Posted on 07/28/2003 11:01:09 AM PDT by Willie Green
For education and discussion only. Not for commercial use.
Little by little, sab maglione could feel his job slipping away. He worked for a large insurance firm in northern New Jersey, developing the software it uses to keep track of its agents. But in mid-2001, his employer introduced him to Tata Consultancy Services, India´s largest software company. About 120 Tata employees were brought in to help on a platform-conversion project. Maglione, 44, trained and managed a five-person Tata team. When one of them was named manager, he started to worry. By the end of last year, 70% of the project had been shifted to India and nearly all 20 U.S. workers, including Maglione, were laid off.
Since then, Maglione has been able to find only temporary work in his field, taking a pay cut of nearly 30% from his former salary of $77,000. For a family and mortgage, he says, “that doesn´t pay the bills.” Worried about utility costs, he runs after his two children, 11 and 7, to turn off the lights. And he has considered a new career as a house painter. “It doesn´t require that much skill, and I don´t have to go to school for it,” Maglione says. And houses, at least, can´t be painted from overseas.
Jobs that stay put are becoming a lot harder to find these days. U.S. companies are expected to send 3.3 million jobs overseas in the next 12 years, primarily to India, according to a study by Forrester Research. If you´ve ever called Dell about a sick PC or American Express about an error on your bill, you have already bumped the tip of this “offshore outsourcing” iceberg. The friendly voice that answered your questions was probably a customer-service rep in Bangalore or New Delhi. Those relatively low-skilled jobs were the first to go, starting in 1997.
But more and more of the jobs that are moving abroad today are highly skilled and highly paid—the type that U.S. workers assumed would always remain at home. Instead Maglione is one of thousands of Americans adjusting to the unsettling new reality of work. “If I can get another three years in this industry, I´ll be fortunate,” he says. Businesses are embracing offshore outsourcing in their drive to stay competitive, and almost any company, whether in manufacturing or services, can find some part of its work that can be done off site. By taking advantage of lower wages overseas, U.S. managers believe they can cut their overall costs 25% to 40% while building a more secure, more focused work force in the U.S. Labor leaders—and nonunion workers, who make up most of those being displaced—aren´t buying that rationale. “How can America be competitive in the long run sending over the very best jobs?” asks Marcus Courtney, president of the Seattle-based Washington Alliance of Technology Workers. “I don´t see how that helps the middle class.”
On the other side of the world, though, educated Indian workers are quickly adjusting to their new status as the world´s most sought-after employees. They have never been more confident and optimistic—as Americans usually like to think of themselves. For now, at least, in ways both tangible and emotional, educated Americans and Indians are trading places.
Uma Satheesh, 32, an employee of Wipro, one of India´s leading outsourcing companies, is among her country´s new élite. She manages 38 people who work for Hewlett-Packard´s enterprise-servers group doing maintenance, fixing defects and enhancing the networking software developed by HP for its clients. Her unit includes more than 300 people who work for HP, about 90 of whom were added last November when HP went through a round of cost-cutting.
“We´ve been associated with HP for a long time, so it was an emotional thing,” Satheesh says. “It was kind of a mixed feeling. But that is happening at all the companies, and it´s going to continue.” Satheesh says that five years ago, computer-science graduates had one career option in India: routine, mind-numbing computer programming. Anything more rewarding required emigrating. “Until three years ago, the first preference was to go overseas,” she says. Nowadays her colleagues are interested only in business trips to the U.S. “People are pretty comfortable with the jobs here and the pay here”—not to mention the cars and houses that once seemed out of reach. Employees in her group earn from $5,200 a year to $36,000 for the most experienced managers.
And as American companies have grown more familiar with their Indian outsourcing partners, they have steadily increased the complexity of work they are willing to hand over. Rajeshwari Rangarajan, 28, leads a team of seven Wipro workers enhancing the intranet site on which Lehman Brothers employees manage personal benefits like their 401(k) accounts. “I see myself growing with every project that I do here,” Rangarajan says. “I really don´t have any doubts about the growth of my career.”
Her experience with a leading brokerage will probably help. Financial-services companies in the U.S. are expected to move more than 500,000 jobs overseas in the next five years, according to a survey by management consultant A.T. Kearney, and India is by far the top destination. U.S. banks, insurance firms and mortgage companies have been using outsourcing to handle tech support for years. Now these firms are using Indian workers to handle the business operations—say, assessing loan applications and credit checks—that the technology supports. Kumar Mahadeva, CEO of the thriving outsourcing firm Cognizant, explains the appeal: “It becomes logical for them to say, ‘Hey, you know everything about the way we do claims processing. Why not take a piece of it?´”
The next logical step, says Andrea Bierce, a co-author of the A.T. Kearney study, is jobs that require more complex financial skills such as equity research and analysis or market research for developing new business. Evalueserve, a niche outsourcing company in Delhi, already performs research for patent attorneys and consulting firms in the U.S. In April, J.P. Morgan Chase said it would hire about 40 stock-research analysts in Bombay—about 5% of its total research staff. Novartis employs 40 statisticians in Bombay who process data from the drug company´s clinical research.
But as educated workers in India are finding new opportunities, those in the U.S. feel the doors closing. Last week Bernie Lantz drove 1,400 miles from his home in Plano, Texas, to begin a new life in Utah. He is 58 years old, a bachelor, and had lived in the Dallas area for 24 years. “I´m leaving all my friends,” he says with a sigh. “It´s quite an upheaval.” Lantz used to earn $80,000 a year as a troubleshooter for Sabre, a company based in Southlake, Texas, whose software powers airline-reservations systems. But over the past two years, Sabre has gradually standardized and has centralized its software service. As Sabre began to outsource its internal IT services, Lantz says, he became convinced that jobs like his were becoming endangered. He was laid off in December. (A company spokesman denies that Lantz´s firing was related to outsourcing.)
Discouraged by a depressed job market in Dallas, Lantz realized he would have to do something else. In the fall he will begin teaching computer science at Utah State University in Logan, and in the meantime he has learned a lesson of his own: “Find a job that requires direct hands-on work on site,” Lantz advises. “Anything that can be sent overseas is going to be sent overseas.”
Pat Fluno, 53, of Orlando, Florida, says she, like Maglione, had to train her replacement—a common practice in the domestic outsourcing industry—when her data-processing unit at Germany-based Siemens was outsourced to India´s Tata last year. “It´s extremely insulting,” she says. “The guy´s sitting there doing my old job.” After 10 months of looking, she is working again, but she had to take a $10,000 pay cut.
To protect domestic jobs, U.S. labor activists are pushing to limit the number of H-1B and L-1 visas granted to foreign workers. That would make it harder for offshore companies to have their employees working on site in the U.S. “Those programs were designed for a booming high-tech economy, not a busting high-tech economy,” says Courtney of the Washington Alliance of Technology Workers. Courtney and his allies are starting to get the attention of lawmakers. Several congressional committees have held hearings on the impact of offshore outsourcing on the U.S. economy, and lawmakers in five states have introduced bills that would limit or forbid filling government contracts through offshore outsourcing.
Stephanie Moore, a vice president of Forrester Research, says companies are concerned about the backlash but mainly because of the negative publicity. “The retail industry is very hush-hush about its offshoring,” she says. But within the boardroom, such outsourcing enjoys wide support. In a June survey of 1,000 firms by Gartner Research, 80% said the backlash would have no effect on their plans.
The advantages, businesses say, are just too great to ignore. They begin with cost but don´t end there. Jennifer Cotteleer, vice president of Phase Forward, a Waltham, Massachusetts, company that designs software for measuring clinical-trials data for drug companies, has for the past two years used offshore employees from Cognizant to customize the application for specific drug trials. Lately she has been relying on their expertise to develop even more-tailored programming. “I certainly couldn´t have grown this fast without them,” Cotteleer says. Her company is growing 30% annually, on track to reach $65 million in revenue this year. “What I´ve been able to do in very tough economic times is manage very directly to my margins,” she says. “I´m providing job security for the workers I do have.”
Creative use of offshore outsourcing, says Debashish Sinha of Gartner Research, offers benefits that outweigh the direct loss of jobs. In an economy that has shed 2 million jobs over two years, he contends, the 200,000 that have moved overseas are less significant than the potential for cost savings and strategic growth. But he concedes that “when you´re a laid-off employee who can´t find a job, that´s hard to understand.”
Perhaps some will follow the example of Dick Taggart, 41, of Old Greenwich, Connecticut. After 18 years in financial services, most recently at J.P. Morgan Chase, he now works for Progeon, an affiliate of the Indian outsourcing giant Infosys, as its man on Wall Street. One week out of every six or seven, he takes securities firms to India to show them the savings that are possible. He knows the transition is painful for the workers left behind, but he has seen it before. “It was the same thing when we moved from Wall Street to New Jersey and then to Dallas,” he says. “Guess what? This is next.”
—With reporting by Sean Gregory/New York City
That's it? That's supposed to be the profound question by which free traders fail to respond? It's very easy to describe what the US would be like with a $500B surplus - it would be like Japan.
It would have a very high currency value and wages relative to other countries, which would force it to move its productive capacity offshore to other lower cost counties (Korea/Taiwan/Malaysia/Mexico), including its primary market (US), in order to compete in export trade.
In the home country, people would protest that jobs/investment were moving offshore (true), while the target countries would benefit from the job creation and net capital inflows.
Because its currency value would be so high, the country would experience limited if not a complete absence of tourism, thereby destroying that part of the economy. [Aside: I see zillions of Japanese tourists in CA; I've personally been to many regions in the world, but have no plans on visiting Japan where bottles of beer cost $10.]
Who benefits from this. Certainly not the average American worker. It all goes to the corporation and their leaders siphon it off for their own.
If we are importing more goods than we export, but foreigners are investing the profits and more back here by buying our stocks and bonds, that's a net positive for us in terms of cash flow.
Where does the profit from those stocks and bonds go. To the foreign country. Once again the money in this situation is directed right back to the corporation leaders.
BTW you have not answered my question. All you have tried to do is convince me that trade deficits a) don't exist and b) even if they did exist they would still be good for us.
I totally disagree on both points.
I work for a large corporation and as a blue collar worker I don't see any of the profit put into wages for us. It all goes to the corporate leaders and back into the corporation. While the people at the top never lose any money, those of us who produce the goods get nothing.
You still haven't answered my question. It sounds to me that you think we need trade deficits in order to be profitable.
I suppose I'm just a sucker for a debate, and I'm not detecting an overt troll (though you could be very good, and if so, then I'm owned), so I'll take the bait.
(1) Japan produces a limited number of goods? I mean, where does one start to respond to such a broadly incorrect statement?
(2) We have all the natural resources we need? I mean, again, where does one start to respond to such a broadly incorrect statement (hint: oil)?
Come on, admit it, I'm being trolled, right?
Depends on the location and brand. Try Super 8. As for the degree, I'd look into the ROI on that before wasting my money on a degree.
Ok, I'll answer the question. If I remember, you wanted to know where we would be if we had a $500 surplus instead of a $500 billion deficit. If we had a $500 billion deficit, it would account for about 6 percent of our $8 trillion economy, so I guess we'd be 12 percent better off in the short term. Over the long run we'd lose huge amounts of foreign capital, the benefits of foreign competition, higher prices on both domestic and foreign goods, trade reciprocity as other countries impose tariffs on us, and a monetary crisis as confidence in the dollar erodes. In short, we'd be in the boat Japan is in now.
I totally disagree on both points...
They weren't points, they were facts. You can disagree with facts if you like, I suppose. But that's where democracy gets us in trouble as people vote their instincts and personal interests rather than objectively examining the ramifications of their actions.
I work for a large corporation and as a blue collar worker I don't see any of the profit put into wages for us.
You chose your job. You can choose not to work in that job. Your pay and your circumstances are strictly defined by the demand/supply equilibrium of whatever it is you do. That is an irreversible fact of life for all of us. If the value is not high enough for you, you should change your circumstances. Become self-employed. Work for a better firm. If these corporations are so inefficient then you should be able to make a fortune by competing with them.
By asking me to support trade barriers you are asking me to endure higher prices and economic disaster so that you can make more than you are worth at a job you don't seem to like much, anyway.
No thank you.
This is liberal claptrap. This country was built with imagination, courage, hard work and fortitude. So long as we have those things we can successfully compete. If, instead, we decide we want to make permanent the spare tires around our waists, then we deserve to become the third world country we are becoming.
You want to see the effects of trade barriers combined with socialism? Look at Europe. Double-digit unemployment, massive losses in productivity, and a lazy citizenry that just doesn't care anymore. That's what trade barriers beget, my friend.
The government does have the power to make your life a little more comfortable over the short term. But at what expense? We cannot reverse the global economy by government fiat. We all need to figure out how to profit from the reality of this difficult environment rather than whining about what once was.
Trade barriers and socialism go hand in hand. Why do you think they called it the IRON CUTAIN? Because nothing could get in or out: not goods, not information, not people. Freedom requires free trade.
No, they're going to vote in the next FDR. Which is what none of us on FR want.
This is why we were supposed to have a government limited by the constitution. Unfortunately, tyrrany of the voting majority has become a reality. Just look at California. If we succumb to the temptation to impose trade barriers, God help us.
As far as FDR, he never increased government spending to the degree of GW, so maybe he would be an improvement.
Please name one of them that is economically better off than us. Their trade barriers do them more harm than good. Look at Japan. Look at Europe. They've had trade barriers for decades and their ecomomies are in far worse shape than ours.
Please name one, just one, instance where trade barriers have worked to benefit a national economy over the long term?
Actually, this is true, and a good point. Trade barriers are probably advantageous for countries with high growth rates. They benefited Japan, for example, in the 70's and 80's and they are benefiting China right now. But when the growth levels out, watch out. Japan is suffering the ill-effects of its trade barriers now, just as we suffered ours during the great depression.
Amen, but by the same token, nothing lasts forever, and the cost of freedom is not always what you think it is, specifically, 'stability' and 'certainty' are the opposite of freedom.
We in the IT industry are reliving what our fathers had to go through -- remember that they had great jobs back in the 1950's in factories that actually built things...
the greatest danger is to succumb to the temptation of keeping things static -- for the government will gladly step in and "keep things static" ...forever. this is exactly what has happened in Germany and Europe which is why they are so stagnant and bereft of new ideas.
what is happening in the US is quite troubling - it can be both the dawn of the next big technological thing (perhaps nanotechnology) but it can also be the thin edge of the wedge to a completely determined economy -- which of course is another name for socialism
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