continues to surge. Revenue growth of 26% to $12 billion is expected for the year ending March 31, according to New Delhi's National Association of Software and Service Companies, an industry lobbying group also known as Nasscom.

Mr. Jaitley says he became concerned in January when legislation passed the U.S. Congress to bar some companies that win federal 2004 contracts from using offshore labor to perform privatized federal-government tasks. In November, India's largest software company, Tata Consultancy Services, had its contract with the state of Indiana to process unemployment claims canceled. Jonathan Swain, a spokesman for Indiana Gov. Joseph Kernan, said the contract, which is being rebid, was withdrawn from Tata because the bidding process didn't allow Indiana companies a fair chance to win the work.

Although the Bush administration didn't push the federal measure, Mr. Zoellick said the measure conformed with world trade rules and represents only a tiny part of the U.S. government's procurement. "We want to keep our markets open, but to do so we need to be able to open markets abroad," Mr. Zoellick told Indian officials during a swing through New Delhi last month. Trade is a "two-way street," he said.

The use of protectionist moves by the U.S. Congress to press nations to open their markets is a long-standing tactic by Washington negotiators. "The message is that if your market is closed, don't be surprised if our elected officials will be expected to respond to the anxieties in the work force," said former U.S. Trade Representative Carla Hills. During the first Bush administration from 1989 through 1992, she used similar tactics to press Japan for concessions on automobiles and semiconductors.

Nasscom President Kiran Karnik said that encouraging Indian companies such as Tata to invest in the U.S. would help defuse trade tension. "It's beginning to happen by a lot of Indian software companies," he said. Some Indian companies are interested in buying American software companies, he added.

Boosting investment in the U.S. was a tactic that Japan successfully used in the 1980s and 1990s to reduce U.S. trade pressure.

URL for this article:,,SB1078686...4448503,00.html

BPO Backlash - Guest - 03-09-2004

<b>The Don Quixotes ( of American politics that is ) are aiming their lances at the wrong targets, and here is my take : </b>
By Ajay Hooda
Source: Always-On

China's IT exports have crossed a billion $s. The Chinese have an ambition to overtake India (seen as a minor bump, Indian IT services market share is still in low single digits, despite all the hype) & then the US ( the real Goliath ). As is already obvious thru Chinese moves in telecom, autos and in general every thing of any import ( military & space included) , the Chinese government actively uses it's clout to shift the advantage it currently sees US enjoying, to its domain and permanently. Encourages use of open software, critical manufacturing is via joint ventures and encourages creation of own standards where ever it emerges as a market having some say.

The ease with which the US won the Afghan conflict and & Iraq war, the few casualties it took, sent shock waves of vulnerability in the Chinese establishment . The Red Army is now considered a sitting duck to the vastly superior American technology . The Chinese reaction is a plan to modernize and possibiliy match America's prowess in a couple of decades. The Middle Kingdom's ways are always well thought out, secretive and effective. Being true Samurais of Geo-politics, the Chinese bide their time and show their sword at the last moment Making it a truly decisive for the participants.

Bush dared tell the Chinese counterpart when they last met to revalue the currency, was told more jobs at risk here and will destabilize the financial system in China causing greater havoc. Was advised to look for solutions else where. Hasn't talked on those lines ever since, nor has the war Hero Kerry dared confer the "Benedict Arnold Award" on the American CEOs who with their billion of $s invested there have given China the strategic clout to wave off a Bush now, and others in the foreseeable future. I for one can't see how any of the high powered think tanks loaded with PhDs and ex-Secretaries of State and other assorted fat brains can suggest a way out of this mess. May be they don't even think that US is in a strategic quagmire created by wrong perceptions and priorities, or with no real answers, have inadvertently developed ostrich like instincts. Three million manufacturing jobs have gone to China, more will follow, and there is no US reaction to speak off , let alone a legislation that India's moderate outsourcing success has attracted right away. Could be I am wrong.

In contrast the Government of India (GOI) cast as the villain in the "Great American Outsourcing Tragedy" has never had any real plans on any thing so big . We thrive in a self created chaos.... of corruption, lawlessness, a few striving educated with a strong instinct for self preservation. For over a decade India saw its cross the border military and strategic competitor record close to 10% growth rate, to our anemic 5% ( factor in a 2% population growth and the low low per capita income of $480) . The Chinese market for almost every thing is 5 to 10 times larger, giving it a competitive advantage that India can't match easily. The GOI or the assorted political lot here are to date silent on any counter plan, and still don't have a real clue to what is happening. It is more of the entrepreneurial drive and the fortunate convergence of technology and work-flow software that has made out sourcing possible, and as we missed the manufacturing bus, the educated unemployed millions here have taken to it...and at any terms no matter what it pays. This opportunity is not open to India only. Close to 3 billion people in India, China, Eastern Europe, Russia, where ever the educated but low paid reside ...are on line and available now to the highest bidder. Moreover the Chinese have a program to teach English , touted as India's reason for the early success. We got it as a legacy of the colonial rule as the Brits needed an army of clerks to govern the teeming humanity ( and profit from it) in a land , where the dialect changes every few miles and language a few hundred.

It is only the industry here that has spoken up and taken up the Chinese challenge to some extent . It is poll time here too, and mercifully the hot air blowing lasts just 2 months. All that the GOI has managed to do is spend quite a few million rupees ( better spent else where) and claim the 8% plus GDP growth glory for it self in a "India Shining" TV & radio blitz. How very politician like.

The reality is that Indian IT companies are aligned with US IT biggies ( IBM, Oracle, Microsoft) and many a states are a part of Microsoft's e-governance & educational programs. There is how ever is a healthy debate here on whether "Word" needs to be taught or a "Word Processing Software". Nothing wrong with that I guess, as US still discusses "Creation Vs. Darwin" as options. Ford & GM own 100% of their auto ventures here in contrast to China where they have JVs with state owned corporations and fakes on the markets. India's infant BPO outsourcing has already been taken over by global giants mostly US . The IT services industry is sure to follow next if one follows the hiring figures. Foreign Institutional Investors, again mostly US are the single biggest category of investors in Indian blue chips.

China's large IT services home market and (other competition) can only with India's low wages, from here or placing Indians in China centers along with the locals . The Indians have made a start , and so far so good.

In short we compete, co-operate, let market forces operate and don't have any enunciated global ambitions.

But the universe too emerged out a chaos, or some say is the result of a grander plan. I like to believe it was the former, but then it is still an open question that forces of chaos do find equilibrium. And US & India may well too... once the Chinese ambitions are perceived as threating the media, politicains , the public a the Indian out sourcing threat is now . Let's await the Samurai unleash his gleaming sword. Right now it is being tempered and polished in the back yard for the eventuality.

And let's not expect the politician to give up their short sightedness and inflamed publics to give up their right to burn the first available witch, real or imaginary.
The Secret of Our Sauce
Bangalore is Coolie Valley, not Silicon
India Takes Economic Spotlight, and Critics Are Unkind

BPO Backlash - Guest - 03-09-2004

NY Times in 'My job went to India' shirt outrage
By Lester Haines
Posted: 09/03/2004 at 12:43 GMT

<b>We at Vulture Central were shocked this morning to read that our magnificent <i>My job went to India and all I got was this lousy t-shirt </i>had not in fact been designed here in Blighty and lovingly hand painted in Indonesia by eight-year-old children working 27-hour days for a mere $10 per week. </b> <!--emo&:o--><img src='style_emoticons/<#EMO_DIR#>/ohmy.gif' border='0' style='vertical-align:middle' alt='ohmy.gif' /><!--endemo--> <!--emo&:o--><img src='style_emoticons/<#EMO_DIR#>/ohmy.gif' border='0' style='vertical-align:middle' alt='ohmy.gif' /><!--endemo-->
In fact, according to Thomas L. Friedman of the NY Times (free registration required), this classic piece of kit is entirely the product of American entrepreneurial spirit in the face of adversity. Here's how:

Yamini Narayanan is an Indian-born 35-year-old with a Ph.D. in economics from the University of Oklahoma. After graduation, she worked for a U.S. computer company in Virginia and recently moved back to Bangalore with her husband to be closer to family. When I asked her how she felt about the outsourcing of jobs from her adopted country, America, to her native country, India, she responded with a revealing story:

"I just read about a guy in America who lost his job to India and he made a T-shirt that said, `I lost my job to India and all I got was this [lousy] T-shirt.' And he made all kinds of money." Only in America, she said, shaking her head, would someone figure out how to profit from his own unemployment. And that, she insisted, was the reason America need not fear outsourcing to India: America is so much more innovative a place than any other country.

Only in America? This is the most outrageous slur on the Bulldog Spirit it has ever been our unhappy duty to report upon. If there is one nation which can get a laugh and a few bucks out of misfortune, it's Britain. And God knows, we've had enough practice.

Indeed, if there were an all-out nuclear war tomorrow, some Brit would have written a sitcom about it by Friday and be flogging compilation DVDs of series one by Monday.

Until that happy opportunity arises, we will content ourselves with making hard cash out of the employment misfortune of others. Sure, your job went to Bangalore, but just be grateful that you live in a country where such a setback is seen as both a cause for laughter and a marketing opportunity - rather than a disaster.

To sum up - the t-shirt in question is <b>as British as Rolls-Royce, the doner kebab and chicken tikka masala</b> <!--emo&:o--><img src='style_emoticons/<#EMO_DIR#>/ohmy.gif' border='0' style='vertical-align:middle' alt='ohmy.gif' /><!--endemo--> . Enough said. ®

BPO Backlash - Guest - 03-12-2004

<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->On one occasion, the Mulla borrowed a large cooking pot from his next-door neighbor. When returning it, he placed a smaller cooking pot inside the borrowed one. The neighbor reminded him that the smaller pot did not belong to him; he had lent the large one. The Mulla replied that in fact it did belong to him. He explained, “While your pot was with me, one night it gave birth to a baby pot.” The neighbor did not object to that.

A few days later, the Mulla again borrowed his neighbor’s cooking pot, but this time never returned it. When the neighbor came asking for his pot, the Mulla told him that he could not have it back. “Your pot had died soon after I borrowed it,” he said.

At first, the neighbor thought the Mulla was joking. But soon he grew irate when he found that the Mulla was sticking to his narrative. The Mulla tried to calm his neighbor, “If your pot could give birth to a baby, why couldn’t it die?”

Notes: The social sciences have invented some quite improbable stories to push the agenda of their clients: privileged classes, ‘races,’ and countries. Occasionally, these narratives are applied only partially.<b> The rich countries tout free markets for their capital, but rigorously protect their own labor</b>.



BPO Backlash - Guest - 03-12-2004

From the NY Times. FYI:

<b>The Great Indian Dream</b>

Published: March 11, 2004


Nine years ago, as Japan was beating America's brains out in the auto
industry, I wrote a column about playing a computer geography game with my
daughter, then 9 years old. I was trying to help her with a clue that
clearly pointed to Detroit, so I asked her, "Where are cars made?" And she
answered, "Japan." Ouch.

Well, I was reminded of that story while visiting an Indian software design
firm in Bangalore, Global Edge. The company's marketing manager, Rajesh
Rao, told me he had just made a cold call to the vice president for
engineering of a U.S. company, trying to drum up business. As soon as Mr.
Rao introduced himself as calling from an Indian software firm, the U.S.
executive said to him, "Namaste" - a common Hindi greeting. Said Mr. Rao:
"A few years ago nobody in America wanted to talk to us. Now they are
eager." And a few even know how to say hi in proper Hindu fashion. So now I
wonder: if I have a granddaughter one day, and I tell her I'm going to
India, will she say, "Grandpa, is that where software comes from?"

Driving around Bangalore you might think so. The Pizza Hut billboard shows
a steaming pizza under the headline "Gigabites of Taste!" Some traffic
signs are sponsored by Texas Instruments. And when you tee off on the first
hole at Bangalore's KGA golf course, your playing partner points at two new
glass-and-steel buildings in the distance and says: "Aim at either
Microsoft or I.B.M."

How did India, in 15 years, go from being a synonym for massive poverty to
the brainy country that is going to take all our best jobs? Answer: good
timing, hard work, talent and luck.

The good timing starts with India's decision in 1991 to shuck off decades
of socialism and move toward a free-market economy with a focus on foreign
trade. This made it possible for Indians who wanted to succeed at
innovation to stay at home, not go to the West. This, in turn, enabled
India to harvest a lot of its natural assets for the age of globalization.

One such asset was Indian culture's strong emphasis on education and the
widely held belief here that the greatest thing any son or daughter could
do was to become a doctor or an engineer, which created a huge pool of
potential software technicians. Second, by accident of history and the
British occupation of India, most of those engineers were educated in
English and could easily communicate with Silicon Valley. India was also
neatly on the other side of the world from America, so U.S. designers could
work during the day and e-mail their output to their Indian subcontractors
in the evening. The Indians would then work on it for all of their day and
e-mail it back. Presto: the 24-hour workday.

Also, this was the age of globalization, and the countries that succeed
best at globalization are those that are best at "glocalization" - taking
the best global innovations, styles and practices and melding them with
their own culture, so they don't feel overwhelmed. India has been naturally
glocalizing for thousands of years.

Then add some luck. The dot-com bubble led to a huge overinvestment in
undersea fiber-optic cables, which made it dirt-cheap to transfer data,
projects or phone calls to far-flung places like India, where Indian
techies could work on them for much lower wages than U.S. workers. Finally,
there was Y2K. So many companies feared that their computers would melt
down because of the Year 2000 glitch they needed software programmers to go
through and recode them. Who had large numbers of programmers to do that
cheaply? India. That was how a lot of Indian software firms got their first
outsourced jobs.

So if you are worried about outsourcing, I've got good news and bad news.
The good news is that a unique techno-cultural-economic perfect storm came
together in the early 1990's to make India a formidable competitor and
partner for certain U.S. jobs - and there are not a lot of other Indias out
there. The bad news, from a competition point of view, is that there are
555 million Indians under the age of 25, and a lot of them want a piece of
"The Great Indian Dream," which is a lot like the American version.

As one Indian exec put it to me: The Americans' self-image that this tech
thing was their private preserve is over. This is a wake-up call for U.S.
workers to redouble their efforts at education and research. If they do
that, he said, it will spur "a whole new cycle of innovation, and we'll
both win. If we each pull down our shutters, we will both lose."

BPO Backlash - Guest - 03-12-2004

Chairman Alan Greenspan has noted that, over the next 15 years, at least 3.3 million jobs and $136 billion in wages will move to Asia.

<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->American math education is in trouble. Many of our children will be ill-prepared for the high-paying yet demanding jobs in the workforce they soon will enter. Federal Reserve Chairman Alan Greenspan has noted that, over the next 15 years, at least 3.3 million jobs and $136 billion in wages will move to Asia.

Our education system does not produce students sufficiently versed in mathematics to stem this flow. In some groups, the result is catastrophic: For example, 97 percent of African American high-school seniors test "not proficient" in algebra, according to the federal Department of Education's National Assessment of Educational Progress. Robert Moses, founder of the Algebra Project, speaks of algebra as a civil-rights battleground: Students who don't have good skills are ineligible for well-paying jobs. Under these circumstances, the American ideal of equal opportunity totters and good jobs leave the country for other shores.

To change this, we must have resources for schools -- particularly in California, which is well below the national median in per-pupil school expenditures. But to justify needed increases, and to use them wisely, we need to know what helps students learn. Assessment -- literally, "sitting by," watching what's being done -- is crucial to finding out what students have learned and how to improve their learning.

Assessment has always played a big role in the classroom, from one-on-one discussions between student and teacher to quizzes, exams and homework. Such assessments, done well, contribute richly to learning. But there's a new element: high-stakes testing, mandated by local, state or federal government to reward and punish schools or regulate graduation. These tests occur more and more frequently, and teachers must bow to them. The higher the stakes, the more such tests dominate the curriculum. As physicist and educator Hugh Burkhardt likes to say, "It's WYTIWYG: What You Test Is What You Get."

What should be taught and tested? That surprisingly controversial question lies behind the so-called "math wars" that have troubled educational discussions and impeded progress for years, perhaps worst of all in California. The sides are sometimes called "conservative" and "progressive." Extreme conservatives ridicule progressives for doing fuzzy math ("Insisting on correct answers and learned skills stunts creativity"). Extreme progressives castigate conservatives as wanting only "drill and kill" -- where multiplication tables and definitions are memorized and repeated without any attention to the understanding or flexible use of the concepts behind them. ("Ours is not to reason why, just invert and multiply.")

In reality, there is much agreement. A "Draft Disarmament Treaty for the Math Wars," circulated by Phil Daro, executive director of the University of California's New Standards Project, might show the way. As it asserts, students should learn to:

-- add, subtract, multiply and divide integers, decimals and fractions accurately and efficiently without calculators;

-- understand the mathematics they study and use;

-- use the mathematics they know to solve problems with calculators and computers;

-- be fluent with the symbolic language of algebra, and understand how to use the basic laws of algebra when solving mathematics problems; and

-- explain and justify their claims and critically evaluate the reasoning of others.

In addition, students and teachers need better resources. Two important examples:

-- All students should have copies of basic instructional materials (textbooks, handouts, etc.) to take home.

-- Math teachers should continue to learn mathematics throughout their careers.

Parents, teachers, mathematics educators, psychometricians and research mathematicians must work together to solve the problems of American math education. Only then can we feel we've done our best to support our kids as they face the challenges of global competition.

David Eisenbud is director of the Mathematical Sciences Research Institute (, a research organization in Berkeley that sponsored a conference earlier this week on assessing students' knowledge of math.


BPO Backlash - Guest - 03-12-2004

Why is ABV playing on backfoot here

GoI should place full page ad in major newspapers and billboards across every foreign consulates of George Fernandes sipping Coca Cola <!--emo&Wink--><img src='style_emoticons/<#EMO_DIR#>/wink.gif' border='0' style='vertical-align:middle' alt='wink.gif' /><!--endemo-->

<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->NEW DELHI - India's prime minister on Friday defended  <!--emo&:o--><img src='style_emoticons/<#EMO_DIR#>/ohmy.gif' border='0' style='vertical-align:middle' alt='ohmy.gif' /><!--endemo-->  job outsourcing to India, saying that it would eventually create more employment in the United States, not less.

Prime Minister Atal Bihari Vajpayee's mention of what he called the "strange controversies" generated over the issue came days after remarks critical of India by U.S. Trade Representative Robert Zoellick over the outsourcing issue.

<b>On Tuesday, Zoellick told the U.S. Senate Finance Committee that India has no right to oppose U.S. curbs on outsourcing because it maintains "one of the most closed economies in the world</b>."

Outsourcing is the relocation of American jobs to lower-paid workers in different parts of the world. India has been one of the biggest winners  <!--emo&:o--><img src='style_emoticons/<#EMO_DIR#>/ohmy.gif' border='0' style='vertical-align:middle' alt='ohmy.gif' /><!--endemo-->  <!--emo&:o--><img src='style_emoticons/<#EMO_DIR#>/ohmy.gif' border='0' style='vertical-align:middle' alt='ohmy.gif' /><!--endemo-->  of the process , which has created an outcry in the United States.

Seeking to cut costs, companies from the United States and other Western countries have hired about 170,000 workers in India over the past few years for jobs such as payroll accounting, telemarketing and customer support services. The figure is expected to reach 1.1 million by 2008, industry groups say.

"Outsourcing makes businesses more competitive, increasing their exports and their profits and placing more investment surpluses in their hands which can be deployed to make more jobs," Vajpayee said.

"The world has spent the last decade trying to make sensible economics prevail over the temptation for short-term political gains," he said in an address to business leaders and opinion makers.

India's government says the United States should not lecture New Delhi about opening its markets when it is trying to block outsourcing.

"The very process of liberalization, on which we have been lectured for so many years, has created competitive skills which are available for utilization by business everywhere," Vajpayee said. "Outsourcing is a natural consequence of this process."

Legislation awaiting presidential approval would prohibit government contractors from shifting work overseas.

Experts say the U.S. legislation would have little impact, since less than 2 percent of India's $10 billion annual software export revenue comes from government-related projects.

Still, the outsourcing issue is generating an image of India as a job-snatcher, especially in the United States.

"The Indians have absolutely no right to complain because they don't belong to the government procurement code" <!--emo&:o--><img src='style_emoticons/<#EMO_DIR#>/ohmy.gif' border='0' style='vertical-align:middle' alt='ohmy.gif' /><!--endemo-->  in the World Trade Organization (news - web sites), which sets obligations for making procurement deals transparent," Zoellick said at the Senate hearing. "And, frankly, they're not that liberal on the services side."   Huh

BPO Backlash - acharya - 03-13-2004

If one can should register for this.

Subject: [SDForum]

Federal IT Market Briefing: Understanding the
Department of the Navy and DoD Marketplace
Federal IT Market Briefing: Understanding the Department of the Navy
DoD Marketplace
Thursday, April 22 2004, 8:00 AM - 12:00 PM
Registration Time : 8:00 AM
Silicon Valley Conference Center - San Jose

Event Co-Sponsor
Information Technology Association Of America (ITAA)

Key Note Speaker:
Mr. David M. Wennergren, U.S. Department of the Navy CIO

Program Highlights

U.S. Department of the Navy CIO, Mr. David M. Wennergren, will present
*The IT priorities of the U.S. Navy and other agencies of the
U.S. Department of Defense
*How Silicon Valley companies can take advantage of those
opportunities, including how to best approach government customers
*Which technologies are being used and which are needed
*Leading Government Market Analyst Kevin Plexico of INPUT will
provide the most up-to-date information on current federal spending and
the outlook for IT spending by the US government, with a special
focus on DoD and the Department of Homeland Security. Selected IT
company executives, who have successfully developed business
relationships with DoD will share their insights based on their

Keynote Speaker Bio
Mr. David M. Wennergren serves as the Department of the Navy Chief
Information Officer (DON CIO). Reporting directly to the Secretary of
the Navy, he provides top-level advocacy in the development and use of
information management/information technology (IM/IT) and creation of a
unified IM/IT vision for the Navy - Marine Corps team. He develops
strategies, policies, plans, architectures, standards, guidance, and
process reinvention support for the entire Department of the Navy.
Additionally, he ensures the development and acquisition of IT systems
are interoperable and consistent with the Department's vision. Mr.
Wennergren is the Department's eGovernment and Knowledge Management
champion, serves as the IM/IT workforce leader, addresses emerging
technologies and issues, ensures the availability, integrity and
protection of the Department's information systems, and serves as the
Department's Critical Infrastructure Assurance Officer (CIAO). In
addition to his duties as CIO, Mr. Wennergren is the Chair of the
Department of Defense Smart Card Senior Coordinating Group, where he is
responsible for the deployment of smart card technology, including the
Common Access Card, across the entire Department of Defense. He also
serves as the co-chair of the Federal CIO Council Best Practices


Silicon Valley Conference Center
2161 North First Street
(located on eBay's new north San Jose campus)
San Jose, California
$45 SDForum, ITAA Members
$60 Non-members

To register by phone, call (408) 494-8378.
To register on-line, visit the link below.

BPO Backlash - acharya - 03-13-2004

Outsourcing: what to do?As more U.S. companies move jobs overseas, debate rages on answers to a divisive issue.March 1, 2004: 5:42 PM EST By Mark Gongloff, CNN/Money staff writerNEW YORK (CNN/Money) -

If you haven't turned on a TV or read a magazine or a newspaper recently, you probably haven't heard that your job is moving overseas. Odds are, it's not, of course. But a growing number of jobs are, and many of them are higher-skilled jobs that once seemed immune to outsourcing.U.S. companies moving jobs offshore has helped keep the job market in its most painful slump since World War II, creating tremendous worry for millions of workers and triggering a vigorous national debate about how best to respond.Here are some of the more common proposals, along with some of the arguments for and against:Scrap WTO, trade pactsSome people argue the United States should simply pull out of the World Trade Organization, NAFTA and other world trade pacts, a view proposed by three candidates for president: Rep. Dennis Kucinich, D-Oh., Rev. Al Sharpton and Ralph Nader."The WTO, as long as we belong to it, will not let us protect the jobs," Kucinich said in a debate last week. "This is the reason why we have outsourcing going on right now. We can't tax it. We can't put tariffs on it."Kucinich says he would withdraw from most existing trade agreements and negotiate new agreements on a case-by-case basis, requiring trading partners to meet certain environmental, labor and human rights standards.Critics say similar protectionist steps have led to slower economic growth and would likely do so again."We need reforms that will enable us to thrive in a dynamic, open, world market and not seek to shut our borders and go down a path proven to lead to reduced national wealth and overall lower standards of living," said Aaron Lukas, a trade policy analyst at the Cato Institute, a libertarian think tank.Of course, none of the proponents of these measures are likely to become president this year, and such proposals would be unlikely to pass Congress.Other Democrats, including Sen. John Kerry, the leader in the race to face President Bush this fall, and his closest rival, Sen. John Edwards, suggest less drastic measures, including greater enforcement of existing trade pacts.Protect government contractsEspecially loathsome to opponents of outsourcing is the idea of federal and state governments sending jobs overseas, right alongside "Benedict Arnold" companies, as Kerry calls them.In that vein, Congress in January passed a law requiring that government functions shifted to contractors had to go to contractors in the United States. In Indiana and New Jersey this year, two state government contracts to move call-center work offshore were canceled under political pressure. And dozens of anti-outsourcing bills await action in federal and state legislatures.Critics of the bills say they would save just a handful of jobs and cost millions of dollars to taxpayers, potentially doing more harm than good."There's a hidden cost that can play out," said Stuart Anderson, executive director of the National Foundation for American Policy (NFAP), a pro-trade group. These measures can discourage foreign investment in the states that enact them, leading to job losses that "far outweigh the number of jobs saved at some call center in New Jersey or Indiana."Slow visa entriesTemporary work visas for high-skilled foreign workers also irritate outsourcing opponents. Not only do they take jobs from U.S. workers in the short run, but visa holders sometimes return home and make future offshore outsourcing even easier for U.S. companies."I find it rather ironic that people who claim to wear the free market mantle would turn around and support government meddling in the marketplace of labor -- right now we have the government encouraging people to dump their cheap labor here," said Scott Kirwin, founder of the Information Technology Professionals Association of America (ITPAA), a worker's rights group.Supporters say many visa holders end up staying in the United States, helping U.S. companies develop new technologies that create jobs and becoming consumers in the broader domestic economy."I find it ironic that some of the same folks against jobs going overseas also don't want people to come here who would be benefiting and creating more jobs in the United States," said the NFAP's Anderson.Caller IDSen. Kerry and other outsourcing critics also want to require workers in overseas call centers to reveal their location in service calls.Not only would such a measure carry on the spirit of the existing requirement to mark foreign-made goods with their country of origin, it might also allow customers to decide whether they want to discuss personal information with a call-center worker in, say, Vietnam, where privacy laws may not be as stringent as they are in the United States.Opponents say this will hurt how call-center workers do their jobs, meaning the U.S. companies using those centers will have to pay more for their services.Compromise alternatives could be to pass measures that would ensure the privacy and security of customers' information.Helping displaced workersIt's all well and good to discuss the long-term economic benefits of trade, as most economists do. But those arguments ring hollow with the millions of workers who will be unemployed or have lower standards of living while they wait for those benefits to come to fruition."People lose in trade, and because our social safety nets here are so thin to begin with, the resistance is greater than it is in some of the other industrial countries," Lael Brainard, a senior fellow at the Brookings Institution, a left-leaning Washington think tank, said in a January speech on outsourcing.Some possible solutions include increased unemployment insurance, wage insurance, and a system that would let workers carry health benefits from job to job.Such measures would require government spending, and so are viewed with some skepticism by conservatives -- but they're likely to be politically popular, and conservatives don't dismiss them out of hand."We have to acknowledge that individuals can face transition costs when trade barriers come down," said Lukas of the Cato Institute.EducationLukas and like-minded conservatives, including President Bush and Fed Chairman Alan Greenspan, believe an even better response is to improve grade-school education and spend government money retraining workers at community colleges."The capacity of workers, after being displaced, to find a new job that will eventually provide nearly comparable pay most often depends on the general knowledge of the worker and the ability of that individual to learn new skills," Greenspan told Congress last month.While almost everyone agrees that U.S. grade-school education could be better, some critics doubt education is the only answer to outsourcing, noting many unemployed workers already have advanced degrees.In January, for example, there were more unemployed workers 25 or older with college degrees than there were unemployed workers without high school diplomas, according to the latest Labor Department data."No one criticizes the higher education system here -- that's why we still draw as many foreign students as we do," said Kirwin of the ITPAA. "Most of the jobs we're sending abroad currently require a college education just to get in the door.

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Tech outsourcing: Here to stayDespite some alarmist talk about moving jobs overseas, outsourcing will remain a hot tech trend.January 19, 2004: 9:57 AM EST By Paul R. La Monica, CNN/Money Senior WriterThis story was originally published in October, 2003.NEW YORK (CNN/Money) -- Executives at some of the nation's biggest technology companies have been talking tough when it comes to the touchy topic of losing jobs to companies in other countries.In a speech in New York this month, Intel CEO Craig Barrett said India, China and Russia were emerging as big threats, due to their strong education systems.Barrett stressed that the United States needs to improve its own system, adding that the government should spend more on research and development to protect the nation's lead in technology -- which has long been a source of growth for the world's largest economy.Intel (INTC: Research, Estimates) Chairman Andy Grove made similar comments in a speech last week.And earlier this year, Cisco Systems (CSCO: Research, Estimates) CEO John Chambers said if U.S. tech companies were forced to expense stock options for employees, that could curtail the use of options at home and send skilled workers overseas in search of potentially lucrative options packages.But U.S. tech companies may be overstating the threat from foreign companies. Many of these same companies are choosing to outsource to take advantage of lower labor costs in other countries.Laurence Gordon, vice president of marketing at Cognizant Technology Solutions (CTSH: Research, Estimates), a software and consulting firm that specializes in offshore outsourcing, said that labor costs for workers in India are often a tenth of what equivalently skilled workers would make in the United States. Most of Cognizant's employees are based in India.And few see any slowdown in overseas outsourcing, especially since technology is making it easier to have workers in remote locations working together."There's no difference sending work from San Francisco to San Jose over the Internet than sending it from Bangalore to San Jose over the Internet," said John Challenger, CEO of outplacement firm Challenger, Gray & Christmas. "So there is going to be declining pay for technology workers in a global marketplace."According to tech research firm Gartner, 10 percent of info tech jobs with U.S.-based tech companies will be based in countries in emerging markets by the end of 2004.Trend is not going awayThe trend isn't new and may be overstated.For example, a spokeswoman for Cisco points out that more than 70 percent of its employees are based in the United States. For its part, Intel has moved about 500 jobs -- less than 1 percent of its domestic work force -- to other countries over the last two years, a spokeswoman said.Michael Mahoney, managing director of EGM Capital, a hedge fund focusing on technology, said that tech jobs were being shipped overseas during the bull market of the late 1990s but since the overall unemployment rate was much lower, nobody cared.He thinks that once the labor market picks up, assuming it does, worries about a tech "job crisis" will fade. He notes it's unlikely that Washington will move to limit or ban outsourcing, despite calls from some federal and state lawmakers to do so."Anybody who thinks the federal government is going to do anything to reverse the outsourcing trend is smoking dope," said Mahoney.Jeroen Tas, president and vice chairman of Mphasis, another IT outsourcing firm in India, said his company is sensitive to the issue but adds people need to realize that U.S. firms are choosing to outsource in order to cut costs and retain an edge."This is not a zero-sum game," said Tas. "Ultimately, it makes U.S. companies more competitive."

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Protectionism: all talk, no actionJob-saving protectionist proposals are mostly hot air -- and that's a good thing, economists say.October 13, 2003: 5:09 PM EDT By Mark Gongloff, CNN/Money Staff WriterNEW YORK (CNN/Money) - Amid the jobless economic recovery in the United States, President Bush and politicians from both major parties are trumpeting protectionist measures they promise will save jobs. But analysts say these measures are precisely the wrong medicine for the world's largest economy -- and say chances are they won't be passed anyway.Though the latest recession was declared over in November 2001 by the gurus at the National Bureau for Economic Research, the job market never got the message -- one million jobs have been lost since then. Many of them have gone overseas, as manufacturers and some service providers have taken advantage of low labor costs in places like China, India and the Phillippines."Of the 2.7 million jobs lost since employment's peak, roughly a third have been lost to overseas competition, and most if not all of those jobs are not coming back," Mark Zandi, chief economist at, told CNNfn Friday. "And that trend is going to continue."Meanwhile, a weak Chinese currency is often blamed for the continuing deterioration of the U.S. manufacturing sector, by keeping Chinese-made goods cheap relative to U.S.-made goods. And the situation is only getting worse; the Commerce Department said last week that the goods deficit with China grew to a monthly record of $11.7 billion in August.The low price of manufactured goods from overseas also has pushed inflation lower, raising fears of a potential "deflationary" spiral, in which prices fall, corporate profits sink and the economy suffers.Election year prompts posturingAs a result, President Bush, up for re-election in 2004, has put pressure on China to float its currency, the yuan, which the Chinese government keeps virtually on par with the dollar.Democratic presidential candidates have called for tougher labor standards in China and other U.S. trading partners. And several protectionist bills -- such as the Currency Harmonization Initiative through Neutralizing Action (CHINA) Act of 2003, which would slap tariffs on Chinese imports if China doesn't float its currency -- have been introduced in Congress."We simply cannot allow countries like China, to continue their illegal, anti-free market trade practices," Rep. Mark Green (R-Wis.), one of the CHINA Act's sponsors, said at a recent Congressional hearing. "Their practices are costing us jobs."All of this sort of talk makes economists, who favor free trade, very nervous."Protectionist sentiment in a slow-growth economy in the leadup to an election tops our worry list," David Rosenberg, chief North American economist at Merrill Lynch said recently, citing Green's comment and some of the bills floating through Congress.Economists generally believe that unfettered trade improves living standards around the world, in part by keeping prices low and allowing for the free exchange of ideas and capital.In a more practical sense, protectionism could impact economic activity in the near term, some economists say. Their fear is that pending bills such as the American Manufacturing Jobs Retention Act of 2003, which would force U.S. employers to keep half their work force in the United States, could undercut corporate profits and lead to even more U.S. layoffs."The U.S. body politic is now taking dead aim at China, making it the poster child for the latest outbreak of scapegoatism," Morgan Stanley chief economist Stephen Roach, who has testified before Congress about these issues, said in a recent research note. "The risk is that the blame game won't stop there. America's multinational corporations could well be next in line..."All talk, no actionFortunately -- or unfortunately, depending on your perspective -- few of these protectionist measures seem likely to pass, according to many political analysts."Are there any real protectionist proposals that have chance of enactment? No," said Greg Valliere, political economist at Charles Schwab Washington Research. "The most negative thing I would say is that the prospects for further trade liberalization are not great, but what we've got in place will stay in place."For one thing, some of the protectionist measures on the table would violate America's international trade agreements and invite massive retaliation from trading partners, said former Treasury Department official Jeffrey Schott, now a senior fellow at the Institute for International Economics and the author of several books on trade."Many of the bills that have been introduced are designed only to send a strong signal, both to our trading partners and to [the president]," Schott said. "Most are not designed to be implemented into law."What's more, the Bush administration's recent experiment in protectionism, a steel tariff imposed in March 2002, has had only mixed results at best. It may have helped steel producers in Pennsylvania and West Virginia -- states with critical electoral votes for Bush's re-election effort -- but U.S. steel users say they have suffered from it, resulting in thousands of additional job cuts."The government should have learned its lesson from steel tariffs -- they were a big disaster," said Matthew Ellis, an economist at Wachovia Securities. "I don't think these protectionist measures will be passed."Ellis and other economists believe the only right medicine for the U.S. economy and the millions of U.S. workers displaced by the movement of jobs overseas is patience. Though things look bleak now, they say, the U.S. economy has undergone such massive changes before, shifting from agriculture to manufacturing early in the 20th century and from manufacturing to information in the late 20th century.As painful as those changes were in the short term, they eventually raised standards of living. The key, many economists believe, is to make sure the American work force is well-educated and able to take advantage of the next big shift in the economy."To stop globalization would be the exact wrong thing to do; we have to embrace what's happening," said Zandi of "It's in place and will remain in place. We need to help [unemployed workers], make them better trained and skilled so they can get better jobs."

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No fix for manufacturingEconomists doubt the Bush administration's efforts will fix a sector long in decline.September 3, 2003: 11:28 AM EDT By Mark Gongloff, CNN/Money Staff WriterNEW YORK (CNN/Money) - The Bush administration has launched a campaign to recover some of the millions of U.S. manufacturing jobs that have been lost in recent years, but many economists believe these efforts will be futile; most of these jobs are simply never coming back. "I understand for a full recovery, to make sure people can find work, that manufacturing must do better," Bush told a crowd of workers in Richfield, Ohio, in a Labor Day speech. "And we've lost thousands of jobs in manufacturing."Actually, since March 2001, when the National Bureau of Economic Research said the latest recession began, manufacturing has lost 2.3 million jobs, making up the bulk of the 2.7 million total jobs the economy has lost.But manufacturing layoffs began long before the recession; since hitting its latest peak in March 1998, manufacturing employment has shrunk by 3 million jobs. In fact, the number of people employed in manufacturing in July 2003 -- 14.6 million -- was almost exactly the same as the number employed in manufacturing in July 1945.In his speech, Bush cited the steady outflow of manufacturing jobs overseas, especially to China, where labor costs are cheap, and he called for a "fair playing field when it comes to trade" -- a not-so-subtle call for China to float the value of its currency, the yuan, which is now tied to the U.S. dollar and may be undervalued by as much as 40 percent.U.S. manufacturers say this imbalance keeps Chinese goods cheaper, making them more competitive overseas and putting U.S. exports at a disadvantage."It is time for the administration to get tough with the Chinese," Jerry Jasinowski, president of the National Association of Manufacturers, said last week.Thanks in part to such pressure from U.S. companies, Treasury Secretary John Snow went to Beijing this week to ask China's government to float the yuan.Reports have varied about the success of Snow's mission, but they haven't exactly been good. The Wall Street Journal said China was unlikely to float its currency at all, while the Associated Press and the Washington Post said China had promised to make its currency more flexible -- some day -- but offered no timetable for doing so.But, as the Bush administration is probably aware, China was never going to cut its currency completely loose right away, owing to the massive disruption such a move might cause."If China was to completely get rid of its currency peg, and the yuan became completely convertible, it would fall under pressure," said Ashraf Laidi, chief currency analyst at MG Financial Group in New York. "It would become another Thai baht," a currency that was slammed by speculative selling in 1997, causing a crisis that spread to other Asian nations.Scapegoating ChinaInstead, Laidi and other analysts said, China is more likely to build up its financial markets through liberalization and slowly give its currency more rope.As part of the requirement for its entry into the World Trade Organization, China already is required to enact some trade reforms by 2005, which should help liberalize its markets. That liberalization could be accompanied by some currency reform, which could be at least help the rest of the world's economy a little bit, according to some analysts."China has a depressing effect on prices across the globe, partly because of the currency undervaluation," said Anindya Chatterjee, emerging markets strategist at Ltd. "Affecting the currency will change the cost of capital and labor."Other analysts aren't so sure. In a July research note entitled "The Scapegoating of China," Morgan Stanley chief economist Stephen Roach said China's real strengths lie in its infrastructure, its quality control, its "passion for and commitment to reform" and other assets unrelated to currency value."I honestly believe that if China were to revalue [its currency] upward by 10 percent -- a change I do not expect nor advise -- its exports would suffer minimal loss of market share," Roach said.Policy misdirection?In his Labor Day speech, Bush also promised the creation of at least one guaranteed new U.S. job -- an assistant secretary at the Commerce Department to focus on manufacturing, "to make sure our manufacturing job base is strong and vibrant."Commerce Secretary Don Evans is scheduled to release details of the administration's plan to fix manufacturing on Sept. 15, but the Washington Post reported Wednesday that there are "hints" it will be little more than a repackaging of some older policy proposals.In any event, it seems unlikely the administration will be able to reverse the steady decline of manufacturing as a function of the total U.S. economy -- in 1946, 32 percent of all U.S. jobs were in manufacturing. Now, just 12 percent are in factories.( In early 1900s a quarter of Population was employed in Agriculture vs one fortieth in late 20th century approx 2% population with more than enough to feed US and rest of the world! – Sundar)Some of this has to do with China and other sources of cheap labor, but much of it has to do with productivity gains, or the ability of factories to use technology to make more goods with fewer workers. Though the process is painful now, economists said, it should pay off in higher standards of living in the future."As we learned in Economics 101, a declining manufacturing sector is part of the normal process as an economy develops," Wachovia Securities economist Matthew Ellis wrote in a recent research note that called for policy makers to focus on re-training workers and avoid protectionist policies -- such as last year's steel tariff -- that could be harmful in the long run.

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Intel: U.S. could lose tech edgeCEO Barrett outlines initiatives that the U.S. must take to maintain tech supremacy.October 3, 2003: 11:32 AM EDT By Paul R. La Monica, CNN/Money Senior WriterNEW YORK (CNN/Money) - Intel CEO Craig Barrett says the U.S. government needs to do more to support the struggling U.S. technology industry in order to stave off competition from emerging markets such as China and India. Although the world's largest semiconductor company increased its sales outlook for the third quarter in August, citing signs of improved demand for desktop and notebook computers, Barrett did not sound incredibly upbeat about the U.S. tech sector's future in a keynote address to the Executive Council of New York's Ten Awards Thursday evening.Barrett, quoting New York Yankee Hall of Famer Yogi Berra, said "the future ain't what it used to be." He added that the biggest threats to U.S. technology companies are no longer from nations such as Japan and Germany, but emerging economies such as Russia, China and India. He joked that the only growth industry in Silicon Valley right now is gubernatorial candidates.More and more tech companies are relying on outsourcing to cut costs and in many cases, tech jobs are moving overseas due to cheaper labor costs. Barrett said one way that the U.S. could stem job losses would be by improving education.He called the K-12 system in the U.S. one of the world's worst and said that other countries like China and India are gaining an edge not merely because employees work for lower wages but also because of a stronger educational background in those nations.More subsidies, less interference on options wantedIn another jab at the federal government, Barrett said there needs to be more subsidies for research and development efforts in the science and technology field. He pointed out that the three industries that receive the most assistance from the government are agriculture, steel and soft lumber."Why does the U.S. subsidize three industries of the 19th century and no industries of the 21st century?" Barrett quipped. The remark was met with loud applause by the audience of New York area business leaders.Finally, Barrett went on the attack against the Financial Accounting Standards Board and Securities and Exchange Commission for their efforts to force stock options to be expensed.This issue is the source of intense debate on Wall Street. Some high profile investors, most notably Warren Buffett, maintain that options are a form of compensation and therefore should be treated as an expense on companies' profit and loss statements.But many tech executives, including Barrett, claim that valuation models for stock options are flawed and that expensing options would create a drag on earnings. Barrett repeated that mantra Thursday evening, saying that if options had to be expensed, it would cause the effective elimination of broad based options grants for tech employees.And that, Barrett argued, would make it even tougher for U.S. tech companies to attract skilled tech talent since other countries, including China, are promoting the use of stock options in order to attract higher quality employees."I'm trying to figure out why the Communists in China think this is a good idea and we think this is a bad idea," Barrett said.Still, other tech companies have found a solution to that problem. Microsoft, for example, announced in July that it would stop awarding employees stock options and would instead give them restricted stock as a form of equity compensation.

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Education may not be the answerGreenspan, Bush say education is the best response to offshore outsourcing. They may be wrong.February 23, 2004: 3:34 PM EST By Mark Gongloff, CNN/Money Staff WriterNEW YORK (CNN/Money) - Alan Greenspan and President Bush believe the best response to the movement of U.S. jobs offshore is the same thing it's always been: educating U.S. workers so they can get better-paying jobs. But some people losing jobs overseas are already highly educated, and some economists doubt education will fully ease the pain -- American workers may have to learn to live with lower wages, or policy makers may have to come up with other ideas.After several decades in which U.S. manufacturing jobs moved overseas steadily, white-collar jobs -- including information technology, customer service, accounting and more -- have begun to flow offshore in recent years as well, as multinational companies take advantage of a cheaper, ever-more-skilled, global labor force.These trends, along with technological advancements, have helped keep the U.S. job market in its longest slump since World War II. Though the economy has grown for nine straight quarters, there are still 2.3 million fewer workers on non-farm payrolls than at the beginning of the 2001 recession.The sluggishness of the labor market has heightened consumer anxiety, kept wage growth slow and put political pressure on President Bush, who is running for re-election in November.In his State of the Union address in January, Bush suggested the solution was to better educate the U.S. work force, and he proposed giving money to community colleges for this purpose, among other initiatives.In a speech on Friday and in his semi-annual Congressional testimony earlier last week, Federal Reserve Chairman Greenspan put his influential stamp of approval on these ideas, saying education has been the key to labor-market transitions in the past -- first from agriculture to the Industrial Age, then from the factory floor to the Information Age."The capacity of workers, after being displaced, to find a new job that will eventually provide nearly comparable pay most often depends on the general knowledge of the worker and the ability of that individual to learn new skills," Greenspan said.Greenspan and many other economists say they firmly believe there will be new jobs eventually, even if it's nearly impossible right now to predict what those new jobs will be.Only if workers are well-educated, these economists believe, will they be able to jump into these new jobs when they materialize."What we do know is that the system manages to work -- we've been dealing with import penetration in this country for over three decades," said UBS chief economist Maury Harris. "Over that period of time, the unemployment rate has had its ups and downs, but there's been no trend increase in unemployment."Harris said a high level of patent applications suggest new jobs are on the way, and census statistics show more Americans have higher levels of education than ever before."I think we're probably more adaptable now than we were in the past," Harris said. "Education is the key to that -- it makes you flexible."It may already be helping -- according to the latest Labor Department data, among people 25 years of age or older, the unemployment rate for people with at least some college is just 3.7 percent, while the rate for people with a high school degree or less is 5.9 percent.Too much supply, not enough demandNot all economists think the answer is that simple, however. For one thing, it's not as if the foreign workers taking U.S. jobs are uneducated -- many of them not only speak English, but are also just as skilled as the U.S. workers they're replacing.What's more, the current movement of jobs offshore is more dramatic than usual, thanks to the quickened pace of globalization and new technologies that make international communication easier than ever.The opening of societies such as China and India, with large populations that value education and have lower living costs -- the New York Times on Sunday profiled a customer-service representative living in Bangalore, India, who was able to pay rent, have a cell phone, make frequent visits to night clubs, buy new clothes and send money to her parents, all on a salary of just $400 a month -- has tapped a rich vein of new workers. (Purchase power of US 18 Cents in India is equivalent of a $ in USA! Data as of 2001/2002 - Sundar)If the global economy does not grow fast enough to raise the level of demand to match that vast new supply of workers, some economists worry, then the price of labor -- wages and salaries -- will certainly fall, with or without education."There are so many low-paid people who are educated that education is simply not the answer," said Robert Brusca, chief economist at Native American Securities in New York. "The answer is, you will be unemployed if this is not stopped."Brusca believes that, for the foreseeable future, the most reliable source of jobs for U.S. workers will be in services that cannot be moved offshore, such as health care, plumbing and automobile repair.Though nurses, plumbers and auto mechanics can make a great deal of money, the generally high wages of the late 1990s -- when a tech-investment bubble was accompanied by a tech-hiring bubble, some economists believe -- might simply be unattainable."Do you have to be reeducated? Maybe not -- maybe you just need to accept a lower wage rate," said Paul Kasriel, chief economist at Northern Trust in Chicago.Kasriel doubts the implications of this pay slowdown are too worrisome in the long run. He believes global economic growth has been slow mostly because post-bubble imbalances are still working themselves out, and that eventually workers in Bangalore, Beijing and Bucharest will get richer and want to buy more stuff, increasing global demand and pushing wages higher."At some point we will have equalization, where an employer will be indifferent between hiring someone in Bangalore or Chicago," Kasriel said -- though he admitted that could be a long time coming.The fear among some bearish economists is that, while the world waits for that equalization to take place, labor-market sluggishness in high-wage, developed countries such as the United States could keep global demand anemic, threatening the global economic recovery."To the extent that hiring in high-wage, developed economies continues to lag, the sustainability of any impetus to private consumption can be drawn into serious question," Morgan Stanley chief economist Stephen Roach wrote in a research note to clients on Monday.

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Greenspan notes 'unease' about jobsCentral bank chairman says worker education is the key to helping displaced workers find jobs.February 20, 2004: 3:30 PM EST By Mark Gongloff, CNN/Money Staff WriterNEW YORK (CNN/Money) - Federal Reserve Chairman Alan Greenspan said Friday that the steady movement of U.S. jobs offshore should help the economy in the long run, but that American workers needed to be better-prepared to take whatever higher-skilled jobs come along to replace the lost jobs. Greenspan noted that, in recent years, new technology has helped businesses produce more with fewer workers, while globalization has led to an increasing flow of U.S. jobs moving overseas.This process is good for the broader economy in the long run, he said, helping to raise standards of living, but is causing "inevitable stresses and anxieties" in the short run."There is a palpable unease that businesses and jobs are being drained from the United States, with potentially adverse long-run implications for unemployment and the standard of living of the average American," Greenspan said in prepared remarks delivered to the Greater Omaha Chamber of Commerce.His solution to the problem, as he told Congress last week, is to do a better job of educating American workers."The capacity of workers, after being displaced, to find a new job that will eventually provide nearly comparable pay most often depends on the general knowledge of the worker and the ability of that individual to learn new skills," Greenspan said.He said this process has been working in the U.S. economy for many decades, helping workers find new work and pushing wages steadily higher, and he saw no reason why it should stop now."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," he said.The labor market has only recently shown signs of emerging from its longest slump since World War II. Payrolls are still 2.3 million jobs lighter than they were when the 2001 recession began. Despite nine straight quarters of economic growth after that recession ended, businesses have only recently begun to add to their payrolls.A combination of weaker-than-usual economic growth and strong productivity gains -- enabling businesses to milk more work from fewer workers -- have conspired to keep hiring anemic. But many economists believe those trends will reverse this year, leading to more hiring.Still, many economists also believe that the effects of globalization and technological advance could keep hiring less robust than in other recoveries. The prospect of further labor-market pain has led politicians of both major parties to talk increasingly of protectionist measures that would limit free trade.Greenspan, in his speech on Friday, warned that such measures would be counterproductive."Protectionism will do little to create jobs," he said, "and if foreigners retaliate, we will surely lose jobs."Some liberal think tanks and politicians have called for measures that would be somewhat less drastic -- though still unpalatable to some companies -- such as offering tax incentives to firms who keep jobs in the United States or requiring trading partners to adhere to certain labor standards.

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BPO Backlash - acharya - 03-13-2004


Special Section: The Rush to Send Back-Office Business Overseas - Part 1 and 2
Earlier this summer, newspapers reported that New York processes its parking tickets in an unusual manner. Instead of dealing with them in a municipal office in the city, officials ship the job to Ghana, where it can be done more cost-effectively. The work was done in India until New York found that Africa was less expensive.
Welcome to the world of global back-office operations, or as it is often called, cross-border business-process outsourcing. While companies have long outsourced manufacturing operations and other tasks such as IT maintenance or software development, the trend has now expanded to include other kinds of business processes such as customer contact, bill processing and medical transcription. Companies are moving such work to locations in India, the Philippines and Jamaica, arguing that they can cut costs by 20% to 40%. As a result, cross-border business process outsourcing has grown into a massive market. Consulting firm Gartner estimates that cross-border business process outsourcing will grow into a $178.5 billion business by 2005 from $123.6 billion in 2001. New deals are announced almost every week. On October 8, Delta Airlines said it would move part of its customer reservations work to BPO centers in India and the Philippines.
Knowledge@Wharton presents a two-part special report examining this phenomenon. In the first part, we look at the pros and cons of business process outsourcing arrangements, examine some human resources issues, and also present some findings from a Wharton research project led by professors Ravi Aron and Jitendra Singh. The second part, which appears below under the title "Managing the Extended Organization: Handling the Risks of BPO Relationships," explores management and financial issues in BPO transactions."

Special Section: The Rush to Send Back-Office Business Overseas - Part 1

The Case For, and Against, Shifting Back-office Operations Overseas
Moving back-office operations to India from Washington, D.C. a year ago let the World Bank kill three birds with one stone.
First, the Bank slashed its costs by 15% in the lower-wage country. Second, the organization chopped down a backlog of accounts receivable and expense forms from hundreds of items to just a handful. And finally, the Indian accountants have helped the Bank get smarter even as they slogged through the work, says Chuck McDonough, director of the World Bank’s accounting department.
"You say, ’While you are doing this, why don’t you think about how we can do the process better?’" McDonough says. "You get to clean out the backlog and you also get to reengineer the business."
The World Bank’s shift is part of a growing practice of sending back-office work from developed nations to developing countries. Thanks to a growing willingness to outsource operations, lower labor costs and technology improvements, firms are deciding to ship tasks such as customer contact, bill processing, medical transcription and even animation to countries such as India, the Philippines and Jamaica. Major corporations such as General Electric and British Airways pioneered this tactic with off-shore operations. But in recent years, a flurry of independent companies offering call center or other services have sprung up, and now prominent Indian information technology companies are jumping into the market.
So far, however, only a small portion of call center work and the like has actually crossed overseas. A survey last October by market research firm Gartner found that just 5% of U.S. corporations with revenues ranging from $100 million to $4 billion outsourced, or had the intention of outsourcing, portions of their back-office offshore. Concerns over security, the viability of providers and service quality were the main objections, Gartner found. There are other hurdles, not least of which is criticism from labor advocates that the trend amounts to eliminating decent-paying jobs in the U.S. while workers overseas are exploited. What’s more, infrastructure isn’t always reliable in the developing world, foreign accents over the phone can turn off U.S. consumers, and the very notion of moving work across the globe can unnerve potential clients. The extent to which back offices will move out of the office altogether and overseas remains unclear.
Gartner analyst Rebecca Scholl predicts off-shore business process outsourcing probably will not pick up significantly for the next two years. And the experience of current business-process outsourcing (BPO) clients will play a crucial role in determining the future of the practice. "It will take several successes to increase adoption," she says. "But it will take one big splash to slow it down."
If early adopters manage to avoid a messy failure, the prize is significant. Gartner pegged the global market for business process outsourcing in 2001 at $123.6 billion, and expects the market to reach $178.5 billion in 2005.
Moving business operations off-shore has precedents in the industrial and IT fields. Decades ago, manufacturers moved their factories overseas or entrusted their production needs to third-party outfits. The same general shift has occurred in information technology in the past several years. Firms based in countries such as Slovenia and India emerged to take on programming and application management tasks for U.S. companies at a fraction of the cost of paying in-house techies or hiring a firm with domestic coders.
General Electric is widely regarded as taking this globalization push to the back office. Several years ago, GE’s financial services unit began operations in India; its headcount in the country has now reached 12,000 employees. GE Capital also has "Global Processing Centers" in China and Mexico, and the facilities provide around-the-clock in-bound and out-bound call centers, accounting services, IT help desks, document storage and software implementation. The Mexican facility alone processes more than 3.5 million documents a day, with turnaround times of as little as eight minutes.
British Airways also established a back-office presence in India with World Network Services, a data management unit. In April, the airline signed an agreement to sell 70% of the business to investment firm Warburg Pincus. Financial services firm Conseco is another big hitter to move back offices overseas. The Indianapolis-based company has operations in Jamaica and India, where it bought business process outsourcing firm When Conseco acquired Exl last April, it announced plans to move 2,000 jobs to India within roughly 21 months. The company has since scaled back the goal to a total of 1,500 jobs by the end of 2003, and so far, Exl has about 1,100 workers focused on Conseco tasks. Software giant Oracle also has plans to set up a 70-person unit in India to handle back-office work including payroll, human resources management and accounting.
With major corporations setting a precedent, independent BPOs have emerged to offer their services. And now India’s information technology services industry is muscling into the market. Infosys Technologies, whose clients include Johnson Controls, Toshiba and Aetna, launched Progeon in April. Billed as a "business process management" subsidiary, Progeon received a $5 million investment from Infosys and a $20 million infusion from Citigroup Investments. Wipro is another Indian IT services firm to ramp up in back-office business process outsourcing. On August 1, Wipro said it acquired a 66% stake in Indian BPO Spectramind e-Services, raising its overall ownership in Spectramind to about 90%. Spectramind has about 3,100 employees serving seven clients with offerings including back-office processing and customer contact services.
Although much of the press on back-office operations overseas has focused on India, it isn’t the only game in town. According to Gartner, other countries with business-process outsourcing facilities include the Philippines, Czechoslovakia and Hungary. Affiliated Computer Services (ACS), a Dallas-based IT and business process outsourcing firm, has operations in Jamaica, the Dominican Republic, Barbados, Mexico and Ghana.
As Gartner sees it, firms like ACS will lead the way when it comes to expanding the overseas back-office industry. Given the newness of the market, "In 2002, U.S. clients will prefer to contract with U.S.-based BPO providers, even if they in turn deliver their services offshore – with their own facility or though partnerships," Gartner wrote in January.
The back-office tasks that can be done overseas vary widely. At the simpler end of the scale are functions such as data entry and expense form processing. Then there are contact centers, which can include inbound or outbound calls, email responses, and tech support. At the higher end are duties such as processing insurance policy applications or suggesting improvements to existing procedures.
Why are companies sending these tasks overseas? One factor is the general willingness, or even imperative, of corporations to focus on their "core competency." Gartner’s survey of corporations with revenues of $100 million to $4 billion showed that 25-30% of the firms were outsourcing to U.S. based firms. Cost then looms large. Contact centers in India can result in 30-40% cost savings, says Vail Dutto, CEO of San Ramon, Calif.-based InTelegy. InTelegy has focused on managing call centers onsite for clients, but in June forged a partnership with HCL Technologies of India. InTelegy now can offer clients use of a 400-seat call center in New Delhi at a billable rate of $18 an hour per Indian worker, vs. $30 to $35 an hour for their U.S. counterparts. "It’s just really expensive to do business here in the U.S., particularly from a customer support standpoint," Dutto says.
The cost benefits go beyond wages alone, Dutto says. Turnover at U.S. call centers can run at 100% and absenteeism can reach 14%, Dutto says. But those drop drastically in India, she suggests, partly because of door-to-door transport services for workers. Prestige also may play a role. Dutto says while call center jobs in the U.S. might be on par with fast-food work, in India they are equivalent to accountant or computer programmer positions. All employees at the InTelegy-HCL Technologies facility have a college degree.
The high level of employee education possible overseas figures into a second reason to locate back-office operations there: quality of work. Wharton operations and information management professor Ravi Aron argues that Indian employees drawn to back-office outfits perform the jobs at a better-than-expected level, and also tend to offer suggestions for improving the business process. "Companies start out for cost, stay on for quality, and then realize that they get a lot of managerial initiative," he says. (See interview, “Business Processes Are Moving from the West to Other Parts of the World.”)
Conseco and the World Bank support Aron’s points. Since it began moving functions such as customer service and data processing to Exl, Conseco has found its operations in India meet or exceed service level standards 95% of the time, says Ruth Fattori, Conseco executive vice president, process and productivity. She suggests that enhancing business tactics almost comes naturally with migrating back-office work overseas. "You expose all the problems you had in the U.S.," she says. "It really gives you an opportunity to stand back and look at a process and how you might improve it."
The World Bank consciously chose to enlist its Indian employees in process improvement work, such as data mining. That’s why the Bank’s cost cutting was just 15%, McDonough says.
The World Bank started with 80 employees at its Chennai, India, facility, and now has 110. Although built before the Sept. 11 attacks, the facility has since provided an unexpected benefit: disaster preparation. "In terms of developing a business continuity plan, it has helped tremendously," McDonough says. "If something happens in Chennai, we can run business out of Washington, and vice-versa."
Also behind the offshore back-office trend are technological advances. Most if not all back-office work happens electronically, which means paper documents such as invoices have to be scanned into computers. Imaging technology has come so far that smudges on documents and signs of forgery now can be detected, McDonough says. Dutto suggests that improvements in networks and voice-over-Internet-Protocol have helped make global call center operations cost-effective and reliable. "Three years ago, you just couldn’t do it," she says.
Still, companies may question whether they want to do it. In the first place, transferring back-office operations overseas is a controversial tactic from a labor standpoint. During a time of economic uncertainty and anger at corporations, slashing U.S. jobs to hire abroad can raise eyebrows if not harsh criticism. There are concerns on the overseas end as well. Labor rights may not be honored in other countries, facilities can be cramped by U.S. standards and they can operate as data sweatshops, given that not all are air-conditioned.
Offshore back-office advocates respond that overseas workplaces and benefits can be world class. Advocates also suggest globalization may cost lower-skill jobs in the U.S. but prod more developed countries to create higher-level positions.
Other problems are cited. Infrastructure in India remains below developed-world standards, Fattori points out. Conseco has had trouble with its land-line telecommunications connection, and Fattori estimates the service is down 4-5% of the time. To get around the problem, Conseco uses satellite service for its India-based voice operations. "Anyone going to India would have to think of redundancy in terms of their telecom," she says.
Customers also may ask how secure their precious customer data is, especially given concerns about the privacy of medical records and other personal information. Prasanna Keth, an Indian native who is launching a U.S.-based BPO named Dynamics, says those fears can be addressed by organizations such as the Customer Operations Performance Center, which certifies that contact centers have achieved an industry standard.
But even if the foreign operation can be trusted, what about threats from guerilla groups, or the lingering conflict between Pakistan and India over Kashmir? "(The) issue of nuclear warfare tends to frighten people way," Dutto admits. The fear, though, is overblown, Keth says, because business process outsourcing facilities are located away from the hotspot. "India is a vast country, and the conflict is somewhere else," he says.
Still, U.S. and European firms looking for a BPO overseas may worry their partner won’t be around a year from now. Observers have suggested a glut of companies are rushing into the market, and not all will be able to make a profit. And despite evidence of top-quality work done overseas, not all offshore BPOs seem ready to deliver quality service. Dutto took a tour of 20 facilities in India earlier this year before selecting HCL Technologies, and noticed a "major difference" between well-funded operations and what she described as opportunistic ones.
Then there are cultural and societal differences, and client concerns about the resulting competency of foreign workers. In other words, if call center workers have never transferred balances between credit cards or shopped online, how can they help Americans do those things? Clients grill Dutto on this issue. "The main objection is, ’Will they be able to understand enough of the U.S. culture to trouble-shoot?’" she asks.
The answer, advocates say, is setting up systems smartly and training, training, training. Indian-based BPO Daksh, for example, might spend three to four weeks training an employee to handle a simple process, and up to three months preparing a worker for a more complex task, says Arijit Sengupta, the company’s director of business development.
Training also is seen as a solution to another cultural hurdle: foreign accents. Fattori says research shows that people on the U.S. east and west coasts don’t mind the sound of a foreign voice, but other parts of the country are less tolerant. So Conseco’s Indian call center workers are trained in "accent neutralization." "Really, what we look for first is for them to slow down in their speech," she says.
Daksh also pushes for "accent neutralization." "They’re not trying to imitate an American accent," Sengupta says. "They’re trying to speak in a neutral and clear way."
Changing Indian accents to please American consumers might strike some as offensive. But companies trying to boost the offshore back-office approach seem more focused on expanding the business. So far InTelegy has two customers using its India call center, but Dutto admits it has been a "pretty tough" sell. A common response to her pitch, she says, is this: "It’s 10,000 miles away and it’s a third-world country, and you’re talking about my customers."
There may also be limits to how much a company wants to move its back-office operations overseas. Firms ought to maintain an understanding of how their business works, if only to avoid being dependent on one outsourcer, Fattori suggests. "If you completely give a process to a third party, and you give up your knowledge, then the cost to switch could be much higher later on," she says.
So there are many cautions and hurdles, along with the possibility one well-publicized flop could put the brakes on shifting back-office operations overseas. But one Conseco problem in India speaks to the way the industry is growing for now. Exl employees are very desirable to new and expanding back-office operations, Fattori says. "We get people trained," she says, "and then [another company] steals them from us."

Special Section: The Rush to Send Back-Office Business Overseas - Part 1

“Business Processes Are Moving from the West to Other Parts of the World”
Long before he became a professor of information and operations management at the Wharton School of the University of Pennsylvania, Ravi Aron worked in the product development group of Citicorp in New Delhi. Memorably, his boss at the time told him to forget what he had learned about marketing at the Indian Institute of Management, Bangalore – because “in a highly service intensive industry like ours, marketing basically means information management.” Aron realized he was right: Almost everyone at Citicorp was busy collecting, analyzing, aggregating and disseminating information. “I realized that information was our stock-in-trade – our input and our output,” Aron recalls. “I began to look for emerging themes, and realized that service essentially means collecting information about the context of the buyer.”
That realization, coupled with a desire to understand it more deeply, prompted Aron – who has worked as a consultant in Malaysia – to pursue a Ph.D. degree at New York University’s Stern Business School. Since joining Wharton in 1999 his research has focused on various aspects of information management, including the pricing of information-rich services and the efficiency of business-to-business markets and online auctions.
These days Aron, in collaboration with Jitendra Singh, a professor of management at Wharton, is studying the outsourcing of business processes such as call centers from the U.S. and other Western countries to India and other parts of the world. Despite the general slowdown that dogs the tech industry, business process outsourcing (or BPO) continues to be regarded as a hot market. Gartner, a tech consulting firm, reckons that the global BPO market will be worth more than $240 billion by 2005. In a recent conversation with Knowledge@Wharton, Aron discussed his findings about the potential and risks of this emerging phenomenon. Wharton's Mack Center for Technological Innovation and the Wharton e-Business Initiative (WeBI) have helped support this research.
Knowledge@Wharton:You have been studying the outsourcing of services such as call centers to India. What have you found so far?
Aron: I am studying the supply chain of expertise; call centers are one aspect of that phenomenon. A call center can be driven by the fact that the cost of human labor intervention is much lower in India than in the U.S. and other Western countries. The orders of magnitude are one-eighth, one-tenth or one-twelfth, depending on the kind of work. But call centers represent just the most visible component. In three to four years, you will see that the supply chain of expertise that connects the West to India, the Philippines, Brazil or Malaysia will not be about call centers but about other things.
Knowledge@Wharton:What do you mean by the supply chain of expertise?
Aron: Many things that are done inside firms are labor intensive. I’m not referring to physical assembly-line labor; I mean the kind of work where human beings have to intervene in a process and use decision-making skills – such as interpretation, validation, translation, transliteration or transformation. For example, when a dealer is given an 8.5% rebate, does that mean 8.5% of the package price or the promotional price? Computers can’t make such decisions. Computers are good at sorting and manipulating large data sets and executing instructions. But when it comes to making judgment calls, you need people. Human beings are good at making meaning out of one medium and translating it into terms that computers can understand. Such processes are called back-office processes, and they are rapidly migrating from the U.S. and other Western countries to India, Singapore, Brazil and other parts of the world.
Consider some examples. In the call-center industry, companies like Daksh (which has the Amazon account), Spectramind (which works for Dell), and Tracmail provide call-center support and telemarketing services to clients. But that is just the beginning. British Airways has moved its back offices to India, as has the World Bank. At these offices people have to look at vouchers and other documents, make decisions about what they mean, and convert information into a format that can be aggregated or manipulated by computer – which is typical of back-office work. From a research standpoint, what is interesting is that things that were once internal to a firm are no longer so. The boundary of the firm in some ways is being compressed, while in other ways it is being expanded.
Knowledge@Wharton:How does this happen?
Aron: When Dell tells Spectramind to handle certain services in exchange for a fee, it means what was once being handled inside the firm has now become a market transaction. As a result, the boundary of the firm is compacted. But a different phenomenon also is underway. An extended organizational form is emerging in which firms relinquish control in return for monitoring.
For instance, let’s say I have a company and I move my back office to Chennai. I stop exercising control; I don’t tell an employee, “I want you to be in the office at 8:30 a.m.” But I do look at the number of errors per 1,000 documents processed and control that quality. In addition, I randomly sample phone calls to monitor the quality of the marketing. Consider DirectTV, whose call center has gone live in New Delhi. If someone were to do telemarketing for me from that call center, I would not tell them how to do their jobs, but we would agree on the outcomes and I would pay them depending on the number of deals they closed for me. So the extended organizational form is one in which you relinquish local control – it is another firm that actually hires the employees – but you monitor those employees.
This is a very different model from traditional supply chains. A company like Johnson Controls might supply automobile components to GM, but there’s no question of control or monitoring by GM – these employees are Johnson Controls employees.
There’s a big difference between the supply of materials and the supply of expertise. This is because IT enables deep linkages to be established between organizations. These linkages are much richer than when you are supplying car seats or windshields. It is reasonable to expect that DirectTV’s customer service (or telemarketing) representatives have to be able to see the same version of customer information in Delhi as those at DirectTV’s headquarters. This establishes very deep information-based linkages between the two outfits. So at one level, these are two companies engaged in a market-based transaction, but at another level you could view this as an extended organization.
Knowledge@Wharton:How have such extended organizations – and business process outsourcing in general – evolved?
Aron: Business process outsourcing began with the setting up of captive service centers by large transnational corporations. These centers, such as the ones set up by Citicorp and American Express in India, began by executing enterprise-wide operations that involved the conversion of data from one medium (such as documents) to another (digitized data in corporate databases). Companies such as American Express and Citicorp started moving more and more of their information extraction and reporting tasks overseas. Two factors that made this possible was the convergence in corporate computing platforms and the rapid advances made in communications technology. As corporations standardized a few enterprise wide platforms (such as Relational Databases, networking standards etc.) and with the availability of software tools that made it easy to port large data sets between dispersed information systems, the flow of data and information between geographically dispersed branches of the same corporation became a viable and nearly costless option.
Knowledge@Wharton:What difference did this change make?
Aron: As the flow of data between computers that talked to each other increased, so did the extent of human intervention and the degree of expertise required of the information worker to transform data into information. As a result, the costs of providing accurate and timely information to support middle management decision making increased by orders of magnitude. Corporations were faced with a two-pronged cost escalation – they had to hire more information workers and at the same time ramp up the expertise levels of existing information workers who provided operational support to the managers. The move to a centralized operations factory in a lower-cost labor regime was an obvious response to the cost frontier faced by these corporations. Hong Kong Shanghai Bank Corp., for instance, has an office in India handling back-office work which employs about 1,000 information workers, and HSBC plans to triple this office size in the near future. America Online’s customer service operations are supported from India. Initial reports suggest that some firms benefit to the tune of up to 60% cost savings in these lower wage markets.
Knowledge@Wharton:On what specific aspects of this phenomenon does your research focus?
Aron: I’m studying at least three issues. Let’s place this in its theoretical context – there are two theories that broadly explain the existence of the firm: the transaction cost and the principal-agent theories. If you look at the extended organizational form, you can argue that people are sending work out to places like India for cost gains. But that also increases the transaction cost. What if the firm behaves opportunistically? So one of the things I’m studying is, what kind of information is shared between organizations?
Secondly, I’m looking at questions such as, what tradeoffs take place between monitoring and control; what are the metrics of performance and who agrees on them; what is efficiency and effectiveness and how are these measured; and how do you align the incentives of firms that ship out the work with those to whom it is sent? In addition, I am studying the so-called KIF problem or the knowledge-intensive firm. These include firms in industries such as insurance, banking, financial services, brokerage, health care – these are now huge and sprawling organizations. Firms have no reason to be that big, and they are starting to unravel to some extent. Ford Motor realized back in 1915 that there was no reason for it to own rubber plantations in the Amazon so that it could make its own tires; someone else could make the tires. In the same way, health care firms, insurance firms and brokerages are beginning to recognize that they don’t need to have all these back-end processes going on within their organizations. That expertise could be acquired much better and cheaper from someone else.
The third issue I’m studying is pricing: contracts, fee systems, etc. Also, I’m looking into whether pricing defines the employees’ behavior in some way. If you take your back office and make it someone else’s front office, what sort of pricing structures do you use? Out of 50 or 60 things that you can study, these are the three I’m focusing on.
Knowledge@Wharton:Have you reached any preliminary conclusions?
Aron: I’m looking closely at these relationships in the financial services industry. Early results show that initially, as the process of organizational unraveling begins, firms look at the most easily definable tasks such as document reconciliation or call centers. After that, they look at a factor I call revenue distance.
The concept of revenue distance is simple: The point at which a financial services firm captures revenue – where a customer works through its doors and agrees to buy a credit card or another service – is the point at which its revenue distance is zero. It is a final and visible process that leads to the sale, but supporting that is a series of processes that run behind it. If you take one step back, before you call a customer to sell him a credit card or another service, you may have looked at his profile, your existing relationship with him, and so on. You may have sifted through a list of 10,000 people and found 1,500 potential prospects. That’s a back-end process. If you take yet another step back, you may have acquired that list of 10,000 names from a credit rating company or some other vendor. As you take more steps away from the point of revenue capture, your revenue distance increases.
Initially companies ship out back-end processes that have really long revenue distance. At that point, their main motivation is cost. But by the time the relationship starts deepening, they realize that costs are relatively unimportant. Many back-end jobs in the U.S. are manned by people who are under-qualified and bored. Attrition rates in call centers in the U.S. range from 70% to 120%. It takes a month and a half to train a person so that he or she can hit the ground running, and then three months later that person is gone.
In contrast, in India, at its worst, the attrition rate is between 12% and 35%. A back-end job in the U.S. is a serious job for someone in India because it pays serious money. This applies all the more as you move away from call centers into other back office processes in financial services and other industries. Pentamedia Graphics is a great example. It is a large animation shop, which also has a U.S. office that does business development. Just as you can find talented engineers and software writers in India you can find talented animators. So you can argue that initially U.S. companies outsource operations to India for cost reasons, but by the time the relationship deepens, it’s driven by anything but costs.
Knowledge@Wharton:What are the main drivers in addition to costs?
Aron: Cost benefits usually just open the doors. You may start by saying that your call center or back office operations are very expensive, and you want to look for other options. Thereafter you discover some interesting things. Consider quality. You might believe that if you are willing to throw money at quality in the U.S., you will get it. That’s not true. You’ll have to pay anything from a 40% to 80% cost premium (in direct wages alone) to get the kind of quality you could get in India. Inaltus, a processes outsourcing company based in Britain which specializes in F&A services (Finance and Accounting), estimates that premium in Britain to be upwards of 80%. In many cases, they point out that the quality is simply not available in the labor pool that competes for these positions in the UK (and several other Western countries). Many of the people in the U.S. who have talent and education don’t want to do back office jobs. In the U.S. there is a serious mismatch between the kind of skills and temperament that delivers quality and the kind of people that are needed to deliver them. That mismatch doesn’t exist in India. So even though a company may enter into a relationship with an Indian firm because of costs, it discovers that it gets much better quality than it had expected.
Moreover, companies that outsource back-office operations to India discover other intangible benefits. At one financial services firm, the back office in India started making suggestions about how processes could be streamlined in Europe and the U.S. That not only led to productivity gains, but also made for much faster customer processing and proximity. Earlier, if you wanted to cross-sell an insurance product to someone who had already bought a credit card or mortgage, it took six to 12 days to turn that around. You can now do that in 24 hours. You can find really smart people who are willing to make a career of this in India.
So companies start out for cost, stay on for quality, and then realize that they get a lot of managerial initiative. It takes a lot of headaches off their hands and allows them to stay focused on their core competence – and to remain close to their ideal customers and serve them.
Knowledge@Wharton:What are the implications of your research for developing countries to which the supply chain of expertise extends?
Aron: Initially many companies looked at setting up back-office operations in Ireland and Canada; now the cost advantages have gone away in those markets. Ireland has a small population, and back-office operations are a sunset industry there. Malaysia and Singapore are trying to get in on the action. They have the infrastructure, unlike India. Getting your telecom infrastructure set up in India is like a doing a root canal without Novocain. You don’t have this problem in Singapore; it’s amazingly agile. In 48 hours you can get full connectivity.
You might also see hybrid situations where more skill- and labor-intensive jobs might migrate to India and parts of Malaysia, and and as a second tier, jobs which carry higher managerial content – which require more Western management techniques and human GUI (graphics user interface) and more of a professional touch – such as offshore CRM services - those might migrate to Singapore.
Knowledge@Wharton:Have you seen any examples so far?
Aron: Architecture offers a good example. There’s a large firm which does a lot of work in Indonesia, but this is how it works: the Australian firm ships out part of its work to Singapore, where the cost differential is very high (in fact, they have many Indian architects working there), and this relationship is managed out of the Sydney office. This allows the firm to be in the region and yet not part of the same cost regime. So you might find middle offices move to countries like Singapore, Thailand or the Philippines. The single biggest advantage India has over these countries is the existence of a large, math-friendly, English-speaking population.
Knowledge@Wharton:What about risks? How should companies deal with the risk of intellectual property being poached as a result of outsourcing arrangements?
Aron: The principal risks are what my Wharton colleague Eric Clemons calls PSOR – poaching, shirking and opportunistic renegotiation. These are very early days, and so most of the time you find companies under-committing and over-delivering. These risks can come up when the market matures, but right now it’s still in the expansion phase.
Still, you have to be careful in a couple of areas. First, if the firm to which you have outsourced work takes ownership of your customer information, that greatly increases its bargaining leverage. Outsourcing firms that have this information can start renegotiating prices or contracts.
Secondly, there is the issue of lock in. When people think about lock in, they usually think about information technology. This is a minor part of lock-in; in fact, there is a great deal of standardization with web services. The greater risk is process-level lock-in. If employees get used to seeing the same screens and doing the same things while someone supports them from a back office, it’s a tremendous bargaining advantage for outsourcing companies (the providers) vis-à-vis the principals (the users). Even if the outsourcing firm increases its fees, it becomes difficult for the principal to discontinue operations or change the way things are done. The human level lock-in – of the person, the process, and the information manipulating system – is much more dangerous and costly. Disruption of those processes is usually unaffordable; and that gives the outsourcing firms tremendous advantages.
There are of course ways to guard against these risks. One is to distribute risk. The other is to have a dummy standby mechanism for every process. And going back to the notion of revenue distance, as you come closer and closer to the point where revenue is captured, for those processes you should keep a skeleton back up, which might let you operate for two weeks without interruption if your supply is disrupted. That skeleton backup is enough because it changes your bargaining power.
Knowledge@Wharton:What opportunities do you see in health care? Medical transcription is being outsourced, but do you see other opportunities as well?
Aron: In the next four to eight years, the U.S. is going to see three important trends in health care. One is boutique medical care: For those who are able to pay, there will be a level of service that goes beyond what is now provided by medical care firms. Every time you hear the term, “high quality service,” it means there is a great deal of information manipulation. So boutique medical care is likely to take off – and this will aim at providing health services priced at $60,000 a year to $400,000 a year. There are more than 1 million millionaires in the U.S., so this is not a tiny market.
Since not everyone is going to get the same suite of health care services, other parts of the industry will segment themselves into groups that make more intelligent use of customer information. In the U.S., some of this will be aimed at better capacity utilization. If, for example, a hospital such as the Columbia Presbyterian Hospital is accepted by 20 health care providers, you might want to make the case that it should be accepted by 200 of them. You can do several levels of fine segmentation, and decide how those costs are going to be covered among the providers.
The finer you price your services, the better it is for people at the lower end. If someone who costs $500 a month to service pays a premium of $250, and someone who costs $50 a month to service also pays a premium of $250, if you can make the premium reflect the risk status a little better, you might be able to reduce the number of the 40 million uninsured in the U.S. Finer segmentation means faster information throughput and movement in the back office. Two very large players in the health care business are already looking for outsourcing opportunities in this area. Special Section: The Rush to Send Back-Office Business Overseas - Part 1

When Back-Office Work Moves Overseas, What Happens to Workers
It may be good for business owners to shift back-office operations overseas, but is it good for workers?
Advocates of the off-shore strategy say yes. Contact centers and transaction-processing facilities in places like India and Mexico can provide good jobs to poorer countries, they argue, adding that U.S. employees who lose work may eventually find higher-skilled positions. Critics, though, don’t buy that version of globalization. They say workers in the developing world can be exploited, and U.S. clerks, accountants and call center workers are by no means guaranteed a decent-paying replacement job. Especially given the slow pace of economic growth compared to a few years ago, moving back-office work overseas will hurt the most vulnerable Americans, suggests Jeff Faux, economist with the Economic Policy Institute. "It’s going to have an impact on opportunities for people to rise up the economic ladder in the U.S.," he says.
The debate isn’t exactly new. It follows disputes over the loss of manufacturing jobs and, more recently, information technology work to lower-wage nations. In contrast to those earlier controversies, though, the labor issues involved in sending back-office operations overseas haven’t boiled over much into the public arena. Perhaps that’s because a relatively small amount of back-office work has been transferred away from the U.S. Last October, research firm Gartner found that just 5% of U.S. corporations with revenues ranging from $100 million to $4 billion outsourced, or had the intention of outsourcing, portions of their back-office offshore. And although major names like General Electric, American Express and Conseco have established their own back-office facilities in countries such as India, China, Mexico and Jamaica, many smaller organizations have not jumped on the bandwagon.
But they may soon. The logic behind going global with accounting, data entry and customer-service tasks is compelling. While call center workers in the U.S. can make in the high $30,000 range or more a year, their Indian counterparts might earn $4,000, or up to $7,000 for a management-level post. Including other expenses, total cost savings of 30% to 40% are possible in moving back-office tasks overseas. What’s more, the quality of the work can surpass expectations. While clerical and call center jobs in the U.S. often are seen as mediocre-paying dead-ends, the same work is a relatively high-paying, high-status job in a developing country. That can translate into better-educated, more-motivated employees halfway around the globe. Betting that more and more U.S. and European-based companies will see this light, business process outsourcing outfits are springing up in India especially.
India’s National Association of Software & Services Companies (Nasscom) says the country’s call center and BPO industry – what it calls IT-enabled services – grew by 70% during the 2001-2002 period to a total of $1.46 billion in revenues. And Nasscom has a bullish outlook as well. Indian revenues in IT-enabled services should jump to $16.94 billion by 2008, capturing more than 10% of the global market, Nasscom predicts. Indian employment in the field, Nasscom says, could rise from roughly 100,000 to 1.1 million people.
A study last year by London-based consulting firm Ovum found that call center capacity worldwide will nearly double within five years, growing from 7.3 million seats in 2001 to over 13 million early in 2006. Ovum also saw the call center industry growing particularly fast in Central and Eastern Europe and in South and Central America (including the Caribbean). Both of these regions’ share of global call center capacity will jump from 2% of worldwide call center seats in 2001 to 7% in 2006 (a combined increase to 14% from 4%), according to Ovum.
But it’s not clear the back-office overseas switch is ideal for workers in developing countries. Not all Indian facilities are air conditioned, notes Vail Dutto, CEO of a U.S.-based contact center outsourcing firm. Dutto toured 20 Indian sites earlier this year while seeking an Indian partner for her firm InTelegy. In India’s tropical climates, lack of air conditioning all but guarantees a "data sweatshop" atmosphere. What’s more, some back-office facilities in India have smaller personal work space standards than offices in the U.S., says Chuck McDonough, director of accounting for the World Bank, which moved some back office operations to Chennai, India last year.
Besides the prospect of hot, cramped offices, another concern is the ability of workers in poorer countries to organize independent unions, suggests Candice Johnson, spokeswoman for the Communication Workers of America union. For example, she says, labor leaders in Mexico have been fired and beaten up. "It’s still a very difficult thing to do to exercise your rights to organize as a worker," Johnson says.
Gartner analyst Rebecca Scholl toured Philippine call centers and wondered about the toll taken on workers with late-night hours. Many employees lacked their own transportation, she said, which led them to stay several extra hours onsite until public transportation service began. Even though sleep rooms and karaoke entertainment were available, Scholl questions the long-term impact of the schedule: "You can just work at night so long before you burn out."
On the other hand, Scholl says the facilities she visited were "world class" in terms of comfort, ergonomics and cafeteria services. Other organizations with overseas back-office operations also say they treat workers properly. The World Bank, for example, used its Washington, D.C. offices as the standard for workspace size at its transaction-processing facility in India, which now employs 110 people. Each Indian worker gets about 90 square feet of room. Dutto, whose firm InTelegy has formed a partnership with Indian-based HCL Technologies, says the 400-seat call center in New Delhi used to serve her clients is air conditioned and provides transportation for workers.
Daksh, an Indian-based business process outsourcing firm, has imported office equipment to make sure its workspaces are ergonomically correct. Its roughly 2,300 employees work in air-conditioned offices, get transportation to and from work, and are given breaks from sometimes-tedious call center duties to take on other roles such as company librarian. Employees also are eligible for stock options.
So are the workers of Spectramind, another major Indian business process outsourcer. Now 90%-owned by Indian information technology firm Wipro, Spectramind’s nearly 3,100 employees also enjoy air conditioning, as well as transportation services and health insurance benefits.
Daksh and Spectramind may treat their workers as well as the top American firms do, but what about those U.S. employees whose jobs are sent to India and elsewhere? The displacement already has begun. Last April, financial services firm Conseco said it planned to move 2,000 jobs to India within 21 months, though it has trimmed the goal to a total of roughly 1,500 jobs by the end of 2003. So far, about 1,100 workers are dedicated to Conseco operations at its Indian subsidiary The World Bank, meanwhile, axed 40 jobs from its Washington headquarters when it shifted some back-office operations to India.
Such lay-offs are likely to become increasingly touchy given the possibility of a double-dip recession and the slow pace of job growth in the U.S. In July, for example, the U.S. economy produced a tepid 6,000 net new non-farm payroll jobs and the unemployment rate remained at 5.9%. Meanwhile, the American public has grown enraged at corporate greed in the wake of scandals at firms such as Enron, Tyco International and WorldCom.
"If U.S. process support personnel are seen to be losing jobs to cheaper white-collar workers in India and the Philippines, it is likely to become a serious political and public relations issue for enterprises considering offshore sourcing," Gartner wrote in a July report. Gartner suggests a wise approach may include using U.S.-based outsourcers with global operations and offering redeployment plans for affected workers.
Jeff Faux, though, suggests redeployment training is only a band-aid to the bigger wound of job exportation. As he sees it, corporations have misled Americans by saying only low-skilled work would be transferred abroad. Higher-skilled jobs also have moved overseas given the ability of people elsewhere to be trained, he says. Indeed, some of InTelegy’s Indian call center workers are handling customer support for software firm Oracle’s small business program, work which requires technical know-how.
Faux also disputes the logic that call center jobs in the U.S. are inherently undesirable. If the jobs weren’t being transferred to India and other countries, the U.S. workers would have opportunities for more training and benefits, he says. "It’s a vicious circle," Faux argues. "You’re creating more ’dead-endness’ to these jobs."
Faux’s point is supported in part by the experience of the CWA, which represents workers at firms including Verizon Communications, AT&T and SBC Communications. Thanks to joint union-management efforts, CWA-represented employees can take a variety of training programs, including Cisco Systems technology certification courses. In addition, CWA-represented call center employees can make up to $40,000 to $45,000 a year doing customer service work, Johnson says.
Faux says that to generate jobs, state governments and the federal government ought to be able to limit overseas outsourcing. He points to a case where New Jersey welfare recipients calling with benefits questions were helped by agents located in India. When the situation came to light earlier this year, it prompted outrage that the jobs weren’t located in the U.S. Faux suggests, though, that free trade legislation may erode the ability of government bodies to prevent privatization and the transfer of jobs overseas. "If you can’t allow the state of New Jersey the freedom to create opportunities in the public sector for its poor and unemployed, it’s unlikely you’re ever going to be (able to) do anything about GE sending its back-office operations to the far east," Faux says.
Off-shore advocates don’t share Faux’s slippery slope vision of job exportation. Organizations, they suggest, are likely to keep a chunk of their back-office operations in the U.S. to avoid becoming beholden to outsourcers and to prepare for disaster situations. What’s more, advocates defend moving back-office work off-shore as good for average Americans in the long run. InTelegy’s Dutto says call center jobs going abroad can prod the U.S. workforce to raise its skill levels. "We become the knowledge workers," she says. "The hourly rate, lower-paying jobs are going to be done where they best can be done."
David Lewis, associate vice president of business development in North America for Spectramind, says helping ailing U.S. companies save money will allow them to earn more and eventually reinvest in more jobs. "It’s in no one’s best interest for U.S.-based companies to suffer the way they are right now," he says. Lewis suggests wages rates eventually will balance out, with poorer countries’ labor standards rising rather than U.S. standards falling.
The World Bank pursued that goal when it moved operations to India. The Bank chose to pay employees an above-average wage - at the 75th percentile – as it hired its Indian staff. And "many, many" affected workers in Washington found other jobs at the Bank, McDonough says. In any event, if some U.S. workers lost jobs while those in a poorer country benefited, the net result is still good, he suggests. "Our mission is to rid the world of poverty," he says. "We’re increasing the standard of living in the Special Section: The Rush to Send Back-Office Business Overseas - Part 1

Call-Center Workers Straddle Two Continents and Cultures
Outside, the street lights blink to life as people make their way home. Inside one particular office, however, every corner is abuzz with sound. Indian actress Aishwarya Rai and American pop diva Britney Spears jostle for pin-up space on the poster boards. Computer screens glow on every desk and soft lounge music weaves a surreal atmosphere.
A young girl in a blue salwar kameez dress sits at her desk staring at the screen. The screen lights up, and she strikes her keyboard. “Hi. This is Jessie. Happy Independence Day, Mrs. Lucas. How may I help you?” At another table, a dark-haired young man who calls himself Murphy is on the phone. “No Problem, Mr. Farelly. We’ll give you a new lawn mower.” At another desk, a shy girl speaks: “Hi, Mr. Brown. This is Nicole from BigBucks Cards. I would like to remind you about your overdue payment, sir.” Meanwhile, a colleague, Randy, portrays an aggressive credit-card salesman. “This would be a great deal, Mr....”
Jessie, Nicole, Murphy, Randy – they all live in Mumbai (formerly Bombay) on India’s Western coast. Most have never been to America and when they step out of their offices, they are Jayanti, Madhuri, Mahesh and Randhir. They often live in the far-flung suburbs of Mumbai, and America has been a dream destination since they were knee-high. Welcome to Youth Online: India’s latest export to the world. They work to American time, try to speak like Americans, and sport attitudes that their peers in New York or San Francisco would find familiar. From Jayanti, Mahesh and Madhuri, they become Jessie, Murphy or Nicole with practiced ease every day for nearly 10-12 hours.
More than 100,000 young men and women, aged between 20 and 23, work for call centers across India, estimates the National Association of Software and Service Companies (Nasscom), an association of software and IT-enabled services companies. They sell everything from cars to travel packages; they nudge tardy customers into paying their credit card bills; they warn customers about overdrafts and staff the helpdesks for shopping malls and offices all over the U.S.
Jessie, whose real name is Jayanti Rao, lives in Dombivili, a suburb of Mumbai. “I work at least 10 to 12 hours a day,” she says. “It’s a tough job, but it’s not bad once you learn to juggle your time well.” She doesn’t just juggle her time; she has also had to learn her Indian and American personae. Jayanti, 23, went to a convent-run school in Dombivili and then attended college in Bandra, another Mumbai suburb. She wears her hair in a long plait and her clothes are Indian. But once she enters a company online chatroom or is on the phone, she morphs into her work persona of Jessie, a white, blonde woman who probably wears shorts to work.
Jessie’s day begins at 5:30 in the evening, Indian time, when she hits the "floor." The floor is a large area where customer service representatives, or e-service personnel, work on their projects. Each representative has a nickname (or "nick") that becomes a part of their personalities. Some use their nicks as e-mail identities or even as second names and some use it among friends.
Jayanti says that she has to be friendly, helpful and appreciative of every customer. Most customers approach her if they want to find out about the delivery of a product purchased from an online mall or want to return something that they had put in their shopping carts. Her challenge is to convince customers against returning goods that they bought and make sure that they come back to the mall.
She fields more than 100 calls a day and not once can she let the mask slip. If it does, it is immediately noticed by her supervisors because every call she makes and every online chat she handles is monitored. There are QCIs, or quality control inspectors, who keep an eye on the spellings, the language, the tone and the attitude of each employee. Says Randhir, who works as a e-service representative with a call center, “At the end of the day, I am told where my mistakes were. It helps me correct spelling mistakes and improve my performance.”
The QCI, everybody is keen to point out, is more a friend than a policeman. He steps in when a customer gets abusive or if a caller is too difficult. “We are told by the client that we can quit the call if the customer or caller gets personal. So we make sure that our representatives are not hassled unduly by such people,” says one supervisor. Supervisors monitor calls to check on the tone, accent and approach of the representatives. While call center employees may not necessarily be penalized, they are reprimanded for missing opportunities or helped to see how to handle a call better, says a supervisor.
“We have to be gracious, pleasant and aggressive at the same time,” says Jayanti. “This is quite different from what I used to be. But now I find that I have become more patient and I listen to my friends and parents a lot more than I used to. I also appreciate things much more.” She says that she finds Americans quick with their praise. They thank her for her help and are understanding about a lot of things.
How does she cope with the unusual work hours? Usually these don’t pose a problem. The office has a lively atmosphere, and everyone has so much fun that she loves working the graveyard shift, she says.
Call center employees typically work long hours. Work begins around 5:30 p.m. in India when it is 8 a.m. in America. Some 100 to 120 people work on a project, depending on its size and nature. They work in two shifts – with the second one starting around midnight. The late shift is the most stressful, but companies say that employees are well compensated through incentives.
Like Jayanti, her colleagues on the floor are very young. They are happy to work at a snazzy office where their take-home pay usually doubles in a year or two. They start at around Rs 8,000-10,000 a month ($166 to $208 a month) and this goes up substantially if they stay on with the organization. Companies offer attractive incentives to employees who agree to work nights and holidays, says a 22-year-old who moved from Delhi to Mumbai in search of a job. He says he is happy working on holidays, even though his office would let him stay home if he chose to. He prefers to work because he can earn much more on these days.
In addition to rapidly rising salaries, office parties offer another attraction to call-center workers. Every month there are picnics, movies, Hawaiian Nights and Rain Dances and other parties that keep the place rocking and enthusiasm levels high. “We are always going out to discos and restaurants together,” says one agent who has been with a call center for two years.
Most of them have no social life outside the office. Their friends are colleagues in other call centers. Also, since most social engagements are around dinner in India, they miss out on such opportunities. The office more than makes up for this, says one young woman. “We have so many parties here that we don’t really need anything else.”
Quite a few find their husbands or wives on the floor too. Most companies are neutral bystanders to these workplace romances but, says a senior representative with a call center, marriage almost always leads to one partner leaving the job.
The other problem is that the initial enthusiasm fades out when working odd and long hours. And for that there are frequent de-stressing programs, yoga and meditation camps that help employees cope with the pressures. Convincing parents about unconventional work hours is another problem. Everywhere employees are encouraged to bring their parents to the office and show them around. This helps a lot, especially with the women. Most call-centers in Mumbai hire college Graduates, preferably those who have taken courses in business or commerce.
Most offices see a constant stream of applicants all through the year, and even though the turnover rate is high, supply far outstrips demand. The tribe of Jessies, Nicoles, Randys and Murphys is on the rise.
The Making of a Call-Center Agent
One of India’s major advantages over other countries trying to enter the BPO market is its large pool of manpower. According to an ICICI Securities report, India has some three million students who Graduate every year outside the engineering and medicine disciplines. And they all speak English – albeit with different regional Indian accents. The makeover is not easy, even for someone who is born and bred in cosmopolitan Mumbai where Western brands, movies and trends are a way of life.
Arjun Vaznaik, COO of Tracmail, a Mumbai-based provider of call center services that has several U.S-based, Fortune 100 clients in the IT, banking and telecom industries, says it takes several months of grooming to get Indian workers ready to deal with Western customers. On the floor call-center workers start as “agents” – or people who are at the front line of answering or making customer calls to the U.S. Some two years later, they may become supervisors and then team leaders and finally center managers. It can take nearly five years for a call-center worker to go from being an agent to center manager.
Training is integral to every stage of this development, and so are the trainers who earn between Rs 15,000-18,000 a month ($315 to $375 a month) initially and nearly Rs 45,000-50,000 a month ($950 to $1,000 a month) after two years on the job. Each company develops its own training module. Vijay Rao, managing director and CEO of Epicenter Technologies, a provider of call-center services in Mumbai, says “the module is proprietary and the trainer can’t use it elsewhere.”
The first step is to recruit right. “While India has a large population of English-speaking people, the dialect and accents of English spoken in several parts of the country may not be completely suitable,” says Prakash Gurbaxani, CEO, TransWorks Information Services, a leading outsourcing company offering transaction processing, financial accounting and HR-related services to international clients. While the accent and voice are important, they are not the only criteria for selection. “We have to look for people who understand that this is a high stress, challenging job and this is the way it is always going to be,” says Vaznaik. Among other things, Tracmail runs a technical help desk and handles voice, chat, and e-mail responses on behalf of clients.
After joining the company, employees are put through an induction program. This lasts about 15 days for a web-based function and a month for voice-based services. This is to help employees become familiar with the ethics and goals of the organization. The next stage has three or four components depending on the project and the client. Here employees go through training programs for their voice, accent, language, domain, process behavior and attitude. Sometimes the client is a part of this training program, but that depends on the project.
“The training is completely non-threatening, and the employees are encouraged to give feedback every step of the way,” says a trainer. Training modules are usually created with the client and have two broad categories. The first deals with the technical and systemic details of the tasks the employee must perform. For instance, an agent with a web-based shopping mall must know the various processes within the mall, the services offered and the tools that he can access on his screen when dealing with a customer. The second module is aimed at helping employees understand the way Americans use the English language. They do this by watching movies, baseball games and TV shows. For example, Indian employees may be unfamiliar with expressions such as “taking a raincheck” or “ballpark estimate.” They soon find out. In one office, every new worker is asked to watch CNN and BBC News regularly to get the accent and tone right. “They watch BBC News, not BBC comedies,” says the trainer.
During the training, employees also le

BPO Backlash - Guest - 03-15-2004

<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->WASHINGTON -- Despite the political outcry over the outsourcing of white-collar jobs to such places as India and Ghana, the latest U.S. government data suggest that foreigners outsource far more office work to the U.S. than American companies send abroad.
The value of U.S. exports of legal work, computer programming, telecommunications, banking, engineering, management consulting and other private services jumped to $131.01 billion in 2003, up $8.42 billion from the previous year, the Commerce Department reported Friday.

Imports of such private services -- a category that encompasses U.S. outsourcing of call centers and data entry to developing nations, among other things -- hit $77.38 billion for the year, up $7.94 billion from 2002. Measuring imports against exports, the U.S. posted a $53.64 billion surplus last year in trade in private services with the rest of the world.

Under government accounting, when a U.S. company opens a technical-support center in India that handles inquiries from the U.S., that is considered a U.S. import of services. When a U.S. lawyer in New York does work for a German auto company or a New York investment banker works on a deal for a Japanese company, that is an export of services.

The numbers suggest that congressional efforts to restrict outsourcing by U.S. companies may backfire, if they provoke retaliation by U.S. trading partners. Economists also say that U.S. service exporters -- insurers, for instance -- might lose some competitive edge if they can't use foreign suppliers for call centers or other back-office operations.

"If you try to protect and limit outsourcing, you will have a negative impact on the exports of service activities, which generate a lot of jobs," said Catherine Mann of the Institute for International Economics, a Washington policy research group.

Despite the developments in services trade, the current-account deficit, the most inclusive measure of the U.S. trade gap, hit another record in 2003, reaching $541.8 billion, or 4.9% of the gross domestic product, up from $480.9 billion in 2002, or 4.6% of GDP. The increase came even though the deficit for the final three months of year narrowed to $127.5 billion, from $135.3 billion in the third quarter.

The white-collar trade issue has risen to the top of the political agenda and has led to legislative proposals to prevent outsourcing, or expose it when it occurs. Sen. John Kerry of Massachusetts, the likely Democratic presidential nominee, wants U.S. companies to reveal to callers that their telephone inquiries are going overseas. Others in Congress legislation to restrict government contractors from sending work abroad.

Politicians have largely ignored the jobs created in the U.S. when Americans sell white-collar services to foreign customers.

"I can understand why members of Congress are responding to what a lot of constituents feel, and I can understand why their constituents feel that way because there has been so much publicity about the potential loss of jobs," said J. Robert Vastine, president of the Coalition of Service Industries. But, he said, "a lot of it is hype, and one of the big problems in this debate is there hasn't been enough analysis."

In addition to hiring more U.S. businesses to provide services, foreigners doubled last year the amount of money invested in U.S. companies, plants, offices, stores and other facilities. That foreign direct investment swelled to $81.98 billion in 2003, from $39.63 billion in 2002, the government said.

Write to Michael M. Phillips at

Updated March 15, 2004 1:56 a.m.