13 Outsourcing Stories
13 Outsourcing Stories
Date: Sunday, May 18, 2003 1:14 PM
JOB DESTRUCTION NEWSLETTER
www.ZaZona.com
I'm consistently seeing more outsourcing stories concerning India than
China and the ones on this newsletter are no exception. India isn't
even in the Top Ten countries in which we are running a trade deficit.
So why is China be #1 and yet more stories focus on India?
India seems to be more open about their business dealings than China so
we may have an unbalanced view of which country poses the largest
threat to American workers. China is beating India to our jobs so don't
let the outsourcing stories below fool you.
http://www.census.gov/foreign-trade/top/dst/current/deficit.html
Year To Date
Deficit in Deficit in
Millions Millions
Country Name of U.S. $ of U.S. $
CHINA -7,669.59 -24,670.34
JAPAN -5,830.56 -16,366.69
CANADA -5,204.96 -14,490.72
MEXICO -3,924.20 -10,841.40
FEDERAL REPUBLIC OF GERMANY -3,374.62 -8,563.44
ITALY -1,427.97 -3,562.60
IRELAND -1,370.48 -4,108.45
SAUDI ARABIA -1,302.02 -3,584.17
VENEZUELA -1,272.61 -2,079.62
TAIWAN -1,152.18 -3,563.05
Story 1:
http://www.nytimes.com/2003/05/11/international/asia/11INDI.html?ei=5065&en=47a6871e4b0d832f&ex=1053316800&partner=MYWAY&pagewanted
More 'Can I Help You?' Jobs Migrate From U.S. to India
Story 2:
http://www.tradealert.org/view_art.asp?Prod_ID=831
DoD's Transformation Plan: How to Dismember the Winning Team
Story 3:
http://www.rediff.com/money/2003/mar/11bpo.htm
Vivek Paul brushes aside America's BPO rumpus
Story 4:
http://www.zdnetindia.com/news/national/stories/366,81488.html
Texas Instruments bets big on R&D in India, to invest $100 million
Story 5:
http://www.siliconindia.com/tech/tech_pgtwo.asp?newsno=19452&newscat=Technology
Animation adds to India's outsourcing prospects
Story 6:
http://www.globaloutsourcing.org/News/ReadNews.asp?NewsID=216
No stopping for Indian outsourcing
Story 7:
http://www.fortune.com/fortune/fastforward/0,15704,450755,00.html
The Net Makes It All Easier--Including Exporting U.S. Jobs
In the age of the Internet, a company's location hardly matters.
Story 8:
http://www.computerworld.com/managementtopics/management/outsourcing/story/0,10801,80440,00.html
The Best of Both Shores
Story 9:
http://www.caledonianrecord.com/pages/local_news/story/828e19da0
Looking To China: Wire Company Eyes Expansion
Story 10:
http://www.washingtonpost.com/wp-dyn/articles/A52698-2003May14.html
Microsoft Call Center Firm to Lay Off 350 while increasing its
Hyderabad staff
Story 11:
http://infotech.indiatimes.com/cms.dll/html/uncomp/articleshow?msid=46347609
Microsoft India scripts mega expansion plan
Story 12:
http://infotech.indiatimes.com/cms.dll/html/uncomp/articleshow?msid=45168633
Sykes to treble staff in India
Story 13:
http://infotech.indiatimes.com/cms.dll/html/uncomp/articleshow?msid=46251807
Intel to invest $41 mn in India; hire 1,000
http://www.nytimes.com/2003/05/11/international/asia/11INDI.html?ei=5065&en=47a6871e4b0d832f&ex=1053316800&partner=MYWAY&pagewanted
May 11, 2003
More 'Can I Help You?' Jobs Migrate From U.S. to India
By AMY WALDMAN
OMBAY In the early morning hours of May 1, American welfare recipients
reached for their phones, dialing toll-free to check on their next
infusion of funds.
On a steamy Indian late afternoon in her air-conditioned cubicle here,
Manisha Martin was waiting for them.
Without a break, the display panel on her phone lit up. Kansas calling.
Arizona. Alabama. Tennessee.
"Hi, this is Megan," she said to each caller. "How can I help you?"
In mostly southern drawls she had once struggled to understand, they
asked about the balances on their electronic benefit cards, which work
much like those used at A.T.M.'s. "Your food stamp balance is 48
cents," she told one caller.
She activated new cards, or told callers to speak to their caseworker.
If they unleashed angry tirades, she tried to understand. When young
single mothers cried, she listened.
Her accent, pleasant and neutral, was hard to place. When callers asked
her location, she demurred. If they knew where she was, said Ms.
Martin, 27, "they would drop off their seat."
Some New Jersey officials say they just about did that when they
learned that a contractor had arranged for Bombay operators to handle
calls from the state's welfare recipients. County welfare directors
complained. A state legislator, Shirley Turner, proposed a bill
requiring that workers hired under state contracts be American citizens
or legal aliens, or fill a specialty niche Americans could not,
prompting at least four other states to consider similar bills.
Much as the exodus of manufacturing jobs abroad did in decades past,
sending service or knowledge-intensive jobs to countries like India is
causing fears of displacement in the United States and elsewhere.
A study by Forrester Research of Cambridge, Mass., estimated that this
type of labor migration, generally referred to as outsourcing if
contracted to another company, or offshoring if run by a company
itself, could send 3.3 million American jobs overseas by 2015. India,
with its large pool of English-speakers and more than two million
college graduates every year, is expected to get 70 percent of them.
American companies say a weak economy is pushing them to find new ways
to cut costs. American workers say the same economy is the reason they
need the jobs to stay home.
"There is a feeling of unease," said Kiran Karnik, the president of
India's National Association of Software and Service Companies. "Unless
the U.S. economy picks up there's going to be a continuing issue about
job loss, and also migration."
Ultimately, Ms. Martin's company, the eFunds Corporation, based in
Scottsdale, Ariz., reached an agreement with New Jersey's Department of
Human Services to move the work to the state. It created 12 jobs in New
Jersey at an additional cost to the state of $1.2 million until the
contract ends in August 2004.
"For us it was about the consistency of the message," said Andy
Williams, a department spokesman. The department is telling welfare
recipients that they have to work or try to, he noted, "so to have a
contract where you're exporting service-sector jobs it just seemed we
were working against our clients' interests."
But few corporations will make similar accommodations. "Even though the
government of New Jersey doesn't want to manage costs, companies do,"
observed Pradeep Saxena, the president of eFunds International.
American companies are using Indian labor often working around the
clock to do research and development, prepare tax returns, evaluate
health insurance claims, transcribe doctors' medical notes, analyze
financial data, dun for overdue bills, read CAT scans, create
presentations for Manhattan investment banks and much more.
Seeking both to increase senior analysts' productivity and to lower
costs, J. P. Morgan Chase & Company is planning to hire 40 junior
analysts and support staff in Bombay to set up an equity research
department there. It also plans to increase the several hundred
employees doing back-office work at its Technopolis office park in
Bombay to 1,100 by the end of the year.
Delta Air Lines has contracted two Indian companies to handle some of
its customer reservations, the first airline to make such an
arrangement. "The main reason is to save us money," $12 million over
the next two years, said Catherine Stengel, a spokeswoman for the
airline, although she added that allowing Indians to handle simpler
reservations would also free American agents for more complex calls.
The move had not prompted any layoffs, she added, although a company
news release announcing the arrangement said it would not affect
domestic employment "at this time."
The Bombay operations of eFunds include selling thousands of products
to American infomercial viewers, back-office work for a British telecom
company, and providing customers' bounced-check records to American
retailers. It provides customer service help to welfare and food-stamp
recipients in 19 American states, using agents who said Dinesh Bhatia,
the head of eFunds sales in India "are trained in empathy."
Ms. Martin and others like her earn just over $200 a month, less than
the American welfare recipients receive but well over the $500 per
capita annual income in India. For more challenging jobs, the savings
to the American companies are even greater.
Despite the New Jersey bill, the threat is less legal than political.
"You can't really outlaw outsourcing," said Jagdish N. Bhagwati, a
professor of economics and political science at Columbia University.
"Outsourcing is just trade."
But American unions, particularly the Communications Workers of
America, have begun a campaign against the practice. When high-tech
offshoring began, said Marcus Courtney, the president of the Washington
Alliance of Technology Workers, he and others thought it would be
confined to technical support. "People never imagined you would
literally be able to export the entire production process overseas," he
said.
Similar protests have come from the Communication Workers Union in
Britain against the British Telecom Group's deal with an Indian
software technology company.
At the same time, in the face of rising unemployment in the West,
resistance has also grown to importing high-tech professionals from
India. In the short term, that may actually prompt moving more work to
India to reduce public resentment.
But over time, Professor Bhagwati predicts, visa restrictions may
actually loosen as countries decide it is preferable to have foreigners
come in to work rather than see jobs migrate abroad. Either way, the
movement of work and labor in both directions is likely to continue.
"We don't see the competitive pressures declining, so the notion of
being able to cut costs and get quality is only going to grow," said
Vivek Paul, the chief executive of the software company Wipro
Technologies.
Executives in India, which was long fearful of opening its economy, are
now lecturing Americans about the virtues of free trade and contending
that visa restrictions effectively constitute trade barriers. "If it
takes six months to process a visa, it's like making a fruit shipment
sit for six months," said Mr. Karnik of the National Association of
Software and Service Companies.
But in the end, the most effective pressure will come from the
companies that benefit.
Doing a tax return in India brings savings as high as 50 percent, said
Kishore H. Mirchandani, president of Outsource Partners International,
which has its headquarters in New York but had about 10,000 American
tax returns prepared in Bangalore, India, this year.
To ease security concerns, he said, the Indian accountants have no
e-mail, Internet or printer access, or even pens and papers at their
work stations to prevent copying data.
More American companies, like American Express, are setting up their
own processing centers in India. Some are finding that with lower labor
costs they can afford to chase smaller outstanding payments.
The presence of these American operations here is driving salaries up.
Still, attrition remains far lower in India than in the United States,
where the jobs, aspirational here, are often seen as dead-end.
EFunds' call centers are in a new suburban development called Mind
Space that houses only "knowledge intensive" companies. It is already
home to eight call centers, with more on the way. Chattering young
people are everywhere.
In an eFunds classroom, eager new employees learn to pronounce both R's
in Mastercard, what a frat party is, what a Wal-Mart looks like
preparation for interacting with far-flung customers. On the board, the
instructor has written, with the second syllable underlined:
A-me-ri-ca.
http://www.tradealert.org/view_art.asp?Prod_ID=831
DoD's Transformation Plan: How to Dismember the Winning Team
By William R. Hawkins
Friday, May 09, 2003
After the 1991 Gulf War, many victorious American military units came
home to be demobilized. The armed forces were cut by 40 percent in the
1990s on the mistaken belief that the world had become a more peaceful,
harmonious place.
The same error may be made again, this time cutting even deeper into
the defense industrial base -- whose skills and innovation created the
shock and awe weapons that brought such quick victory in the Iraq War.
The threat comes not from anti-war groups or Congressional liberals, as
one might expect, but from civilian reformers in the Pentagon itself --
with the backing of certain corporate interests -- in the form of The
Defense Transformation for the 21st Century Act, a large document that
covers a myriad of subjects and that does contain many useful ideas
about how to better manage the Department of Defense. Unfortunately, it
also contains changes in current law which would allow widespread
waivers of domestic source and content requirements and of Abuy
American@ provisions. Such waivers would allow foreign defense firms --
many owned by foreign governments at odds with current U.S. policy
around the world, to replace American firms in the supplying of
equipment and technology to America's armed forces.
Several arguments have been put forth against the common wisdom that
the national security of the United States is too important to be
trusted to foreign interests. All of these reform arguments fall apart
upon careful examination.
The first is that the increased interdependence of U.S. and foreign
defense firms would increase the interoperability of Allied forces. It
has been well known since the Gulf War that a gap in capabilities has
opened between what U.S. forces can do and what its NATO allies in
Europe are able to do. This gap has widened even more, as American
forces have continued to improve their weapons and tactics, as shown in
Iraq, while Europe continues to stand still.
European militaries are not challenged by the same missions as the
American military. They face no imperative to improve their power
projection capability, to strengthen their standoff precision-strike
systems, to network their forces, or enhance their joint-warfare
capability because they do not intend to operate against rogue states
or emerging powers in distant parts of the world. They invest little in
new technology at a time of declining defense budgets. The only
practical way for European states to improve their ability to work with
American forces is to adopt the more advanced American systems.
At the cutting edge of military technology, U.S. defense contractors
and information technology firms are more competitive than their
European counterparts. Indeed, armaments and information technology are
two of America's best export industries. With greater market shares at
home and worldwide, their costs are generally lower than those of
European competitors. So there is next to nothing to be gained in new
capability from opening defense contracting to foreign firms.
This does not mean that there may not be a particular gadget that is
developed first overseas, as America does not have a monopoly on
genius. But that contingency can be handled as in the past. The
enormous leverage of the U.S. defense market can be used to induce a
foreign firm to license a new device to an American firm for production
in the United States.
What is driving the reform movement is the desire to buy more standard
components from overseas as a lower price; not to build better weapons,
just cheaper weapons. Despite the events of the last two years, the
Bush Administration still wants to hold down defense spending while it
pursues a program of radical tax cutting. Buying foreign defense
products is one way to do that, but it is a very short-sighted, penny
wise, pound foolish program.
The defense industry is a dynamic system and its integrity and future
growth should not be risked by farming pieces out to overseas
suppliers. This is true even if major American defense firms are
supportive of the reforms, as, indeed, some of them are. These
corporations are open to the same temptations as other business firms
which have been outsourcing production and jobs to cut costs and raise
profits. One of the largest U.S. defense contractors is Boeing
Aircraft, which has laid off thousands of its American workers as it
has moved production for major pieces of its commercial aircraft
business overseas -- some of it to China, a potential military
adversary.
But the defense industry is not like other lines of business. It is not
just selling shoes or DVD players which can be replaced easily at any
retail outlet without any noticeable impact on the world balance of
power or the security of the country.
The United States cannot afford to let happen to the defense industry
what has happened to other industries that have gone down the
outsourcing route. Globalizing, transnational corporations have had
their American operations "hollowed out" to where they can no longer
function independently of their foreign connections.
One last reform argument deserves mention as the most ludicrous of all.
Joel Johnson, a vice president at the Aerospace Industries Association,
told Defense News that the United States "runs a major trade surplus in
defense products, about six to one with Europe and about 10 to one with
the rest of the world," and that "it is hard to explain to customers
[outside the United States] why they should buy planes from us, but we
can't buy bits and pieces [of equipment] from them." But it apparently
isn't that hard, if a major defense trade surplus has been run up under
the current rules. Reform will not improve this record. Indeed, Johnson
expects reform to reduce the U.S. surplus, as it surely will.
But if the system is not broken, and it clearly is not given the
superiority of American weapons and the country's defense trade
surplus, why does it need "transformation?" The answer is, of course,
it doesn't.
http://www.rediff.com/money/2003/mar/11bpo.htm
Vivek Paul brushes aside America's BPO rumpus
Subir Roy in Bangalore | | March 11, 2003 | 12:50 IST
Wipro seems totally unfazed by the growing reaction in the west to
business process outsourcing to India and feels confident of coming out
on top.
Vivek Paul, Wipro vice chairman and head of Wipro Technologies, who
spoke up on the issue before it publicly boiled over, says ultimately
things will work their way out.
"This is no different from the manufacturing globalisation two decades
ago. Eventually what's going to happen is inevitable.
"Globalisation of services will happen, companies like Wipro will do
well. It is up to us to figure out how we get the right message out to
the press there (the west) so that they focus more on the implication
and what to do with it rather than whether it is good or bad or not."
For the right outcome, he said, lobbying will be necessary on Capitol
Hill and Nasscom is handling that well.
But most crucially, Paul is confident that "the chances of US
government regulation blocking our industry are slim."
He is also upbeat on the issue of H1B visas whose annual quota is
currently slated to go down sharply later this year.
"The expectation is that there will be a bump up (from the current low
figure for next year). I think you will see some number higher than
that. But frankly, with only 24 per cent of our workforce not working
in India, that liability is reasonably low."
His confidence stems from the fact that if customers found there
weren't enough H1B visas available, a lot of them who are taking it
easy by having more on-site population, may actually be pushed towards
more offshoring, "which is better for us."
His cardinal logic is, "The US industry needs their H1B visas to go up.
It is not just our need, it is also the need of our customers, US
companies."
BPO means a lot for Wipro right now. Volumes in IT services are going
up but that's about it.
On the other hand, "BPO is a growth area for us. We are seeing a lot of
interest and have been able to do both service line expansion in terms
of new service lines that we've offered as well as a very healthy cross
penetration of business process to our existing IT customer base. But
it is too early to call successes.
"New accounts keep coming in. We continue to see a healthy trend both
in terms of adding new services as well as penetrating existing
accounts and gaining new accounts."
For Wipro, which is also a technology company, "in terms of aggregate
technology spending, 2003 will be a very challenging year. The good
news is that a company like Wipro is sheltered because we are taking
over existing spends. But everything is about how to make things more
productive. The current killer application is optimisation."
http://www.zdnetindia.com/news/national/stories/366,81488.html
Texas Instruments bets big on R&D in India, to invest $100 million
US-based $8.5-billion Texas Instruments, a semiconductor solutions
provider, is in the process of expanding its research and development
work in chip designing and related work out of India.
Prachi Verma, May 12, 2003
US-based $8.5-billion Texas Instruments, a semiconductor solutions
provider, is in the process of expanding its research and development
work in chip designing and related work out of India. Towards this end,
the company plans to make an estimated investment of close to $100
million in the next 12 months.
Further, the company is also evaluating the possibility of enabling
local manufacturing in the wireless and broadband arena along with
cellular handset providers, wireless card and solutions providers in
another year or two. In this partnership, TI intends to train the
companies in chip designing as well as provide solutions on chip
designing.
"Texas India has the competency to combine solutions especially in chip
designing like complex system on chips that includes a mix of digital,
analogue and radio frequency chip. We are planning to exploit this
potential of the workforce in the country," Texas Instruments (TI)
managing director Biswadip Mitra told.
When asked about the investments planned for India, Mitra said that the
company will be investing close to $100 million in the country within
the next 12 months. The company is also exploring the possibility of
developing phone-on-a-chip in India by 2004.
The company already has a centre in Bangalore involved in chip
designing with over 600 software engineers. This centre is one of the
largest R&D centres outside the US. Since early 2001, TI India has
actively promoted TI's third party program and now has over 40 Indian
partners working under this program. The program enables local
companies to reach out to international customers through TI marketing
channels.
Apart from investing in chip designing, the company is also planning to
invest in EDA tools, testers and infrastructure in the country.
"There is a huge talent gap in the country and in order to bridge the
gap between the demand and supply for VLSI (very large scale
integration) circuit experts, we are planning to introduce specialised
masters' programme on VLSI by 2004," Mitra said.
The company is planning to co-develop this programme along with 15
universities in the country.
The Indian arm clocked sales of $10 million in the last year ending
December 2003, according to Mitra.
In 1985, Texas Instruments started its operations in India and later
set up the system-on-chip centre of excellence in Bangalore. The
initial activity of TI India was the development and support of
proprietary electronic design automation software systems used for
integrated circuit (IC) design by TI's semiconductor design centres
worldwide. This activity included the development of applications for
creating, simulating, testing and verifying both logical and physical
IC manufacturing processes.
The mixed signal IC design centre lead to the setting up of a design
centre for application specific products in 1990, according to its
website.
TI India also opened a centre for design for 3G wireless chipsets and a
centre for developing wireless LAN (WLAN) chipsets. The company has
already developed 225 intellectual property rights (IPRs) out of its
centre in Bangalore on audio, video, circuit design and application
specific integrated circuit (ASIC) solutions development.
http://www.siliconindia.com/tech/tech_pgtwo.asp?newsno=19452&newscat=Technology
Animation adds to India's outsourcing prospects
IANS
Monday, May 12, 2003
After carving out a niche in the global technology outsourcing market,
India is fast going up the animation-outsourcing ladder by capitalising
on its vast pool of low-cost skilled professionals.
NEW DELHI: India is a recent entrant in the global animation scene but
demand for its production services is growing at a fast pace.
And with local animation design studios gradually establishing their
credentials overseas and building their skill sets in this high
potential global market, animation production outsourcing to India in
poised to boom, believe experts.
"We have all of the right ingredients to become a worldwide powerhouse
in animation outsourcing business," said P. Jaykumar, director
(operations) of Kerala-based Toonz Animation India.
"Indian animation companies have the raw talent, ingenuity, cultural
heritage, language, low labour rates and entrepreneurial spirit. We
have the cost and language advantage over numerous other competing
countries," Jaykumar told IANS.
"If Indian studios continue to improve the quality of their work and if
they manage their businesses well, animation will become a major
industry in India."
Set up with an investment of $7 million in 1999, Toonz Animation has
emerged as one of the leading players in the nascent Indian animation
market.
Besides focusing on developing its own cartoon animation, skits,
serials and full-length feature films for the export market, Toonz also
has a co-production deal with Britain-based Tree House Production for a
fun animation series.
Toonz Animation is also working on a 26-episode animation show "Tenali
Raman", named after the brilliant 16th century court jester of southern
India, for Cartoon Network television channel.
Said Jaykumar: "India offers the lowest production costs for animation
in the world. The overseas companies are also choosing India for
outsourcing animation production because of its rich heritage of epic
myths and legends."
According to an animation industry study report, Indian animation
production costs are the lowest, as compared to production rates in the
U.S., Canada, South Korea and the Philippines - the major global
centres for animation production.
While the rates for production of a half-hour television animation
programme would be around $250,000-400,000 in the U.S. and Canada, it
is in the region of $60,000 in India, the report says.
The total animation production by Indian companies is expected to rise
from $600 million in 2001 to $1.5 billion by 2005, while the total
global animation production would touch $51.7 billion.
"Indian animation producers are barely skimming the tip of the global
animation production services iceberg," says a study report of the
National Association of Software and Service Companies (Nasscom).
"A vast unexplored potential still exists that can be tapped by Indian
players."
The animation market in India today is characterised by the presence of
multiple players including Crest Communications, UTV Toons, Pentamedia
Graphics, Padmalaya Telefilms, Moving Pictures and Toonz Animation.
The animation studios are catering to the requirements of segments such
as feature films, television programmes, advertisements and computer
games.
Currently, Indian animation players are predominantly catering to the
needs of overseas television programme production companies with a
relatively low penetration in areas such as feature film production and
gaming.
"Trends in the global animation market shows increasingly companies are
outsourcing their requirements to markets such as Asia Pacific," said
Alice Manuel, head (production) of Escotoonz, an arm of New Delhi-based
industrial group Escorts.
"Animation studios in this region not only offer services at lower
costs on account of availability of low cost computer animation
platforms and lower rates of professionals, they also boast a vast
manpower base skilled in animation."
Manuel said outsourcing is also happening because studios are coming up
in developing markets that offer world-class infrastructure and quality
processes to produce animation work that's delivered on time and within
estimated cost.
Equipped with the largest animation studio in north India, Escotoonz
has been largely providing animation for a number of advertisement
campaigns and documentary films since setting up shop in July 2001.
The company is currently working on a 26-episode animation serial
"King" in a co-production agreement with Canadian animation firms
Decode and Funbags. "King" is the first overseas major animation
project that Escotoonz has bagged.
India is, however, up against substantial competition from countries
within the Asia Pacific region such as the Philippines, Taiwan and
South Korea that have been active in the animation production market
for a longer period.
http://www.globaloutsourcing.org/News/ReadNews.asp?NewsID=216
No stopping for Indian outsourcing
3/6/2003
CIOL
BANGALORE: Even as reports erupt about US states voicing against
outsourcing, the industry is shrugging off the protest as a minor
aberration and is focussing on business as usual. It is learnt that
Nasscom and CII may come into the picture to do the rescue act. They
are planning to hold talks with their US counterparts and try solving
this issue.
As per industry resources, Nasscom is doing its bit by making contact
with legislators and constitution makes and making them understand the
core issue. It has also appointed a public affairs and PR firm, Hill &
Knowlton for a Global Awareness Program both in the US and Europe. It
is associating itself with an apex industry body, ITAA for addressing
the people that outsourcing does not mean exporting jobs.
vMokshas Chairman and a CII member, Pawan Kumar suggested that a
campaign should be held to create awareness among the people concerned
about the outsourcing issue.
http://www.fortune.com/fortune/fastforward/0,15704,450755,00.html
TECH@WORK
The Net Makes It All Easier--Including Exporting U.S. Jobs
In the age of the Internet, a company's location hardly matters.
FORTUNE
Monday, May 12, 2003
By David Kirkpatrick
Where is work most efficiently done? It's a logical question, but one
that business never had the luxury to ask: Work was done where the
company was. Then, as travel and communication got easier in the 1950s
and 1960s, manufacturing started moving to wherever costs were lowest.
Today, with the rise of what's called business process outsourcing
(BPO), the same thing is happening to office and white-collar work. In
the age of the Internet, a company's location hardly matters. That's
starting to make labor little more than a commodity.
It's a scary thought for many of us, but for businesses this new
hyperflexibility may be the most fundamental--and positive--change yet
wrought by the Information Age. Companies now can send office work
anywhere, and increasingly that means places like India and the
Philippines, where for $1.50 to $2 per hour companies can hire college
graduates to do jobs that could go for $12 to $18 in the U.S. Says
Damon Jones, a spokesman for Procter & Gamble: "Your expense report
doesn't have to be processed by someone down the hall. They can be in
another country as long as you both have access to the same computer
network." P&G says it has saved $1 billion since 1999 by concentrating
back-office work in Costa Rica, the Philippines, and Britain.
BPO doesn't just save money; it generally results in better work. It
attracts the top people in the new countries, since the jobs tend to
pay more than most local positions. Turnover is low, and people work
hard to improve their skills. "The shock has been that the quality of
the work's better," says Dennis McGuire, CEO of TPI, an outsourcing
consulting firm in Houston. "It reminds me of back when we assumed that
if something was made in Japan, it was worse quality. We were wrong."
Experts say that even after factoring in transitional and management
expenses, most companies can cut net costs of a given process 30% to
50%. Says Gail Fosler, chief economist for the Conference Board: "This
phenomenon will be a very important force for getting profit to the
bottom line."
BPO has its roots in IT outsourcing, which IBM, EDS, and others have
been doing for more than a decade. The pace of the dot-com boom years,
coupled with pressures surrounding Y2K, forced many CIOs to ship coding
jobs to places like India or Bulgaria. Now, in a time of wrenching
pressure to cut costs, nonmenial, nontech jobs are moving too. Ernst &
Young uses accountants in India and the Philippines for tax work, and a
number of Wall Street firms are considering using offshore researchers
to analyze stocks. Wipro, a major Indian outsourcing firm, has people
doing not only customer-service work but benefits administration,
credit card and insurance claims processing, and CAT-scan reading for
U.S. clients. Atul Vashistha, whose neoIT firm in San Ramon, Calif.,
advises on offshore outsourcing, says a client is negotiating to move
1,000 U.S. product-support jobs. Another recently signed a five-year,
$40 million deal to do employee-services work in India.
Outsourcing can enable companies to do things they simply couldn't do
before. Wipro CEO Vivek Paul offers as an example a consumer products
company that had previously found it impractical to chase down tardy
customers buying less than $1,000 worth of goods. With the process run
in India, the cost dropped so much the company can now profitably
follow up on bills as low as $100.
Which company is this? Paul isn't saying--and no wonder. Most corporate
giants remain mum for fear of a political backlash. There are already
signs one is brewing. After a state contractor hired agents in Mumbai
(formerly known as Bombay) to handle telephone inquiries from welfare
clients, the New Jersey state senate last fall unanimously passed a
bill prohibiting such outsourcing for state contracts. The bill remains
in a state assembly committee. Says Lisa Ross of Ross Research in
Cambridge, Mass., which studies the outsourcing industry: "Offshoring
is not viewed as particularly patriotic."
Fosler of the Conference Board says the critics should relax. She
doesn't think that the trend will significantly hurt U.S. employment.
Forrester Research estimates that 3.3 million U.S. jobs will move
offshore by 2015. But Fosler points out that the U.S. services sector
loses about ten million jobs every year even as it creates another 12
million. "So a couple hundred thousand jobs a year going to India is a
drop in the bucket," she says. In addition, this new means of holding
down costs will combat inflation, benefiting consumers. And it will
help U.S. companies remain competitive in an increasingly brutal global
marketplace.
Vashistha, a U.S. citizen who was raised in India, sees another major
benefit in the offshoring trend--it helps spread wealth from rich
nations to poor ones. "When I walk through the streets of Manila or
Bangalore, it makes me proud to see the impact we're having," he says.
Among its many other virtues, the Internet may turn out to be the great
equalizer.
David Kirkpatrick is senior editor for Internet and technology.
http://www.computerworld.com/managementtopics/management/outsourcing/story/0,10801,80440,00.html
The Best of Both Shores
By JULIA KING
APRIL 21, 2003
Cost pressures top just about every company's list of reasons for
sending greater amounts of IT work offshore. IT labor rates in India,
the Philippines and elsewhere are as much as 70% lower than those in
the U.S. As such, they're simply too compelling to ignore, IT
executives say.
But equally compelling is the potential of losing control over foreign
technology workers and the quality of IT projects based thousands of
miles away.
Allstate Insurance Co., Avon Products Inc. and Global Exchange Services
Inc. (GXS) are among a small group of U.S.-based Fortune 500 companies
that have set up and staffed their own IT centers in lower-cost
countries like India, Ireland, India and Hungary to address the twin
issues of cost and control.
In this offshore-insourcing model, foreign IT workers aren't
contractors but employees of the U.S.-based companies. They receive the
same training, use the same software development tools and adhere to
the same business processes as their IT counterparts in the U.S. The
big difference is that they're paid a lot less. For example, for every
$100 that GXS spends on an IT employee in the U.S., it spends just $30
on an employee in Bangalore, India, where it employs 230 IT workers.
"Manila is even less expensiveperhaps 30% to 40% less than India,"
says Tasos Tsolakis, senior vice president of global technology at
Gaithersburg, Md.-based GXS.
By shifting about 70% of GXS's internal IT projects and 40% of its IT
work on customer-facing applications to offshore centers, Tsolakis
estimates that he has saved about $16 million a year for the past three
years. At the same time, he says, GXS has been able to ensure quality
and meet software delivery deadlines, because the offshore employees
and projects are managed using the same Six Sigma processes that the
company, a former business unit of General Electric Co., applies in the
U.S. Among large U.S. companies, GE is one of the best-known proponents
of Six Sigma quality-control processes.
Consistency Across Continents
"Clearly, the labor rate is the big driver [for hiring IT employees
abroad], but you need to treat them like your regular [U.S-based]
teams. Every development tool and testing tool I have here, my
resources in Bangalore have. It's critical that they feel a part of
your team. They're first-class citizens like everyone else is,"
Tsolakis says, adding, "That's how you can really create synergies and
optimize resources."
The company's 650 offshore IT employees work at Allstate-owned
facilities in Belfast and Londonderry in Northern Ireland. The centers
in those cities were set up in 1998 and 1999, respectively, as a result
of the IT labor shortage in the U.S. caused largely by a crush of Y2k
work and the then-thriving dot-com economy.
"We had an additional issue in that we had a large number of
contractors working for us here in Chicago and they were extremely
expensive. With the labor crunch and Y2k, we had a ratio of 50%
contractors who were constantly leaving for higher-paying jobs,"
recalls Mike Scardino, assistant vice president for finance at
Allstate.
Cost savings was one of the big advantages of hiring offshore
employees, and it remains so. Allstate spends about 75% less on
contractors now than it did prior to setting up in Northern Ireland,
Scardino says.
The company is also retaining critical business knowledge and
intellectual capital that used to walk out the door with departing IT
contractors. "In the insurance business, there's a tremendous amount of
business knowledge that goes with programmers. You can't just bring
somebody in who knows Cobol," Scardino says. "Now, the business
knowledge stays with the employees. That's a huge benefit and a big
driver in terms of our ability to maintain our existing applications
and to develop new ones, because they know what they're talking about."
More Than Maintenance Work
Both GXS and Allstate launched their offshore operations with the
intent of exporting primarily software maintenance work to foreign IT
employees. But that soon changed. GXS's IT employees in India, for
example, now work mainly on Web-based transaction management services
and other software tools that GXS offers to its 60,000 retail
customers. In Bangalore, staffers "don't want to do just support work,"
says Tsolakis. "You have to offer a continuous balance of work."
Mike Scardino, assistant vice president for finance at Allstate.
Scardino says Allstate's Irish employees work on everything from
software program maintenance to application development projects. "We
started with the idea that it would primarily be maintenance, but with
the skills and abilities of the workforce we hired, we're able to do
all different types of projects," he says. "As we speak, I'm expanding
beyond IT to call centers."
Keeping U.S.-based IT workers informed of the company's plans for
distributing various IT projects is a critical component of managing
onshore/offshore IT groups. "The U.S. teams ask, 'What's the future for
me, and why should I stay if you're moving work offshore?' " says
Tsolakis. "You need to give an overall direction and plan. It's
important to address this upfront. If you don't do that, you end up
losing some key resources that you don't want to lose."
Scardino and Tsolakis also agree that on-site management, preferably by
a local national, works best at offshore regional IT centers. GXS's
Bangalore facility is managed by an Indian woman who reports directly
to Tsolakis. "We have a whole infrastructure, including an HR person in
Bangalore helping with recruiting and a finance person. This is because
it's important to mesh the local culture with the U.S. culture," he
says.
For IT executives considering setting up and staffing an offshore IT
center, Scardino advises that they first make "sure the economics of
the local environment are sustainable, that there's talent, that
there's a quality workforce and that those things aren't going to
change." For all of these reasons, Northern Ireland was an ideal
location for Allstate, Scardino says.
"Part of the success of being in Northern Ireland is also because
people [in the U.S.] are willing and able to go there. Routinely, we
have people on the ground, and the people in Northern Ireland are over
here," he says. "There are travel costs, but relative to the economics,
on a cost-per-hour basis, the travel budget is less than $1 an hour
[per employee] when you spread it across all of our programs."
That's one more item IT executives must add to their list of
outsourcing considerations.
http://www.caledonianrecord.com/pages/local_news/story/828e19da0
Looking To China: Wire Company Eyes Expansion
For Now, NEEW Works Through TRolling Layoffs'
By ALEXANDER MacINNES, Staff Writer
LISBON, NH - Lisbon's largest employer has its eye on expanding
operations to China.
Squelching word of massive layoffs at the New England Electric Wire
Corp., chief executive Wendell Jesseman said the company is continuing
its rolling layoff strategy during this downturn in the
telecommunication industry. Right now the company is trying to balance
the demand of its product with its work force.
However, NEEW is looking to expand its reach to China in the next three
to five years if the economy improves.
A rolling layoff is asking an employee to take a certain amount of time
off and return to work after that specified period. At NEEW, some
employees are being asked to take a week off every month. Others, such
as office workers, are taking one of every eight weeks off.
Although this strategy has been ongoing for over a year, Jesseman said
Wednesday he is looking at China as a means to expand when the economy
turns upward. He described this expansion as an evolving process and
said the plan would increase jobs in Lisbon rather than cut them.
"I can envision it might increase employment (in Lisbon) 10 to 20
percent," Jesseman said of the Far East expansion process.
NEEW has 308 employees and was founded in 1898. The company
manufacturers specialized wires for the medical, telecommunications,
audio and general electricity industries.
Recently the company has expanded its space in town with the addition
of a 120,000-square-foot building, but that construction has been
coupled with a downturn in incoming orders resulting in a cut in the
work force. In 2000, the company's peak employment period, there were
440 workers.
Besides the rolling layoffs, the company has permanently laid off four
employees in the last eight weeks. Jesseman would not disclose from
which department those workers were cut.
"We're continuing to evaluate our work force requirements relative to
the existing workloads in all of our individual departments," Jesseman
said. "(The workload) of course varies in most respects relative to the
number of orders placed with us in a given time period."
Although there are no firm details on the expansion involving China,
Jesseman described two likely scenarios.
The first would be to initially set up a sales and marketing force to
reach some of their customers who have moved operations there. The
company would offer the same products being made in Lisbon. Jesseman
said NEEW would most likely join forces with a Chinese company rather
than build a manufacturing plant there.
The second scenario is a move to offer new products to their customers
around the world. The company manufactures specialized wiring cables
but in the future, Jesseman sees providing more standard, low-end
cables.
In this case, NEEW would outsource the manufacturing of these new
products from a firm in China. From there, they would be shipped to
Lisbon where the products would be inspected, repackaged and relabeled
before going on to the customer. In essence, the Lisbon plant would act
as a passing-through facility.
"We've talked about this for over a year now and we really started to
move aggressively in that manner in the last two months," Jesseman
said.
The chief executive stressed that this new strategy may take up to five
years to implement and that right now the company is weathering the
economic storm.
The Caledonian-Record is a daily newspaper serving Northern Vermont and
Northern New Hampshire. Visit our website updated daily at
www.caledonianrecord.com
http://www.washingtonpost.com/wp-dyn/articles/A52698-2003May14.html
Microsoft Call Center Firm to Lay Off 350
By JOHN K. WILEY
The Associated Press
Wednesday, May 14, 2003; 12:47 AM
LIBERTY LAKE, Wash. - A company that provides telephone technical
support for Microsoft Corp. plans to lay off 350 workers by the end of
September as the software giant ends a contract.
Software Spectrum has provided a call center for Microsoft since 1998,
said Alison Eldred, Software Spectrum's human resource director.
Software Spectrum is a subsidiary of Level 3 Communications, a software
services company based in Garland, Texas.
Microsoft spokeswoman Stacy Drake said Tuesday the move is part of the
software giant's international expansion.
The Washington Alliance of Technology Workers, which represents more
than 250 workers at 15 technology companies, criticized Microsoft's
move as part of a strategy to move U.S. jobs offshore, particularly to
India.
Microsoft has a software development center in Hyderabad, India, where
it employs about 150 software engineers. Microsoft has said it would
invest $400 million in India in the next three years, including
increasing its Hyderabad staff to 500 by 2005.
Drake said the company is not replacing U.S. jobs or laying off workers
as a result of overseas expansion.
But the company will continue to add jobs overseas as it expands sales
there, she said.
Laid-off employees will be given severance pay and bonuses for staying
through the transition period, as well as help in finding new jobs,
Eldred said.
http://infotech.indiatimes.com/cms.dll/html/uncomp/articleshow?msid=46347609
Microsoft India scripts mega expansion plan
TIMES NEWS NETWORK[ WEDNESDAY, MAY 14, 2003 11:18:43 AM ]
NEW DELHI: Microsoft has chalked out a string of ambitious plans for
its India operations. The software giant will offshore internal
software development to Hyderabad and start providing support for its
products and services on a global basis from Bangalore.
Having earmarked about Rs 2,000 crore (its largest investment outside
US, excluding manufacturing activities) in three years, Microsoft has
already spend over $50 million in the country in last 6 months. We
have already invested more than $50 million and are on track with our
investment plans announced earlier, says Mr Rajiv Kaul, managing
director, Microsoft (India).
Already in an expansion mode at its India development centre, Microsoft
is setting up the two new facilities.
It plans to hire about 150 software developers and have about 200-250
partner people in the next 12 months. Microsoft already has about 30-35
people on board. The IT applications to be primarily developed for
in-house use, are also sometimes showcased to the customers. The
expansion plans would depend on the success of the pilot project.
Internal IT applications team has about 1,500 people worldwide.
Microsoft will also start providing product support and services from
Bangalore on a global basis. It will begin with a pilot project for
hi-end products, employing about 100 people in the next 12 months.
At the same time, the Redmond giant plans to more than double its
manpower in India, thus raising the headcount to 500 in three years
from about 200 at present. It also plans to have a campus of its own
for the development centre.
The company has also rolled out an ambitious computer literacy
programme, called Shiksha and will kick off the project with
Uttaranchal and Kerela governments in the initial round. The company
will set up one academic laboratory each in Dehradun (Uttaranchal) and
Thiruvanantapuram or Cochin (Kerala).
The project aims to cover 80,000 school teachers and 3.5 million
students over the next five years.
Microsoft chairman and chief software architect Bill Gates had
announced an investment of Rs 2000 crore to be spread over three years
during his vists last year. The investment was aimed at boosting
education, partnerships, innovation and localisation.
http://infotech.indiatimes.com/cms.dll/html/uncomp/articleshow?msid=45168633
Sykes to treble staff in India
REUTERS[ FRIDAY, MAY 02, 2003 04:31:38 PM ]
US-based Sykes Enterprises, which runs call centre services to Fortune
1000 companies, aims to treble its staff in India to nearly 1,200 by
the end of this year, as it boosts operations in low-cost countries.
"Our clients that are looking to save costs, are now using our offshore
(locations)," Marlene Avila, call centre director at Sykes' fully-owned
Indian unit, told Reuters on the sidelines of an industry conference on
Tuesday.
Foreign firms are flocking to set up back-office service units for
financial claims processing and build customer support desks in India,
attracted by its vast pool of low-cost English-speaking graduates and
engineers.
Tampa, Florida-based Sykes, which has customers mainly in the
technology, consumer and financial services industries, started
operations in India's technology capital of Bangalore less than a year
ago.
While reporting its quarterly results on Monday, Sykes said it will add
up to 3,400 seats over the next 12 months across the Phillippines,
India and Costa Rica as part of its expansion plans.
Computer-maker Dell and media giant AOL Time-Warner have in the past
few years joined General Electric and American Express in setting up
their customer service units in India.
http://infotech.indiatimes.com/cms.dll/html/uncomp/articleshow?msid=46251807
Intel to invest $41 mn in India; hire 1,000
REUTERS[ TUESDAY, MAY 13, 2003 12:19:11 PM ]
BANGALORE: Intel on Monday said it will invest $41 million in India to
set up a facility where it will design and develop a new generation of
microprocessors.
The company, whose five-year-old computer chip development centre in
Bangalore is already its largest non-manufacturing site outside the
United States, said it hopes to more than double the number of
engineers it employs in India to 2,000 by end-2004.
"India continues to play an important role in helping Intel to deliver
architectural innovation to our customers...," the chipmaker said in a
statement.
Other global giants like Motorola, Texas Instruments and IBM are also
ramping up their technology centres in India, attracted by its vast
pool of English-speaking engineers whom they can hire at a fraction of
what their counterparts earn in the West.
Intel's proposed facility on a 43-acre campus in the technology hub of
Bangalore is part of a plan to invest about $100 million in India over
the next few years, announced by its chief executive officer, Craig
Barrett, during a visit last year.
Intel's engineers in Bangalore have begun developing core product
designs for its new Xeon processors, the statement said.
It said it had also set up Asia's first design team, which will enhance
and develop the next generation Intel Centrino mobile technology.
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