The lure of India

Date: Wednesday, October 23, 2002 11:17 PM

************ H-1B NEWSLETTER *************

* Get the Facts on H-1B at *
* www.ZaZona.com *

Craig Barrett, Intel's chief executive, explained that companies now seem to
be focused more on shifting work overseas than bringing foreign workers to
the United States under the H-1B visa program. Although this might explain
why the H-1B statistics are going down it won't be of much comfort to
unemployed Americans that hope to find another job.

The next statement might explain why American workers have been so slow to
understand what is happening:

"We've liked to imagine we had such a skill advantage over the rest of the
world and that the kind of jobs that go offshore would be low-skill," said
Lori Taylor, an economist with the Federal Reserve in Dallas. "So it's a bit
of a jolt to realize that all kinds of industries operate in the world
market, and all types of workers are exposed to global competition. We're
not the only ones with a highly skilled labor force in the world."

The second article about Dell's customer un-service makes an interesting
companion to the first one.

http://www.austin360.com/auto_docs/epaper/editions/monday/business_1.html

The lure of India
Cheaper labor drawing high-skilled tech jobs from U.S.
By John Pletz

AMERICAN-STATESMAN STAFF

Monday, October 21, 2002

When he still had a job at Dell Computer Corp., Gary Davidson didn't think
much about India.

But after he and 5,700 other Dell workers in Central Texas lost their jobs
last year, about the same time the company was opening a call center in
India, Davidson and others reached the inescapable conclusion that
high-tech, like other industries before it, was increasingly looking to
cheaper labor overseas.

While companies such as Dell, Intel Corp. and Computer Sciences Corp. have
been cutting jobs by the thousands in the United States, they've been
expanding in India, Russia and China. Other companies with Central Texas
ties that have back-office and design functions overseas include IBM Corp.
and Motorola Inc.

"We talked a lot about it after the layoffs," said Davidson, an IT manager
who was laid off in February 2001. "It was a big thing on people's minds,
that the expansion should be happening here."

High tech is following a well-worn path to maturity, moving to cheaper
markets overseas to shore up profits as prices come down. But high tech is
different from textiles and automobiles in one key aspect: Many of the jobs
that are moving offshore aren't low-skilled manufacturing positions. Many
are skilled, white-collar jobs, such as technical support, software
development and semiconductor design.

"We've liked to imagine we had such a skill advantage over the rest of the
world and that the kind of jobs that go offshore would be low-skill," said
Lori Taylor, an economist with the Federal Reserve in Dallas. "So it's a bit
of a jolt to realize that all kinds of industries operate in the world
market, and all types of workers are exposed to global competition. We're
not the only ones with a highly skilled labor force in the world."

During the past two years, 336,000 high-tech jobs have been eliminated
nationwide, including more than 20,000 in Central Texas.

Dell's headcount has grown dramatically in Bangalore, India, while remaining
flat in Central Texas. In Bangalore, Dell now employs more than 1,000
people, up from 180 in June 2001.

"India can become a major part of Dell's operations and a major source of
the human capital that Dell takes on as a company," Michael Dell, the
computer maker's chairman and chief executive, told Indian media during a
trip to the country this year.

The economics are simple: A call-center employee in India makes 30 percent
to 60 percent less than an American worker gets for the same work.

"We've found if you've got an outsourcer in Dubuque, well, a Dell-badged
person in Bangalore is less expensive and does a better job," said Dell
president and chief operating officer Kevin Rollins.

CSC also has discovered India. Since early 2000, CSC's employment in Austin
has dropped by one-third to 800 workers. At the same time, CSC has been
building its Indian operations. The company now has about 400 workers in
India, where it had none in 2001. Employment is expected to double to 800 by
early next year, analysts say.

After Intel announced plans a few months ago to cut 4,000 jobs in the United
States, the company said it planned to add 200 workers in India, eventually
tripling the number of engineers there to more than 3,000. The company has
scrapped plans to build a new design center in downtown Austin, and
employment here remains flat at about 620.

Nearly a decade of growth

India's technology industry, especially its call centers, has been growing
dramatically for nearly a decade. General Electric Co. was among the first
U.S. companies to open facilities in India. Others who have followed include
IBM Corp., Motorola Inc., Nortel Networks, Reebok, Sony, American Express
and HSBC. America Online is expected to open one of the country's largest
call centers -- with more than 3,000 workers -- in Bangalore.

The value of technology products and services exported from India grew from
just $1 billion in 1997 to $6.3 billion last year, according to the National
Association of Software and Service Companies, or Nasscom, an Indian trade
group.

India is attractive because of its large population of skilled technical
workers who are fluent in English, not to mention a multibillion-dollar
investment in communications infrastructure by the Indian government, said
Julie Giera, an analyst with Giga Information Group.

India is just one region that's benefiting from the pursuit of cheap labor.
Russia, Poland, China, even Africa have seen U.S. employers come calling.

Dell's growth in the past year illustrates the trend. Its worldwide
employment as of Aug. 2 was up 2,000 from a year ago to 36,000. Employment
in Central Texas remained unchanged at 16,000.

"Most of the additions have been international," Rollins said. "It's
predominantly in Asia. There's parts of Eastern Europe. We have development
capabilities in China, India, Brazil and Russia. The headcount has come from
two things: outsourcing that's been moved inside Dell and growth in
international markets."

Craig Barrett, Intel's chief executive, recently announce plans to triple
the company's employment at a design center in Russia and a chip fabrication
plant in China.

Companies now seem to be focused more on shifting work overseas than
bringing foreign workers to the United States under the H-1B visa program.

During the peak of the tech boom, when employees were in high demand and
short supply, Congress expanded the H-1B program. It tripled the number of
employees companies could hire on visas annually from 65,000 to 195,000.

Work visas dropping

But data from the Immigration and Naturalization Service said the number of
H-1B visas granted in the nine months between Oct. 1, 2001, and June 30,
2002, fell by more than half to 60,500.

The move to cheaper markets ripples far beyond Central Texas and the United
States. In the past five years, Singapore estimates it has lost more than
40,000 jobs in the disk-drive, computer and electronic-appliance sectors to
China and other parts of Asia where labor is less expensive.

The latest outsourcing frontier is Africa. In 2000, Affiliated Computer
Services, a Dallas-based company that processes insurance forms for Aetna,
opened the first data-processing center in Accra, the capital of Ghana.
Workers are paid for each form processed, earning between $1 and $3 a day.

There's no sign that offshore outsourcing will slow down, Giera said. She
estimates the industry will grow 20 percent to 28 percent in 2003. Nasscom
and Deutsche Bank predict that Indian IT service exports will grow 20
percent annually in the next four years, nearly tripling by 2006 to $18
billion.

Overseas expansion by tech companies has been under way for several years,
starting in Ireland and Canada. But it wasn't until U.S. workers started
getting pink slips that they began to complain to the Equal Employment
Opportunity Commission, the courts and labor groups such as the AFL-CIO.

"In those boom years in the '90s, when they were getting stock options and
signing bonuses, there was nothing we could offer them they didn't have,"
said Ed Sills, spokesman for the Texas AFL-CIO in Austin, an umbrella group
for various unions. "Now that job security is an issue, there may be
something we could offer them they don't have. We're sending the signal that
we are available."

But unions have almost no representation in high tech, and it's unlikely
that legions of tech workers will trade their stock options for union cards
anytime soon.

"Periodically we hear from workers in tech industries about forming a
union," Sills said. "But for anything to happen, it would have to be more
than a few stray inquiries."

The Teamsters union in Nashville initially attempted to organize workers at
Dell when the company opened its plant there in 1999. But the effort died
quickly, and Teamsters officials in Nashville say they haven't heard much
from employees since then. Nashville was largely unaffected by Dell's
cutbacks.

Backlash in U.S.

Losing jobs to cheaper workers overseas is a new phenomenon for high-tech
workers, many of whom thought until recently they had found an industry safe
from the economic shocks that have hurt others in the past. The cutbacks
have produced a backlash by some workers.

"The economy's bad, and that's a big reason why," said Peggy Cripps, who
assembled computers at Dell's manufacturing plant in Nashville for about two
years before quitting in early 2001 after being turned down for a promotion.
"Everything eventually will go overseas. That means we won't have anything.
We'll go to McDonald's and flip burgers for $7 an hour with no benefits."

Companies are sensitive to the appearance of exporting U.S. jobs overseas.

Dell says it didn't export many jobs directly to India, with the exception
of "a small number" of online tech-support positions, said spokeswoman
Cathie Hargett. Most of the jobs in India were tech-support positions that
Dell used to contract out to companies in the United States, she said.

"The notion that we're not doing something here at the expense of what's
happening overseas is just not accurate," she said. "To our point of view,
the jobs we're creating in India are new jobs. They aren't replacing jobs
here."

CSC addressed the issue in an August memo announcing another round of
layoffs in the financial-services division, which is based in Austin.

"Many of you may ask if your job is being replaced by the use of offshore
resources," wrote division President Jim Cook. "We have added offshore
resources in order to win business that requires this element in our
solution, business we could not have won otherwise."

That's little comfort to laid-off workers, said Taylor of the Federal
Reserve.

"It doesn't matter from the perspective of an employee that you lost your
job to the fall of the Berlin Wall; you still lost your job," she said.
"It's almost a red herring, where jobs have gone. The fact is, they are
gone."

jpletz@statesman.com; 445-3601

Posted on Wed, Oct. 16, 2002

http://www.tallahassee.com/mld/tallahassee/business/4290912.htm
Overseas call centers fight a language barrier

By Crayton Harrison
KNIGHT RIDDER TRIBUNE

DALLAS - Bob Duke was growing exasperated on Dell Computer Corp.'s customer
service hot line.

Again the Arlington, Texas, resident told the service representative that
his computer wasn't plugged in, and again she asked him to turn the computer
on and check for the little green light, speaking in an accent that was hard
for Duke to understand.

"Ma'am," he told the rep, "we're obviously in two different countries,
separated by a common language."

Even as U.S. companies send more of their customer service phone banks
overseas, they risk a customer backlash if their employees aren't trained
correctly or have accents that aren't clear to the American ear, experts
say.

At the same time, the global economy keeps pushing companies to look around
the world for sources of labor, so Americans probably will have to grow
accustomed to different accents and behaviors, the experts say.

"This is not going away," said Shiek Shah, co-chief executive of Akili, a
technology-consulting firm in Dallas. "This train is not coming back to us."

Companies that do have call centers abroad, such as Dell, acknowledge that
some customers have been dissatisfied, and the companies say they are
working with employees to improve service. Analysts have praised Dell's
India operations as some of the best-run call centers in the country.

India had 3,250 workers at call center outsourcing firms in 2000, said Brian
Huff, an analyst at Datamonitor PLC, a market research firm. That number
doesn't include the thousands of Indian call center workers who are employed
directly by American companies.

By 2005, Datamonitor expects India to have 35,000 outsourced call center
workers, an increase of about 61 percent each year. Jobs at U.S. call center
outsourcers will grow only 6 percent per year, to about 390,000 in 2005,
Huff said.

Big savings

Companies can save about 30 percent to 40 percent by having their call
center functions in India, Huff said. Dr. Richard Feinberg, director of the
Center for Customer Driven Quality at Purdue University, believes the
savings could be closer to 75 percent.

The figure depends on whether companies outsource call centers they
previously operated or operate their own centers in India.

The biggest savings from Indian call centers come from lower salaries. A
call center employee who makes $12 an hour in the United States would be
paid $3 to $4 an hour in India.

The recruits are also well educated. Dell estimates that each year there are
14 million new college graduates in India, including 1 million engineers.

"The cost benefit outweighs the fact that customer satisfaction levels may
dip," Huff said.

Indian call centers have attracted an impressive roster of U.S. companies,
including General Electric, FedEx and Citibank, part of Citigroup Inc. Many
call centers are located in the high-tech, well-educated city of Bangalore.

Companies do internal surveys to measure customer satisfaction with service
from offshore call centers, but those data are not often publicly available.

Many Indian firms that want to do call center duties for American companies
lack proper training and technical resources, Feinberg said.

"The companies in India change every two weeks," he said. "It's a giant
turnstile for people who think they can get into the call center business,
but it's not working out that way."

Solving problems

Employees at Indian call centers are just as smart as their American
counterparts, but many call centers themselves aren't run well, Feinberg
said.

"You have less of a chance of getting a solution to your problem if your
call goes to India," he said. "Consumers don't care who they speak to. They
could speak to a mouse as long as it got the problem solved. The issue is
solving the problem the first time."

It took Duke, the computer user from Arlington, days of calling Dell tech
support before he could get help. On his first call, he had to ask the
customer service representative several times to repeat herself so he could
understand her.

Duke knew what was wrong with his computer and told the representative that
he simply wanted to order a part. But the woman, who told him she worked at
the call center in India, continued asking him basic, unnecessary questions.

It was obvious she was reading from a script, said Duke, the 54-year-old
president of an Arlington insurance firm.

"Finally, she told me she was going to 'ups' me a technician with the part,"
Duke said. He believes the woman meant she was going to send the part via
UPS, but he never got a package and had to call Dell customer service again,
eventually getting the computer fixed.

Dell employees in Bangalore undergo an extensive training process for both
technology and the American version of the English language, said Rick
Chase, who is in charge of the company's India operations.

Like employees at many Indian call centers, Dell's Bangalore workers are
encouraged to watch American television shows to imitate the accent and
learn the slang.

Such training can make an overseas call center successful, Huff said. "I've
actually witnessed it," he said. "I went over to a call center in India last
year, and they were watching a 'Friends' episode in a big amphitheater."

The India call center industry has been working on a certification process
to help companies make sure they're getting quality customer service, Shah
said. Indian call centers will get better and rival their U.S. peers, he
said.

"You can't tell me that someone in New York is going to understand somebody
at a call center in Alabama," he said. "India has a billion people, and not
everyone is going to speak perfect, accentless English. But some call
centers work really hard on getting rid of the accent."

Help to Keep ZaZona.com Online

Donate to the Cause at
http://www.zazona.com/Donations.htm

Back to archives