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U.S. jobs: Next stop, India?
MySanAntonio.com ^ | 09/21/2003 12:00 AM | By Sanford Nowlin and Travis E. Poling

Posted on 09/21/2003 7:49:30 PM PDT by 11th_VA

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."

To be sure, the lure of an inexpensive overseas work force is tough to resist.

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."

Aren't there protections for U.S. workers in the laws that govern work visas?

Well, it depends on the visa.

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


TOPICS: Culture/Society; Extended News; Foreign Affairs; News/Current Events; Politics/Elections; US: Texas
KEYWORDS: h1b; nafta; outsourcing
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To: Bryan Resheske
For instance, in CA now employers are soon going to be REQUIRED to offer 6-months 50% PAID Family Leave to employees (the reasons for taking leave is very vague, as well, wide open to interpretation and lawsuits).

There is another bill which will REQUIRE CA businesses with 20+ employees to pay 80% of all employee health care costs and those with 200+ emplyees, to pay this amount for all employees and their family members.

With regs like these, there is no salary level at which Americans can compete, and Indians will be making $50k/yr. before those jobs could ever come home.

41 posted on 09/22/2003 6:08:32 AM PDT by eno_ (Freedom Lite - it's almost worth defending)
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To: kimosabe31
I just got off the phone with the RNC and they say this is a false story. 202-863-8500 and punch 3 (I think) for communications.
42 posted on 09/22/2003 6:22:33 AM PDT by Samizdat
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To: Texaggie79
Hey, Texaggie79 ! Or should I say Texas_Dawg.

How is your work for the Chinese military going these days ?
43 posted on 09/22/2003 6:32:00 AM PDT by Tokhtamish (Free trade ! Cheap Labor ! Cheap Life ! Cheap Flesh !)
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To: Bryan Resheske
Such is the case with India, and forcing American companies to do business in a hostile business environment, such as the USA is increasingly becoming, will do nothing but drive companies out of business.

There is an old adage that says that business is like war except that there is no bloodshed. Following that same logic, American industry was not prepared to fight either WW-II or the Korean Wars. But after an initial phase of catching up to the demands of the battleground, American tactics, ingenuity, and herculean efforts were able to overcome all comers.

American pilots were forced to face the Japanese over China and Burma in aircraft that were not considered world-class in any sort of description. But by playing to superior tactics and utilizing the tools at hand, the American Volunteer Group (AVG, the "Flying Tigers") soundly defeated the very best pilots and aircraft that Japan could offer.

Even after the start of WW-II, the American forces were faced with superior equipment and battle-tested foes from the Pacific to North Africa and England. But we eventually overcame and percevered by our superiority of spirit, will and production capability. But there were unavoidable losses in this learning curve. And the same thing happened again in Korea.

We are in not just an economic war with the rest of the world, but also an ideological one as well. We, as Americans, can overcome because we will not flinch from a collective and individual commitment to the job of doing whatever it takes to win any battle that we are faced with.

Rather than focusing on why we cannot compete with the rest of the world because of any sorts of factors, why not get started winning our battles where we have them now, in the workplace?

Old Patriot

44 posted on 09/22/2003 6:34:04 AM PDT by old patriot
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To: Tokhtamish
How is your work for the Chinese military going these days?

The individuals in the Chinese military are not paid by the government in any way, they are required to do extra jobs in state run factories to earn money for their own support. Also, the individual's family is expected to assist with the military person's upkeep too.

Military service is likened to one's duty to one's family and is considered an honor, not a job. Though it must be said that all Chinese companies are in some ways are also connected to the government in Beijing, even the outlaw ones.

Also, all Chinese public work projects are being built with penal battalions as they are in any communist country. We here in America are more enlightened than that, we sell prison labor out to contractors so that they do not have to pay as much to good hard-working American workers. So where is the protection of American jobs being respected over here? And there is always the illegals we can use if need be.

Old Patriot.

45 posted on 09/22/2003 6:43:52 AM PDT by old patriot
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To: 11th_VA
There is a very simple monkey-wrench that the Congress could throw into this process that actually would make a lot of sense. Prohibit the export of data containing social security numbers and other personal information that can be used to fake identities outside of the United States as a matter of national security.
46 posted on 09/22/2003 10:18:08 AM PDT by Question_Assumptions
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Comment #47 Removed by Moderator

To: Tokhtamish
R U attempting to accuse me of being another poster? I can call in the Admin Mod to clear things up.

And I have yet to find the connection you attempt to draw from me to the chinese military.

We would ALL be happy to see you post some proof here....
48 posted on 09/22/2003 12:34:38 PM PDT by Texaggie79 (Did I say that?)
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To: eno_
Regulatory costs are what is hurting the lower-middle class. Jobs should be cheap to make. Decent small houses should be cheap to build. Good schools should be cheap to run. All these costs are currently too high due to regulation and taxation.

Fix these problems and we will have factories here that are cheap enough to run that China will complain that we are too efficient to fairly compete against. China has enormous costs due to corruption, poor education, and poor infrastructure. They can be beaten even if the Chinese work for free.

That sure seems right to me. We can best prosper at what we do best - individual freedom and enterprise.

49 posted on 09/22/2003 1:33:18 PM PDT by secretagent
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To: Question_Assumptions
This is a great idea that needs to grow legs ... (hopefully in the Republican party, but I won't hold my breath)
50 posted on 09/22/2003 7:36:39 PM PDT by 11th_VA (Ross was right !!!)
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To: eno_
Why is anyone suprised that any rational business will go for the least costly IT they can get?

You are entirely right in your statement about IT, that is why I got completely out of it. This was a house of cards all the time.

Old Patriot

51 posted on 09/23/2003 3:45:48 AM PDT by old patriot
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To: Question_Assumptions
Prohibit the export of data containing social security numbers and other personal information that can be used to fake identities outside of the United States as a matter of national security.

Won't work. You would immediately create a huge business in "data smuggling." Then we would have the Data Enforcement Administration doing no-knock raids on small IT outsourcing shops suspected of data smuggling.

52 posted on 09/23/2003 5:12:14 AM PDT by eno_ (Freedom Lite - it's almost worth defending)
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To: eno_
If Data Smuggling has a suitably harsh penalty, then I doubt it will happen much. I'm sure the NSA already has a pretty good grasp of what's going into and out of the country, anyway. What it would do is deter the bigger players such as insurance companies and credit card firms from outsourcing not only their IT but their customer service centers to places like India.
53 posted on 09/23/2003 7:51:01 AM PDT by Question_Assumptions
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To: Question_Assumptions
So you are prepared to go for a total surveillance state with laws against encryption (oh wait, that's already in Patriot II) just to enable protectionist legislation to try to save IT jobs?

Kewl. Freedom is pretty cheap these days.
54 posted on 09/23/2003 8:31:08 AM PDT by eno_ (Freedom Lite - it's almost worth defending)
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To: eno_
So you are prepared to go for a total surveillance state with laws against encryption (oh wait, that's already in Patriot II) just to enable protectionist legislation to try to save IT jobs? Kewl. Freedom is pretty cheap these days.

That's what I love about debate on the Internet. Every issue is reduced to two options -- all or nothing. No need to bother with the complexities of finding a functional middle ground.

Why is it that with laws against theft, rape, and murder, we accept less than 100% perfect enforcment? Why is it that we don't have a "total surveillance state" to stop theft, rape, and murder to bring enforcement up to 100%? And why is it that few call for an end to laws against theft, rape, and murder on the grounds that those laws are not 100% effective or that better enforcement of these laws may lead to a "total surveillance state"? Could it be that the real world is more complex than simplistic excluded middle arguments allow for?

55 posted on 09/23/2003 8:49:38 AM PDT by Question_Assumptions
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To: Question_Assumptions
Your analogies are false.

In data smuggling, there is no plausible probable cause that could be generated other than through comprehensive surveillance. Whereas, in most murder cases, you have a dead body, a weapon, a motive, etc. If I go to the police and say "Question_Assumptions is a murderer!" they will, of course, ask me where to find the corpse, or if I can corroborate my statements in any way.

Standards of probable cause are eroded by bad laws that cannot be enforced without a system of domestic spying. A data transfer law would be disasterous in this regard. For example, if I picked up the phone and told the police "Question_Assumptions is growing pot in his closet!" they would have to reply on my dubious assertion and break down your door with machineguns at the ready in order to find out.
56 posted on 09/23/2003 10:28:03 AM PDT by eno_ (Freedom Lite - it's almost worth defending)
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To: Ciexyz
"Why should I care about these $60,000/yr jobs being lost?"

That $60K job helped keep the economy out of recessionary waters, by helping it expand. That engineer, software writer, or network analyst who's job went to Bombay used to take his salary to the grocery store, to the gas station, the dry cleaners, to the barber shop, to FedEx, to the sporting goods store, etc. Each dollar he spent went into someone else's pocket, who in turn took it to the grocery store, the gas station, etc., and so on. That demand for more food, gas, cars, computers, rollerblade wheels, etc. meant more jobs would be needed to produce, sell, transport, stock and retail those goods and services. From there, more people would be employed to keep those new cars running, to fill out insurance paperwork when those cars are involved in traffic accidents, make new tires to go on the car, keep the XM satellites up and running so the driver could listen to XM radio when he drove, etc. I was once told in Econ 150 in college that each dollar earned in the private sector is respent seven times. So when that $60K is removed from the American economy, it's actually $420K. Multiply that thousands of times, and is it any wonder the economy has been so bad for so long?

Each of those 60K dollars were also taxed, which provided the government funds for defending the nation, building new roads, keeping CommieLib NPR on the air, and keeping Social Security flowing. If you don't understand the economic impact of losing well-paying jobs in any other way, this last example should hit home with you.

Scouts Out! Cavalry Ho!

57 posted on 09/23/2003 11:02:56 AM PDT by wku man (Bucs 31, Atlanta 10...oh how sweet it is!)
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To: eno_
In data smuggling, there is no plausible probable cause that could be generated other than through comprehensive surveillance.

Sure there would be. If a customer service center in India asks you for your SSN when processing a claim, you've got your probable cause. Certain industries simply cannot operate customer service centers abroad without SSN and other personal information. No large company would be able to do this. Would it catch every small infringement? No. But it would catch the biggies. And making it a national security issue could help encourage people to turn in their own employers.

Whereas, in most murder cases, you have a dead body, a weapon, a motive, etc. If I go to the police and say "Question_Assumptions is a murderer!" they will, of course, ask me where to find the corpse, or if I can corroborate my statements in any way.

And if you tell me that Insurance Company X has sent my personal information overseas, I simply need to perform a customer service call to them and demonstrate that the call center is overseas to prove it.

Standards of probable cause are eroded by bad laws that cannot be enforced without a system of domestic spying.

Using your criteria, plenty of laws could not be enforced without a "system of domestic spying". How do you think they capture organized crime figures through surveillance without putting every US citizen under surveillance?

A data transfer law would be disasterous in this regard. For example, if I picked up the phone and told the police "Question_Assumptions is growing pot in his closet!" they would have to reply on my dubious assertion and break down your door with machineguns at the ready in order to find out.

This always comes back to drugs, doesn't it? There is a thing called "probable cause" and a "warrant". Most warrants are not issued with broken down doors and machine guns. And, ideally, you'd need to sign a complaint and could be held liable if they didn't find any evidence of pot.

You should note that this problem doesn't exist simply for drugs and information. Suppose I found out that you were holding a woman as a sex slave in your house against her will and told the police. Rather than question me about my evidence and attempt to get a warrant should they simply ignore the complaint? Should we not make it illegal to keep a person against their will in your home as a sex slave simply because there is no way to inforce it except through tips, warrants, and searches?

58 posted on 09/23/2003 11:04:33 AM PDT by Question_Assumptions
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To: Question_Assumptions
And, ideally, you'd need to sign a complaint and could be held liable if they didn't find any evidence of pot. Well now, if only our standards of probable cause were even 5% this good in practice. In practice, we have dogs trained to indicate on the handler's signal. Voila, probable cause.

And you also don't need to export the computers to do coding and operate call centers overseas. Most CRM systems are now Web-based, and many are run by ASPs in off-site facilities anyway, and many of those are geographically distributed for disaster-recovery reasons. Servers, call center agents, etc. can all be anywhere on the planet at any moment in time.

By your plan, you would be making access to a Web-based extranet from outside the U.S. a crime.

59 posted on 09/23/2003 12:54:26 PM PDT by eno_ (Freedom Lite - it's almost worth defending)
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To: eno_
By your plan, you would be making access to a Web-based extranet from outside the U.S. a crime.

Exempt people from viewing their own data. I can think of a handful of other exemptions. Not too difficult to add. My point was largely that the only way they will stop outsourcing to India and elsewhere it to make it a national security issue. To a degree, I think it is. A firm in India with access to names, addresses, and social security numbers could trivially select out a set of US citizens with Indian names and use that as the basis for fake passports. Similarly, they could select out Indians with valid US visas and forge Indian passports, expecially if they have sufficient real-time human resources information to figure out when they are taking their three weeks of vacation to visit family in India.

60 posted on 09/23/2003 1:26:35 PM PDT by Question_Assumptions
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