07-07-2004, 07:15 PM
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<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->http://www.kansascity.com/mld/kansascity/n.../9088397.htm?1c
<b>Outsourcing's explosive success is transforming India</b> BY STELLA M. HOPKINS
Knight Ridder Newspapers
HYDERABAD, India - (KRT) - Four years ago, the 10-story Cyber Towers sat one-third empty on this city's barren outskirts.
Vijay Kumar and other government officials had envisioned the building as the start of a suburban high-tech oasis to woo the world's computer work. But critics questioned whether the southern India city's emerging outsourcing industry had the vigor to grow.
Today, the 158-acre project is nearly full and surrounded by bustling software parks, including one that's home to a start-up by Charlotte, N.C.'s Bank of America Corp.
"Hyderabad has come up on the map," said Kumar, who heads a major push to recruit and serve the information technology industry. "There is no looking back."
India's outsourcing industry is a growth machine.
Leaders are scouting new opportunities and evolving into consultants to capture more business. Workers are invigorated by a newfound success that's transforming lives and a nation. But that prosperity is under stress. Rising wages imperil India's world supremacy in selling high-tech brainpower at Wal-Mart prices.
In the past four years, the industry's sales have doubled - and jumped 30 percent to $12.5 billion for the year ended March 31.
IT spending is on the upswing with the U.S. economy on the mend, so India expects the current year to be even bigger.
And U.S. jobs may be moving abroad faster than thought. Last month, Forrester Research Inc. estimated that by the end of next year, offshoring will have claimed the jobs of 832,000 white-collar U.S. workers since 2000. That's up more than 40 percent from the firm's 2002 job-loss estimate. By 2015, Forrester estimates a total of 3.4 million U.S. jobs will be lost to workers abroad.
Corporate America's motivation is well-known: Offshoring saves money. You have to do it to compete - especially if the other guy does it.
India's cyber players know they have to sell more than cheap labor to win what's up for grabs.
They want to be seen as more than computer code crunchers and call center operators. They want to be partners. They want more sophisticated work, and they want a broader range of clients.
Among the 800,000 people working in India's outsourcing world, there is the excitement of fatter paychecks and the pride and prestige of being players in the new economy.
"We have seen we can win," Atul Takle, a vice president with Tata Consultancy Services, one of India's largest and oldest outsourcers, said over drinks in a Bombay lounge in March. "We are not just a country of snake charmers and elephants. We will never go back."
---
The Forrester report projected that the greatest outsourcing growth during the next 18 months will come from companies already doing it. The firm also said that by 2008, more than half of Fortune 1000 companies will be sending work abroad, up from about one-third now.
India's outsourcing industry hopes to seize new work by anticipating customer needs rather than just taking orders.
Tata Consultancy Services, which counts Bank of America and Wachovia among its clients, increasingly hires people who know an industry, such as banking or manufacturing, rather than just tech experts. Eager to tap the entertainment industry, for example, Bombay-based TCS last year hired a former technology executive from film studio MGM, Takle said.
"You either anticipate the change, or you become a relic," he said. "There is no middle ground."
Ravi Gopinath leads the TCS push for manufacturers' business from an office tower overlooking the Arabian Sea. He talks of software that helps U.S. factories
trim utility costs and helps U.S. automakers slash design costs.
Gopinath will park engineers at customer factories to learn their business and suggest improvements. Customers today are receptive much sooner to a closer
working partnership, he said.
"Their perception of TCS changed," Gopinath said. "Now they see, here is a proactive TCS that is challenging their notions."
Outsourcers also do high-end work.
Bombay-based Patni, a software firm, has latched on to an IT growth area, called embedded systems, that is generating new business. For example, Patni's embedded software runs the mini computers becoming more common in cars for everything from navigation to monitoring engines.
Patni general manager Deepak Khosla said customers "have seen projects work, and now they're developing more strategic relations. It's being discussed at higher levels, not just the IT guys."
---
In February, Gregory Mankiw, a top economic adviser to President Bush, said offshoring could hold long-term benefits for the economy. Bi-partisan tongue-lashing quickly prompted Mankiw's apology for a "lack of clarity" that left the impression he "praised the loss of U.S. jobs."
<b>Despite the politics, U.S. economists generally agree that free trade yields benefits to the nation.</b>
Supporters say the latest move abroad saves billions, speeds work, resolves labor shortages and frees U.S. employees for more creative work.
Critics say offshoring is eroding the middle class.
Forrester's 3.4 million job-loss estimate, the most detailed yet, also projects offshoring will sap $151 billion in U.S. wages. With a starting point of 2000,
the job losses average little more than 200,000 a year. That's a relatively small number of jobs in an economy that has added an average of about 2 million a year the past 20 years.
However, there is no way to count jobs that aren't created in the United States when new IT work is sent overseas.
Indian IT workers and executives, legislators and industry leaders empathize with U.S. workers' worries. But they also point to the United States as a vocal champion of free trade. Now India - with one-sixth of the world's population - has found a lucrative trading niche.
India, with 1 billion people, the world's largest democracy, remains a Third World nation of heart-breaking poverty. But since the early `90s, the economy has been on the move. The government began privatizing state enterprises. Interest and tax rates are down. Malls and apartments are going up. Mortgage lending, auto loans and other financing are rising.
Nowhere is the boom more apparent than in IT, where people muse about retiring at 45. The industry's lush business parks dot India's shantytown squalor, islands of prosperity that could some day help lift the poor from the streets where they sleep on dirty rags.
"It's highly visible, and it's something people are very, very proud of," Alhad Nimbalkar said of the industry.
Early last year, Nimbalkar, 34 and an engineer, bet on outsourcing for a better life. He quit the security of 11 years with an appliance maker - India's old economy to join the Bombay office of Exult, a California outsourcer with global offices and its largest service center in Charlotte. Exult's work includes processing paychecks and accounts payable and tracking employee benefits.
Nimbalkar wanted a challenge, a chance to advance that he didn't have in the factory hierarchy, and a better life for his family. And when working for a U.S. company, he said, "There is this sense of pride shown by your family members."
Nimbalkar bought a new house soon after joining Exult. At 1,240 square feet, it's twice the size of the one he had shared with his wife, their two sons and his parents.
"I could dare to take a housing loan because I can afford it," he said.
In Hyderabad, a city of about 3.5 million, Vijay Kumar couples the discipline of 25 years of military service with a passion for building a legacy.
The retired army colonel heads a federal, one-stop, economic-development shop for outsourcing in the southern state of Andhra Pradesh, home to Hyderabad, one of India's top cyber cities.
Soft-spoken, 53 years old and the father of two teen daughters, Kumar works from early morning to late at night and often on Saturdays, darting to meetings, juggling phones and tending to prospects. One day he's meeting with a Korean company. The next he's hosting a Spanish-speaking group. Then he's negotiating with a U.S. firm looking to add 1,600 workers to its Hyderabad operation.
He commands a storehouse of information on the outsourcing industry, its needs and what India offers. Dark eyes unwavering, he listens intently. "Tell me what you need."
From his sixth-floor office at Cyber Towers, he has helped build the city's outsourcing industry from 359 companies four years ago to 1,079 today.
When he moved into the office in 1999, he'd sometimes stare at the desolate landscape, and wonder how many millions of years the unending gray boulders had seen. Today, in software parks, those boulders landscape gardens, glisten beneath waterfalls and level gullies for parking lots.
"It's an amazing change in a short time," he said.
---
The most significant, long-term threat to the industry's growth is a product of its success.
Demand is driving up wages.
Cheap, well-educated, English-speaking labor built the Indian IT industry. Last year, a programmer in India with a few years' experience made $6,000 to $9,000 compared with U.S. wages of $45,000 to $85,000, according to California consultant neoIT.
The IT industry handed out some of India's highest average salary hikes last year nearly 14 percent at the top - according to a survey by Hewitt Associates Inc., an Illinois outsourcing and consulting firm.
Wages also are rising as employees job hop - much like American IT workers before the dot-com collapse. And U.S. companies contribute to wage inflation as they set up operations in India.
Companies sweeten benefits to retain workers and rein in wages. For example, Exult said that in April it extended medical insurance to employees' parents.
In a December report, the Indian government estimated that by 2009 the country's IT industry could be short nearly half a million workers, putting more pressure on wages.
Other low-wage countries, such as China, are angling for outsourcing work. That makes India's IT industry vulnerable to the same search for cheap labor that pushed textiles in the 1800s from New England to the Carolinas and more recently to Mexico and Asia.
India approaches the hurdles with a new energy, and the industry projects its outsourcing sales will more than quadruple to $57 billion by 2008.
<b>"The industry has helped change India's perception about itself, that we can't compete with the world," Arun Shourie, India's former IT minister,</b> said during an interview in Delhi. "We can charm many snakes, but we can do more." <!--QuoteEnd--><!--QuoteEEnd-->
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->http://www.kansascity.com/mld/kansascity/n.../9088397.htm?1c
<b>Outsourcing's explosive success is transforming India</b> BY STELLA M. HOPKINS
Knight Ridder Newspapers
HYDERABAD, India - (KRT) - Four years ago, the 10-story Cyber Towers sat one-third empty on this city's barren outskirts.
Vijay Kumar and other government officials had envisioned the building as the start of a suburban high-tech oasis to woo the world's computer work. But critics questioned whether the southern India city's emerging outsourcing industry had the vigor to grow.
Today, the 158-acre project is nearly full and surrounded by bustling software parks, including one that's home to a start-up by Charlotte, N.C.'s Bank of America Corp.
"Hyderabad has come up on the map," said Kumar, who heads a major push to recruit and serve the information technology industry. "There is no looking back."
India's outsourcing industry is a growth machine.
Leaders are scouting new opportunities and evolving into consultants to capture more business. Workers are invigorated by a newfound success that's transforming lives and a nation. But that prosperity is under stress. Rising wages imperil India's world supremacy in selling high-tech brainpower at Wal-Mart prices.
In the past four years, the industry's sales have doubled - and jumped 30 percent to $12.5 billion for the year ended March 31.
IT spending is on the upswing with the U.S. economy on the mend, so India expects the current year to be even bigger.
And U.S. jobs may be moving abroad faster than thought. Last month, Forrester Research Inc. estimated that by the end of next year, offshoring will have claimed the jobs of 832,000 white-collar U.S. workers since 2000. That's up more than 40 percent from the firm's 2002 job-loss estimate. By 2015, Forrester estimates a total of 3.4 million U.S. jobs will be lost to workers abroad.
Corporate America's motivation is well-known: Offshoring saves money. You have to do it to compete - especially if the other guy does it.
India's cyber players know they have to sell more than cheap labor to win what's up for grabs.
They want to be seen as more than computer code crunchers and call center operators. They want to be partners. They want more sophisticated work, and they want a broader range of clients.
Among the 800,000 people working in India's outsourcing world, there is the excitement of fatter paychecks and the pride and prestige of being players in the new economy.
"We have seen we can win," Atul Takle, a vice president with Tata Consultancy Services, one of India's largest and oldest outsourcers, said over drinks in a Bombay lounge in March. "We are not just a country of snake charmers and elephants. We will never go back."
---
The Forrester report projected that the greatest outsourcing growth during the next 18 months will come from companies already doing it. The firm also said that by 2008, more than half of Fortune 1000 companies will be sending work abroad, up from about one-third now.
India's outsourcing industry hopes to seize new work by anticipating customer needs rather than just taking orders.
Tata Consultancy Services, which counts Bank of America and Wachovia among its clients, increasingly hires people who know an industry, such as banking or manufacturing, rather than just tech experts. Eager to tap the entertainment industry, for example, Bombay-based TCS last year hired a former technology executive from film studio MGM, Takle said.
"You either anticipate the change, or you become a relic," he said. "There is no middle ground."
Ravi Gopinath leads the TCS push for manufacturers' business from an office tower overlooking the Arabian Sea. He talks of software that helps U.S. factories
trim utility costs and helps U.S. automakers slash design costs.
Gopinath will park engineers at customer factories to learn their business and suggest improvements. Customers today are receptive much sooner to a closer
working partnership, he said.
"Their perception of TCS changed," Gopinath said. "Now they see, here is a proactive TCS that is challenging their notions."
Outsourcers also do high-end work.
Bombay-based Patni, a software firm, has latched on to an IT growth area, called embedded systems, that is generating new business. For example, Patni's embedded software runs the mini computers becoming more common in cars for everything from navigation to monitoring engines.
Patni general manager Deepak Khosla said customers "have seen projects work, and now they're developing more strategic relations. It's being discussed at higher levels, not just the IT guys."
---
In February, Gregory Mankiw, a top economic adviser to President Bush, said offshoring could hold long-term benefits for the economy. Bi-partisan tongue-lashing quickly prompted Mankiw's apology for a "lack of clarity" that left the impression he "praised the loss of U.S. jobs."
<b>Despite the politics, U.S. economists generally agree that free trade yields benefits to the nation.</b>
Supporters say the latest move abroad saves billions, speeds work, resolves labor shortages and frees U.S. employees for more creative work.
Critics say offshoring is eroding the middle class.
Forrester's 3.4 million job-loss estimate, the most detailed yet, also projects offshoring will sap $151 billion in U.S. wages. With a starting point of 2000,
the job losses average little more than 200,000 a year. That's a relatively small number of jobs in an economy that has added an average of about 2 million a year the past 20 years.
However, there is no way to count jobs that aren't created in the United States when new IT work is sent overseas.
Indian IT workers and executives, legislators and industry leaders empathize with U.S. workers' worries. But they also point to the United States as a vocal champion of free trade. Now India - with one-sixth of the world's population - has found a lucrative trading niche.
India, with 1 billion people, the world's largest democracy, remains a Third World nation of heart-breaking poverty. But since the early `90s, the economy has been on the move. The government began privatizing state enterprises. Interest and tax rates are down. Malls and apartments are going up. Mortgage lending, auto loans and other financing are rising.
Nowhere is the boom more apparent than in IT, where people muse about retiring at 45. The industry's lush business parks dot India's shantytown squalor, islands of prosperity that could some day help lift the poor from the streets where they sleep on dirty rags.
"It's highly visible, and it's something people are very, very proud of," Alhad Nimbalkar said of the industry.
Early last year, Nimbalkar, 34 and an engineer, bet on outsourcing for a better life. He quit the security of 11 years with an appliance maker - India's old economy to join the Bombay office of Exult, a California outsourcer with global offices and its largest service center in Charlotte. Exult's work includes processing paychecks and accounts payable and tracking employee benefits.
Nimbalkar wanted a challenge, a chance to advance that he didn't have in the factory hierarchy, and a better life for his family. And when working for a U.S. company, he said, "There is this sense of pride shown by your family members."
Nimbalkar bought a new house soon after joining Exult. At 1,240 square feet, it's twice the size of the one he had shared with his wife, their two sons and his parents.
"I could dare to take a housing loan because I can afford it," he said.
In Hyderabad, a city of about 3.5 million, Vijay Kumar couples the discipline of 25 years of military service with a passion for building a legacy.
The retired army colonel heads a federal, one-stop, economic-development shop for outsourcing in the southern state of Andhra Pradesh, home to Hyderabad, one of India's top cyber cities.
Soft-spoken, 53 years old and the father of two teen daughters, Kumar works from early morning to late at night and often on Saturdays, darting to meetings, juggling phones and tending to prospects. One day he's meeting with a Korean company. The next he's hosting a Spanish-speaking group. Then he's negotiating with a U.S. firm looking to add 1,600 workers to its Hyderabad operation.
He commands a storehouse of information on the outsourcing industry, its needs and what India offers. Dark eyes unwavering, he listens intently. "Tell me what you need."
From his sixth-floor office at Cyber Towers, he has helped build the city's outsourcing industry from 359 companies four years ago to 1,079 today.
When he moved into the office in 1999, he'd sometimes stare at the desolate landscape, and wonder how many millions of years the unending gray boulders had seen. Today, in software parks, those boulders landscape gardens, glisten beneath waterfalls and level gullies for parking lots.
"It's an amazing change in a short time," he said.
---
The most significant, long-term threat to the industry's growth is a product of its success.
Demand is driving up wages.
Cheap, well-educated, English-speaking labor built the Indian IT industry. Last year, a programmer in India with a few years' experience made $6,000 to $9,000 compared with U.S. wages of $45,000 to $85,000, according to California consultant neoIT.
The IT industry handed out some of India's highest average salary hikes last year nearly 14 percent at the top - according to a survey by Hewitt Associates Inc., an Illinois outsourcing and consulting firm.
Wages also are rising as employees job hop - much like American IT workers before the dot-com collapse. And U.S. companies contribute to wage inflation as they set up operations in India.
Companies sweeten benefits to retain workers and rein in wages. For example, Exult said that in April it extended medical insurance to employees' parents.
In a December report, the Indian government estimated that by 2009 the country's IT industry could be short nearly half a million workers, putting more pressure on wages.
Other low-wage countries, such as China, are angling for outsourcing work. That makes India's IT industry vulnerable to the same search for cheap labor that pushed textiles in the 1800s from New England to the Carolinas and more recently to Mexico and Asia.
India approaches the hurdles with a new energy, and the industry projects its outsourcing sales will more than quadruple to $57 billion by 2008.
<b>"The industry has helped change India's perception about itself, that we can't compete with the world," Arun Shourie, India's former IT minister,</b> said during an interview in Delhi. "We can charm many snakes, but we can do more." <!--QuoteEnd--><!--QuoteEEnd-->