U.S. companies expanding operations in India

Date: Monday, March 10, 2003 12:06 PM

H-1B and JOB DESTRUCTION NEWSLETTER

www.ZaZona.com

American business groups say that it's a good thing that they are
saving millions of dollars in wages and taxes for U.S. government
programs such as Social Security when they fire domestic workers and
replace them with foreign workers. If you want to understand how that
sleight of hand works you will probably have to ask Michael Clark,
executive director of the U.S.-India Business Council.

We are also treated to the age old "free trade" argument that says that
when U.S. companies are able to cut their costs they will pass along
the savings to unemployed American consumers in the form of low prices.
If that's true, why do Nike shoes cost so much?

http://the.honoluluadvertiser.com/article/2003/Feb/02/bz/bz26a.html

Posted on: Sunday, February 2, 2003

U.S. companies expanding operations in India

By Raju Chebium
Gannett News Service

WASHINGTON Although the U.S. economy is sluggish and 8.6 million
people are unemployed, American companies are hiring workers by the
hundreds, building posh offices and signing new business contracts in
India.

More and more Fortune 500 companies are expanding their operations in
India or farming out work outsourcing, in business parlance to the
world's most populous democracy, which has more than 1 billion people
and a large English-speaking, college-educated and tech-savvy work
force.

"You are increasing the competitiveness of U.S. companies globally. You
are lowering the cost to consumers substantially. You are improving in
many cases the quality of service to consumers because you have (a)
highly motivated ... work force that has become sort of the world
standard," said Michael Clark, executive director of the U.S.-India
Business Council.

The U.S. government doesn't keep up-to-date numbers on the number of
companies expanding operations in foreign countries. Business groups
don't keep totals of how many people U.S. companies as a whole are
employing in India. However, analysts say the number of companies
looking to India is rising quickly.

A total of 3.3 million U.S. jobs and more than $136 billion in wages
will be sent overseas in the next 15 years, John McCarthy of Forrester
Research wrote in November. In an interview, McCarthy said two-thirds
of those jobs and money are bound for India, where the federal and
state governments and private high-tech groups have joined hands to
market themselves aggressively.

This trend worries unions and other critics, who say U.S. companies
should be mindful of what this country of 285 million people needs
jobs and not be fixated just on their bottom lines.

Saving money

Companies save hundreds of millions of dollars by paying Indian workers
less money than U.S. workers, analysts say. They are quick to add that
the Indians aren't working for slave wages. In fact, those working for
or contracting with U.S. firms make much more money than the rest of
the country's work force one big reason Indian unions haven't objected
to the growing American presence.

By saving millions of dollars in wages and taxes for U.S. government
programs such as Social Security, U.S. companies are able to cut their
overall production costs and pass along the savings to domestic
consumers in the form of low prices, business groups say.

At the same time, U.S. companies are getting some of the world's best
products and services out of India, where the technical sophistication
and customer care have evolved to world-class standards, the analysts
say.

"This isn't five guys working out of the back of a scooter any more,"
said McCarthy of Forrester Research, a respected business-analysis firm
in Cambridge, Mass.

After the U.S. economy softened in mid-2000, companies began to cut
costs. Some firms fired thousands of workers, contributing to
December's 6 percent unemployment rate, a level reached in April and
November but otherwise the highest it has been in eight years. Some
firms closed dozens of plants and offices. And many companies began
sending work to India.

Big-name computer companies such as Microsoft and Dell;
telecommunications companies including IBM Corp.; such credit-card
companies as American Express; and conglomerates including General
Electric, which makes everything from light bulbs to plastics, are
doing robust business in India.

Indians increasingly are processing payments, answering customer calls,
handling accounting tasks, developing software, and even managing
payrolls for their U.S. clients. The intensifying U.S.-India business
relationship is transforming the Indian economy and raising wages in
what is one of the most impoverished countries in the world.

Many U.S. companies have set up sleek new offices in such cities as
Bangalore in southern India, considered India's Silicon Valley.

A more recent trend: U.S. biotech companies doing cutting-edge research
in areas such as genetics and conducting clinical trials there, said
Sudhakar Shenoy, a native of India who owns a Northern Virginia
high-tech consulting company called Information Management Consultants.

Flight of jobs

Countries such as Ireland, the Philippines, China and Russia also get
work from the United States, but India is beating the competition hands
down, McCarthy said.

Unions and other critics argue that what is good for a company's bottom
line isn't necessarily good for the U.S. economy. They say that
manufacturing jobs in industries such as textiles have been going
overseas for the past 30 years or so as this country has entered into
global trade deals.

Now, high-tech jobs are following the same trend during gloomy economic
times.

Thea Lee of the AFL-CIO, an umbrella group for labor unions, said U.S.
companies should try harder to expand operations domestically.

"Companies say they can't find workers. That's nonsense. These
companies are not willing to pay their workers what they are worth,"
Lee said.

"You can't have a healthy consumer economy if people don't have decent
jobs.

"That's sort of a long-term question for American companies," she said.
"If they don't show the loyalty to their countries and communities,
there may come a point where they may have no one to sell to."

If the U.S. government prevents companies from doing more business in
India or any other foreign country, the U.S. economy would suffer,
Shenoy warned.

"You and I buy things made in China. Are we losing jobs by doing that?"
he asked. "How is that any different from doing software in India or
doing your back-office operations in India? Free trade means you should
be able to do anything you want anywhere you want."

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