Software Success Has India Worried

Date: Thursday, February 13, 2003 7:04 PM

H-1B and JOB DESTRUCTION NEWSLETTER

www.ZaZona.com

India's National Association of Software and Service Companies, Nasscom
is the umbrella organisation for IT Software and Services industry in
India. They hired Hill and Knowlton to spruce up the image of their
outsourcing campaigns. Here is a little history on Hill and Knowlton.
They got the job done for China so perhaps they can for India also.

(I recommend that you go to the NY Times page to see the picture of the
line of Indians waiting to apply for call center jobs.)

http://multinationalmonitor.org/hyper/mm0496.09.html
TERRIFIED THAT CHINA could become a hot issue during this year's
presidential election campaign, especially with Peking's
"most-favored-nation" trade status up for review in June, several U.S.
corporations have started a covert PR blitz to convince the public that
the Chinese leadership is deserving of greater sympathy. To coordinate
the public relations effort, the companies have hired Hill and
Knowlton, whose president, Howard Paster, is President Clinton's former
congressional lobbyist.

http://www.nytimes.com/2003/02/13/business/worldbusiness/13RUPE.html

February 13, 2003
Software Success Has India Worried
By SARITHA RAI

OMBAY, Feb. 12 Is the United States going to start turning its back on
outsourcing, the lifeblood of India's software and services industry?

The global economic downturn and possible war with Iraq are, of course,
big concerns for industry executives, who are gathered here this week
for an annual industry conference to meet with analysts, consultants
and the chief information officers from American corporations, their
most important customers. But the growing threat of a political
reaction against outsourcing is the worry dominating the discussion.

So far, the only concrete signs of a reaction are in the public sector.
After the eFunds Corporation of Scottsdale, Ariz., a contractor hired
by the State of New Jersey to manage a welfare and food-stamp program,
moved its customer-service operations to Bombay from Wisconsin, a New
Jersey legislator, Shirley K. Turner, introduced a bill that would
require that workers hired under state contracts be American citizens
or legal aliens or they occupy some specialty niche that American
workers cannot be found to fill. " `I say it's time to bring 'em back
from Bombay,' Senator Turner said of the client service jobs currently
based in India," a news release stated.

Connecticut, Maryland, Wisconsin, and Missouri have also begun
considering such laws.

Though public-sector work directly accounts for only a tiny part of
India's software and services exports to the United States, executives
here are concerned about a chilling effect, with American customers
reluctant to send work overseas lest it complicate dealings with
government bodies.

The $10 billion software and services industry is hugely important to
India. It has so far grown robustly despite the broader slowdown in
technology spending, as more Western companies, especially American
ones, cut expensive jobs at home and contract out software development
and support, call-center operations and other functions to low-cost
suppliers in India and elsewhere. By 2008 the Indian government expects
the industry to account for about 8 percent of all economic output, up
from 2.87 percent now.

More than half the world's top 500 companies, including General
Electric and American Express, outsource work to India.

To supply the demand, Indian companies like the Bangalore-based Infosys
Technologies and Wipro, and Tata Consultancy Services, or T.C.S., of
Bombay, part of the Tata conglomerate, have been hiring by the
hundreds, bucking the generally sluggish global trend. Revenue from
software and services exports from India were $6.9 billion in the last
three quarters of 2002, up 28 percent from the period in 2001,
according to data released Tuesday by the National Association of
Software and Services Companies. The association, known as Nasscom,
organized this week's conference.

The legislation being considered in several states has software and
services executives worried that American opposition to outsourcing in
India is growing. They worry that regardless of whether such laws are
enacted, the sentiment will spread. It may, they fear, slow companies'
decisions to outsource and perhaps even encourage them to send work to
other countries.

India's exporters are divided over whether such legislation should be
challenged at the World Trade Organization. "Legislation banning
contracts from going abroad is a nontariff barrier, and we are
exploring the possibility of countering this at the W.T.O.," Nasscom's
president, Kiran Karnik, said.

But some leading companies with large American corporations among their
customers said that the job loss issue was emotional and was best
underplayed.

Even within Nasscom, a division was evident this morning at a session
on global technology trends. When one panelist, E. Jeffrey Berg,
executive director of Citigroup Program Management, brought up the
proposed New Jersey legislation, Som Mittal, vice chairman of Nasscom
and chief executive of Digital GlobalSoft, an Indian subsidiary of
Hewlett-Packard, cut in, saying that even a discussion would
sensationalize the issue.

Nasscom has recently engaged the public relations firm Hill & Knowlton
to work with businesses and politicians in the United States to counter
the opposition toward outsourcing to India and to increase the global
brand equity of the Indian software industry.

While in the past there has been opposition in the United States to
moving manufacturing jobs overseas, those moves primarily affected
blue-collar workers. Now, the jobs of white-collar workers are on the
line. "This is the vocal, articulate middle class who form an important
constituency of every political party," Mr. Karnik said.

Nasscom said it was campaigning to show how Indian software and
services exporters were helping the American economy to be more
effective. In a letter to the governor of New Jersey, Nasscom said its
preliminary data indicated that outsourcing to India gave American
banks a 10 percent to 20 percent cost advantage over their European
peers and resulted in an $8 billion savings for the banking industry in
the last four years.

Nasscom is also talking to nearly 40 state senators in New Jersey in a
campaign against the legislation, saying that state governments would
have to burden their citizens with more taxes if they insisted that
work be done in high-cost locations.

Despite the controversy, outsourcing deals are still being struck by
Indian companies. Among them, the World Bank is scheduled to announce
next week a $10 million to $20 million technology services deal
outsourced to an Indian software company. "Backlash is a natural
reaction even at the World Bank, but in this era of globalization,
sustaining business and securing jobs is more likely to happen if
projects are executed in the most efficient destinations," said Mohamed
V. Muhsin, chief information officer of the World Bank.

Gartner Inc., the research firm based in Stamford, Conn., has prepared
a note advising its Indian clients to promote the value of their
services not just to customers but to the public.

In the note, "How to handle backlash against offshore services," two
Gartner analysts, Rolf Jester and Partha Iyengar, warn, "To ignore the
problem, or to pretend it is not real, is to allow negative perceptions
to fester, generating a climate of opinion in which selling becomes
more difficult."

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