, Gary Davidson didn't think much about India. Posted on 12/15/2002 12:04:03 PM PST by RnMomof7
By John Pletz
October 22, 2002
When he still had a job at Dell Computer Corp. (Nasdaq: DELL) , Gary Davidson didn't think much about India.
But after he and 5,700 other Dell workers in Central Texas lost their jobs last year, about the same time the company was opening a call center in India, Davidson and others reached the inescapable conclusion that high-tech, like other industries before it, was increasingly looking to cheaper labor overseas.
While companies such as Dell, Intel Corp. (Nasdaq: INTC) and Computer Sciences Corp. have been cutting jobs by the thousands in the United States, they've been expanding in India, Russia and China. Other companies with Central Texas ties that have back-office and design functions overseas include IBM Corp. (NYSE: IBM) and Motorola Inc (NYSE: MOT) .
"We talked a lot about it after the layoffs," said Davidson, an IT manager who was laid off in February 2001. "It was a big thing on people's minds, that the expansion should be happening here."
High tech is following a well-worn path to maturity, moving to cheaper markets overseas to shore up profits as prices come down. But high tech is different from textiles and automobiles in one key aspect: Many of the jobs that are moving offshore aren't low-skilled manufacturing positions. Many are skilled, white-collar jobs, such as technical support 
, software development and semiconductor design.
"We've liked to imagine we had such a skill advantage over the rest of the world and that the kind of jobs that go offshore would be low-skill," said Lori Taylor, an economist with the Federal Reserve in Dallas. "So it's a bit of a jolt to realize that all kinds of industries operate in the world market, and all types of workers are exposed to global competition. We're not the only ones with a highly skilled labor force in the world."
During the past two years, 336,000 high-tech jobs have been eliminated nationwide, including more than 20,000 in Central Texas.
Dell's headcount has grown dramatically in Bangalore, India, while remaining flat in Central Texas. In Bangalore, Dell now employs more than 1,000 people, up from 180 in June 2001.
"India can become a major part of Dell's operations and a major source of the human capital that Dell takes on as a company," Michael Dell, the computer maker's chairman and chief executive, told Indian media during a trip to the country this year.
The economics are simple: A call-center employee in India makes 30 percent to 60 percent less than an American worker gets for the same work.
"We've found if you've got an outsourcer in Dubuque, well, a Dell-badged person in Bangalore is less expensive and does a better job," said Dell president and chief operating officer Kevin Rollins. CSC also has discovered India. Since early 2000, CSC's employment in Austin has dropped by one-third to 800 workers. At the same time, CSC has been building its Indian operations. The company now has about 400 workers in India, where it had none in 2001. Employment is expected to double to 800 by early next year, analysts say.
After Intel announced plans a few months ago to cut 4,000 jobs in the United States, the company said it planned to add 200 workers in India, eventually tripling the number of engineers there to more than 3,000. The company has scrapped plans to build a new design center in downtown Austin, and employment here remains flat at about 620.
India's technology industry, especially its call centers, has been growing dramatically for nearly a decade. General Electric Co. (NYSE: GE) was among the first U.S. companies to open facilities in India. Others who have followed include IBM Corp., Motorola Inc., Nortel (NYSE: NT) Networks, Reebok, Sony, American Express (NYSE: AXP) and HSBC. America Online is expected to open one of the country's largest call centers -- with more than 3,000 workers -- in Bangalore.
The value of technology products and services exported from India grew from just $1 billion in 1997 to $6.3 billion last year, according to the National Association of Software and Service Companies, or Nasscom, an Indian trade group.
India is attractive because of its large population of skilled technical workers who are fluent in English, not to mention a multibillion-dollar investment in communications infrastructure by the Indian government, said Julie Giera, an analyst with Giga Information Group.
India is just one region that's benefiting from the pursuit of cheap labor. Russia, Poland, China, even Africa have seen U.S. employers come calling.
Dell's growth in the past year illustrates the trend. Its worldwide employment as of Aug. 2 was up 2,000 from a year ago to 36,000. Employment in Central Texas remained unchanged at 16,000.
"Most of the additions have been international," Rollins said. "It's predominantly in Asia. There's parts of Eastern Europe. We have development capabilities in China, India, Brazil and Russia. The headcount has come from two things: outsourcing that's been moved inside Dell and growth in international markets."
Craig Barrett, Intel's chief executive, recently announce plans to triple the company's employment at a design center in Russia and a chip fabrication plant in China.
Companies now seem to be focused more on shifting work overseas than bringing foreign workers to the United States under the H-1B visa program. During the peak of the tech boom, when employees were in high demand and short supply, Congress expanded the H-1B program. It tripled the number of employees companies could hire on visas annually from 65,000 to 195,000.
But data from the Immigration and Naturalization Service said the number of H-1B visas granted in the nine months between Oct. 1, 2001, and June 30, 2002, fell by more than half to 60,500.
The move to cheaper markets ripples far beyond Central Texas and the United States. In the past five years, Singapore estimates it has lost more than 40,000 jobs in the disk-drive, computer and electronic-appliance sectors to China and other parts of Asia where labor is less expensive.
The latest outsourcing frontier is Africa. In 2000, Affiliated Computer Services (NYSE: ACS) , a Dallas-based company that processes insurance forms for Aetna, opened the first data-processing center in Accra, the capital of Ghana. Workers are paid for each form processed, earning between $1 and $3 a day.
There's no sign that offshore outsourcing will slow down, Giera said. She estimates the industry will grow 20 percent to 28 percent in 2003. Nasscom and Deutsche Bank predict that Indian IT service exports will grow 20 percent annually in the next four years, nearly tripling by 2006 to $18 billion.
Overseas expansion by tech companies has been under way for several years, starting in Ireland and Canada. But it wasn't until U.S. workers started getting pink slips that they began to complain to the Equal Employment Opportunity Commission, the courts and labor groups such as the AFL-CIO.
"In those boom years in the '90s, when they were getting stock options and signing bonuses, there was nothing we could offer them they didn't have," said Ed Sills, spokesman for the Texas AFL-CIO in Austin, an umbrella group for various unions. "Now that job security is an issue, there may be something we could offer them they don't have. We're sending the signal that we are available."
But unions have almost no representation in high tech, and it's unlikely that legions of tech workers will trade their stock options for union cards anytime soon.
"Periodically we hear from workers in tech industries about forming a union," Sills said. "But for anything to happen, it would have to be more than a few stray inquiries."
The Teamsters union in Nashville initially attempted to organize workers at Dell when the company opened its plant there in 1999. But the effort died quickly, and Teamsters officials in Nashville say they haven't heard much from employees since then. Nashville was largely unaffected by Dell's cutbacks.
Losing jobs to cheaper workers overseas is a new phenomenon for high-tech workers, many of whom thought until recently they had found an industry safe from the economic shocks that have hurt others in the past. The cutbacks have produced a backlash by some workers.
"The economy's bad, and that's a big reason why," said Peggy Cripps, who assembled computers at Dell's manufacturing plant in Nashville for about two years before quitting in early 2001 after being turned down for a promotion. "Everything eventually will go overseas. That means we won't have anything. We'll go to McDonald's (NYSE: MCD) and flip burgers for $7 an hour with no benefits."
Companies are sensitive to the appearance of exporting U.S. jobs overseas.
Dell says it didn't export many jobs directly to India, with the exception of "a small number" of online tech-support positions, said spokeswoman Cathie Hargett. Most of the jobs in India were tech-support positions that Dell used to contract out to companies in the United States, she said.
"The notion that we're not doing something here at the expense of what's happening overseas is just not accurate," she said. "To our point of view, the jobs we're creating in India are new jobs. They aren't replacing jobs here."
CSC addressed the issue in an August memo announcing another round of layoffs in the financial-services division, which is based in Austin.
"Many of you may ask if your job is being replaced by the use of offshore resources," wrote division President Jim Cook. "We have added offshore resources in order to win business that requires this element in our solution, business we could not have won otherwise."
That's little comfort to laid-off workers, said Taylor of the Federal Reserve.
"It doesn't matter from the perspective of an employee that you lost your job to the fall of the Berlin Wall; you still lost your job," she said. "It's almost a red herring, where jobs have gone. The fact is, they are gone."
a Dallas-based company that processes insurance forms for Aetna, opened the first data-processing center in Accra, the capital of Ghana. Workers are paid for each form processed, earning between $1 and $3 a day.
How long until this system is hacked and your medical records are spread worldwide?
Do you think HSBC cares how difficult it is for you?
The person that told me this today says they even give them news and cultural lessons along with with English classes so they can have "small talk " with you
Will you work for $3 a day?
In 50 years there will be only two classes left. The very rich and the rest of us peasants.
Yea... you end up correcting their junk.
My multi-media division was getting all its work sent to India.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.