BPO Backlash

03-16-2004, 02:01 AM

OP-ED COLUMNIST
Origin of Species
By THOMAS L. FRIEDMAN
Published: March 14, 2004

QUOTENandan Nilekani, C.E.O. of the Indian software giant Infosys, gave me a tour the other day of his company's wood-paneled global conference room in Bangalore. It looks a lot like a beautiful tiered classroom, with a massive wall-size screen at one end and cameras in the ceiling so that Infosys can hold a simultaneous global teleconference with its U.S. innovators, its Indian software designers and its Asian manufacturers. "We can have our whole global supply chain on the screen at the same time," holding a virtual meeting, explained Mr. Nilekani. The room's eight clocks tell the story: U.S. West, U.S. East, G.M.T., India, Singapore, Hong Kong, Japan, Australia.

As I looked at this, a thought popped into my head: Who else has such a global supply chain today? Of course: Al Qaeda. Indeed, these are the two basic responses to globalization: Infosys and Al Qaeda.

Infosys said all the walls have been blown away in the world, so now we, an Indian software company, can use the Internet, fiber optic telecommunications and e-mail to get superempowered and compete anywhere that our smarts and energy can take us. And we can be part of a global supply chain that produces profit for Indians, Americans and Asians.

Al Qaeda said all the walls have been blown away in the world, thereby threatening our Islamic culture and religious norms and humiliating some of our people, who feel left behind. But we can use the Internet, fiber optic telecommunications and e-mail to develop a global supply chain of angry people that will superempower us and allow us to hit back at the Western civilization that's now right in our face.

"From the primordial swamps of globalization have emerged two genetic variants," said Mr. Nilekani. "Our focus therefore has to be how we can encourage more of the good mutations and keep out the bad."

Indeed, it is worth asking what are the spawning grounds for each. Infosys was spawned in India, a country with few natural resources and a terrible climate. But India has a free market, a flawed but functioning democracy and a culture that prizes education, science and rationality, where women are empowered. The Indian spawning ground rewards anyone with a good idea, which is why the richest man in India is a Muslim software innovator, Azim Premji, the thoughtful chairman of Wipro.

Al Qaeda was spawned in Saudi Arabia, Pakistan and Afghanistan, societies where there was no democracy and where fundamentalists have often suffocated women and intellectuals who crave science, free thinking and rationality. Indeed, all three countries produced strains of Al Qaeda, despite Pakistan's having received billions in U.S. aid and Saudi Arabia's having earned billions from oil. But without a context encouraging freedom of thought, women's empowerment and innovation, neither society can tap and nurture its people's creative potential â so their biggest emotional export today is anger.

India, Pakistan, Saudi Arabia and Afghanistan each spontaneously generated centers for their young people's energies. In India they're called "call centers," where young men and women get their first jobs and technical skills servicing the global economy and calling the world. In Pakistan, Afghanistan and Saudi Arabia they're called "madrassas," where young men, and only young men, spend their days memorizing the Koran and calling only God. Ironically, U.S. consumers help to finance both. We finance the madrassas by driving big cars and sending the money to Saudi Arabia, which uses it to build the madrassas that are central to Al Qaeda's global supply chain. And we finance the call centers by consuming modern technologies that need backup support, which is the role Infosys plays in the global supply chain.

Both Infosys and Al Qaeda challenge America: Infosys by competing for U.S. jobs through outsourcing, and Al Qaeda by threatening U.S. lives through terrorism. As Michael Mandelbaum, the Johns Hopkins foreign policy professor, put it: "Our next election will be about these two challenges â with the Republicans focused on how we respond to Al Qaeda, and the losers from globalization, and the Democrats focused on how we respond to Infosys, and the winners from globalization."

Every once in a while the technology and terrorist supply chains intersect â like last week. Reuters quoted a Spanish official as saying after the Madrid train bombings: "The hardest thing [for the rescue workers] was hearing mobile phones ringing in the pockets of the bodies. They couldn't get that out of their heads."Â Â

03-16-2004, 05:28 AM

The Real Benedict Arnolds
By James K. Glassman Published 03/11/2004

Sen. John Kerry is fond of calling CEOs who employ foreigners "Benedict Arnolds," after the despicable Revolutionary War turncoat.

But look at H.J. Heinz & Co., the family business of Kerry and his wife Teresa. Of the 79 factories that the food-processor owns, 57 (a felicitous number!) are overseas. According to its website, Heinz is making ketchup, pizza crust, baby cereal and other edibles in such countries as Poland, Venezuela, Botswana, China, Thailand and India.

Put hypocrisy aside. The traitors to American interests aren't CEOs seeking to boost profits that ultimately lead to more hiring at home. The real Benedict Arnolds are Kerry and his colleagues in Congress, like Sens. Hillary Clinton (D-NY) and Jon Corzine (D-NJ), who understand enough economics to know that outsourcing is trade and that trade -- as David Ricardo figured out 200 years ago and as Hillary's husband articulated in the 1990s -- benefits both parties.

Imagine if U.S. computer companies were forced to make all their components at home. The cost of computers would be higher, so U.S. business could not enhance productivity, grow and hire workers. Plus, U.S. computer makers would be priced out of the market and forced to fire workers.

So far, legislation backed by Clinton, Corzine and the rest has been fairly benign. But they have fanned the flames of protectionist anger, and the fire is raging out of control. One result could be a reversal of the global movement toward open trade, which has been a boon to America.

This is a good time to remember the 1930 Smoot-Hawley Act, which touched off a tariff war that cut global trade by more than two-thirds in five years. Smoot-Hawley, in the view of many economists, intensified and prolonged -- and perhaps even caused -- the Great Depression.

But there's a more immediate way that the outsourcing hysteria hurts American interests: It is antagonizing India, one of our most important allies.

Indians are angry and bewildered by what's happening here. India had been the world's most prominent example of autarky, a backward policy of protectionism. Partly because of pressure from the United States -- and partly from observing the economic success of smaller countries like Singapore and South Korea -- India has eased that policy in recent years.

Imports and exports have soared, and India's growth rate has doubled to 8 percent. The world's largest democracy, with a population of one billion, is getting more prosperous, creating what could ultimately become the best market in the world for American goods and services.

Meanwhile, India has been critical to American foreign policy. The war against terror forced us to lavish aid on India's arch-rival, Pakistan, and a nuclear war between the two countries over disputed Kashmir seemed possible. But peace is now closer, and despite provocations, India has proven a steadfast ally.

Now, many Indians feel they are the scapegoats for America's cyclical economic downturn in what they see as a racist campaign. Isn't this the way trade works? "On the one hand you talk about opening up our markets. On the other, you want to ban â¦outsourcing," said India's deputy prime minister.

In fact, the business processes (or BP) work that Indians do for companies worldwide is a "good thing," as Gregory Mankiw, the head of President Bush's Council of Economic Advisors had the temerity to say, like the little boy who couldn't help but speak the truth while his elders were telling lies. ("This simple restatement of the logic of liberal trade brought derision down on Mr. Mankiw's head," wrote The Economist. And from, among others, Corzine, the former CEO of Goldman, Sachs!)

As the BP sector waxes, India becomes a bigger market for "Dell personal computers, Cisco switches, and Avaya telecommunications equipment," writes Rafiq Dossani of Stanford in Outlook, an Indian magazine.

It would be understandable if the Indians threw up their hands and said: "Fine! We're going back to our mercantilist ways, and forget about cooperating on foreign policy."

Yes, trade does cause some hardship, which the U.S. must address through job retraining and aid for displaced workers. But constraints on trade cause much more pain, threatening to poison our relations with key allies and plunge the world into another depression. That is no exaggeration.

Patricia Hewitt, the British trade secretary, recently accused U.S. politicians with "playing politics with people's jobs and prosperity." It's worse. At a time when leaders should be educating Americans about the benefits of trade, Kerry, Clinton and the others are putting America in peril.

James K. Glassman recently wrote for TCS about Alan Greenspan.

03-16-2004, 08:45 AM

Watch the arguments shift to new level
Prove it's secure

03-18-2004, 09:09 PM

For US academics, India is now an obsession
Thursday March 18 2004 16:07 IST
PTI

NEW YORK: Impressed by the Indian economy emerging on the global scene and its ability to attract jobs, students and faculty members in the US are increasingly involving themselves to understand the phenomenon and want to visit the country to study it at first hand.

"There's a tremendous interest in understanding two things -- the emergence of the Indian economy on the global scene, and its important role in the decoupling of services from where work is done and where it is delivered," Patrick T Harker, Dean of the Wharton School of the University of Pennsylvania told the New York Times.

India, he said, is "so hot" that almost every faculty member at the Wharton wanted to visit it. "When a phenomenon bursts on the scene, people struggle to understand it. Academics are getting asked questions all the time." Researchers at schools like the Kellogg School of Management, the University of California at Berkeley and the Columbia Business School are studying India's intellectual base, and the trials that software services companies face as they compete globally, the paper said.

At the Sloan School of Management of the Massachusetts Institute of Technology, outsourcing is drawing an overflow of MBA students to a new course that focuses on the variety of economic, technological, managerial and organisational factors in corporate decisions to transfer white-collar jobs to other countries.

"Outsourcing is seen as the next major issue that corporations in the US will be grappling with," Partha Iyengar, vice president for research at Gartner India, a technology research and consulting company, was quoted as saying.

"The faculty are trying to establish themselves as experts, which then typically begets prestige, grants and fame," said Iyengar, who, in addition to conference calls with clients, investment banks and investors, now gets calls from American professors.

Lester Thurow, a former Sloan school Dean and one of the class's teachers, was quoted as saying that outsourcing was not only a major political issue, but also one of real relevance to MBA students.

"Professional outsourcing creates a world where losses often occur at the top rather than the bottom of the pyramid," Professor Thurow said. "Naturally, our students need the skills to navigate in such a new environment."

At Wharton, the paper says at least 20 faculty members are researching outsourcing. "Increasing numbers of our students -- not students of Indian origin -- are asking to be placed in India," Dean Harker said while on a visit to India last year.

Each week, the Times says, Sachin Mulay, a strategic marketing manager with India's leading software services firm, Wipro Limited, is overwhelmed with E-mail messages from American universities proposing visits to the company or inviting Wipro executives to speak about the phenomenon of outsourcing. In the last few months, it noted that the Bangalore-based Wipro alone has had a dozen visits by students and faculty of top United States colleges, and 10 more are scheduled in the coming months. A competitor, Infosys technologies, also in Bangalore, has had eight student groups visit in the same period.

Infosys, the subject of case studies at Wharton, the Harvard Business School and the Stern School of Business at New York University, is seeing an increase in case study requests from academicians.

Its chairman and founder, N R Narayana Murthy, has delivered lectures at Stanford, Wharton and Cornell. At Fordham University in New York, research on outsourcing is thriving.

Sumita Raghuram, Associate Professor of management systems, is designing a study that will examine the role of cultural sensitivity in outsourcing, the paper said. Students are interested in pursuing careers in dynamic economies, says Harker, "and India is undoubtedly one of them."

He said both India and China, with their impressive Gross Domestic Product rates, are attractive to students and academicians alike. "Today, every other country in the world is trying to reposition itself to compete with India and China," he told the Times.

Few have tracked outsourcing more closely than Annalee Saxenian, a professor at Berkeley and one of the trend's early researchers. "The speed with which this phenomenon has taken off has amazed me," she said.

In contrast with today, she said, on her first visit to India in 1997, American companies were highly sceptical of the idea of doing business there.

Vivek paul, vice chairman of Wipro, told the paper, "the rapid acceptance of offshoring of services is viewed by academia as being part of a huge change still in its infancy, with much yet to be discovered."

"Students are eager to learn how this trend will affect employment opportunities, what entrepreneurial openings this may create and what skills are required to succeed in the new world," he said.

03-19-2004, 11:00 PM

Bush campaign gear made in Burma
QUOTEThe official merchandise Web site for President George W. Bush's re-election campaign has sold clothing made in Burma, whose goods were banned by Bush from the U.S. last year to punish its military dictatorship. <img src='style_emoticons/<#EMO_DIR#>/ROTFL.gif' border='0' style='vertical-align:middle' alt='ROTFL.gif' />

03-22-2004, 08:57 PM

All is Not Lost.... in Translation

03-23-2004, 03:53 AM

Needs job, moves to India
As U.S. jobs move abroad, more Americans are willing to work overseas.
By Leslie Haggin Geary, CNN/Money staff writer

NEW YORK (CNN/Money) - Robert Dunn first spotted the warning signals three years ago, after the dot-com bust.

That's when his Las Vegas-based company, Creative Healthcare Solutions, which provides Internet technology services to healthcare clients, started seeing jobs being awarded to companies in India and China.

Instead of protesting against the offshoring of work that might have gone to U.S. firms like his, Dunn, 55, has decided to get in on the game. Call it a case of, "If you can't beat them, collaborate with them."

Recently, Dunn found himself contacting head hunters in Bangalore -- southern India's Silicon Valley -- where many information technology (IT) and other white-collar jobs have sprouted in recent years.

His goal is to send himself, and as many of the 20 people who work with him, to India to consult on healthcare IT projects.

The way Dunn sees it, he has 30 years of experience in the field, as do many of his colleagues. They are perfect candidates to oversee and manage work that's now being awarded to Indian workers with less experience in the field.

"It's important for Americans to collaborate more than they have been," Dunn says. "It's unfortunate that everyone has put a stake in the ground that outsourcing is totally bad or totally good. No one's looking in the middle."

Foreigners working in India
As it turns out, Dunn isn't the only American starting to look -- and even move -- abroad for work. And his contention that American workers can still find opportunity in this dawn of offshoring isn't a case of wishful thinking, according to the Indian employers he's contacting.

"We need overseas people to work in our country," agrees Kris Lakshmikanth, founder and CEO of Head Hunters India. "In fashion, health care, biotechnology, there are areas where India needs special knowledge that is available in the U.S. and Europe. The other thing we need are people who can speak different languages, American English, French, German."

Today, experts say, there are about 30,000 foreigners working in India. That's a virtual drop in the bucket for a country that has a population of more than 1 billion -- and far less than the 250,000 foreigners (mostly English) living in India some 60 years ago, just before India's independence in 1947.

But the number of people willing to uproot themselves from homes in New York to become expatriates in New Delhi is expected to grow in coming years. In fact, it's already become easier for Indian employers to attract foreign workers.

Last week, for example, Lakshmikanth received an e-mail from a woman who worked at a call center in Kansas. Could she send a resume?

"I get two to three e-mails from the U.S. and one from Europe a week asking for jobs in India," he says. "It's the future."

The accidental expat
India wasn't something Geri Golemme, a vice president of staffing for a large financial services company, sought out. Her boss asked if she'd be willing to relocate temporarily to Bangalore to help launch the firm's new overseas operations. She'd be home in six weeks.

That was in March 2003, but Golemme's still in India, and won't return to Boston until next year. But she's not unhappy about the delay. On the contrary, Golemme says the India assignment offers abundant professional opportunity plus new adventure.

"When you're part of a startup, even though it's part of a huge organization, you have opportunities you never would have back in the U.S.," she says.

That's not to say uprooting doesn't have challenges. Golemme's roots in Boston are "very deep." She owns a home on Beacon Hill and misses things like going out for salsa dancing.

"I wanted to challenge myself to do something I'm afraid of doing," she said. "When I arrived in India at 2 a.m. and got off the plane, I didn't know what to expect."

Many Americans moving to India are natives who left the subcontinent in search of better opportunity. Now, people like Sam and Neeta Iyengar are making a reverse migration home.

From 1996 to 2001, the Iyengars lived and worked in New Jersey, Sam as owner of a tech company. Neeta's jobs included stints as a radio disc jockey and newspaper reporter. Their daughter, Shloka, was born in the Garden State in 2000, and Sam quips: "Hoboken is known for baseball, Frank Sinatra and Shloka. She's a Jersey girl."

The Iyengars started to feel the pull of home soon after Shloka was born. "We wanted her to be close to her grandparents," says Sam. "They were growing old."

So Sam sold his business and the family moved to Bangalore.

He now works as senior vice president at Sonata Software, a tech company. The job wasn't hard to find: a cup of coffee with an old acquaintance resulted in a job offer.

"Companies here are struggling to be more market- and customer-oriented," Iyengar says. "To have American techies and management come over here will help that process."

Though moving to India may involve a long flight, the actual process is easier than ever. Companies post job listings online, so anyone can send a resume to prospective employers with a click of a button.

Monster.com India has about 3,000 foreigners looking for jobs on its Web site. And headhunters like Lakshmikanth are coming to the United States to talk up the virtues of relocating.

Their message is resonating with people like Mahesh Prasad.

Prasad moved to the United States 20 years ago to get an M.B.A. degree. He became an American citizen and has worked in the telecommunications industry around Washington, D.C., where his wife was a transportation lobbyist.

Neither had thought of moving back to India. Then a recruiter called Prasad. Reliance Infocomm, India's No. 1 telecom company, needed people with experience.

In the States, telecom was suffering badly. By comparison, working for Reliance "was a lifetime opportunity," Prasad said.

"We were creating a market with 35 million phones to 250 million phones in a matter of a few years," he explained. "For someone like me, it was an opportunity to do something that won't be repeated."

03-23-2004, 06:45 PM

WSJ today:

Next on the Outsourcing List

Job Shift to Cheaper Countries
Could Threaten More Careers:
Analysts, Architects, Attorneys
By KRIS MAHER
Staff Reporter of THE WALL STREET JOURNAL

Sheryl Matta earns roughly half what she did a few years ago, and every month the job market in her field seems to get worse. She points to a single cause: offshoring.

A medical transcriptionist, Ms. Matta took her latest pay cut in January, when the Rockville, Md., company she had been working for lost a contract to a competitor that outsources work to India, and she was laid off. After scrambling for a month, she found more work transcribing notes that physicians dictate -- but will need to work 15 hours a day at her new employer's 7-cents-a-line pay rate to hit her goal of earning $2,000 a month.

"I can't make a living at this anymore," says Ms. Matta, 54 years old, who lives in Odessa, Texas. The two phone lines and Internet account needed for her job chew up about $190 a month, and she can't afford to send her 16-year-old daughter to band camp for the French horn this summer. "Our jobs are being taken away, and we're very, very angry about it."

The list of jobs being affected by the movement of U.S. work to lower-cost countries around the world is growing. American companies have shipped computer-programming and call-center jobs to educated workers in India, the Philippines, Mexico, Canada and elsewhere for the past decade. Now, workers in a wide range of other fields, from accountants to electrical engineers, are discovering that their jobs aren't immune from offshore outsourcing.

<table cellpadding="1" width="254" cellspacing="0" border="0" align="left"><tr><td valign="top" bgcolor="#7194BA" width="243">< !-- Start Nest --><table bgcolor="#ffffff" cellpadding="0" width="243" cellspacing="0" border="0"><tr valign="top"><td height="1" width="8" rowspan="99"><spacer type="block" width="8" height="1"></td><td class="plnEleven" style="padding-top: 5px; padding-bottom: 5px;">HELP WANTED -- JUST NOT HERE

[img]/img/g.gif[/img]
[img]/img/b.gif[/img]
<div class="plnEleven">A sampling of jobs now being done by workers overseas:
<reprintsdisclaimer><div class="plnEleven">Medical

Processing insurance claims and hospital bills

Medical transcription and billing
<div class="plnEleven">Animation

3-D animation special effects

Linear and nonlinear editing
<div class="plnEleven">Insurance

Applications and claims processing

Benefits administration
<div class="plnEleven">Digitizing

Converting text, engineering drawings, architectural designs and maps from
paper to digital format
<div class="plnEleven">Desktop Publishing

Page layout

Advertising campaigns

Typesetting and color separation
<div class="plnEleven">Telemarketing

Customer-service management for international banks, software companies and
credit-card companies

Airline ticketing and reservations
<div class="plnEleven">Financial

Financial analysis for Wall Street banks and insurance companies

Accounting and bookkeeping

Tax preparation
<div class="plnEleven">Sources: outsource2india.com; WSJ
research
</td><td height="1" width="8" rowspan="99"><spacer type="block" width="8" height="1"></td></tr></table>< !-- End Nest --></td>
<td width="9"><spacer type="block" width="9" height="5"></td></tr>
<tr><td height="12" width="252" colspan="2"><spacer type="block" width="252" height="12"></td></tr></table>

"You've got to look in the rear-view mirror when there's someone else coming on the job scene who can do what you can do for less," says John McCarthy, a Forrester Research Inc. vice president. He estimates that as many as 588,000 U.S. white-collar jobs will be "offshored" by 2005 -- and a total of 1.6 million by 2010. The U.S. had a total of 138.3 million employed workers at the end of February.

India's National Association of Software and Service Companies estimates that more than 300,000 white-collar jobs have been created there since 2000 to serve overseas clients, many of them U.S. companies.

In some fields, there is theoretically no reason why the majority of positions couldn't be sent offshore, much as furniture and textile companies gradually moved production overseas or imported foreign-made products. So-called placeless jobs that don't require face-to-face customer interaction are increasingly at risk. Information-based jobs are especially vulnerable, because it is easy and cheap to transmit data almost anywhere these days.

About 10% of U.S. jobs in medical transcription, in which doctors' tape-recorded notes about cases are accessed electronically and typed into a computer by workers who must know medical terminology, already have been shifted to India, Pakistan, Canada and other countries, according to the American Association for Medical Transcription. Some estimates put the offshoring figure as high as 30%. The U.S. industry had about 99,000 workers in 2002, according to the Bureau of Labor Statistics.

"A lot of our members are single moms raising kids, and they're going to be put out of jobs," predicts Carrie Boatman, the Modesto, Calif., trade group's director of professional relations.

Yet even outsourcers acknowledge there are limits to how much work can be sent offshore. Geographic and cultural differences can make it hard for overseas workers to take over highly sophisticated jobs, says Manoj Jain, chief executive of Pipal Research Corp., a Chicago investment-research and consulting firm with a staff in India of 50 native-born employees holding a doctorate or M.B.A. degree.

Salaries for the most sought-after foreign workers also are surging, offsetting the cost savings that lure U.S. companies overseas. Mr. Jain recently gave 80% raises to his Indian employees in order to hold onto them. "The level playing field will happen sooner than people expect," he says.

And some job fields in the U.S. are regulated so closely that they are relatively insulated against offshoring. While radiologists often are mentioned as likely casualties as jobs move abroad, federal laws require that anyone interpreting X-rays and other images for U.S. hospitals be trained and licensed in the U.S. The loss of U.S. radiology work "sounds sensational and scary, but it is such a small, small part of the bigger picture," says Jon Berger, vice president of NightHawk Radiology Services LLC in Coeur d'Alene, Idaho. The company has 30 radiologists in Australia -- all of them U.S. citizens paid more than $300,000 a year. That costs about the same as a U.S. radiologist, but the Sydney office is able to keep working after NightHawk's employees in the U.S. have gone home for the night.

Still, lots of other job categories are vulnerable. Here are several fields that experts say could see an increasing amount of U.S. work moved to other countries:

Accountants and tax professionals. Offshoring tax work is particularly attractive to many accounting firms, thanks to a large supply of qualified, lower-paid accountants in India and other countries. Mark Albrecht, CEO of outsourcing firm Xpitax LLC, estimates that about 100,000 U.S. tax returns will be handled overseas this year, including about 10,000 by the Braintree, Mass., company's staff of 75 tax professionals in Chennai, India.

Some outsourcers estimate that an accounting firm can save $50,000 for every 100 tax returns it ships to India. Xpitax electronically receives tax information from other accounting firms and then loads it onto an Internet server that can be accessed by its accountants in India.

So far, outsourcing has captured barely a speck of the U.S. tax-preparation business, which includes 132 million individual returns expected this year by the Internal Revenue Service. But temporary U.S. workers who help handle the tax-season rush from January to April could eventually be hit hard, some experts worry. Paid preparers complete more than half of all individual tax returns.

"It could eliminate a whole work force, but too much is unknown at this point to say with any accuracy whether this will happen," says Cindy Hockenberry, a spokeswoman for the National Association of Tax Professionals in Appleton, Wis.

Technical writers. The job of translating complex technological concepts and procedures into language that can be easily understood by a nontechnical audience can be done from afar because it usually doesn't require face-to-face collaboration with product developers. As a result, some companies are turning to English-skilled writers in India, Russia, China and other Asian countries to compose user guides and highly technical product manuals.

Some technical writers in the U.S. already have seen their wages and job opportunities plummet. Michele Davis, 39, a self-employed technical writer in Minneapolis, says she earned $100,000 three years ago -- but only $12,000 in 2003. She knows several technical writers who have been forced to take retail jobs paying about $10 an hour with no benefits.

"I've talked to several people whose jobs have gone to Korea," says Ms. Davis, who thinks her former clients have been moving writing jobs overseas. "It's cheaper to have them write it and have an editor in America correct it."

Her husband, Jon Phillips, a programming analyst for an Emerson Electric Co. unit, has been told that his job will be outsourced in about six months, after he completes a new database project. Mr. Phillips earns $80,000 a year, and estimates that his Indian replacement will earn about $20,000. An Emerson spokesman couldn't be reached for comment.

Architects and drafters. Many architecture firms have begun exporting drafting work and the creation of legal documents used during construction. Carl Roehling, president and CEO of SmithGroup, a 750-employee architecture firm with eight U.S. offices, estimates that about a quarter of large architecture firms currently offshore their construction-documents work, and more firms are considering the practice to remain competitive. SmithGroup currently offshores only construction-documents work for overseas projects.

Younger architects face the biggest threat. "I think we have less need to hire on a very basic level than we did six years ago," says an executive director for a West Coast firm that designs buildings for public-sector clients. The large firm, which asked not to be identified, cut its staff by 10% over the past few years and uses offshore drafters for some construction drawings.

Some students, particularly those in drafting programs, are nervous. Joyce Pelletier, enrolled in a computer-aided drafting program at Hudson Valley Community College in Troy, N.Y., says many students could have diminished opportunities as a result of offshoring. "If you're going to design a Wendy's, it makes no difference whether you're here or in India," she says. Drafters "may be the steel worker of Pittsburgh," says Ms. Pelletier, 47.

Legal and investment research. Mindcrest Inc., of Chicago, provides legal research for companies and law firms and has a staff of 15 in Bombay, India. Much of its work in India is administrative tasks that typically would be handled by paralegals or junior lawyers, and involves document searches and researching laws in different areas, says George Hefferan, Mindcrest's vice president and general counsel.

The number of overseas employees doing such work is small but doubling about ever year at Mindcrest. The job shifts are larger when companies that have set up their own research departments outside the U.S. are included.

Aric Press, editor in chief of American Lawyer, a legal publication in New York, adds that "commodity legal work that is largely repetitive can be done by intelligent lawyers anywhere."

Meanwhile, some U.S. financial firms are creating fewer research jobs even as they gear up for the industry's expansion, says Peter Mintz, president of Fleetwood Research, an investment research firm in New York's Westchester County. "Instead of rushing to hire everyone back they're saying, 'Wait a minute, we don't have to hire back the same amount of people,' " he says.

Insurance claims processors. The job of processing claims involves inputting information from people seeking to be reimbursed from insurers, and then determining how much to pay based on insurance policies. That chore has gone digital in recent years, removing some of the barriers that kept processing jobs in the U.S.

Most of the insurance jobs being moved to other countries involve relatively simple data entry, but companies are now experimenting with shifting more-complicated tasks such as reading contracts and settling claims. "America doesn't have a lock on the skill base needed to do this job," says Sid Miner, president and CEO of Business Process Management Inc., the parent of a medical-claims processor.

Between 10,000 and 20,000 so-called claims-adjudication jobs have moved to other countries, Mr. Miner estimates, leaving about 300,000 of those jobs in the U.S.

URL for this article:
http://online.wsj.com/article/0,,SB1079994...7862153,00.html

03-27-2004, 12:01 AM

Contradictory to the belief that outsourcing has eaten away much of
US jobs the business week has come out with this week article that
its now outsourcing but good old "Productivity" that is the real
culprit...

The Price Of Efficiency
Stop blaming outsourcing. The drive for productivity gains is the
real culprit behind anemic job growth
QUOTEWhat on earth is going on in the U.S. labor markets? Demand for goods and services is the strongest in years, and profits are going through the roof. Companies are spending again on new equipment, while starting to restock their depleted inventories. Yet they are not hanging out the "help wanted" signs as they did in earlier economic recoveries. If past business cycles are any guide, by now
robust GDP growth -- 6% in the second half of 2003, with 5% widely expected in the current quarter -- should be creating more than 200,000 jobs per month to help restore the 2.7 million positions lost since the recession hit in early 2001.

But check out the government's February employment report. Days before its Mar. 5 release, economists were confidently predicting an increase of 125,000 new payroll jobs -- a modest number, by the way, when compared with previous recoveries. Yet to the shock of almost everyone concerned, the U.S. created a measly 21,000 jobs last month. After more than two years of economic recovery -- and with only 364,000 new positions created since payrolls turned up last September -- the oft-repeated assertion that strong job growth is just around the corner is starting to ring hollow. Says Alan B. Krueger, a labor economist at Princeton University: "It's surprising that job growth has been so anemic."

So what accounts for the shortfall? To many Americans increasingly anxious about their prospects, the culprit is clear: the outsourcing, or offshoring, of manufacturing and, increasingly, white-collar jobs. And hardly surprising in a Presidential election year, politicians are throwing fuel on the fire. Even as they ratchet up the rhetorical attacks on outsourcing, many are racing to propose legislation that would make it more difficult and costly for companies to move jobs out of the U.S.

SURVIVAL OF THE LEANEST. But if the outsourcing of jobs to India, China, and other low-wage centers has caused some of the U.S. job losses of the past three years, it is hardly the primary explanation for the weak job market. Instead, the continued ability of U.S. companies to squeeze out productivity gains on the order of 5% annually, since the recession ended, is having a far greater impact on the jobs picture. What's more, thanks to a late-'90s binge on technology, a broader array of industries is now finding ways to eke out efficiencies from their workforces than in the past. That means that the dearth of hiring, long a fact of life in the manufacturing sector, is becoming a reality in the service businesses -- retail, finance, transportation -- that account for 80% of U.S. jobs. "Don't be surprised that people aren't rushing out to hire more as this economy expands," says Nickolas Vande Steeg, the chief operating officer of Parker Hannifin Corp., a Cleveland company that makes factory equipment for other manufacturers. Since 2000, his company has cut 7,675 jobs, by streamlining such things as procurement, even as sales have inched higher, resulting in a 14% rise in sales per employee in the last two years. "If ever there was a time to gain productivity," he adds, "it's now."

Other powerful, transformative forces are also at work, reshaping the economy and suggesting that job growth may not pick up to the degree it did following the recession of 1990-91. China's emergence as a low-wage powerhouse, for one, has stiffened global competition and forced U.S. companies to become even more efficient. At the same time, the demands for profits by a growing investor class have heightened the pressure on corporations to keep costs low. The soaring cost of health-care benefits is also making companies more hesitant to add workers. Finally, the political and economic shocks of the past three years -- the stock market bust, the terrorist attacks, the corporate scandals, and war in Iraq -- have generated unprecedented uncertainty and caution in the executive suite.

What's confounding economists is that high-growth, high-productivity periods in the past -- the mid-'60s, say, or the late '90s -- have coincided with robust job creation. Consider that from 1997 to 1999, the economy expanded an average of 4.5% annually, productivity growth accelerated sharply, and 264,000 jobs per month were created. So why isn't the same thing happening this time around?

Fact is, the U.S. economy has changed dramatically in the past decade. One of the key differences is the intensity and the breadth of the pressures on business. But even more important, new technologies have emerged that have given companies the tools to meet the new imperatives of competition and cost-cutting. As innovation has brought ever-cheaper computing power and new ways to make use of it, capital has become increasingly cheap relative to labor. The returns on investment in new labor-saving, high-tech equipment have soared. Given that labor accounts for about two-thirds of the cost of making and selling products, greater labor productivity in today's global economy is tantamount to corporate survival. As a result, productivity is growing even faster now than in the late 1990s. And it's a real job killer this time: A one-percentage-point increase in annual productivity growth costs about 1.3 million jobs.

Up to now, the pressures have been most evident in the manufacturing sector, at both old-line factories and New Economy giants. Increased foreign competition has forced the Big Three to design and engineer new cars on the cheap. General Motors Corp. (GM ) used to make midsize cars for different global markets using several platforms. Now, the auto maker builds four different midsize cars on one platform designed in Germany. So GM doesn't need to hire more designers and engineers in the U.S.; instead, it has slashed salaried U.S. staff in each of the past three years by 10%, to 40,000 currently. Meanwhile, tech-equipment maker Cisco Systems Inc. (CSCO ) is also boosting its productivity, increasing Internet-related savings from $650 million in 1999 to $2.1 billion in the latest fiscal year. Cisco says that only when it hits $700,000 in sales per employee -- it reached $632,000 per worker in its most recent quarter -- will it consider widespread hiring.

Now, a broad range of services industries, and even small businesses, are striving to make similar gains in efficiency. That is especially true in retailing, which employs nearly 12% of all U.S. workers. Retailers from department stores to gas stations to restaurants are now able to move a 35% greater volume of goods and services out the door per worker than they did five years ago, meaning far fewer workers are needed. To take just one example, Home Depot Inc. (HD ) has self-checkout counters in almost half of its 1,707 U.S. stores, allowing it to move as many as 1,000 cashiers to the sales floor. The shift helped drive sales per labor hour up 4% last year alone. Another big factor: the explosion in goods moved through e-tail sites, which have done away with salespeople, restockers, cashiers, and other posts required in traditional retailing.

CREATIVE DESTRUCTION. It's not only that companies are getting efficiencies from the equipment they have been laying in over the past year. More important, they're still squeezing productivity gains from the technology acquired during the '90s. Many continue to find new ways of integrating technology into their production and distribution processes, and of getting customers to tap into the technology to make their purchases. Southwest Airlines Co. (LUV ), which made major investments in new technology to upgrade its reservation system during the 1990s, is now eliminating three of its nine reservation centers as increasing numbers of fliers book their tickets online. Plus, those earlier outlays are now facilitating new investments in self-service kiosks. The result of such moves: Even as the discount carrier's fleet grew from 375 to 388 planes last year, its payroll fell from 33,705 to 32,847.

As for companies considering hiring, they increasingly face a situation that has long plagued their European rivals: The soaring cost of employee benefits is making companies increasingly hesitant to add workers unless absolutely needed. Benefits costs, fueled by sky-high health-care premiums and the need to restore underfunded pension plans, are up 6.5% from a year ago. After adjusting forinflation, that's the fastest clip on record. If a company can get three people to do the work of four, that's one less health-care premium it has to pay. Don Listwin, CEO of Openwave Systems Inc., a Redwood City (Calif.) wireless software company, says rising benefits costs are causing it to hold back hiring and to outsource work. Saving on benefits also helps explain why companies are leaning heavily on temp workers. In the past six months, temp jobs, which are less than 2% of all employment, have accounted for about a third of the increase in overall payrolls, according to the Labor Dept.

Increased use of temps also reflects the new flexibility of the U.S. workforce. Instead of "just-in-time" inventory management, companies are now talking about "just-in-time" labor. However, that increased flexibility, along with rapid technological change, is what facilitates the process of creative destruction -- destroying jobs in the short term but making the economy stronger over the long haul. Unlike in Europe, where greater union power makes labor markets more rigid, it is easier for U.S. companies to hire and fire. But in this business cycle, the patterns of gross firing and hiring, which result in the Labor Dept.'s net monthly job numbers, are dramatically different.

IDLE YOUTH. The problem isn't in the overall number of jobs eliminated; they are running no higher than in past cycles. Instead, far fewer jobs are being created to replace those lost in the job market's churning than would usually be the case. The implication: More of the productivity gains seen during and after the 2001 recession are permanent. Unusually strong productivity also partly explains why other labor market indicators, especially weekly claims for jobless benefits, have tended to overproject job growth.

Given a dearth of new jobs, why is the unemployment rate falling, from a peak of 6.3% last June to 5.6% in February? Chiefly, people are dropping out of the labor force, which has reduced the amount of job growth needed to push the jobless rate lower. The labor force participation rate -- the percentage of the working-age population that is either employed or seeking work -- has dropped to a level even lower than during the 1990-91 recession. However, almost all of the decline has occurred in the 16- to 24-year-old age group, while participation in the 25-and-older segment has held up.

Young, inexperienced people, who were sucked into the job market
during the boom, are not what companies are looking for right now.
That's especially true in finance. In this recovery, Wall Street
firms are being more picky about their hiring, looking for
experienced, highly productive bankers, traders, and
brokers. "Usually, by this time in a recovery, the industry would be
hiring thousands of young people," says Alan M. Johnson, founder of
Wall Street compensation consultants Johnson Associates. "This time
is dramatically different." Nowhere is that truer than in the
technology area: Lehman Brothers Inc. (LEH ), like many others, is
automating grunt work such as payroll and other administrative
functions while moving software-maintenance and -testing jobs to
India.

Which comes back to the vexing issue of outsourcing. No one doubts that it is having an impact -- though exactly how strong is hard to say since good numbers are unavailable. While some put the number higher, Forrester Research Inc. estimates that of the 2.7 million jobs lost in the last three years, only 300,000 have been from outsourcing.

However, the same issue came up in the 1990s jobless recovery. "My
gut reaction," says Princeton's Krueger, "is that the amount of
outsourcing hasn't changed dramatically, but what has changed is the
types of occupations that are affected." Now, white-collar jobs are
increasingly being outsourced -- something that didn't happen during
previous business cycles. The fear is that as the trend spreads,
many more jobs will eventually be at risk. Researchers at the
University of California at Berkeley recently estimated that some
11% of the U.S. workforce is vulnerable.

Small businesses, which generate the lion's share of new jobs in the
economy, are also getting in on the outsourcing act. More and more
entrepreneurs use outside help these days. While exact numbers are
hard to come by, a study by Cutting Edge Information Inc., a Durham
(N.C.) consulting firm, found that 90% of all U.S. businesses now
outsource some work -- though some of that is done locally. Some of
that may be temporary, but most job watchers believe small
businesses will continue to turn to outsiders even as the economy
strengthens, because they face the same relentless pressure to cut
prices as big companies do. "This is more than a temporary
phenomenon," predicts Brian S. Wesbury, chief economist of the
Chicago investment bank Griffin, Kubik, Stephens & Thompson Inc.

But if outsourcing poses potential challenges over the long haul, in
the coming year productivity holds the key to the jobs outlook. The
pace of efficiency gains always slows as a recovery picks up steam,
but no one is really sure how much. The question is how long
companies can meet this big increase in demand without expanding
their workforces. "We're getting up close to the point where firms
will of necessity have to hire additional people to sustain the
growth they see in the demand for their products and services,"
Treasury Secretary John W. Snow told BusinessWeek. To judge by
history, business cannot lean on the workforce so heavily for much
longer. The problem, however, is that in this unusual business
cycle, history has rarely proved a decent guide.

03-27-2004, 10:13 PM

came via email. NOT SURE as to how authentic it is since the URL is pointing to something else.

Bharti ships jobs back to US

Pioneer News Service/ New Delhi
QUOTEAt a time when the West is rallying against outsourcing to Indian companies, telecom major Bharti Tele-Ventures has done just the opposite. In probably one of the biggest deals in recent times, Bharti has outsourced its entire IT operations to US-based IBM, which has operations in India.

The deal is worth $250-275 million over a period of five years and $700-750 million over 10 years, said group chairman Sunil Mittal at a news conference here on Friday. The deal also envisages that IBM India use Bharti as its preferred supplier of telecom services such as bandwidth, satellite connectivity, last-mile wireless, wireline access, and national and international long distance communication solutions.

The two companies will also jointly pursue market opportunities and avenues for selling value-based services in the areas of communications, IT services and convergence.

Mr Mittal said that Bharti would also transfer 200 of its staff to IBM India to manage outsourcing IT work. At present, IBM India has about 9,000 employees.

The scope of the outsourcing work to IBM India includes all hardware, software and IT service requirements of Bharti. This includes all customer-facing IT applications, such as billing, customer relationship management and data warehousing. IBM will also service Bharti's internalfacing applications like intranet, e-mail and online collaboration

Asked why the outsourcing contract was not awarded to any Indian IT company, Mr Mittal said that though there are competitive Indian companies, IBM fitted Bharti's requirements in the most comprehensive manner.

However, he did not reveal the amount Bharti would save on account of outsourcing its IT operations to IBM saying that the deal was not just about costs, but that in the long-run the company will certainly save a lot.

Mr Mittal also said that Bharti has not put in any exclusivity clause in the deal and IBM was free to enter into similar contracts with other telecom companies in India.

He said that once IBM enters into contracts with other telecom firms then the contract price will reduce and Bharti as well as other firms will benefit. On the telecom services front, Mr Mittal said that India will have 100 million customers in the next two years and Bharti will have 25 million customers.

At present the total subscriber base of Bharti is little over seven million.

03-27-2004, 10:48 PM

Actually, jobs will stay in India, but IBM will make profit in India.

03-30-2004, 08:29 PM

Subscription site - posting in full

Forbes 2000
A Tale of Two Cities
Kerry A. Dolan Robyn Meredith, 04.12.04

From techie to truck driver in Silicon Valley. From tea broker to techie in Bangalore. The wave of jobs heading offshore causes wrenching loss--and produces enticing gains.


QUOTESarah Beaver rode the bubble at Cisco Systems, building her career as a Web producer in five years at the once-roaring maker of network routers. She managed to lift her salary to $60,000 a year and save enough cash for a down payment on a new condominium. She was closing on the condo last April when Cisco laid her off. "I panicked. The first person I called was my real estate agent." Beaver, 36, moved back in with her parents in Stanford, Calif.

While she was moving, a contract worker for Cisco, toiling 8,700 miles away in Bangalore, India, was busy buying his own house at age 25--and a home for his parents, too. Now 29, Stawan Kadepurkar has put in six years with Infosys, working mostly on projects for Cisco--in Dallas, Portland, Ore., Hyannisport, Mass. and even at Cisco's base in San Jose, Calif. He could have bumped into Sarah Beaver in the hallways there. In that time his salary has risen fourfold, and it is up 15-fold since he took his first job out of college in 1995. Despite that surge and his role overseeing 25 workers on three Cisco projects, he earns all of $20,000 a year.

Beaver and Kadepurkar represent two sides of the most controversial and divisive issue in economics: offshoring. Crushed by the tech-spending crash that began in 2000, many of Silicon Valley's giants and dozens of companies elsewhere have imposed layoffs at home and hired cheaper talent in India, China and elsewhere. Suddenly this job drain is a central issue of the presidential campaign, prompting calls for new protectionism and providing fodder for the pulpits of cable news and the front pages of newspapers.

America is at war with itself. Firms here need the latitude to compress costs by shipping labor and production to ever-cheaper markets offshore. Yet American workers need to protect their livelihoods. Caught in the middle--and exploiting the hell out of it--are outsourcing firms in bootstrap markets, eager to serve U.S. companies and their customers. In the ensuing outcry, Senator John Kerry calls offshoring U.S. firms "Benedict Arnolds," while CNN anchor Lou Dobbs hammers job-exporting "offenders" nightly. Thirty-one states have proposed antioutsourcing legislation, and the U.S. Senate has voted to ban the practice for federal contracts.

Whatever the economic wisdom of such legislation, it seems unlikely to stop a powerful trend that makes many kinds of service jobs as readily exportable as factory work. "What we are really seeing is the unintended consequences of globalization," says Nandan Nilekani, chief executive of Infosys, one of India's outsourcing giants. Some benefits are clear-cut: a better bottom line for businesses, higher returns for investors, cheaper services and $80 DVD players for Americans.

Catherine Mann of the Institute for International Economics makes the case in favor of offshoring: High-tech hardware would have been 20% more expensive in the 1990s if not for offshoring. This spurred investment in more high-tech gear, boosting productivity and freeing up cash to plow into still more innovation. Plus, for every dollar spent on offshoring, the U.S. gets back $1.12 (and the global economy reaps another 33 cents), says a report from McKinsey consultants. Think about it: As more workers in India land higher-paying jobs, they can afford to buy more U.S. products, from processor chips to Hollywood films. By spreading the wealth, offshoring makes life a little better in some of the poorest regions of the world.

For the case against, listen to almost any politician talk about unemployment.

To examine the two sides of the coin, FORBES tracked down a dozen Americans laid off in the Valley because of offshoring, plus a like number of workers who gained some of those jobs in Bangalore, India's offshoring hotspot.

In the U.S. some casualties of the offshore wave remain bitter and financially devastated. "I could understand if this was benefiting us, but people are losing their homes," laments Odell Williams, who has applied for 300 jobs, unsuccessfully, since EDS laid him off in July 2002. At Milpitas, Calif.-based PalmOne, manager Natasha Humphries spent two weeks in India training workers in software testing--then got laid off in August, replaced by one of her trainees. (PalmOne says Humphries' work is still being done in Milpitas.) "They used us and then discarded us," she says angrily.

Some people have given up on tech. Patrick Roney, for 15 years a consultant to Apple manufacturing sites, got laid off in late 2001, displaced by Indian contract workers, he says. (Apple won't comment.) Last year he took to the road, spending three months as a truck driver ferrying things like beef from Nebraska to New York. In February he landed a temporary software job. Michael Clapperton, formerly an infotech manager at Cadence Design Systems in San Jose, saw his layoff coming. He is now selling insurance on commission. His $10,000 monthly paycheck has shrunk to $2,500. It will go up, he says, and he won't have to worry about being laid off ever again.

But other fired techies are steeled by adversity. After Cisco cut her Web-producer job last April, Sarah Beaver vowed to stick with tech. After much digging she landed a $4,500 federal grant for retraining and used it to learn Javascript and other Web-design skills. "It made a ton of difference, at the very least in my own confidence." She has landed a temporary job at a unit of Apple, earning 20% higher pay and hoping it becomes permanent. "I feel like I've found a place where I can use my creativity," she says.

In Bangalore the job-gainers are proud of their upward climb and eager to keep on advancing, echoing sentiments of the American Dream. Some express sympathy for the Americans whose jobs they took and say the U.S. will figure out how to navigate this wave. "The U.S. is resilient enough to get out of this," says Stawan Kadepurkar, the Cisco contract manager in Bangalore. Biotech, he says, is going to provide millions of jobs in the next few years.

In three years the U.S. has lost 400,000 service and 1 million manufacturing jobs to offshoring, Goldman Sachs says. Some 3.3 million white-collar jobs (and $136 billion in wages) will flee the U.S. in the next ten years, Forrester Research says. All told, up to 14 million U.S. jobs are vulnerable to offshoring, say researchers at the University of California, Berkeley. Another problem:Even when American employers don't move jobs to India, they have virtually stopped creating them in the U.S. when the tasks can be done more cheaply abroad. The U.S. service sector is 6.2 million jobs shy of the hiring that typically accompanies an economic recovery at this stage, in part because of the move overseas, says Stephen Roach, chief economist at Morgan Stanley.

In Silicon Valley 200,000 workers have lost their jobs since 2001, albeit only 6,000 of those jobs headed overseas, Stanford University researcher Rafiq Dossani estimates. But that number will grow, he says, as the offshoring pace accelerates for jobs in software programming and product development. Already 150,000 engineers hack away in Bangalore--20,000 more than in Silicon Valley, the Times of India reports. Cisco used only a few Infosys workers in Bangalore six years ago; now it uses almost 300 contract staff, plus 550 full-fledged employees in its own Bangalore office. In two years PeopleSoft's Bangalore offshore force has grown to 200 freelancers and 350 full-timers.

Jesal Mehta has worked both sides of the offshore surge. Twelve years ago, fresh out of university in Gujarat, India, he landed a programming job in Bombay for a contractor serving U.S.-based Tandem Computer. He worked long hours for low pay in American terms (about $100 a month), but he was among the highest-paid Graduates in his class. "It was a royal time," he recalls.

In 1994 his employer, the big Indian contract firm Tata Consultancy Services, shipped him to Cupertino, Calif. to work for three years at Tandem developing software. He went back to India for 18 months, then returned to Silicon Valley and in 1999 began working--as a full-timer on staff--for Novell in San Jose. Mehta loved the job, the people he worked with and his U.S.-scale pay: He was making $112,000 a year. He and his wife, also a software engineer, bought a house in San Jose and had a baby girl. At night and on weekends he earned an M.B.A. at Santa Clara University.

Then Novell laid him off last June. Colleagues told him his job was moving offshore--back to his home country of India. (Novell won't comment.) A day later, though, Mehta was hired by a friend to work at his U.S.-based software firm, Cignex, which in turn contracted Mehta out to a Redwood City, Calif. software company. So Jesal Mehta has come full circle. In his current duties as an implementation manager, by day he talks with customers who want to purchase the firm's legal-contract software, trying to customize the software to meet customers' needs. Then, sometime after 9 p.m., he calls Bangalore to talk to the contract developers at an outsourcing firm called VMoksha. Sometimes they call him in the middle of the night or on weekends. "When you are up against customer deadlines, you can't tell the guys in India, âHey, I want to go back to sleep,'" he says. Plus, he identifies with them, given his own start: "I feel like I'm one of them."

Mehta knows he was lucky to land a new job so quickly, and he empathizes with unemployed Americans. "People who are laid off are never going to be happy," he says. "They want to blame somebody." But he believes that if his adopted nation--the U.S.--opens its borders, jobs will move across them in both directions. And over all, that's good for the economy. "There's entrepreneurship in this country to create new jobs," says Mehta. "The U.S. can withstand this."

At VMoksha in Bangalore, group manager Sohraib Italia, 41, has followed Mehta's steep climb up the economic ladder. His father was the chief financial officer of a jute products maker. He now earns five times as much as his father did a generation ago. As a child Italia dreamed of going to America. In 1986, when he Graduated with an accounting degree from a school in Calcutta, he got a job paying $800 a year at a big tea broker in the same city. India was still a tech backwater then; he had to wait 18 months to get his first phone installed. Now the country rings with 30 million cell phones, with 2 million more added each month. In the early 1990s Italia earned $4,000 a year as a finance manager for what is now GlaxoSmithKline. His pay quintupled when he joined Oracle in 1997, and it nearly doubled again three years later, when U.S. tech company I-Gate hired him for its Indian operations. That job fed his dream of seeing America, placing him for monthlong stints in Pleasanton, Calif. (for PeopleSoft) and in Pittsburgh (at I-Gate's base).

When VMoksha started in 2001 in Bangalore, Italia was one of the company's first hires. His colleagues are the ones who keep Jesal Mehta on the phone late at night back in San Jose. He now earns $37,400 a year, which makes him a rich man in Bangalore, where a luxury three-bedroom apartment rents for $500 a month. Full-time housekeepers and cooks, earning just $55 a month, are commonplace among the middle class. Cell phone service starts at $5 a month, cheaper than land lines.

Some of America's cash comes right back. Middle-class Indians now munch on McDonald's fries, wear Guess and Gap jeans and drive Ford sedans. In a land where a car used to be a luxury, the roads are now clogged with traffic--much of it headed to parking lots at India's tech giants of Infosys, Wipro and Tata, and to the offices of the U.S. companies that have set up shop in India.

The new jobs tend to employ nearly equal numbers of men and women, altering India's social dynamics. "Before, it was all arranged marriages. Now, we have a lot of office romances," Italia says.

What's next for Italia? Under a VMoksha contract he is supervising a pilot project for another U.S. company, Authoria, debugging software. Just 5 VMoksha employees work on it now. In six months that offshore staff will grow to 20.

Michael Huston figured his job at Hewlett-Packard in Cupertino, Calif. was safe. For seven years he had worked on software for big servers, complex stuff for which few people had the right skills. He was pulling in $110,000 a year and had survived two big mergers (Tandem got swallowed in 1997 by Compaq, which in turn disappeared into HP in 2002). In 1998 he had his first brush with offshoring when he and a boss spent a month training a few programmers visiting from India, advising them on spooling software used to send documents to printers. His team had completed development but not testing, and that task moved to India that same year (which caused no layoffs).

But HP wanted to squeeze 15,000 jobs out of its merger with Compaq, and in November 2002 Huston's was one. He was 59 and couldn't afford to retire. His 401(k) was weighted heavily with tech stocks that had taken a plunge. So he vowed to try anything. He took the test to become a substitute school teacher, sought work as a security guard and applied for a sales job at a new Home Depot. Home Depot told him he was overqualified.

Four months after his layoff he spotted a small ad for a job programming in the ancient computer language Cobol for a sporting goods chain. It wasn't nearly as challenging as his HP job and it pays only $60,000 a year. "Emotionally, that was hard to accept," he says. But he counts himself luckier than colleagues who are still pounding the pavement. "For this moment in history, [management] has gone in the direction of complete business decisions. Employees be damned," he says, sighing deeply.

Ravi Trivedi, 29, is one of the workers from India who were summoned to HP headquarters for training and work. Now he is back working full time for HP in Bangalore, in a modern gray-and-white building with a fountain in front. If it weren't for the occasional flickering of lights caused by Bangalore's erratic electricity supply, this could be Silicon Valley.

Unlike Michael Huston, Trivedi thinks of his next raise rather than whether he is willing to take a pay cut. After college, he earned a master's degree in computer science at the Bangalore campus of the famed Indian Institute of Science. At his first job, he earned $2,665 a year. Now he earns ten times that as a software analyst. His most recent HP project was writing Java code that creates B2B yellow pages.

With his pay rising and his job prospects ever brighter, Trivedi, like many IT Indians, is on a spending tear. "You have a lot of freedom and purchasing power," he says. He owns a motorcycle, is saving for a house and has become a bit of a globetrotter. He has worked for HP in the U.K. and is planning vacations to Malaysia and Thailand. In his time in the U.S. working for HP, he visited Washington, D.C., Philadelphia, Phoenix, Dallas and the Grand Canyon. "I used a lot of frequent-flier miles," he says with a grin.

But only hotshot M.B.A.s and techies earn on Trivedi's scale. A friend with a government job earns half Trivedi's salary and struggles to pay the rent on a small apartment. Though both of his parents are professors at famous universities, Trivedi earns more than their paychecks combined.

More Indians are joining Trivedi's ranks--and more Americans will be facing Huston's fate. HP began its offshore operations in India in 1995, and its head count there has rocketed up to 10,000. By cutting costs the company is landing big service contracts, such as one to do data processing for Procter & Gamble, at $3 billion over ten years. Last year, despite the economic slump into which Palo Alto has sunk, HPincreased its revenue 29% to $73 billion and reported $2.5 billion in profits after a $900 million loss in 2002.

Back in Bangalore, at the humming offices of Infosys, where Stawan Kadepurkar oversees three Cisco projects, some techies are well aware of an inevitable irony: that American innovation sparked the job flight now hurting America. Back in 1998 Kadepurkar himself was the first Infosys worker to work on-site at Cisco. He wrote programs to allow voice-over-IP, a key Internet-based advance that made overseas phone calls so cheap that corporate America could serve its U.S. customers via call centers and tech labs on the other side of the world.

And now India has to watch its back. With Indian tech salaries on the rise, says Infosys Chief Nilekani, the country must build on its reputation for quality, not just price, to keep the jobs that have flooded in from the U.S. and Europe. Salaries in China are lower than in India, and Chinese companies have sent teams to India to learn how to set up their own offshoring companies to serve Western clients.

Meanwhile, what should workers in America do? Nilekani recommends pursuing careers in specialties that cannot be delivered over a wire. "If someone is a cardiac surgeon, he will not be displaced. But if you are a radiologist, somebody from Bangalore is liable to check X rays." That is cold comfort to a laid-off engineer in Silicon Valley; retraining to become a surgeon would take another nine years.



Sidebar:
QUOTEBy the NumbersÂ
Booming Bangalore 

Offshore work is fueling prosperity in India, especially in Bangalore .

400,000 - U.S. service sector jobs lost to offshoring last year.

14 millionÂ - U.S. jobs vulnerable to offshoring since 2001.

$1.5 - billion India's IT-enabled services exports in 2002.

$17 - billion Forecast for India's IT-enabled services exports in 2008.

120,000 - Number of engineers in Silicon Valley.

150,000 - Number of engineers in Bangalore.

Sources: Goldman Sachs' UC Berkeley Fisher Center for Real Estate and Urban Economics; Nasscom; the Times of India.

03-31-2004, 05:54 PM

Outsourcing actually creates U.S. jobs, study finds

04-02-2004, 02:40 AM

This desi has clearly lost it : <img src='style_emoticons/<#EMO_DIR#>/mad.gif' border='0' style='vertical-align:middle' alt='mad.gif' />
Outsource to India, without compromising US interests

QUOTEOutsource to India, without compromising US interests
April 01, 2004
-John Laxmi

The raging debate on outsourcing of high-tech jobs to India misses the most important point: national interests and security.

The problem with outsourcing is not with the efficient invisible hand guiding the economic decisions of individual corporations or governmental units. The American economy is resilient and will eventually replace these jobs with new and better ones.Â That is not the main issue.

The main issue here is the particular type of functions being outsourced predominantly to one specific country (India), which makes this a phenomenon of national importance, even national security to the United States. Outsourcing could become a blind race to the bottom, one that could potentially compromise American interests.

First, some important disclosures:Â I have significant investments in the stocks of GE, Intel and IBM, companies benefiting from 'outsourcing' high-paying technical jobs from the US to countries like China and India. Two of my siblings are senior professionals in large American corporations, directly engaged in outsourcing of technology jobs to India. I live in New Jersey and shop at Walmart and Dollar Stores without bothering to see where the merchandise is produced. I am a free-market supporter, a former investment banker and teach a course on bond markets at New York University. My teaching job at NYU is not threatened by outsourcing. I am an American who leans towards the Republican party on economic issues.

All this should make me a wholehearted supporter of Outsourcing. Right? Not quite.Â

Our national interests must be aligned and synchronised with countries which supply products and services to us. After all, we don't outsource medical services to Cuba. On principle, without regard to economic costs, we boycotted South Africa during its apartheid years. Recently, we refused to use our tax dollars to outsource Iraq reconstruction contracts to French, German or Russian firms. We didn't buy oil from Libya. Our oil dependence on sheikdoms turned out to be a disaster.

In the same vein, as we careen forward on the freeway to creative destruction, we must take a closer look at India, the nation contending to supply us with everything from call centres to computer security.

Superficial observers like Tom Friedman of The New York Times gush about young Indian women newly 'empowered' by call centre jobs. Indian women, in jeans and eating pizzas, are supposed to make us feel good.Â Sure.Â

But, a closer examination reveals the potential perils of appointing India as the sole supplier of vital software and services to our business and government.Â

First, let's deal with the cost saving arguments. The cost advantages claimed are neither permanent nor fair.Â The Indian government lavishes generous tax-breaks on outsourcing and IT industries, (zero income tax on most IT outsourcing operations) tax-breaks of a magnitude neither deserved nor needed by the IT industry. Really ?Â <!--emo&

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Also Read: Subhash Kak on Globalization and the Knowledge Industry

These tax subsidies from the Indian government come at the expense of the most basic governmental services critically needed by the two-thirds of India that is mired in shameful poverty, samples of which can be readily seen in the silicon gullies in Bangalore, just a few miles from the glittering offices of Infosys and Intel.Â In Chennai, another major Indian OutSourCity, no drinking water is available even to vast sections of the middle class.Â

More importantly, these cost advantages are not guaranteed to last. India's labor is free and mobile; American and foreign purchasers of this labor compete in a free market, which means there is no ceiling to Indian wages except those set by world markets.Â Â

You might ask: What's wrong with exploiting these cost savings as long as they last; we can always move these operations to other countries or even back to the United States when cost advantages narrow?Â

Not so easy.Â

These types of service jobs, even those involving call centres, cannot be shuffled around.Â Indeed, the types of jobs going overseas are not limited to simple coding but increasingly involve higher-level design and development tasks.Â These skills, especially those customised for specific customer applications, are not likely to be readily available in Indonesia, Philippines or elsewhere once these jobs become entrenched in India.

This means that the current outsourcing stampede could make American government and businesses permanently beholden to critical technology services and support from India, just as we have become dependent on energy from the Middle East.Â

Outsourcing and India: Complete Coverage

But, you say, India is not Saudi Arabia or China. India is a democracy. Indians speak English; they eat pizza and wear jeans. Once we get past these superficialities, however, we find that India is not a country we would readily pick as our strategic business partner.Â

Although India has been coddling up to the West in recent years, Indians have long been inimical to Western ideas, technology, liberal principles and modernity. Allying itself with the Soviet Union, India labeled itself the leader of the so-called nonaligned movement, and habitually hectored the US at the United Nations.Â (someone needs to remind him the year's 2004 and berlin wall came down over a decade ago)

India continues to tolerate large-scale piracy of intellectual property, from books to movies to high technology products. (any numbers to back this up or just hot air to fill in the word count?Â <img src='style_emoticons/<#EMO_DIR#>/mad.gif' border='0' style='vertical-align:middle' alt='mad.gif' /> )

India is praised for its English-style laws, but the Indian government blatantly reneged on its contract with the largest power plant built by American investors. (Oh, oh, let me guess, did this large power plant built by American investor haveÂ a name starting with 'E' and did these Amercian investors take it's own American employees and shareholders to the cleanersÂ <img src='style_emoticons/<#EMO_DIR#>/mad.gif' border='0' style='vertical-align:middle' alt='mad.gif' /> ) The Indian government has failed to distribute equitably among its own citizens the large extortive penalty collected from Union Carbide for the Bhopal accident. In the 1970s, India drove IBM and Coke out of the country for refusing to pay political ransom.Â Dude - it's 2004 coke and pepsi is back, even bottled water in India is by Coke - or did you miss this in that Tom Friedman Op-Ed

If you dismiss all this as irrelevant baggage from India's past, the current Indian government shows no clear principles either.Â The leading party in India's governing NDA coalition is the Bharatiya Janata Party, which rose to power by blatantly exploiting and advocating virulent and fanatical Hindu-first sentiments.Â The people of India are poised to give this party a larger mandate at national elections scheduled this month.Â (Ah, seems we are begining to understand where you are coming from now)

Having started a non-winnable nuclear-race in the sub-continent with Pakistan, India continues to refuse to sign the nuclear non-proliferation treaty.Â So has Pakistan and/or Israel - what's that got to do with the price of tea in China

Indian politicians are trying shake down Coke and Pepsi through 'investigations' of contamination in beverages marketed by these American corporations in India.Â Sometimes I think Elliot Spitzer is doing the same in your neighborhood. But then someone has to speak out for the little guy rightÂ <!--emo& Wink

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Just last year, when the US sought international support for action against Saddam Hussein, India went AWOL, hiding behind domestic politics. The Indian parliament went so far as to pass a resolution condemning the US-led action in Iraq.Â Even after the fall of Saddam Hussein, the Indian government would not offer even token support to the Coalition's peace-keeping efforts in Iraq. India is much more closely aligned with the French and the Germans than you'd guess.Â how many French and German products are being sold in India? or any numbers on the BPO business going to France or Germany

This is the India that we are outsourcing our guts, lungs and brains to.Â Â

Whether we are buying oil or software, the principle remains the same. We must make sure our suppliers' interests are closely aligned with ours. Let's not kid ourselves. If we went looking for business partners, India would not be the ideal choice.Â Â why don't you name one? 

As critical functions of the American economy are outsourced to this antagonistic nation, Americans will grit their teeth, and bear the costs and consequences of keeping global markets free. But, as citizens of the only nation championing democracy and free markets, should Americans just shut their mouths and march to the unemployment office? I think not.

We must make vigorous investment in our own educational system and keep our borders open to immigrants to restore critical skills and capabilities. Meanwhile, we can do more. We could demand that our government ask India to change and reform its ways.Â

First, we should demand that India must send a meaningful contingent of troops to help the coalition in Iraq and Afghanistan, meaningful in size and commensurate with the global power Indians think India is becoming.Â what has Iraq, India and Outsourcing has to do with price of tea in China?

Second, the US government should demand that the Indian government must source preferentially from American contractors and manufacturers for the ambitious infrastructure building effort under way in India. India's roads, ports, power and water facilities are woefully underdeveloped guess while in NYC, John Laxmi ought to check out areas in Harlem or upper east side American technology and know-how can help speed India's development process while strengthening the commercial ties between the two countries. and hurting IT by taxing it will helpÂ <!--emo&

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Third, the US must demand that the Indian government level the playing field between American and Indian technology firms.Â This means India must phase out its tax subsidies to the IT industry and agree to subjecting Indian firms to the same consumer protection laws and other legal liabilities governing American firms in like businesses.Â <img src='style_emoticons/<#EMO_DIR#>/blink.gif' border='0' style='vertical-align:middle' alt='blink.gif' />

Finally, the US must demand that the Indian government will sign the nuclear non-proliferation treaty if Pakistan agrees to sign the treaty, paving the way for a more peaceful subcontinent.Â (Ah, hindi-paki hypenated hypocrite)

A peaceful Indian subcontinent, aligned closely with American interests, is vital if we are going to rely increasingly on Indians providing services to the American economy.Â Â Â

John Laxmi teaches a course on bond markets at New York University (pity his students). He is also a board member of the South Asian Journalists Association. The views presented in this article are his own and do not represent those of NYU or SAJA.

04-02-2004, 03:44 AM

QUOTEJohn Laxmi teaches a course on bond markets at New York University (pity his students). He is also a board member of the South Asian Journalists Association. The views presented in this article are his own and do not represent those of NYU or SAJA.

His name and association tell everything what is his mind set. Biju brand.

QUOTEFinally, the US must demand that the Indian government will sign the nuclear non-proliferation treaty 
Ask US to dismantle all nuclear weapon Mr. John. What a moron he is?

QUOTEwe should demand that India must send a meaningful contingent of troops to help the coalition in Iraq and Afghanistan
Send him to Iraq for good. It is my first demand. <!--emo& Big Grin

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QUOTEthe US government should demand
the US must demand thatÂ 
What the heck he is thinking, as if country of 1Billion people are joke?

04-02-2004, 04:06 AM

Mudy: The phrase 'new mussalmaan going the length to eat some extra onions to prove himself' comes to mind as I read John Laxmi.

Or maybe he's confusing India with Pakiland with his US must demand this and that and the kitchensink from India crap.

04-02-2004, 08:37 PM

Rage against off-shoring is off target

04-03-2004, 04:24 AM

From Salon; subscription site - posting in full...

How India is saving capitalism 
For one Silicon Valley company, hiring Indian programmers wasn't about greed, it was about survival. A special report from Chennai, globalization's ground zero.

Editor's note: This is the first of a series of reports on the offshoring of white-collar jobs, reported on location in India.
- By Katharine Mieszkowski

QUOTEApril 1, 2004Â |Â CHENNAI, India -- In an auditorium on the Chennai campus of the Indian Institute of Technology, Brian Behlendorf is stumping before 200 engineering students. The pony-tailed founder and CTO of the Silicon Valley start-up CollabNet is here, ostensibly, to talk about open-source software. The event has been organized by the Indian Linux Users Group-Chennai; the 30-year-old Behlendorf, who coordinated the growth of the hugely successful Apache Web server project in its early days, is one of the heroes of the open-source movement.

But he's also an executive of an American company that has outsourced a significant part of its operations to India, placing him at the center of the firestorm that has erupted in the United States over the globalization of white-collar jobs. So he can't avoid addressing the issue of what has really brought him to the subcontinent, even as he adds his own unique twist to the debate.

"Outsourcing is a sensitive topic in the U.S. for political reasons," Behlendorf says. "But the open-source community has been doing outsourcing since the beginning." Programs like Apache and Linux and many others, he argues, were developed by thousands of volunteers from around the globe -- an example of massively outsourced labor. In a sense, the move by Western corporations to outsource programming operations to developing nations isn't just about cutting costs, it's about adopting a new software development model.

Behlendorf's audience is receptive to his remarks. It is made up of students from one of India's most elite engineering institutions -- a school that's harder to get into than Harvard, a school so competitive that its tens of thousands of applicants are known as "aspirants." The men, who make up the majority, are dressed in button-down oxfords and belted khakis, the women in flowing salwar kameez. There's only a smattering of geeky T-shirts: "2001 Welcome to Linux: It's now safe to turn on your computer," reads one.

After Behlendorf has finished speaking, the students come up to the podium to pepper him with questions. When he finally leaves the stage, a dozen engineers follow him out into the humid night, intent on spending every possible moment with him until he disappears into the car that will take him back to his $130-a-night room at the Sheraton. Then, the students walk away into the dark, a loose group scattered below a jumbled canopy of banyan, neem, mango, tamarind and eucalyptus trees populated by dangling wild monkeys.

Behlendorf isn't here in Chennai for the second time in 10 months just to spread the open-source gospel. He's here because the boom in offshoring is resulting in a tight labor market -- in India. In the topsy-turvy logic of globalization, it's Behlendorf who's here to court the engineers: highly educated, technical talent that costs a fraction of what it commands in the U.S. Recruiting such talent is becoming an ever more competitive endeavor for companies looking to join the offshore flood.

In the U.S., the rush to outsource labor internationally is increasingly being seen by workers as an us-vs.-them zero-sum game. As they watch one corporate behemoth after another -- IBM, GE, Oracle, HP, Google -- send significant portions of their operations offshore, their agitation is burgeoning into a political hot-button issue. According to a new Gallup Poll, 58 percent of Americans say that outsourcing will be "very important" when they decide their votes for president. And 61 percent say that they are concerned that they, a friend or a relative might lose a job because the employer is moving work to a foreign country. Analysts' estimates that 3.3 million jobs are likely to be lost to outsourcing by 2015, and that 14 million are vulnerable to foreign competition, have turned India into the new Japan in the imagination of American workers: an ominous economic threat to their livelihoods. Despite assurances from economists that the furor is so much protectionist alarmism, the nagging question remains: How can you compete with a worker who makes a 10th of your salary?

But for Behlendorf and CollabNet, the outsource-or-not-to-outsource challenge is no cut-and-dried case of greedy American corporations sending jobs overseas. Behlendorf, as befits his open-source roots, is an idealist. Taking a global perspective, he believes that spreading the wealth internationally is good for the world in the long run. He and his fellow executives want CollabNet to be a truly global company, with no distinction made between employees in one country or another. But even more to the point, CollabNet's main product, SourceCast, is a set of software tools that facilitate development among teams of programmers working in different locations.

In other words, CollabNet's developers, both in the U.S. and India, are hard at work writing code that makes it easier for workers on opposite sides of the globe to work together effectively. CollabNet even "eats its own dogfood," as the saying goes, using its main product as the development environment for writing the SourceCast code.

One important market for SourceCast: corporations that outsource.

CollabNet's story is symbolic of a larger truth about the globalization of white-collar jobs -- particularly those in the technology sector. If Silicon Valley now faces an uncertain future as a center for software development, the seeds of that uncertainty were planted not in India or China or the Philippines, but right at home. The build-out of the Internet and the tremendous advances in computer technology over the last decade have opened up new passageways between disparate economic realities. And no one has embraced one of the central premises of the Internet age -- easy interconnection between everybody -- more than software engineers. The immense strength and vitality of the open-source software phenomenon is a clear testament to that.

It wasn't so-called "Benedict Arnold" CEOs or greedy shareholders or even the ruthless laws of economics that crafted these new virtual workplaces where job performance is measured purely by your output on the screen, no matter where you log on from. Technological innovation and investment opened up the doors for coders in India and China and everywhere else. It is one of the tremendous ironies of the digital era that the easy flow of capital and labor to every inch of the globe, made possible by the superhuman efforts of American and European programmers, has ended up wreaking havoc on the job security of those very programmers.

Got a problem with that, Silicon Valley? Don't blame India, and don't blame the CEOs. Blame yourself.

If you pick up a phone in CollabNet's office in Chennai and dial a Brisbane, Calif., extension, you can reach the West Coast via VoIP Internet telephony, no long-distance call required. It's a hotline from one economic reality to another.

In Chennai, day laborers do road construction on the clogged city streets by hand without benefit of bulldozers or cranes, working with pickaxes and shovels at the rate of $4 U.S. a day. The traffic veering around their stooped, sweaty forms is a writhing choke of belching open-air auto-rickshaws, cars, motorcycles and scooters. Barefoot bicyclists brave the squalls, often with red, blue, yellow and green jugs strapped to the back of their bikes: water.

There's such a severe shortage of water here that while the wealthy buy theirs commercially and have it delivered to their homes in trucks by the tankful, their servants -- the legions of drivers and cooks and maids and guards -- wait in line for more than an hour each day to receive their own subsidized rations.

Walking the ragged sidewalks here means dodging not only the other pedestrians and stray dogs, but one-man-band businesses that have annexed scraps of pavement: a tailor sits behind an ancient sewing machine in the middle of the pavement, open for business.

And yet, on the same streets where child beggars wade into traffic, putting their cupped filthy hands to their mouths to plead for food, billboards advertising "Business Process Outsourcing" broadcast an entirely different set of possibilities. Glimpses of it are visible in the dilapidated local airport, where it is 80 degrees Fahrenheit at night with no air conditioning (except for ceiling fans -- which are all turned off), but there's a room of smudged, gray PCs where travelers can check their e-mail. And you can hear it at a charity benefit, where the famed Odissi dancer Sonal Mansingh teases the posh audience with a "Message from Krishna!" jab when their mobile phones persist in interrupting her performance.

Past the street vendor selling vegetables from a wooden cart, and the men in flowing kurtas, an elevator takes you up to CollabNet's offices on the third floor of Trimex Towers on Subbaraya Avenue. Past the guard at the front door, what's shocking is not how different the office here is from the corporate headquarters back in Brisbane overlooking the San Francisco Bay, but how fundamentally similar it is. You're greeted with a setup that could be any start-up in Mountain View or Sunnyvale: rows of cubicles filled with guys in their 20s -- and a few women -- dutifully engrossed in their computer monitors.

There's a sport to picking out the superficial differences between CollabNet's two offices: In Chennai, the bathroom doors are marked "ladies," "gents" and "executive." In Brisbane, the receptionist wears a trendy pink Paul Frank T-shirt with a signature monkey cartoon on the front over jeans with a rainbow-colored stripe up the side. In Chennai, the receptionist sports an elegant salwar kameez with a flowing dupatta scarf draped down the back -- casual wear by local standards.

In Brisbane, the lunchroom is stocked with a Galaga arcade game, a foosball table, a serve-yourself fridge full of soft drinks and a pantry bursting with granola bars. In Chennai, a servant delivers sweet south Indian coffee and cookies, and workers take coffee and tea breaks both morning and afternoon.

But the deeper into the work environment you get, the more the two offices appear identical at the most critical level: the technology. On their desktops, the developers and Q.A. (quality assurance) engineers here use the same tools as do the coders in Brisbane. Call it virtual, if you must, but in a very real sense, they are working in the same environment.

The real CollabNet workplace is not in Brisbane or Chennai, it's in the packets of information zipping across the Net, whether via instant messaging software or e-mail or through the features of the SourceCast collaboration software. All that really matters is who is online at any given time. In this Web-based development environment, notification is by e-mail, the browser is the interface and deploying means giving someone else a URL.

There are advantages to such virtuality, says Behlendorf. "Instead of having a conversation in person, you have the development over e-mail. If you have a conversation in person, you're lucky if someone takes notes. On an e-mail forum that stuff is always recorded. It's always available for searching."

Add a lot of cheap bandwidth to the mix and anything is possible. "During the [dot-com] boom a lot of telcos were laying a lot of cable across international lines. The cost of getting a T1 or a T3 to the other side of the world is no longer prohibitive for most companies," says Behlendorf. "There's actually a glut."

Now, someone is always working at CollabNet. "Any time of the day or night, 24/7, 365 days a year, people are on our IRC [chat] channels," brags Chris Clarke, 34, a director of engineering, who works out of Brisbane.

CollabNet is unusual in the outsourcing/offshoring debate in that the product it is selling is explicitly aimed at aiding the work of collaborating programmers. But the merging of offices across time zones and international borders is, on a global scale, a consequence of the advances in computer and telecommunications technology. Outsourcing, viewed from the technological perspective, is not surprising, nor is it necessarily exploitative. It's just what happens when you connect the world together.

CollabNet's arrangement between its U.S. and India offices is not technically outsourcing, in the sense of a particular company task being contracted out to another company. Everyone in the Chennai and Brisbane offices is a CollabNet employee. On the company's intranet, the directory shows the names and faces of employees in Chennai, India; Brisbane, Calif.; and Chicago, Ill., intermingled in an alphabetical index of who works here -- wherever "here" is.

CollabNet has brought its offshore workers into the company, which in an unfortunate parlance of the Indian software industry is known as running a "captive" facility. There are no third-party buffers separating the workers in Chennai from the employees back in Brisbane, aside from the fact that they are paid on scales that are orders of magnitude different.

CollabNet even put the programmers in its offshore facility to work on its core business: writing the SourceCast software. While Q.A. testing is mostly located in the Chennai office, development work now occurs both in the U.S and in India. Programmers in both places not only work on the same projects, they literally modify the same files of code.

How did CollabNet get here? The reasons are a mix of pragmatism and idealism. In late 2002, the business environment for a small technology company looking to expand was brutal. CollabNet had been through layoffs but, paradoxically, what the company really needed was more people -- a lot more people.

"We just needed more arms and legs to be able to provide the robustness that the product needed to have," says CEO Bill Portelli.

"What we were capable of doing with the people on staff was not what we needed to win business," says Behlendorf.

In fall 2002, Portelli says, he was receiving three solicitations a month from outsourcing companies, up from a rate of about one every other month just a year before. E-mails and follow-up phone calls poured in: "We'll help you do this, cheaper, smarter, faster!" (Now, he gets about a dozen such offers a month.)

But the more the company explored these outsourcing options, the less it wanted to pursue them. Behlendorf objected to what he dubs the "fast food" model of services outsourcing: writing a specification, sending it to another company with developers offshore, and waiting weeks for the code to come back. Would this result in software the company wanted? As a pioneer and veteran of the inclusive, open-source world, Behlendorf just found the idea distasteful.

"I wanted a team there that felt like they were CollabNet," he says.

Jack Repenning, 51, a senior software engineer in the Brisbane office, puts the power dynamics of the traditional outsourcing relationship in stark terms: "Enterprise offshoring is a kind of colonialism, like growing pineapples in the Philippines or bananas in Hawaii. It's very demeaning and counterproductive: Do this and shut up."

CollabNet wanted to seed collaboration among all its developers, as opposed to creating a two-tiered model of service provider and client. It's a model taken directly from the open-source world. "This year, you'll call it outsourcing, but in a few years, you'll call it global development, where there are locations everywhere," says Jason Robbins, a developer who was the 10th employee at CollabNet when he worked for the company remotely from Southern California. "And you won't think of breaking off a chunk of development with limited risks and management responsibilities for another second-class team to do. Instead, development organizations will think of it as a global employee pool," says Robbins, now a lecturer at the University of California at Irvine.

This was the model that CollabNet was preaching to its customers and prospects: If they couldn't make it work themselves, did they have any business selling it?

There was another, even more pragmatic reason to avoid the subcontracting-out style of outsourcing. Despite a reputation as a low-cost alternative, outsourcing services still come at a premium, since you're paying a middleman to hire and manage the remote office of cheaper labor. If you can pull it off yourself, in the long run, it's even less expensive to run your own shop.

So, instead of hiring the work out, CollabNet decided to merge with an existing software company, Enlite Networks. Enlite was incorporated in Delaware, with management in Mountain View, Calif., and a few key developers in Plano, Texas. But by far the majority of its coders, some 31 programmers, were in Chennai. From its inception in 1999 Enlite was organized around the assumption that work would flow back and forth between the U.S. and India.

The company product -- a project management tool -- was folded into SourceCast. "They were not doing low-level work out there," says Behlendorf. "They were doing J2EE, heavy database stuff, the same kinds of things that you have people doing out here."

In early January 2003, when the company told the developers in Brisbane about the acquisition, the fallout was immediate and predictable. "A lot of people thought most of the engineering staff was going to lose their jobs," says Dan Rall, 26, a senior software engineer.

At an engineering offsite in the Marin Headlands, soon after the announcement, a "V.C.-type" speaker came in to put the company's move into a larger economic context, developer Leonard Richardson, 24, remembers.

"He talked about how the agricultural economy had become the industrial economy, which in turn had become the knowledge economy. Someone asked him what comes next, after outsourcing takes its toll on the knowledge economy. He said that if anyone had any ideas he was interested in hearing them," says Richardson.

Kevin Maples, another programmer, dubbed this vague notion the "I don't know, you think of something" economy.

The developers in Brisbane weren't the only ones who were worried. The Enlite engineering team in Chennai was also apprehensive. Here they'd been developing their own product, explains Muthu Krishnan, one of Enlite's U.S.-based founders. What exactly would they be doing for this CollabNet company? And what would these American executives in California expect of them? Programmers who had been writing code were put on the relatively less interesting task of testing software for bugs.

CollabNet had almost no QA department back in Brisbane, and this was an easy way to get an immediate benefit from the merger: The engineers in India would find bugs while the U.S. developers slept. Plus, it would help the engineers in India get up to speed on the product. Still, going from writing code to testing can only feel like a demotion.

The story of how CollabNet has striven to integrate its Indian and American engineers offers an illuminating test case in the evolving drama of globalization and its impact on the world's labor force. Along with the usual merger upheavals, the company had to surmount the perpetual barrier of a 13-and-a-half-hour time difference, and vast cultural differences as well. And no matter how enlightened the management, there's no getting around the economic facts. Indian programmers cost less; therefore it makes economic sense to hire them. Even for the most highly valued programmers in Brisbane who support what their company is attempting to do, that equation still chafes.

The 40 some-odd programmers, quality-assurance engineers and customer support staffers who work in CollabNet's two-floor outpost in Chennai are mostly in their mid-20s. By mid-2004, the managers here hope to recruit about 15 more of them. The market for their skills has become so heated in Chennai that headhunters brazenly call them up in their cubicles to solicit their services, dangling pay hikes of 30 percent.

"A programmer with two or three years of experience gets a salary of more than a big government official who had to struggle to get to that level," explains P.V. Gopinath, 41, a development manager. And Chennai, a southern port city formerly known as Madras, is sleepy compared to Bangalore, with considerably less job-hopping and salary inflation; it's an Austin, Texas, to Bangalore's Silicon Valley.

For these programmers, a job working for an American company like CollabNet is a ticket to the good life -- and a lot of long hours. When 29-year-old Venkat, an engineer who once worked Q.A. but now fixes the bugs he found as a tester, first started working with the CollabNet developers in Brisbane, he would work from 2 p.m. to midnight, so he'd have more time to chat with his remote colleagues in the chat rooms. But despite the late nights, he says, "I.T. [information technology] improves your lifestyle. You make more money. You have more satisfaction." But he adds, "You don't get a lot of holidays to go around and enjoy it."

Ramaswamy Subbaroyan, 34, a senior software developer who worked for 18 months in Boston for another company on an H1B visa, says that the rise of the I.T. industry in India has "put a lot of money in middle-class people's pockets." And the lifestyle that an I.T. job in India brings beats the ones back in the States. "Once you reach the middle level with 10 to 12 years experience, life is pretty good here, compared to people in the U.S. with 10 to 12 years experience."

But, he says humbly, the developers in the U.S. are superior: "The best programmers are still in the U.S. It's more of a do-it-yourself, self-starter culture." But he sees that changing in India, where a government job used to seem attractive because of the decades of job security it could offer. "Young people are cutting loose," he says. "They're not bothered by job security."

The same is not true for American programmers.

Since the merger, the programmers in Brisbane have not been axed en masse, as some had feared, but in the last year there have been some layoffs of individuals. And some developers have gone from coding almost all the time into very different roles; they've been put to the task of training and mentoring the staff in India. "You have to be a people leader, and not just sit in your small cube working on stuff," says Muthu Krishnan, one of Enlite's original U.S.-based founders. It's a real-life version of the advice that venture capitalists and economists have for American programmers who are concerned about their own prospects: Move up the food chain.

That means more documentation and lots of late-night sessions answering questions on chat. One insomniac Bay Area developer who happened to be online a lot was on the receiving end of so many of these queries that he started getting small tokens of thanks in the mail from his colleagues in India. One present was a small plaque with a formal declaration of friendship.

But moving from writing code to encouraging and managing a team of coders remotely is not for everyone. "I was a technical lead, but I didn't want to lead a team remotely. I didn't want to stay up all night bringing people along," says Michael Stack, who quit to work at another software company. "I remember interviewing someone long-distance over the phone, and just thinking. 'This doesn't work.' Interviewing is one of the most important things you do in a company. Trying to get a reading off of somebody off a bad phone line, I was at a loss."

"Their jobs changed or are changing," says Sandhya Klute, a director of engineering in Brisbane. Although she was hired eight months ago, well after the merger, Klute found herself still trying to reassure the 22 engineers here that they wouldn't be irrelevant as soon as the developers over in India got up to speed on the product.

Klute, who worked for Hewlett-Packard for 21 years as a middle manager, argued: Why would the company hire a new manager in Brisbane if they were just going to get canned? But she also struck a tough-love note: "The reality is we don't have to like it. Just look outside, it's happening in every other company."

Perhaps the most challenging aspect of the merger has been ironing out workplace culture issues. In Chennai, programmers call their managers "sir," and lofty job titles command respect. A tester wouldn't feel comfortable disagreeing with the CTO or a V.P. But in Brisbane, programmers treat each other as peers and respect is accorded based on contribution -- a style that comes directly out of the open-source world of software development.

So it's hard for a 26-year-old technical lead in Brisbane to understand why a programmer in Chennai might be too intimidated by him or just too shy to ask a lot of questions that could speed the training process along. "They can't just pop on over to my desk and ask me a question," says Dan Rall, 26, a senior software engineer. "But if they could, would they?"

No wonder that when Behlendorf spoke to those IIT students in Chennai his biggest piece of advice to them was to not be shy about participating. "I understand there are big cultural differences," Behlendorf told them. "The culture here is a lot more polite," but it's by jumping into the sometimes-bruising online fray that you can contribute and build your reputation.

"We don't get as much work out of them as we wish we did," says Repenning. Is the culprit the cultural mismatch? Are the American developers still not communicating clearly enough? Do they need to write more documentation? Is it the stupid time zone problem? Or do the developers there just need more time to ramp up? Or some combination? Repenning is not sure.

"You find yourself spending about equal time worrying about them moving up the value chain to take your job, and wishing that they would move up the value chain faster so they could do their jobs," says Repenning, who now leads a team of four engineers in Chicago and two in Chennai.

On the American side, the tension of working in a shrinking job market can make the cross-cultural interactions uneasy.

"This industry is having a hard time. Friends are losing jobs. Sitting beside someone who makes a 10th of what you do, it's a pressure you feel," says Stack, the American developer who left CollabNet to work for another company. "On the surface, all goes along swimmingly, but there is an underside not being discussed. That colors your interaction no matter how you might dismiss it."

Rall, a tech lead, is obviously proud of how fast some of his team's Indian engineers have adapted to their new roles at CollabNet -- such as Venkat, whom he dubs "a total star." And he says that some of the fears of job loss in Brisbane have abated over time. But he still wonders what the company's new deal means to American engineers just a little younger than he is, who are just getting out of school:

"A 21-year-old who just got out of school here with $100,000 in debt, what did he get for that debt? What does he have to look forward to now?" says Rall. "We don't hire those people anymore. We only hire senior engineers." He's not the only one wondering, since in the U.S. the the number of unemployed college Graduates has recently surpassed the number of unemployed high-school dropouts.

- - - - - - - - - - - -

It's morning in the CollabNet office in Chennai, and Behlendorf has just come in after staying up until 4 a.m. in his hotel room at the Sheraton answering the flood of e-mail from California that arrives after dinner in India, when it's 9 a.m. back in Brisbane. This is his second visit to Chennai in the past 10 months, and he thinks he's already seeing signs of change in the streets. There's less litter. Road conditions seem to be improving -- at least there's a lot of construction on them. He's optimistic that the influx of Western capital is playing a role in helping improve things here.

In the early 1990s, Behlendorf was the founder of SF Raves, the San Francisco mailing list that launched countless all-night underground parties in the name of "community." He still deejays until dawn. Is this the man American workers are thinking of when they rail against "Benedict Arnold executives" sending "our jobs" overseas?

Behlendorf says that CollabNet could have hired 10 people back in San Francisco for what the India office costs them: That's a ratio of about 4 to 1. But he thinks that wouldn't have been enough people to make the company's product succeed.

"We saved the jobs of the people who are employed in San Francisco by hiring people here [in India]," he says. "I don't know that we would be around as a company if we hadn't done that. What was the right thing to do, morally?"

04-06-2004, 10:33 AM

Outsourcing Grandma to Mumbai

04-07-2004, 08:20 PM

Subscription required - pasting in full:

Chicago Tribune, April 5th 2004

From (Burton's <!--emo& Tongue

--><img src='style_emoticons/<#EMO_DIR#>/tongue.gif' border='0' style='vertical-align:middle' alt='tongue.gif' /> ) Indiana to India: Why 1 firm leapt
Company found a pool of talent to help business--and overseas
town--blossom

QUOTEBy Michael Oneal
Tribune staff reporter
Published April 5, 2004

PUNE, India -- When Cummins Inc., the diesel enginemaker based in
Columbus, Ind., opened a product research center here recently, a Hindu
priest set up a small shrine next to a new office cubicle and led employees
in prayer.

He lit sticks of incense and dipped flowers in water. He ran a smudge
of color along the foreheads of the assembled Cummins executives. As the
chanting built to a climax, one American turned to a Cummins vice
president, Bharat Vedak, and asked what this peaceful ceremony signified.

"He is saying `May you have all success in the new venture,'" Vedak
said with a smile, "`and may you conquer all your enemies.'"

Conquering enemies before they conquer you is what the rush to India is
all about. As companies such as Cummins struggle with stiff global
competition and chronic pressures to cut costs, access to India's army of
high-quality, low-cost engineers has become an essential weapon.

A close look at Cummins' decision to locate its technical center in
Pune (pronounced POON-uh) reveals outsourcing to India is not just about
call centers and low-level jobs. It's about the crucial
interrelationship building between India and places like Indiana.

The pitched debate about outsourcing being heard in the U.S.
presidential campaign may focus on the idea that India is somehow stealing jobs
with the complicity of greedy CEOs. But that misses the point. In a
global economy, India and companies like Cummins need each other to thrive.
That gives the trend strong momentum.

A little over a year ago, Cummins Chairman and CEO Tim Solso recognized
what countless other CEOs are discovering: India is blossoming into a
vital resource of world-class technical talent that companies ignore at
their peril. On an eye-opening trip to Bangalore in southern India,
Solso saw engineers drawing complex 3-D models of jet engines and
analyzing ways to make combustion systems more efficient.

"They were very productive, very well-educated people doing
sophisticated work in a high-quality way," Solso says. "It was a huge competitive
epiphany."

What he concluded is that India is disrupting the world's economy much
the way Japan did 30 years ago, when companies including Toyota
dramatically improved the quality of car manufacturing.

Now, Cummins is counting on Indian engineers to help write the software
that will make its engines perform more efficiently. It is hiring
Indians to do computer analysis of those engines so the company can do away
with costly prototypes. The stakes could not be higher. Cummins is in
an all-out race with archrival Caterpillar Inc. to meet stringent new
environmental standards.

For India, the stakes are high as well. The country's tech boom is
fueling a broader surge in its economy that began when India loosened its
suffocating economic controls in 1991. But the backlash in the U.S.
means the pressure is on to become all the more indispensable to American
companies.

Indians fear that U.S. protectionism could slow a movement that is
creating a new middle class with new expectations and buying habits. These
consumers are giving the nation's economic renaissance added momentum
by encouraging the restructuring of other industries. A quarter of
India's population suffers abject poverty. But there's evidence the
free-market reforms are slowly changing that too.

"The way I look at it is that the country has not even scratched the
surface in terms of economic growth," says Ravi Pandit, a local
businessman who runs a technology company in which Cummins has a small stake.
"There is phenomenal growth that lies ahead."

Where the past

meets the future

How far this city of 3.7 million has come in the past five years and
how far it has to go can be glimpsed on Pune's snarl of dusty, pocked
streets.

About 100 miles south of Bombay, Pune looks like most urban areas in
India. Rivers of bicycles, scooters and cars compete for the right of way
with gaunt cows and goats. Women balancing bundles on their heads walk
by in saris as teenage girls in T-shirts and jeans zip past on
motorcycles. Traffic is constant and wild; at least one person is said to die
on Pune's roads every day.

Storefronts sell scooters that once took years of waiting to obtain.
New cars--and low-interest loans--are plentiful. But poverty is never far
away. Slums of corrugated steel shacks line the banks of the city's
murky river. Half-naked children play in dirt piles while their parents
dig in trenches with hand tools. Smog hangs over the city in a brown,
sooty haze.

This collision of future and past is starkly visible on the outskirts
of Pune, in a village called Hinjewadi.

In one direction, villagers in bright, traditional clothing go about
their business at a row of squat, concrete buildings. Across a highway,
the view is straight out of Silicon Valley.

Tall, modern buildings stand emblazoned with the names of India's most
prominent information technology companies. Quiet streets and
landscaped lawns crisscross hundreds of acres that include a bank, a hotel and
two new universities. High-speed Internet connections tie Hinjewadi's
engineers to points around the world.

If there is any doubt about what these professionals are capable of,
numbers tell the story. Since 1996, the city's software exports have gone
from $25 million to about $1 billion.

"We've got [many thousands] of software engineers in the city and they
are very highly paid," says Sushil Gupta, director of Software
Technology Parks of India Ltd. "It is transforming Pune. It underscores our
country's coming of age."

Cummins has manufactured engines in Pune for 42 years. But last year
when Solso visited several other U.S. companies' Indian operations,
including General Electric's John F. Welch Technology Centre in Bangalore,
he said he was blown away by the depth and sophistication of what he
saw.

As soon as he got off the plane in Columbus, where his $6.3 billion
company is headquartered, Solso called a meeting of his top staff.

"I said, `I want every one of you to go to India and I want you to take
your key people,'" Solso recalls. "`And specifically, I want you to
look at sourcing software development, IT operations, business services
and a tech center. And I want to get going right now.'"

For Solso, a 33-year Cummins veteran, the meeting was reminiscent of
one he attended in 1983. Then, he was directing the company's operations
in Britain. His boss, James Henderson, who later became Cummins
chairman, had just returned from Japan, where he had toured a series of
diesel-engine plants operated by Yanmar, Hino and Komatsu.

Henderson had experienced a similar epiphany. He saw firsthand why the
Japanese were taking the manufacturing world by storm. To produce an
engine, they used less capital, one-third the number of employees and
one-half the hours Cummins required. Organized in flexible teams, workers
were boosting quality. They were also coming out with new products much
faster than Cummins.

"We clearly have a more urgent problem than I previously thought,"
Henderson told his staff, according to a company history titled "The Engine
that Could: Seventy-Five Years of Values-Driven Change at Cummins
Engine Company."

"We must make major progress in three years, not five years. Five years
is too long," Henderson said.

Solso recognized on his trip to India that the situation today is
similar. The difference is that technology, not steel, is the new coin of
the manufacturing realm.

For companies such as Cummins, the ability to use computers to
streamline operations, speed product design and improve internal communications
may spell the difference between success and failure in the information
age.

And after the bitter three years he had just been through, Solso
recognized that India presented a better way to compete.

Solso, 57, took over as chairman of Cummins in 2000, just before the
2001 recession. Faced with a 70 percent one-year decline in U.S.
heavy-duty engine sales, he cut 17 percent of his employees and closed or
consolidated 14 plants, including the flagship engine factory in Columbus.

But he also used the opportunity to rethink how Cummins did business.
He faced two unrelenting challenges. Global truck manufacturers such as
Volvo and DaimlerChrysler had consolidated into huge companies that
could squeeze Cummins for every last penny. And the U.S. Environmental
Protection Agency had instituted standards requiring drastic reductions in
diesel engine emissions over the next several years.

That set off an expensive technology and design race between Cummins
and Peoria-based Caterpillar. With the clock ticking, Solso was looking
for any advantage he could get.

"That made us look globally," Solso says. "We wouldn't have survived if
we didn't look globally."

Globalization

began years ago

The truth is, Cummins was already a global company. It had
manufacturing operations all over the world. But globalization today means using
the Internet and other communication technologies to take advantage of
assets--people, skills and supplies--around the world.

As a result of Solso's meeting, executives scrambled to beef up
existing buying offices in Pune, Shanghai and Prague, Czech Republic, to find
new, cheaper sources of supplies. They also rushed to send much of the
company's enterprise computing work and other administrative functions
to suppliers in India.

But the main focus for Cummins these days is the effort to develop
engine technology that can meet the EPA standards without sacrificing
performance.

"If we don't do it," says Tom Linebarger, president of Cummins' power
generation unit, "Cat wins."

Part of the effort involves writing sophisticated software that can be
embedded in engines to manage how they work. Much of that software is
designed in Columbus. But the code is written by KPIT Cummins
Infosystems Ltd., the company in Pune run by Pandit.

Embedded software is part of the control system that helps the hardware
do all sorts of crucial functions, including firing the ignition system
in the most precise, fuel-efficient way.

Pandit says he charges about $20 an hour for writing the embedded
software. In Columbus, the rate would run closer to $70.

That alone might justify the decision to outsource. But the logic is
more refined. By saving that much on programming costs, Cummins can throw
more people at the problem. That speeds development and gets Cummins
products to market faster.

"We could not deliver our products on time without them ," says John
Wall, the company's chief technical officer.

The same thinking applies to Cummins' most ambitious effort in India
yet. After seeing GE's jet-engine design efforts in Bangalore, Cummins in
late January launched a similar, though much smaller, technology center
in Pune--the one blessed by the Hindu ceremony.

The bulk of the engine design still will be done in Indiana and other
markets around the world, but a new team of Indian engineers will use
powerful workstations to analyze those designs for defects and
performance, which is a critical and expensive part of the development process.

This is no small matter. Wall explains that in a combustion system, for
example, there is a long list of parameters that can be manipulated to
try to increase efficiency. Fuel can be squirted into the combustion
chamber at this angle or that. Air can come in at a different angle or
volume. The piston head can be machined in any number of different bowl
shapes. All told, there can be hundreds of variations.

"So I'll make three fuel injectors, each with a different spray angle,"
Wall says. "And oh, by the way, what about the air flow through the
engine? A little swirl, or a lot of swirl? Then you've got the timing of
the fuel--when do you inject it?"

Traditionally, Cummins engineers would choose the most promising
concept and build a prototype. They would run the new engine and collect
streams of data on performance. The process is painfully slow and
expensive.

The goal now is to do it on the computer. Using sophisticated software
and 3-D modeling, Indian engineers can predict where an engine part
might break under extreme stress. They can "watch" as virtual exhaust
flows through a virtual filter to see how the design might be tweaked to
boost efficiency.

The process, called analysis-led design, can eliminate the need for
multiple $100,000 prototypes. It can also find mistakes before they
happen, which speeds development dramatically. Already, preliminary efforts
done in Columbus have boosted turnaround time from nine months to three
months. That alone took $3 million out of the development process, Wall
says.

So if they could do that much in Columbus, why can't all this work be
done in the United States? The obvious answer is that it's cheaper to do
it in India, which means Cummins can add more people faster.

But India also has a demographic advantage over the U.S. Not only does
the country produce a swarm of bright, young engineers every year, but
the engineers are hungry and enthusiastic, and more willing to tackle
work American programmers might scoff at.

"Doing this is cost-effective," Wall says. "But it is both--cost and
effective. If you only have the cost part, you're not getting it."

At the opening ceremony of the new Cummins technology center, Ritesh
Dungarwal proudly demonstrated how his 3-D computer models can simulate
the flow of air through a diesel piston chamber. As head of the center's
flow analysis group, the young engineer has several university degrees
and has already far surpassed in income and opportunity anything his
parents could have dreamed.

In the past, he says, people like his father aspired to go into
public-sector jobs. The big appeal was not the challenge in that work, but job
security.

"Now people don't worry about that," Dungarwal says. "With all these
companies coming here, you can decide your limits. Right from schooling,
people think they can do something. The whole younger generation is
looking to be a part of this growing industry."

It's also true that Indian companies are figuring out how to harness
this enthusiasm in ways that are highly efficient and productive.

Quality relies on

process, planning

KPIT's Pandit, a soft-spoken 54-year-old with a master's degree from
the Massachusetts Institute of Technology, explains that because Indian
companies work with clients thousands of miles away, the demands for
quality and accountability are especially high. If quality wasn't up to
snuff, he says, the cost advantage wouldn't be worth it.

As a result, companies like KPIT have been forced to use the latest
techniques to devise disciplined processes for planning projects and
implementing them. They have also had to build quality into the production
process, much like the Japanese did with automobiles.

One result is that Indian software companies tend to break software
development into discrete components that can be tested and perfected,
then replicated.

"The parallel to that in the automobile industry is to come out with
parts that are interchangeable so you can quickly take it and put it
where you need it," Pandit explains.

The emphasis is also on catching bugs early. If there is a mistake in
the software during the design stage that isn't caught until the testing
stage, "then you spend 10 times the effort to fix it," Pandit says.

"Again, it's the same challenge as for the automobile industry," he
adds. "You get a part and you make sure the part is faultless so that you
don't have to rip up the car later on after it has been more or less
manufactured."

Arvind Thakur, president of NIIT Technologies in New Delhi, takes the
theory another step. In America, he says, software engineers tend to be
older. They tend to ask for, and are given, a lot more responsibility
for designing the software. Creativity is a big part of their job.

NIIT does it differently. It has less-experienced engineers do the
"manufacturing" of the software out of those prefabricated components. The
designing is left to more-experienced programmers.

"We have taken the art of programming and turned it into a process,"
Thakur says. That way production is scalable, which means pools of young
engineers can be arranged into "factories," where together they can
produce large quantities of high-quality software.

All this talk about factories and cars is hardly coincidence. Indian
entrepreneurs like Pandit and Thakur have every intention of following
the Japanese example by building world-class businesses on the back of
India's early successes at lower-end work. Already, both firms have the
highest quality designation from Carnegie Mellon University's Software
Engineering Institute.

"There's no question that some Indian groups are doing pretty darn good
work compared to companies over here," says Watts Humphrey, a fellow at
the institute who helped develop its standards. "It took Detroit quite
a while to determine that they had to defend themselves on quality. I'm
convinced it's the same issue here."

Pandit acknowledges that Indian companies have a huge cost advantage.
But he says they would be sticking their head in the sand if they were
to assume they could compete forever on price. Wages in India are
rising--KPIT's spiked 15 percent last year--but political backlash in America
will continue until Indian companies prove they can compete on quality
and service above all else.

Consequently, Pandit's strategy is to begin putting software centers in
the U.S., following the Japanese transplant strategy. Thakur points out
that Toyota started with low-budget cars and received lasting respect
from U.S. consumers only when it started producing the Lexus in the
1980s.

"The endgame in our industry is that once we come out with systems and
processes that are more efficient than what most of our competitors
have, we can operate with any labor," Pandit says. "Did anybody ever
believe that Toyota could employ American labor in American states and still
come out with better cars than Ford and GM? Did anybody believe that?"

New corporate

model emerges

Whether you believe in Pandit's vision or not, the global model is here
to stay.

Ten years ago, a Pune entrepreneur, Anand Khandekar, was in Bangalore
running Motorola Inc.'s pioneering technology center. Now he is involved
in tech start-ups based in Pune and Silicon Valley.

Khandekar's two companies, a chipmaker called Cradle Technologies and
video compression firm, PACE Soft Silicon, were designed from the outset
to take advantage of the rich pool of talent in both places. The "front
end" of each firm is in California, where executives raise venture
capital and court customers such as Intel and Texas Instruments. The "back
end," or technical work, is done in India, where engineers develop
patented technology.

Of PACE, Khandekar says, "It's not an American company and it's not an
Indian company. It's a global company."

As far as he's concerned, this is the corporate model for the 21st
Century.

To one degree or another, few large U.S. or European companies believe
they can compete today without tapping the unique combination of price
and quality found in India.

Like Cummins, more industrial companies are setting up centers in
places like Pune. And technology firms including Texas Instruments and
Motorola have been there for years, augmenting their efforts with India's
enthusiasm and expertise.

That has created enormous momentum. Not only has the IT success started
to bleed over into India's old-line manufacturing sector, where firms
are starting to export, but an improving economy has contributed to a
rise in literacy rates and a drop in the poverty rate over the past
decade, according to the World Bank.

It is hard to overestimate the sense of exhilaration and confidence
bubbling up in India.

Ravi Venkatesan, who has a master's of business administration degree
from Harvard, ran Cummins' India operations until February, when he left
to become chairman and general manager of Microsoft India. He says the
energy comes from a historical sense of freedom: liberation at last
from the legacy of British colonialism.

Young people in India, he says, "are absolutely driven to succeed
because they've known want and poverty and they finally see an escape
hatch."

"Whereas their counterpart in France may be just as smart and just as
educated, he would be thrilled to take a break after 35 hours and kick
back a bit," he says. "Here you're willing to work 70 or 80 hours just
to make it. So the drive to succeed, the ambition, the passion is just
amazing."

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