U.S. jobs: Next stop, India?

When Paul Olivares took a job at USAA's information technology department 14 years ago, he thought he might stay with the company until retirement.

But his hope for that faded as the insurance giant began a series of layoffs in 2001 that slashed hundreds of jobs, then imported scores of foreign contractors to work in its information technology subsidiary, ITCO.

USAA, like many other major corporations, outsourced part of its IT workload to Mumbai, India-based Tata Consulting Services, which supplies staff that some estimate are working for less than half what USAA workers earn.

Olivares, 40, left USAA a month ago after a supervisor gave him a poor mid-year review, yet was unable to provide what he thought was sufficient cause. He said he was "forced out," adding that the person now doing his job is a Tata employee.

While Olivares said he's not sure how much his replacement is making, he's willing to bet that the worker is making a lot less than his $65,000-a-year salary.

A USAA spokesman said Olivares left on his own and his position has not been filled by a Tata employee or anyone else.

"I felt like I had no stability," Olivares said of his final months at USAA. "I wasn't sure whether I'd have a job one day to the next. How can you compete with someone who's happy working for half of what you are? A lot of people at USAA feel that way. There are a lot of really nervous people out there right now."

Increasingly, U.S. companies are shifting high-tech work overseas and importing inexpensive foreign contractors as a cost-cutting measure.

The move has become more and more controversial since it means the loss of U.S. jobs amid an already dismal market for high-tech workers, and it has generated fear among corporate employees that their positions may be the next to go.

The U.S. Bureau of Labor Statistics estimates 500,000 information technology professionals have lost their jobs since 2001, and that figure could reach 1 million by the end of 2004.

Most of the job losses have been the result of the dot-com failures and several years of corporate cost cutting, but many say U.S. corporations' use of foreign outsourcing will be one of the key drivers going forward.

About 550,000 high-tech jobs are expected to move overseas by year's end, according to technology research firm Gartner Group. And only about 40 percent of the U.S. workers who once held those positions will be "redeployed" by their current employers.

By the end of next year, eight of 10 corporate technology directors will be ordered to outsource at least a portion of their services to an overseas vendor, according to the report. Among those already outsourcing are San Antonio-based telecom giant SBC Communications Inc., Austin's Dell Computer and Bank of America.

"I only see the trend increasing," said Carrie Lewis, who follows IT outsourcing for Boston's Yankee Group. "The people who are going to feel it are the companies' internal IT people, the people who are managing the projects (that go overseas)."

Riding high on the outsourcing boom, though, are companies like Tata: consulting firms based in India, which has an abundance of well-educated, English-speaking tech workers, most of whom will work for a fraction of the salary expected by U.S. employees.

Operations in China, Russia and the Philippines have also won work from U.S. companies for their access to skilled low-wage workers.

Tata, which bills itself as one of the world's largest IT consulting groups, has $1 billion in annual revenue, the majority coming from U.S. clients.

The company has more than 50 U.S. offices, and its customers include not only USAA, but SBC, Best Buy, three state governments and the U.S. Department of Defense.

USAA currently uses about 500 workers from Tata's TCS business unit. That's about 2 percent of the insurer's Alamo City work force and 20 percent of the jobs inside its ITCO division.

SBC uses Tata for special IT projects, though officials said there are only about 10 of the Indian company's workers in the United States on such work right now. SBC also uses overseas contractors for customer-service work, such as online help for users of its fast DSL Internet service, but officials declined to say how many people the contractors employ.

While SBC has cut more than 20,000 jobs during over two years, company spokesman Walt Sharp said the use of contractors such as Tata isn't a means for it to jettison U.S. workers.

"The purpose of this, in part, is to maintain our costs and allow us to spend domestically on the development of new products and services," he said.

Brad Russell, a spokesman for USAA, also defended his company's hiring of Tata workers, saying the work performed by the consultants isn't the same as that done by the ITCO workers laid off in 2001. [Yeah, right]

Although Tata employees did help phase out the old technology some of those people worked with, Russell said they were not replacements for the laid-off USAA employees. The several hundred ITCO employees caught in recent layoffs were unable to meet changing technology and job requirements [don't like the smell of curry and won't work for 5 rupees a day]], he added.

And ITCO hasn't stopped hiring, according to Russell. It's beefing up its ranks again with 50 to 100 new, non-Tata hires soon.

USAA said contracting allows the company to save money on wages and benefits and helps avoid layoffs of its own employees when the task is accomplished. The company still owns the intellectual property produced by the consultants.

"In today's environment, companies are looking at ways they can maintain their competitiveness," Russell said. "It's a lot less expensive to have that flexibility."

But experts said that flexibility comes with a high cost to workers. While there are job retraining programs for workers laid off when manufacturing jobs are shipped overseas, there is no such safety net for workers in IT or other white-collar fields.

"The problem I have is that you need to do something to acknowledge the losers, the people who have lost their livelihoods because of this," said Ron Hira, a Rochester Institute of Technology public-policy professor who tracks IT work force issues. "There are no programs right now to do that.

"Workers often don't even know they're going to be affected because the companies aren't up front with them. They're getting hit with this out of the blue."

USAA workers caught in the company's recent layoffs balk at the thought that the company's use of Tata is preventing further layoffs. They said the choice to use Tata was a move to cut costs by getting rid of U.S. workers.

"The layoffs are still going on," said Al Cortez, a former USAA IT manager who lost his job in 2001. "You don't hear of 400 or 500 being let go, but it's happening in ones and twos."

Candice Johnson, spokeswoman for the Communication Workers of America union, which represents more than 100,000 SBC workers, said she recognizes the company is contracting out customer-service work to remain competitive.

But, "it's disappointing that this is the way SBC and other companies seem to be dealing with cutting costs," she added.

"When manufacturing jobs were going overseas, we were told that they were being replaced with these new, information-age jobs. What are our workers going to do now that these information-age jobs are leaving?"

Despite the objections of workers and a growing number of outsourcing activists, many companies are following USAA's and SBC's lead.

Dallas-based EDS early this month said it's cutting jobs and increasing its work force in places like India and the Philippines to 20,000 from 9,000 by the end of next year. And union officials this summer said IBM Corp. is planning to move thousands of jobs to India and China to cut costs.

Indeed, during the next 15 years, 3.3 million white-collar jobs — not just those in the tech trades — are expected to move overseas, according to Forrester Research Inc. estimates.

"There's no way this is going to stop at IT," said Mike Emmons, an anti-outsourcing activist who lost his job last year when Siemens Information Communication Networks outsourced its entire IT department to India. "Who are they going to cut next? Accounting? Finance? Architects? If you sit at a desk, they can send your job overseas or bring someone in to replace you."

U.S. IT workers who charge $80 to $120 per hour for project work compete with Indian workers who will do the same work for $40 an hour, Yankee Group analyst Lewis said in a new research report.

The movement is "an irreversible mega trend" that is disorienting not only North America but also the United Kingdom and Australia, Diane Morello, a Gartner vice president and research director, said in a recent research report.

Companies should worry about farming out so much IT work to overseas firms "because they cannot afford to have domestic IT talent dry up," Morello said. "When investment resumes and the economy rebounds, (chief information officers) will need a cadre of seasoned IT professionals and eager recruits to turbocharge new ideas, new investments and new programs."

Many workers fretted about companies' use of the H-1B visa, which allows employers to bring in foreign workers to fill skilled positions. That visa requires that the company can show it's unable to find a U.S. worker to fill the position and that the foreign worker it hires will be paid the prevailing U.S. wage for the job.

But anti-outsourcing activists said companies often skirt the H-1B regulations or bring in contractors using the less-restrictive L-1 visa.

Originally designed to allow large companies to transfer professionals with "special knowledge" to their U.S. operations from overseas subsidiaries, the L-1 is now widely used to bring contractors into the country. Unlike the H-1B, it doesn't require companies to seek a qualified U.S. worker first or to pay the visa-holder prevailing U.S. wage.

Companies' use of the H-1B fell in 2002 with the collapse of the tech industry, but the L-1 rose during most of the '90s and experienced virtually no decline from 2001 to 2002.

"My parents came in as immigrants," Rochester Institute's Hira said. "I have nothing against immigration. I think the problem is that the program is being gamed and abused by these companies, sometimes quite flagrantly."

Employees' anger and worry about the outsourcing trend and perceived misuse of the L-1 may be generating some waves with politicians.

Three bills designed to curb the use of the L-1 have been introduced in Congress, and some lawmakers have called for hearings on the issue. What's more, the Homeland Security Department is also investigating whether corporations' use of the L-1 to bring in contractors is an abuse of the program.

But activists such as Emmons question how successful those measures will be, given the political clout of the companies that are using L-1s or overseas contracting to cut costs.

"Do you think these people are going to do anything to hurt the corporations that are writing them checks?" he asks.

Indeed, even the Republican Party has turned to outsourcing recently. The Indian magazine Business Standard recently reported that the GOP has hired HCL eServe to set up call centers in two Indian cities to make fundraising calls into the United States.

And the recent moves in the Capitol are little consolation for U.S. workers who claim they've already been victimized by the outsourcing trend.

Former USAA manager Cortez, who now teaches math for the Alamo Community College District, said he worries his students now studying for computer science degrees may be moving into a lousy job market once they graduate.

Olivares, the other ex-USAA worker, said he's pursuing an unemployment claim against his former employer and looking into a career change, possibly pursuing his lifelong love of music. [Stay off my street corner, buster] He said he feels burned out on IT and worries that he may end up at another company that decides to outsource his job.

Olivares said he harbors no resentment toward the Indian workers who now populate the ranks at ITCO, but said the decision by management to bring them has contributed to his desire to leave the tech business.

"How can you blame the Indian people?" Olivares asks. "They're just doing what they're allowed to do. It's the company management that's made this decision."

-------------------------------------------------------------------------------- snowlin@express-news.net

Customer service agents field calls from the United States at the Customer Asset call center in Bangalore, India. Labor can be 70 percent cheaper than in the United States, and companies that shift their customer service departments to India can save up to 60 percent.

Associated Press File Photo

Since when has it been one political party or the other that could guarantee one's employment, unless it was a union job? Ever since America was a nation we have had problems of either a newer and cheaper work force would come onto our shores or the jobs were sent overseas.

Wait until India starts losing their jobs to China and see how quick they will start to yell.

Americans need to start looking for other ways to make livings when these things happen instead of complaining to Washington for some kind of public assistance. Since when did any politician ever claim that they could keep some plant open or business solvent?

We all need to start thinking for ourselves and quit looking for politicians to fix anything but the next election.

Old Patriot

While Olivares said he's not sure how much his replacement is making, he's willing to bet that the worker is making a lot less than his $65,000-a-year salary

Heres another one against free trade, against american companies maximizing their profits, etc.

It wont do any good, the company that replaced him with cheap foreign labor, is going to make plenty of extra profits, to enable them to give even more money to people in congress to make sure that cheap foreign outsourcing continues. As long as the politicians are given campaign contributions by the companies doing the outsourcing, our laws wont change in eliminating over paid americans.

Americans need to start looking for other ways to make livings when these things happen instead of complaining to Washington

Exactly which jobs are available for American workers over the age of 50 who are displaced by cheap foreign labor? Perhaps you can help by pointing out exactly where the jobs are for them, esp if they are older workers?

I'll remember this the next time I get a call from the RNC for money.

My sympathies to anyone who's losing a job over outsourcing to India. But the more I read about this problem, the more jaded I'm becoming. I never made $60,000 plus a year. Why should I care about these $60,000/yr jobs being lost? I'm retiring soon. I want the cheapest damn price for every service I get, for every article of clothing that I buy. Why should I sympathize with these guys? It's everybody for themself in this economy.

Nobody sympathized with the Rust Belt states when their steel jobs went overseas. Now it's the turn of other sectors of our economy. It's no fun, right? Maybe their areas will start to look like the run down steel mill towns that litter the Western PA landscape. They can turn it into a waterfront mall and pay people minimum wage to work there.

I tell you why you should care. The Dems may well win the election over this - and win back congress. It is not just IT. Outsourcing means that almost any middle class job can and will be sent overseas. I fear it is too late as it is already planted in the back of everyone's mind. This is a very big deal. If we get two more Dem terms where they can control congress the nation will not recover. We will go the way of the UK. It will be over for us - we will side into third world status withing 15 years. Your retirement money will be worth nothing.

People that think that we are on the cusp of a conservative revolution in this country better get a grip on this issue, we are likely to get tarred with it even if it was sent in motion years ago. Conservatism will lose out for another generation - it will be the New Deal all over again.

Are people on this board actually suggesting that the Imperial Federal Government step in and tell private enterprise who they can and can't hire, what they can and can't do with their own businesses?

Is this the Free Republic spirit?!

Overseas outsourcing actually spares American jobs as it allows a business to continue to exist in the international marketplace by shopping out certain non-local functions, as opposed to this firm simply going out of business due to an inability to compete.

The TRUE source of this outsourcing trend are such things as:

a. Minimum wage laws
Which drive up the cost of goods and service at every level of the supply chain.

b. Restrictive mandatory daily overtime laws
Which force companies to hire unnecessary, costly employees due to the fact that the current workforce is not allowed (under law) to fill in certain shifts.

c. Paid Family Medical Leave legislation
Which makes it very costly financially and managerially to employ American workers.

d. Confiscatory levels of taxation
Which create unnaturally high consumer prices, forcing companies to cut fixed and variable costs at any and every level

What we need is much LESS governmental meddling in the affairs of private enterprise and the employees who drive this nation's economic engine.

Outsourcing to India is but a symptom of a very large government-induced problem.

Pure, free-market capitalism is the most moral and ethical economic system, as it distributes the largest amount of goods and services to the largest number of individuals in the shortest amount of time, and compensates people at all levels for doing so.

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