7 Outsourcing Articles
7 Outsourcing Articles
Date: Friday, June 13, 2003 9:10 AM
JOB DESTRUCTION NEWSLETTER
www.ZaZona.com
Article 1:
http://www.businessworldindia.com/WebUserArticle.aspx?SectionId=131&ArticleId=141&PageNo=2
WHO MOVED MY JOB?
Article 2:
http://online.wsj.com/article_print/0,,SB105459073563672300,00.html
Unions, States Seek to Block Outsourcing of Jobs Overseas
Article 3:
http://economictimes.indiatimes.com/cms.dll/xml/uncomp/articleshow?msid=6296
Prudential Insurance to shift 1,000 jobs to India
Article 4:
http://cnews.canoe.ca/CNEWS/TechNews/2003/06/07/106049-ap.html
Russian rocket carries U.S. telecom satellite into orbit
Article 5:
http://www.wired.com/news/business/0,1367,59126,00.html
Jobs Squeeze for Indian Workers
Article 6:
http://news.bbc.co.uk/1/hi/business/2957094.stm
British Telecom attacked over call centre plans
Article 7:
(short link)
http://makeashorterlink.com/?I26152E83
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2003/02/21/BU227355.DTL&type=business
SBC Yahoo! Tech Support In India
http://www.businessworldindia.com/WebUserArticle.aspx?SectionId=131&ArticleId=141&PageNo=2
WHO MOVED MY JOB?
As more and more jobs move offshore, the US anger towards outsourcing
is bound to rise
RAVI SHAH
Mon Valley, a region in Pennsylvania, US, housed the steel empire that
Andrew Carnegie built. Carnegie's company, U.S. Steel, lasted a century
before it collapsed in 1980 and had 31,000 workers at its peak; today,
it employs just a little over 4,000. U.S. Steel was the heart, soul and
body of Mon Valley.
"We had a diverse population," says one resident whose family moved
there in the 1920s. "We all got along together - kids of all
backgrounds. We were all steelworkers' children. I learned to do the
polka down there on 11th Street at the Polish Club."
And then the party stopped. Layoffs happened, jobs disappeared. Jobs
moved to offshore locations and steel imports from other countries
began to rise.
>From a robust and bustling region, Mon Valley has now become a 'ghost
town'. Unemployment rates are startlingly high, sometimes above 10% in
some Mon Valley towns and the population has significantly diminished.
This economic labour erosion was replicated in various flavours across
the US and fundamentally changed the nature of its steel industry.
Is offshore outsourcing or offshoring creating a similar impact on the
US service industry and, if so, what does it look like? What changes -
good, bad and ugly - will we, on both sides of the Atlantic, witness in
the near future?
"Over the next 15 years, 3.3 million US service industry jobs and $136
billion in wages will move to countries like India, Russia, China and
the Philippines. The IT industry will lead the initial overseas
exodus," says a Forrester report (See 'Number of US Service Jobs Moving
Offshore'). This represents a significant micro as well as
macroeconomic impact on the US economy.
The ITES Industry
According to the National Association of Software and Services
Companies (Nasscom), the IT-enabled services (ITES) industry in India
is expected to grow by 65% to Rs 11,700 crore ($2.3 billion) in
financial year 2003. This growth is expected to come from services
related to call centres, and transaction and data processing, spanning
industries like banking, insurance and mortgage. These industries
represent billion-dollar markets and are prime for offshoring.
Value chains in these industries are characterised by a number of
processes and activities that are manual and repetitive in nature, and
supported by technology as their core platform. Corporations also
expend a lot of money on maintaining back-office operations; by
offshoring these activities, they can get an attractive return on
investment. For many whose product lifecycles have reached maturity and
who are struggling to boost profit margins, this is a low hanging
fruit. (See 'Nature of Services That Can Be Offshored'.)
As offshoring gathers steam, we will see fundamental shifts in the way
business is done around the globe. "The customer does not care whether
the call centre representative is sitting in Detroit or Delhi. As long
as he understands the voice at the other end and answers are provided
accurately, he will be satisfied. Offshoring also allows the onshore
organisation to offer... higher levels of service than those being
offered... (now) at a lower cost," says Michael Skolnik,
vice-president, Wipro Technologies.
The Cost-Benefit Analysis
To understand the impact of offshoring on the US economy, one needs to
separate the short- and the long-term effects of offshoring as well as
isolate the macro from the microeconomic changes. In the short term,
the single most important factor driving offshoring decisions is cost
savings. (See 'Cost Savings: The Main Driver'.)
Financial benefits stem from leveraging labour wage differentials at
similar skill levels in different geographies. These may be augmented
by the nature of the processes outsourced. Of the 700 service job
categories in the US, 550 will be affected by offshoring in the near
future. An analysis by McKinsey & Company shows that the ITES market is
likely to touch $142 billion in 2008. This is against the current cost
of $532 billion for these services. The difference of $390 billion is
the net saving the US economy can expect from offshoring. This will
have a huge economic impact: tangible dollar savings leading to value
creation for shareholders and, ultimately, affecting the common man.
This is the direct result of companies being able to leverage labour
pools from different parts of the globe based on the most efficient use
of resources. Hence, an organisation like GE can have its R&D centre in
the US, production base in South-east Asia and back-office in India.
This distributed model helps create firms whose operations are
streamlined and who have a low cost base.
"One of the fundamental facts about business in a free market economy
is that production travels based on the principal of lowest cost. This
dynamic, which has played itself out in the manufacturing sector, will
now get repeated in the services industry," says Matthew Halle,
vice-president at QCSI, a healthcare solutions provider.
While the benefits of offshoring, both tangible and intangible, are
quite evident, the society has to bear certain costs during the
transition of jobs. These costs may have a greater impact only in the
short term; once the macroeconomic adjustments have taken place, they
should no longer be an issue. The social and economic costs of
offshoring can be classified into three broad areas: displacement of
labour, reduced consumption by society and a lowering of the wage
structure.
The first consequence of transferring work offshore is that locals will
lose employment. Social repercussions will follow the economic ones.
Two factions are especially likely to lose jobs: workers possessing
high-end skills (e.g. the IT labour pool) and those engaged in routine,
clerical and administrative tasks.
The other result is a reduction in consumer consumption. Beyond a
certain level, unemployment increases affect consumption. From a supply
standpoint, the labour force is not utilised to its fullest and, hence,
potential productive capabilities are not realised. Meanwhile,
consumption goes down due to falling incomes and decline in consumer
sentiment. With 3.3 million jobs (catering to 1% of the US population)
headed offshore, the absence of spending may affect certain areas or
communities.
This is already evident in the Silicon Valley, where unemployment has
risen from a low of 1.8% in September 2000 to almost 8%. Businesses are
feeling the impact of having less money in the area: stores are closing
and about 25% of commercial property lies empty.
The third impact of this phenomenon is a decrease in wage levels in
sectors that can be potentially offshored. So far, white-collar
globalisation has only made a dent in US salaries. In 2000, senior
software engineers were paid up to $130,000 a year; the same job now
pays around $100,000. Entry-level computer help-desk staffers would
obtain about $55,000 then. Now they get as little as $35,000.
The 'American Backlash'
The social cost will, in turn, manifest itself in various forms. The
so-called 'American backlash' is likely to be a multi-headed monster,
with politicians, trade unions and individual champions of
protectionism all part of it. The most prominent, so far, has been
senator Shirley Turner's New Jersey bill, which proposes a ban on
government agencies contracting with offshore service providers.
"First they took blue-collar jobs to China, Mexico and elsewhere. Now
they're taking middle-class jobs to other countries," US representative
Bernard Sanders of Vermont told a local newspaper. This echoes the
sentiment of many politicians today. What started with the New Jersey
bill has now spread to four other states (Maryland, Connecticut,
Missouri and Wisconsin) and an additional three states have joined the
bandwagon since. "Given the state of the US economy, this is a very
emotional issue for many people and, unfortunately, subject to a lot of
posturing... by politicians. In the long run, so long as... companies
are under pressure to cut costs, politicians will not be able to
prevent this tidal wave," says Girish Nadkarni of The VIEW Group, a
private equity firm specialising in investing in US firms that
outsource to India.
The primary trend that will determine the extent of the backlash in the
next 2-5 years is the strength (or lack thereof) of the US economy.
If the US economy continues to go downhill, companies will come under
greater pressure to show profitability. Then, offshoring will not only
be attractive, but also necessary. The bear market is already
pressurising firms to reduce costs. (See 'US Economy In Trouble'.)
The other outcome of a soft economy is high unemployment. Any addition
to current unemployment levels due to offshoring will receive high
visibility. "Offshoring... (could) completely change the landscape of
the service industry. But... with unemployment increasing, don't expect
these decisions to be popular with the American people," says Kim
Noyce, a project manager with a large health insurance company.
If that happens, the backlash from unions, politicians and the like
will get stronger as unemployment is a key political and economic
agenda. In the short term, we will see three major trends (See
'Near-term Impact'). "The current sentiment... is likely to adversely
impact... only... US entities receiving financial assistance from
federal or state governments. Those that do not receive such financial
assistance will remain free to outsource. The adverse effect of any
state measures impeding outsourcing to India will, therefore, be
minimal because large BPO customers generally are not affected by such
measures," says Anand Pathak, a mergers and acquisitions and
outsourcing specialist with Pathak & Associates, an Indian law firm.
Who wins the battle, only time will tell. But history may shed some
insights into the likely outcome.
The Manufacturing Experience
The US economy faced a similar situation in the 1980s. In order to trim
costs and increase global competitiveness, American manufacturers
outsourced operations to offshore locations with cheaper labour pools.
Between the 1950s and now, the manufacturing industry lost 5 million
jobs, of which 2.5 million have been lost since 1998.
As one can see in 'US Manufacturing Jobs (1946-2002)', there are two
phases in this decline. The first took place in the 1980s and was in
traditional manufacturing (like automobile and steel) and the second,
since 1998, was primarily technology-related due to the emergence of
the South Asian tigers. While the number of jobs lost in both phases
was about the same, the resulting backlash in each was very different.
The first phase saw a large number of protests by unions and trade
workers. The United Auto Workers (UAW) union, which governs workers
employed with the Big Three automakers, arose during this phase as did
many others. But the second phase was markedly different as offshore
manufacturing had established itself as a best practice in business.
Hence, opposition was minimal.
Can we draw insights into the dynamics of offshoring based on what we
have seen in manufacturing? The answer seems to be in the affirmative.
The current situation appears to be similar to the events that took
place during Phase One of the manufacturing job decline - protectionist
legislation, trade union involvement, employee propaganda, and the
like. The outcome, too, is likely to be the same. Just as American
manufacturers did not stop going offshore, there is a slim chance that
the backlash will make a significant dent on Indian business.
"Witness the huge economic surplus because of outsourcing manufacturing
to Mexico, East Asia and China - this surplus was partly responsible
for the high growth, low inflation. The resources that were freed up...
were profitably redeployed in new sectors such as IT, biotechnology,
etc. You only have to contrast Europe and the US to better understand
the significant advantages that US is building because... (of)
offshoring," says Rajeev Ahuja of EurIndia, a private equity firm based
in the UK.
One may not be able to draw any insights from the second phase of the
job losses though, as the economy was very healthy at that time.
Displaced workers found it easy to get new jobs. This may not hold true
today. Hence the backlash can be a long drawn out affair.
"The American backlash is classical 'isolationism'. Global free
trade... will elevate the economic well being of everyone. A rising
tide raises all ships," says Chris Adams, an offshoring consultant with
Renodis, a business advisory services company. History, too, has been
favourable to the Indian agenda. Three years ago, the US Supreme Court
ruled against a Massachusetts state law, which proposed to boycott
companies trading with Myanmar for alleged human rights violation in
that country.
Yet, the backlash is very real. India Inc. needs to understand its
dynamics to nip the issue in the bud.
What Can India Do?
Nasscom has taken the first step by engaging the services of public
relations firm Hill & Knowlton. It is also working closely with US
trade organisation, the Information Technology Association of America
(ITAA). Nasscom is also touting the $8-billion savings that the banking
and finance sectors have made till date due to offshoring. Many such
business cases need to be developed as the backlash intensifies.
Nasscom is but one cog in the wheel. What India Inc. needs is a
coordinated effort on multiple fronts. The Indian government will have
to be one of the key stakeholders. So far, it has pledged Rs 5 crore -
a paltry sum, given the size and nature of the undertaking required.
What is really needed is a strong exchange of dialogue and
communication between the bureaucrats of the two countries. US
legislators can shape the outcome of the backlash; a strong campaign
aimed at them will help the cause.
This is already happening, but not to the extent required.
Organisations like Nasscom, the external affairs ministry and ITAA need
to be more proactive in identifying potential states, local unions and
trade bodies that can pose hurdles, and coming up with a coordinated
strategy. (See 'Fighting The Backlash'.)
India must also coordinate with trade-related bodies in the
Philippines, Jamaica, China and other nations vying for a share of the
offshore pie to put up a united front against the backlash.
But the onus falls on the offshore service providers to take up the
issue with their clients and develop a value proposition that
transcends this backlash. "We are striving to build a firm that will
last well beyond... any potential backlash. Ninety per cent of our
professionals are graduates of the IITs or top-flight MBA schools. We
expect our value proposition to eventually supersede any near-term
negativity," says Alok Aggarwal, chairman of BPO company Evalueserve.
In Conclusion
It is still too early to say what the final outcome will be. What is
evident is the impact on workers in both countries.
Displaced workers will need to retool themselves for higher-skilled
jobs. From an economic perspective, the US will now have a new
workforce with superior skills and their contribution to the economy on
a net-net basis will be higher than what it currently is. A change in
the curriculum in universities and technical colleges may also be in
the offing.
On the other hand, it will also help workers in low-cost countries gain
experience and companies can offer services higher up in the value
chain. Education levels, too, will improve dramatically.
With significant ramifications on the balance of power, politics and
labour economics, offshoring is already creating its mark in the
business world. As the industry is in a nascent stage of its evolution,
these will be interesting times for those who are part of the game as
well as those watching the exchange of rallies between the different
contestants.
Ravi Shah is New Horizons Consulting's principal consultant on BPO
practices related to the healthcare and insurance sectors. He is based
in Madison, US.
http://online.wsj.com/article_print/0,,SB105459073563672300,00.html
The Wall Street Journal
June 3, 2003 2:50 p.m. EDT
Unions, States Seek to Block Outsourcing of Jobs Overseas
By MICHAEL SCHROEDER
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- Alarmed by jobs flowing overseas where skilled workers
are cheaper, state lawmakers and labor unions are fighting back.
Legislation aimed at keeping jobs in the U.S. is pending in at least
five states -- New Jersey, Connecticut, Maryland, Missouri and
Washington. Thebills employ a variety of methods, including blocking
companies from using foreign workers on state contracts and requiring
foreign call-center employees to identify where they are located. On
Capitol Hill, the AFL-CIO
and one of its members, the Communications Workers of America, are
urging members of Congress to direct the General Accounting Office to
study the trend's U.S. economic impact.
By one estimate, several million U.S. jobs are expected to move
offshore in the next 12 years, particularly to India. Multinational
firms are feeling the first ripple of the backlash, but are bracing for
the worst. "It's the perfect storm right now," says Harris Miller,
president of the Information Technology Association of America, an
Arlington, Va., trade group representing 500 technology concerns.
Foreign-job migration was less visible during the 1990s when the U.S.
was booming and employers had trouble filling positions. That has
changed as the economy continues to struggle through a three-year slump
and jobs in the U.S. are increasingly scarce. Manufacturing positions
were lost in droves to foreign competitors the past two decades. But
the current round is hitting more affluent white-collar workers who are
beginning to align themselves with new union initiatives to protect
jobs.
Emotionally Charged Issue
New Jersey became the emotionally charged issue's pivotal legislative
battleground in a dispute that involved all of nine jobs. Democratic
State Sen. Shirley Turner said she was incensed to learn that an
Arizona firm that New Jersey had hired to assist welfare recipients
shifted help-center jobs from Green Bay, Wis., to India's Bombay.
Early last year, she introduced a bill requiring state contractors to
use U.S.-based employees. The state Senate passed it unanimously in
December, but then the business lobby, caught off guard, regrouped and
mounted a fierce lobbying campaign, so now the bill is hung up in
committee in the General Assembly.
Nevertheless, the bill was enough to get the attention of the offending
contractor, eFunds Corp. The company agreed to move the jobs from India
to a new Camden, N.J., call center that opened last month in the small
basement office of a downtown bank. But the nine new jobs came at a
hefty price: The state agreed to pay eFunds an additional $886,000 a
year above the original $4.1 million annual contract to open the local
call center -- a 22% increase that effectively cost the state nearly
$100,000 per job.
"I had no idea this would be such a hot-button issue," Ms. Turner says.
Pauline Menes, a Maryland House Democrat, says she introduced a bill
similar to New Jersey's after reading about the eFunds dispute. Though
the Maryland legislature didn't act on the bill in the most recent
session, Ms. Menes says she'll be watching what happens in New Jersey.
She plans to reintroduce a more detailed bill that includes some
exceptions when the legislature reconvenes in Annapolis in January. The
movement to protect jobs "is something that's just beginning," Ms.
Menes says.
Hiring Lobbying Firm
The bills have prompted India's National Association of Software and
Service Companies, a New Delhi trade group representing 850
international companies, to hire Hill & Knowlton, an influential
lobbying firm, to represent its interests in Congress and the state
houses. The firm worked to water down the New Jersey bill, sending the
trade organization's vice president, Sunil Mehta, to meet personally
with state lawmakers, people familiar with the situation say. If the
bill gets to the Assembly floor before lawmakers adjourn at the end of
June, it likely will include new compromise language that will provide
exceptions for foreign outsourcing of jobs. Hill & Knowlton and the
Indian trade group declined to comment.
Another lobbying force opposing such measures are the 1.5 million
Indian expatriates living in the U.S., mostly well-paid technical
workers and professionals. They are represented in Congress by the
India Caucus, the largest such group on Capitol Hill with 140 members.
Its co-chairman, New York Democrat Joseph Crowley, says he objects to
state legislation that
would restrict businesses from making cost-saving decisions to hire
foreign workers.
Opponents argue that blocking foreign employees from working on state
contracts could violate World Trade Organization laws. If such
legislation passed, "it would send a terrible symbolic message at a
time when we are trying to open up global markets and create new
markets for our exports," says Mr. Miller of the Information Technology
Association, which also has
been lobbying lawmakers in New Jersey.
Budding Campaign
Much of the budding national campaign is being directed by the
Washington Alliance of Technology Workers, a unit of the Communications
Workers of America that was created exclusively to fight overseas-job
migration. After the New Jersey Assembly's State Government Committee
failed to act on Ms. Turner's bill in March, the labor alliance ginned
up its grassroots efforts. Within days, members of the committee were
swamped with thousands of angry e-mails.
Surveys show that U.S. companies of all sizes are relocating a greater
number and a greater range of service jobs to foreign nations to cut
labor costs. The positions, once limited to call centers and other
low-level processing work, now include stock analysis, accounting, and
tax return and insurance-claims processing. More than 25% of all of the
500 largest U.S.
corporations are engaged in outsourcing to foreign countries.
Developing nations can offer the technology links and a
college-educated work force that is paid a fraction of U.S. salaries,
so they are the prime beneficiaries of the emerging global knowledge
industry. Thea Lee, assistant director of the AFL-CIO's international
economics department, says U.S. policy makers don't understand the
economic implications of this trend yet.
"The logical extension is that you will see massive erosion of living
standards of a big chunk of the U.S. middle class," Ms. Lee says. With
that in mind, the union is taking "all the steps we can in trade and
tax policy to make sure we've done everything we can to make it
attractive and profitable to do business here."
Write to Michael Schroeder at Mike.Schroeder@wsj.com5
http://economictimes.indiatimes.com/cms.dll/xml/uncomp/articleshow?msid=6296
Prudential Insurance to shift 1,000 jobs to India
PTI[ WEDNESDAY, JUNE 04, 2003 07:11:21 PM ]
LONDON: Despite increasing discontent in US and Britain over
outsourcing to India, British insurance company Prudential plans to
shift a third of its remaining 3,000 customer-service jobs to Mumbai
and save an estimated #16 million a year, a report said on Wednesday.
Prudential selected Mumbai over rival locations in east Europe, Asia
and Ireland because of lower hiring costs but, as also because "the
infrastructure and potential for savings and productivity gains made
India a winner, said Philip Broadley, the company's finance
director.
The move comes as British Communication Workers' Union issued a warning
this week of strikes against BT, the telecommunications giant, over its
Indian plans.
Similar moves by other companies in the US and the UK to low-cost
offshore centres are now gaining international political attention, The
Financial Times, London, reported on Wednesday.
US unions and politicians are also launching campaigns to protect jobs.
Unemployment in the US IT sector, now in its third year of downturn,
hit 5.2 per cent last year, up from 3.7 per cent in 2000. Giga
Information Group, an IT researcher, said that by 2015, a cumulative
total of more than 472,000 IT jobs will be moved from the US to
overseas locations, up from about 27,000 in 2000.
The "Great Tech Job Exodus", a campaign to stem the export of
technology jobs to low-cost centres, was recently launched by the
Washington Alliance of Technology Workers based in Seattle, the
hometown for Microsoft, the world's largest software company.
Last month, legislation was introduced in the US Congress that would
restrict foreign companies' ability to transfer Indian workers to their
subsidiaries in the US.
The transfers are said to violate the terms of special visas known as
L-1, which are supposed to be used in a limited way for intra-company
transfers.
Lawmakers in four US states have also introduced legislation that would
deny government contracts to companies that choose to do the work
abroad.
The proposed legislation is among the first signs of a backlash against
the loss of once high-paying jobs, the daily said.
Technology companies acknowledge that they face a struggle this year in
persuading Congress to maintain the high numbers of foreign technology
workers allowed to enter the US on H-1B visas for people with
specialist skills.
Under lobbying from the industry, Congress in the 1990s raised the
annual limit to 195,000 workers, but that will fall to 65,000 next year
unless Congress acts to extend the higher quota.
India's business process outsourcing, still a small part of its
$10-billion IT services sector, is forecast to grow for a third
consecutive year at over 60 per cent.
Foreign clients may initially have turned to India because of cheaper
labour costs of at least 40 per cent. But most have ramped up their
relationship with their Indian technology partners because of
productivity gains.
US companies have saved nearly 8 billion dollars in the four years to
2002 by outsourcing to India, and the benefits in terms of productivity
and competitiveness as well as savings are rising according to the
National Association of Software and Service Companies (Nasscom).
http://cnews.canoe.ca/CNEWS/TechNews/2003/06/07/106049-ap.html
Russian rocket carries U.S. telecom satellite into orbit
MOSCOW (AP) - A heavy Russian Proton-M rocket brought a U.S.
telecommunications satellite into space on Saturday, Russian news
agencies reported.
The rocket carrying the AMC-9 satellite, commissioned by SES Americom
and built by France's Alcatel, blasted off from Russia's Baikonur
Cosmodrome in neighbouring Kazakhstan at 2:24 a.m., local time,
Saturday, the Interfax news agency reported, citing the Russian Space
Forces.
The 4.1-tonne satellite entered geo-transitional orbit about nine hours
later.
Interfax said the satellite would be used for long-distance
communications, digital television and data transfer services and is
expected to function for more than 15 years.
http://www.wired.com/news/business/0,1367,59126,00.html
Jobs Squeeze for Indian Workers By Michelle Delio
Story location: http://www.wired.com/news/business/0,1367,59126,00.html
02:00 AM Jun. 06, 2003 PT
U.S. companies such as IBM, Intel, Hewlett-Packard, Oracle and
PeopleSoft are already exploring countries with even cheaper sources of
technical labor, says a report from research firm IDC. The new
destinations include Romania, Russia, Hungary, the Czech Republic, the
Philippines, Singapore, Thailand and Vietnam.
As a result, India, which some have blamed for the loss of American
jobs, may soon lose jobs itself.
In recent years, "offshore" tech support has become a booming business
in India. India's 50 or so call centers, operated primarily for
American companies, pulled in about $183.9 million last year, according
to the National Association of Software and Service Companies in New
Delhi.
That sum was predicted to more than double within the next four years.
But American tech firms are now eagerly seeking outsourcing options in
other countries.
Research firm Forrester estimates that over 3 million jobs, many from
tech industries, will leave the United States by 2015.
Forrester's research indicates that India will still be a major
outsourcing contender, but will not be the only or perhaps even the
primary option for outsourcing tech work in the next decade.
Tech workers in the United States have already formed organizations to
try to stop the flow of jobs to India, saying they can't compete with
low salaries paid to Indian workers.
Now they will be competing with workers from many other countries.
Hungary, Russia, Romania, and the Czech Republic have begun to obtain
more outsourcing contacts from U.S. firms like IBM, Boeing and Intel.
But most of the workers in these countries are more apt to be doing
software testing and development than technical support, said Traci
Gere, Group Vice President at IDC.
According to Gere's research, the Philippines is strong in "call
centers and sweatshops" but is a challenge due to the country's
political instability.
Singapore workers want close to western level salaries. And Thailand
has "limited labor quality" and a "challenging business environment."
Vietnam may be the most likely Asian contender for India's tech support
crown, as the government is "keen" to develop a reputation as a
technology center, Gere reported.
That keenness is a concern to Padmajai Goenka, a 23-year-old technical
support worker in Mumbai, India, who goes by the name of Pam when she's
on duty troubleshooting problems for puzzled PC users in the United
States who very rarely know they are speaking to someone who lives
thousands of miles away.
Goenka, who requested her company name be withheld, said that she was
trained to "act American."
"Even though there is a lot of yelling from the clients, I love this
job." Goenka said. "I have been fascinated with America since I was a
little girl. Now I get paid to pretend I am American -- it's
wonderful."
Indian call center workers receive meticulous training before they are
allowed to field tech support calls. Farhat Gupta, owner of several
Bangalore call centers, said that little attention is paid to technical
training, as "all the answers are always on the computer screen in
front of the workers. We exist for people who do not want to use the
Internet themselves to find their own answers."
Instead, instruction is centered on learning American culture, and
"losing the British accents they all pick up in school," Gupta, who has
an office in Jackson Heights, Queens, said.
Trainees typically watch dozens of American movies and TV shows for the
first week to acclimatize themselves to U.S. slang and accents.
Gupta said he too was concerned that outsourcing might be outsourced
from India in the near future.
"It's hard to know where it will all end. Is there a country were
people will work for free?"
http://www.boston.com/dailyglobe2/142/business/Philippine_leader_aims_to_lure_more_outsourcingP.shtml
Philippine leader aims to lure more outsourcing
By Hiawatha Bray, Globe Staff, 5/22/2003
NEW YORK - Move over, India. There's a new player in the global
outsourcing business.
Philippine President Gloria Macapagal Arroyo, who visited with
President Bush and was feted at a White House state dinner Monday, came
to the nation's financial capital yesterday to pitch US companies on
the benefits of moving some of their key business and technology tasks
to her island nation.
After years of watching countries like India, Ireland, and Russia
attract foreign outsourcing business, the Philippines is on an
aggressive drive to win a larger share of this growing market. And
Arroyo told about 200 guests at a Philippine outsourcing seminar at the
Waldorf Astoria Hotel that her low-cost country is one of the best
destinations for US firms in Asia.
''We're a very open economy,'' said Arroyo, ''and our culture is very
well adapted to Western business practices.''
For example, Philippine officials said, their firms use the same
accounting standards expected of US companies. The majority of the
country's 90 million citizens speak English, and about 350,000
Filipinos graduate from colleges and universities each year. And the
Philippines has a highly developed telecommunications infrastructure,
including a nationwide fiber-optic backbone and multiple undersea
cables to every region of the world.
The Philippine government and business community hope such factors will
lead American firms to choose their country as an outsourcing
destination over India. But they don't expect the Philippines to rival
India's strength in high-tech areas such as software engineering. ''To
take on India in software development is ludicrous,'' said Roberto
Romulo, senior adviser to Arroyo and former president of IBM Corp.'s
Philippine operations. ''No way we can catch up.''
Romulo's great hope is that his nation can become a power in the larger
field of ''business process outsourcing,'' such as medical
transcription, accounting, tax preparation, and customer service call
centers.
Already major US companies, such as Internet provider America Online,
use Filipino call centers to provide customer service, while US
hospitals purchase transcription services from Medi-Type Transcription
Services Corp. This Yorktown Heights, N.Y., company lets doctors
dictate medical information by phone, then electronically sends the
recording to be transcribed by clerical workers in the Philippines and
double-checked by Filipino doctors.
In these fields, Romulo said, the Philippines have a big advantage over
India and other outsourcing rivals. For instance, because many Filipino
doctors and nurses have studied and worked in the United States, they
are familiar with the US healthcare system. And a study by the research
group Gartner Inc. found that Americans find it easier to understand
Filipino English speakers than citizens of India or even Ireland.
''In business process outsourcing, you need CPAs, you need doctors, you
need lawyers,'' said Ramon Dimacali, chairman of the business
association Outsource Philippines. He said that his country's
educational system produces many well-trained experts in these fields,
while lagging behind India in the training of engineers and computer
programmers.
Even so, Dimacali said his own company, Software Ventures
International, has 800 employees doing outsourced software development.
And William Ferguson, Asian marketing executive for US financial giant
Citibank, said his company has about 200 programmers in the Philippines
designing software for use by Citibank's retail customers. Citibank has
been doing business in the Philippines since 1902, and Ferguson said
the country still has vast untapped potential as a destination for
outsourcing.
''While India is viewed as having the lead,'' Ferguson said, ''the
Philippines is clearly in the group of the leading challengers.''
And more challengers are still emerging. Among the guests at
yesterday's seminar were Yaw Owusu, chief executive of Ghana Cyber
Group Inc., a New Jersey firm that hopes to develop business process
outsourcing opportunities in the West African nation of Ghana. Ghana is
already becoming an African leader in outsourcing, with Dallas-based
Affiliated Computer Services Inc. employing more than 1,300 workers at
a data entry site in Accra.
Owusu says that's just the beginning. ''We can't compete with the
Philippines in terms of infrastructure,'' Owusu said. ''But give us
time. We'll get there.''
Hiawatha Bray can be reached at bray@globe.com.
This story ran on page D1 of the Boston Globe on 5/22/2003.
) Copyright 2003 Globe Newspaper Company.
http://news.bbc.co.uk/1/hi/business/2957094.stm
BT attacked over call centre plans
UK telecoms giant BT has been threatened with strike action if it goes
ahead with plans for creating customer service jobs in India.
The Communication Workers Union (CWU) described the proposals as
"catastrophic" for the areas in the UK where call centres are based.
BT said no permanent employees would lose their jobs as a result of
work being transferred to India.
The CWU said that as many as 200,000 UK call centre jobs could be lost
across the industry over the next five to 10 years.
'Crude exploitation'
BT caused controversy earlier this year when it announced plans to
create 2,200 customer service jobs in Bangalore, southern India in a
bid to save money.
We will continue to protest and if necessary we will take strike action
Mark Taggart, CWU
The CWU accused the telecoms company of paying Indian workers just 80p
an hour, compared with #6 an hour for call centre workers in the UK.
Mark Taggart, an executive member of the CWU, told the union's annual
conference in Bournemouth: "It is crude exploitation and it is simply
about making more profits.
"Most companies are currently turning to India but it could soon be
Malaysia or China.
"We will continue to protest and if necessary we will take strike
action."
Disparity denied
Jeannie Drake, the union's deputy general secretary warned that if BT
announced any further plans to move call centre jobs to India there
would be a ballot for industrial action.
The union said it believed BT was bringing highly skilled technicians
from India to work in the UK at some substantially lower rates of pay
than comparable British workers.
BT said it was "simply not true" that Indian workers were being taken
on at lower pay rates.
"The total package of Indian sub-contractors working on BT projects is
comparable to those of their UK counterparts and is well above the UK
national average wage. They do not lose out," a company spokesman said.
BT later issued a statement which said: "We are disappointed that the
CWU continues to threaten industrial action on this issue, especially
when less than 1% of the total number of people working in BT's call
centres took part in demonstrations about India in March.
"Our plans for India are measured and responsible, designed to make BT
more competitive and better able to serve our customers. This, in the
long term, is critical to safeguard jobs in the UK."
Outsourcing customer service and IT maintenance work to Indian
subcontractors is a growing trend in the UK, with many companies
attracted by India's low labour costs and highly skilled workforce.
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2003/02/21/BU227355.DTL&type=business
SBC's 'Floyd' attracts PUC's eye
David Lazarus
Friday, February 21, 2003
)2003 San Francisco Chronicle | Feedback
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2003
/02/21/BU227355.DTL&type=business
Wednesday's column about "Floyd," SBC's seemingly robotic online tech-
support guy, sparked an unusually heavy flood of feedback -- including
from suspicious state regulators.
The consensus among tech-savvy readers was that Floyd's probably human,
but he's almost certainly using some sort of automated system for
responses.
Also, he's not really a Floyd. Not unless Indian parents have suddenly
embraced the name for their offspring.
Telecom giant SBC is dodging questions about its Indian affiliate, but
the facts speak for themselves.
Dave Johnston, a Ukiah networking consultant, dug into the Web address
I provided for SBC Yahoo's online tech support. He found that when you
connect to the system, you're actually being transferred to a server
registered to a company called HCL Infinet in -- you guessed it --
India.
HCL's Web site says the company's numerous English-speaking employees
handle tech support and other services for a variety of corporations
worldwide.
It boasts of a commitment to quality that "has resulted in some key
clients reposing faith in us over the last few years." It doesn't say
which clients specifically have reposed that faith.
So I gave HCL a call. It was about 1 a.m. at the company's facility in
New Delhi, but a sleepy-sounding worker there said HCL has about 2,000
people providing customer service for a wide variety of clients --
among them, SBC.
"They are a very important client for us," the worker said.
There you have it. Straight from Floyd's mouth.
"SBC is obviously hiding this," said Johnston, the networking
consultant. "They probably think customers are going to have a negative
reaction, like the whole Nike sweatshop thing."
Whatever else, SBC is clearly being deceptive. Why else would the South
Asian techies handling the online service use bogus names like Floyd
when dealing with SBC's high-speed Internet customers?
And why else would guys like Floyd (or whatever he's really called) not
be authorized to discuss any topic that might reveal their true
identity or whereabouts? Heck, I couldn't even get Floyd to comment on
the latest "Lord of the Rings" movie.
Most disconcertingly, how can SBC justify calling this "live" support
when Floyd and his cohorts are apparently limited to a series of canned
responses to customers' queries?
"This definitely warrants some looking into," said Linette Young, a
telecom- industry analyst at the California Public Utilities
Commission.
She noted that the PUC is already investigating customer service
throughout the business and is very interested in looking at how
companies like SBC handle complaints regarding DSL connections.
"The commission wants to establish jurisdiction over DSL service
quality," Young said.
Another PUC source told me that investigators will likely now ask SBC
to provide more information about its relationship with subcontractors
outside the United States.
Hopefully they'll have better luck than I did. Fletcher Cook, an SBC
spokesman in San Francisco, refused to return my calls this week and
said he'd only respond by e-mail to written questions.
This guy works for the phone company, mind you.
Yet in response to my very specific questions about Floyd and India,
Cook replied Thursday that SBC won't comment on its relationships with
subcontractors.
"The bottom line here is they provide great service, and that is the
most important thing to our customers and the company," he wrote.
In any case, tech-smart readers, including a few who work for software
companies specializing in language simulation, say that Floyd's
responses in Wednesday's column sounded artificial because he was
limited to a carefully scripted handful of replies.
"These guys have very strict rules about what they can and can't say,"
noted Jon Lieberman, managing partner of New York's InfiniteAgent,
which makes automated natural-language programs for AOL. "They'll
literally cut and paste responses into message windows."
Karthik Arumugham, a Massachusetts network engineer, said the time lag
for Floyd's answers suggests that he was dealing with more than one SBC
customer at once, probably jumping back and forth between computer
screens.
Of course, many companies have set up service centers in India,
including Dell, Oracle and Hewlett-Packard, to name just a few. Call
center workers in the United States can earn as much as $12 an hour.
Their Indian counterparts might make a third of this amount.
But while other companies may also strive to obscure the fact that
customers in the United States are talking to people in India, they
don't seem quite as obsessed with hiding the truth as does SBC.
"We're not trying to deceive people," said Dell spokeswoman Cathie
Hargett. "We'll tell them if they ask."
In response to my questions, SBC's Cook refused to specify whether the
company outsources customer support to India but did say that SBC is
not deliberately trying to fool customers
"We don't have a policy on employees using their given name or a
nickname in dealing with customers," he wrote. "We do have a policy on
delivering great customer service, and that's what consumers are
concerned with, not a name."
I also asked if SBC is worried about the company's business practices
drawing scrutiny from state regulators.
"No," Cook replied.
Guess again.
THIS JUST IN: I had a stormy exchange with Cook when I finally tracked
him down to his cell phone.
Turns out the powers-that-be at SBC don't like what I'm writing about
the company, so they've officially decided that none of my calls will
be answered. Ever. Instead, they'll deal with me by e-mail only.
I asked Cook if this was because I'd misquoted an SBC executive or
mischaracterized anything I'd been told.
"No," he replied. "We just want to document all our exchanges."
A little nervous, boys? I wonder why.
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