Buffaloed by Hillary

Buffaloed by Hillary - Part 3

Date: Thursday, March 20, 2003 12:51 PM

H-1B and JOB DESTRUCTION NEWSLETTER

www.ZaZona.com

Hillary Clinton had better start preparing for a massive reduction of
tax income for the state of New York now that she invited TATA to take
American jobs there. Martinez, a state unemployment insurance director
said that "TCS paid its local employees the same as what its workers in
India make, plus a $2,000 monthly living expense." What he doesn't
realize is that the salary is deposited in Indian banks, and the
monthly living expense is sent to the USA tax-free. TATA is allowed to
bring these workers into New York and not pay tax or social security.
What a deal, huh?

Gupta, the president of TCS, admits that 70% of the work will be sent
offshore and only 30% will be done in the United States. Gupta says
that half his employees are Indians on work visas, but you can bet the
percentage is far more. He must have had a tough time holding the
laughs back when he said that TATA is "taking in as many local U.S.
citizens and permanent residents as possible."

Not only is TATA putting Americans out of work, but in an ironic twist
they are even managing their unemployment checks. As an example, the
New Mexico unemployment insurance department recently paid Tata $6
million for an online unemployment-claims system.

Just in case those unemployed techies get arrested while stealing some
bread for their starving kids, they might be thrown into a jail managed
by TATA. Pennsylvania, for example, uses TATA for a project with the
Department of Corrections that sends data electronically from county
jails to state prisons. TCS underbid under the $400,000 project budget,
while other firms bid at least $200,000 over budget, says Andy Keyser,
former CIO of the Corrections

With tax free H-1Bs and L-1s, and sweatshops in India, TCS consistently
outbids companies for government projects. If this trend continues TATA
might one day provide cradle to GRAVE service for Americans (note the
emphasis on grave!).

http://www.informationweek.com/story/IWK20030316S0003

Foreign Policy

Should government pursue offshore outsourcing if it means U.S. jobs?

By Mary Hayes And Eric Chabrow, InformationWeek
Mar 17, 2003 (12:00 AM)
URL: http://www.informationweek.com/story/IWK20030316S0003

Sen. Hillary Rodham Clinton, D-N.Y., led a welcoming ceremony in
Buffalo, N.Y., last week for the new local office of Tata Consultancy
Services, an IT services firm based in India that competes with U.S.
companies. Meanwhile, 400 miles across the state in New York City,
council member Gale Brewer introduced Resolution 2126, calling for
businesses and government agencies to "Buy NY"--that is, strongly
consider local technology vendors and developers for IT work.

Council member Brewer sees a "simplistic emphasis" on offshore
outsourcing's benefits.

The juxtaposition exemplifies the growing divide over offshore
outsourcing. While the U.S. IT workforce is shrinking--joblessness
among IT workers was 5.6% in December, according to the Bureau of Labor
Statistics--the offshore IT services business has never been stronger,
as companies flock to foreign firms that offer high-quality work at
substantially lower costs than in the United States. In part that's
because they pay workers lower salaries, in some cases one-quarter or
less of what a comparably qualified U.S. worker would command. For
private business, the equation is just too compelling to pass up.

Now offshore outsourcing is poised to grow in the public sector, as
foreign services firms target what they see as a growth market of
cash-strapped state and local governments looking to cut costs. It's a
dilemma-in-the-making for government agencies: save taxpayers money or
protect U.S. jobs.

"States need to look at [their] best value in procurement," says John
Engler, former governor of Michigan and now VP of state and local
government business for EDS, which has its own offshore practice.

In New Mexico, the unemployment insurance department recently paid Tata
Consultancy Services $6 million for an online unemployment-claims
system. The state "did get some criticism" for the contract, says
unemployment insurance director Arthur Martinez. "But we're spending
taxpayer money, and we're being asked to run government like a
business. We're making a proper business decision, rather than one from
the heart."

Price was a factor: TCS's bid was less than half of TRW's ($18 million)
or IBM's ($13 million). And so was TCS's commitment to quality,
Martinez says, noting that the firm's Indian development centers are
certified at the highest level--level five--of Carnegie Mellon
University's Capability Maturity Model, a standard for ensuring quality
software development.

The project involved a team of 25 TCS employees working in Albuquerque
and 80 in India to build a multitiered architecture that includes Sun
Microsystems' Java 2 Enterprise Edition platform and IBM's DB2
database. Martinez says TCS paid its local employees the same as what
its workers in India make, plus a $2,000 monthly living expense. The
state had budgeted about $12 million for the project, with $7 million
coming from federal Department of Labor grants.

TCS is shopping the unemployment-claims system to other states, most
recently Indiana, says Arup Gupta, president of TCS America. He says
TCS, which is close to $1 billion in annual revenue, will earn more
than $15 million from state government work for its fiscal year ending
March 31, out of $850 million in projected U.S. revenue. TCS's U.S.
business is growing 30% annually, and Gupta sees a "huge opportunity
for growth" in government, primarily at the state and local levels.
It's more difficult to win federal contracts, he says, because of
existing relationships and the long approval processes.

TCS's price was so good that Keyser, then CIO of Pennsylvania's
Corrections Department, couldn't pass it up.

TCS's relationship with Pennsylvania has grown from one project with
the Department of Corrections three years ago to 40 IT projects with 10
state agencies. For its first job, a system that sends data
electronically from county jails to state prisons, TCS bid well under
the $400,000 project budget, while other firms bid at least $200,000
over budget, says Andy Keyser, former CIO of the Corrections Department
who last month joined TCS as head of business development for
government contracts. "I really didn't have a choice," he says. "If I
wanted to get the project done, I had to take a chance with them."

Proponents argue that big companies like TCS bring jobs to the United
States. The typical TCS model, in terms of development work, is to send
about 70% of the work offshore, while 30%--infrastructure building and
planning--is done in the United States, Gupta says. Among those working
in the United States on a project, more than half are typically Indians
on work visas. "We're taking in as many local U.S. citizens and
permanent residents as possible," he says. "It can't be 100%, because
all the investments we've made in the last 30 years are ingrained in
the people in TCS in India."

Critics decry the "simplistic emphasis" on offshore outsourcing, "where
buyers in the private sector and government are often urged to 'look
overseas first' when procuring vendors for a technology project,"
according to Brewer's resolution. "I'm not saying the [offshore]
companies aren't doing a good job," says Bruce Bernstein, president of
the New York Software Industry Association. "But American companies are
and can be competitive."

Bernstein's organization, which represents more than 600 New York-area
vendors and developers, conceived the Buy NY campaign to try to recover
some of the IT jobs lost in New York after the dot-com crash and the
terrorist attacks. Bernstein maintains there are hidden costs
associated with offshore outsourcing, mainly having to do with
project-management problems. Many offshore services firms, including
TCS, have opened U.S. offices for that reason. Indian firms' fees have
been rising, says Michael Doane, an analyst with Meta Group, because of
increased demand and the sophistication of their offerings. That's
driving some buyers to explore other offshore operations, in places
such as China.

There has also been pushback at home. New Jersey's state Senate in
January approved a bill that forbids state agencies from sending
services work--IT work included--offshore. An Assembly version of the
bill is pending.

Jason Epstein, a lawyer with Baker, Donelson, Bearman & Caldwell who
specializes in IT outsourcing, says offshore companies can help
themselves by showing commitment to communities. TCS has 50 offices in
the United States, including two in New York City. Its Buffalo office
will serve as headquarters for its local and state government work. TCS
signed a memorandum of understanding with the University at Buffalo
last week to share technology research in bioinformatics that the
company says will lead to recruitment and job creation in Buffalo.

Government agencies, applying the lessons of business, appreciate the
offshore-outsourcing equation. The challenge will be weighing that
against the needs of their constituents--and the potential political
fallout.--with David M. Ewalt, Paul McDougall, and John Soat

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