Outsourcing backlash hits India

NY Times via Seattle Post-Intelligencer ^ | February 17, 2004 | SARITHA RAI

[sarcasm]

BOMBAY, India -- The rising political reaction in the United States to the loss of some American jobs to workers overseas is creating a whiplash effect among India's leading technology companies.

"The dramatic buildup of opposition before the U.S. elections is disturbing," Jaithirth Rao, the chairman of a leading software and call-center company, MphasiS BFL Ltd., said in an interview at the three-day annual meeting of Nasscom, India's software industry trade association last week.

MphasiS, based in Bombay, has 6,000 employees, and its operations are spread across the cities of Bangalore and Pune. More recently, it has expanded to Shanghai, China and Tijuana, Mexico.

Companies such as MphasiS are the biggest beneficiaries of a movement among many of the largest corporations in the United States to shift certain white-collar work to low-cost India, where local companies are adding thousands of skilled, English-speaking employees every quarter to meet the increased demand. At the same time, companies such as General Electric and Microsoft Corp. are expanding their operations in India on everything from basic customer service to high-end research and development.

The political reaction in the United States against such outsourcing has built rapidly in the last year; nearly two dozen states have voted on legislation to ban government work from being contracted to non-Americans.

More recently, the Senate approved a bill aimed at restricting outsourcing of contracts from two federal departments. The House has not acted on similar legislation.

"We are concerned that this is federal legislation and that it is sponsored by a Republican," said Kiran Karnik, president of the software association. "Republicans are traditionally free-marketers."

Karnik, who has been vocal in promoting the cost-saving advantages of India's workforce, said he was perturbed that "all of the election-year rhetoric equates offshoring with job losses."

More than 70 percent of India's software export revenue comes from companies based in the United States, but less than 2 percent of India's export earnings comes from work for American governments, and the software and related service industries account for only 3 percent of India's economic output.

Still, the industry is increasingly associated with the Indian economy's upbeat mood, and its leaders are anxious. As fears of American white-collar job losses continue to rise, they say, the issue is expected to become a sticking point in trade negotiations between India and the United States.

Gartner, a technology research firm, predicts that the outsourcing reaction will continue to escalate at least through the fall.

"The aggressive campaign against moving work to low-cost destinations will become a political imperative for the presidential campaign," said Partha Iyengar, a Gartner vice president for research who is based in Bombay.

American corporate customers of Indian software companies were not conspicuous at this year's annual meeting. Corporations in the United States, and the Indian companies they contract with, kept a low profile.

However, Cognizant Technology Solutions, a company based in Teaneck, N.J., has 70 percent of its development operations in India and said it was still seeing five to eight customers and prospective clients from the United States every week at its offices in Chennai in southern India.

In a further indication that outsourcing is likely to be an increasingly touchy subject here, Robert Blake, the U.S. charge d'affaires in New Delhi, said last week that India's best response was to open its markets wider to help create other jobs in the United States.

Blake's remarks rankled India's government. "That is not the way to go," said Yashwant Sinha, the external affairs minister. "It smacks of retaliation that 'if you don't open up, we will impose restrictions,' " Sinha told reporters last week.

"The U.S. has to realize that by outsourcing, its companies remain competitive and save jobs," Sinha said.

[philosofy123]

The concept of lobbying as an acceptable method of influencing lawmakers has been abused greatly and no longer resembles its original intent. The regular people do not contribute money to politicians, and do not have the resources to lavish on congressmen as corporate lobbyists do. At the end, we can see how the lawmakers bend over backwards to accommodate the need of corporate America, even if that would destroy our population earning power, or job opportunities. Perhaps revision of lobbying laws to include equal time from the affected party may provide a relieve.

[lewislynn]

President Bush distanced himself on Thursday from one of his top economic advisers who said the outsourcing of U.S. jobs to workers overseas may benefit the economy.

"The U.S. has to realize that by outsourcing, its companies remain competitive and save jobs," Sinha said.

Why would Bush "distance himself" from such a good thing for the country? I guess outsourcing is the reason why all those jobs are now available...It was "outsourcing" that made this country great. < /sarcasm >

[Cronos]

Those free traders argue that we've got many times more invested in Europe that Asia. True. But we are allowed to market to European citizens, that's why the factories are there; we don't have to export the goods and services back to the U.S. to sell. We have factories here for our domestic market.

We also market goods to India and China.

I interpret oursourcing to mean moving jobs to India, for example, then importing the work performed there whether the work is services or goods.

That's what Siemen's did to the German workers. Why didn't they keep all their manufacturing in Germany? Because they got better, cheaper and less union filled jobs here.

[ninenot]

Siemens is a German Company--but they bought the electrical-equipment assets of ITT: breakers, switches, distribution centers, etc.

Thus, some of the Siemens operations are really American organizations which happen to have the Siemens nameplate.

Reverse is true with Rockwell/Allen-Bradley, who bought the Swiss 'Sprecher & Schuh' nameplate, (same kind of equipment) years ago, and for practical purposes, has moved most of its breaker/control manufacturing businesses offshore as a result.

[manic4organic]

Good points. Seems like companies like Dell overlooked the price vs. value thing with their tech support. I don't mind paying more for good service. That's value.

[Cronos]

we do put import taxes on goods from other countries. Maybe not at the same level as third world countries, but then that's why they are third world countries -- they try to restrict incoming goods.

[dfwgator]

Of course a good company would build their products so that the need for tech support in the first place is rare.

[ninenot]

And a German company that outsourced to us.

You can demonstrate that formerly made-in-Germany products are now made-in-America?

[Cronos]

"Looks like they want to keep Free Trade Street one way."

India and China are dominated by American or European FMCG groups like Colgate-Palmolive, Gilette, Proctor and Gamble, Nestle, Unilever etc. It's not one way. FAce facts these countries are opening up and since 2 billion people are being freed from the socialist 'heaven' there will be greater supply of technically sound people. Supply and demand. The thigns that can make us even more competitive than we are (and we're 25% of the world GDP and have a near 5% growth -- phenomenal, we add the euqivalent of Australia to our GDP yearly) is by reducing the size of government, not increasing it with tariffs, taxes, regulations, rules, lawyers, politicians etc. etc.

[Cronos]

But we are allowed to market to European citizens

Try telling that to our farmers who can't get past BRussel's farm subsidies. Or tell that to Boeing which has to fight agains the massive government handouts given by the Eurozone ot Airbus (when was the last time a Eurozone official airline bought a Boeing?)

[philetus]

MphasiS, based in Bombay, has 6,000 employees, and its operations are spread across the cities of Bangalore and Pune. More recently, it has expanded to Shanghai, China and Tijuana, Mexico.

Now, a U.S. company can outsource it's customer service to India and customers can end up talking to customer service reps in Tijuana.

[ninenot]

We also market goods to India and China.

Not Harley-Davidsons. Not "Big Three," in ANY measurable fashion.

Not food products.

Got some other ideas?

[Cronos]

Then why can't they speak it properly?

I dunno, I never use help-desks much. Generally I find help desks are useless whether they're in Boston or Bombay.

[EEDUDE]

"Sit tight, my friends. Wait for the housing prices to hit rock bottom."

Good point!

This will happen, and in addition many of those in industry who are now promoting "free enterprise" will lose their jobs as well.

All the "models" that champion free trade assume a free flow of BOTH capital AND labor. This is NOT reality.

[Jim Cane]

Maybe not at the same level as third world countries.

Ahhh, the level is in the details and that's what it'a all about isn't it? Levels of wages, levels of market openness, levels of taxation, levels of regulation. Some countries are less level than others.

[cjshapi]

I just spoke with someone from Siemens yesterday to order parts. Could not recognize the slight accent. Next time I have to call am going to ask what location (geographically) I am speaking with.

[Jim Cane]

You can demonstrate that formerly made-in-Germany products are now made-in-America?

BMWs in Spartanburg, S.C.

[Cronos]

Not Harley-Davidsons. Not "Big Three," in ANY measurable fashion.

Not Harley Davidsons -- their roads are too cr**py for such bikes, but Ford and GM are selling qutie a number of vehicles there. Plus Ford's partner Hyunadi is the number one seller of cars in India and GM is hte number one in China. Both are nearly in the black.

Food? What about Pepsico, it makes profits in both countries. India and China's biggest FMCGs are Unilever and Nestle (EUropean I'll grant you).

[ninenot]

Agreed that US regs/taxes are a part of the problem.

Are you REALLY trying to tell us that Chinese laborers, working for $0.35/hour, are going to buy millions of SUV's in 2004? 2005? Or Palmer-Johnson yachts?

PRC/American companies manufacture, in China, cars, furniture, consumer electronics, tools, plumbing items, and most other household products you and I buy regularly.

Why the hell would Chinese people buy US product? And HOW would they buy it?

You've had a little too much GWB/Minkew/Libertarian KoolAid.

[Cronos]

Not food products.

The eurozones much more restrictive towards our food exports. The Indians and Chinese markets are being prised open by the WTO (yeah, the one everyone likes to b**** about is actually opening markets for US goods) and forced to scrap a lot of regulations. True, they ain't completely open yet, but they are getting there and they are realising that countries that threw themselves open first are now developed nations (Singapore, Chile, Malaysia Etc.)