Tempest Over Outsourcing

Date: Monday, June 16, 2003 1:23 PM

JOB DESTRUCTION NEWSLETTER

www.ZaZona.com

This article in Business Week is almost an exact copy of the ones that
appeared all over the Indian magazines. Businessweek is perpetuating an
insulting statement that India is fighting protectionist workers in the
U.S. by taking the "moral high ground" on free trade. No explanation
was offered as to why it's moral to destroy the jobs of middle class
Americans.

India's spokespeople are making the preposterous argument that
bodyshops such as Wipro, Tata Consultancy Services, and Infosys, are
creating more jobs than they destroy because they are hiring U.S.-based
marketing and consulting executives. While those bodyshops may hire
rich PR firms like Hills & Knowlton, they systematically discriminate
against all non-Indian workers. The few jobs they create cannot
compensate for the thousands of high-tech workers they are displacing
with cheap Indian code coolies.

This statement is worthy of a late night comedy show:

"Nasscom claims Indian IT has been especially kind to New Jersey,
having created 1,600 jobs there in the past four years.
Of course, as the Indians admit, if they hire too many
high-priced American workers, they could erode their cost

advantage.

^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Business Week

June 16, 2003

SECTION: BUSINESSWEEK INTERNATIONAL EDITIONS; Asian Business: India;
Number 3837; Pg. 20

LENGTH: 690 words

HEADLINE: A TEMPEST OVER OUTSOURCING

BYLINE: By Manjeet Kripalani and Bruce Einhorn in Bangalore, with Paul
Magnusson in Washington

HIGHLIGHT:
American legislators are accusing India of stealing tech jobs

BODY:
It has been a rough few months for India's IT-services companies. With
a slow global economy and increasing competition from multinationals on
their own turf, their profit margins have been sliding. So the last
thing they need is a trade spat with the U.S. But that's just what
they're getting. Alarmed by the loss of jobs to foreigners, American
lawmakers are trying to limit the outsourcing of tech services and
other white-collar work abroad. Says a top IT executive in Bangalore:
''When bad news starts coming, it comes in truckloads.'' The U.S.
accounts for 70% of India's software services exports.

The momentum against the export of white-collar U.S. jobs has been
building for months. Congress in early June began considering bills to
close an immigration-law loophole where foreigners can service U.S.
clients using guest worker visas. Representative Nancy L. Johnson
(R-Conn.) has asked that large insurance companies disclose how much of
their IT work is being done by foreign workers in the U.S. At the state
level, legislatures in Maryland, Washington, Connecticut, Missouri, and
New Jersey are considering laws banning outsourcing of government
tech-services contracts to low-wage developing countries. Even if they
don't pass, though, they might make a U.S. company think twice before
outsourcing more work to India and elsewhere.

The Indians are fighting back by taking the moral high ground on free
trade. N. Narayana Murthy, chairman of the premier Indian software
company Infosys Technologies Ltd., points out that India opened its
markets to U.S. consumer goods and services, so it's unfair for
Washington to erect protectionist barriers. ''When you have these kinds
of noises, it creates the impression that you preach these things when
it suits you,'' he says.

India's software association, Nasscom, has launched a major lobbying
effort in Washington with help from U.S. public relations firm Hill &
Knowlton Inc., while New Delhi has appointed a representative in its
embassy there as part of India Inc.'s campaign against the
protectionist wave. They are talking up India's software prowess, with
the goal of convincing Americans that both countries gain when they
cooperate. Nasscom Vice-President Sunil Mehta argues that while India
sells $ 6.75 billion worth of software services to the U.S., the
industry contributes more than twice as much to the American economy by
way of hardware and software purchases, customer savings, and U.S.
taxes paid by Indian workers. ''The Indian IT industry is making U.S.
companies globally competitive,'' Mehta says.

The industry also argues that it's actually creating jobs, not stealing
them. As they expand into the higher-end tech-consulting business,
India's top three IT companies, Wipro, Tata Consultancy Services, and
Infosys, are hiring more U.S.-based marketing and consulting
executives. Nasscom claims Indian IT has been especially kind to New
Jersey, having created 1,600 jobs there in the past four years. Of
course, as the Indians admit, if they hire too many high-priced
American workers, they could erode their cost advantage.

Indian executives are betting that simple economics ultimately will
prevail. Indian software services deliver cost savings of more than 60%
to U.S. companies, says C. Srinivasan, who heads offshore operations in
India for Electronic Data Systems Corp., the consulting and outsourcing
company based in Plano, Tex., which plans to employ 2,500 in India by
yearend. And despite the potential political heat in the U.S., he
expects the outsourcing trend to continue. ''In the next three to five
years, the India solution will be a critical part of every portfolio,''
he says.

But as long as the U.S. IT industry remains in the doldrums, New Delhi
will come up against U.S. protectionism. U.S. Rep. Jay Inslee
(D-Wash.), who supports India's free-trade argument, says the
politically charged issue won't be resolved anytime soon. ''You'll hear
an ongoing debate for the next decade,'' he says. India's new tech
powerhouses better gird themselves for a long fight. URL:
http://www.businessweek.com/index.html

GRAPHIC: Photograph: BANGALORE CALL CENTER: Tech execs say Indian
operations save U.S. companies big money PHOTOGRAPH BY NAMAS BHOJANI ;
Illustration: Chart: SOFTWARE SURGE CHART BY JONI DANAHER/BW

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