Dozen Outsourcing Articles
Dozen Outsourcing Articles
Date: Thursday, August 07, 2003 11:08 AM
JOB DESTRUCTION NEWSLETTER
www.ZaZona.com
Article 1:
http://www.businessweek.com:/print/magazine/content/03_31/b3844132_mz033.htm?mz
Outsourcing: Make Way for China - It's fast becoming an important hub
for IT services. Move over, India
Article 2:
http://www.philly.com/mld/philly/business/6466311.htm
Maytag to add a third Mexican plant
Article 3:
http://www.internalmemos.com:8080/memos/memodetails.php?memo_id=1757
BellSouth - Project Horizon
Article 4:
http://www.theinquirer.net/?article=10881
HP Indian outsourcing meets grief as Aussie support staff re-hired
Article 5:
http://www.projo.com/business/content/projo_20030803_off03x.68c8d.html
Job flight - U.S. businesses transferring work to foreign sites
Article 6:
http://media.guardian.co.uk/Print/0,3858,4726840,00.html
Jobs under threat as Reuters looks to India
Article 7:
http://chestertontribune.com/Business/visclosky_and_bayh_still_working.htm
Smartbomb component maker Magnequench moving to China
Article 8:
http://sify.com/finance/fullstory.php?id=13207065
UTStarcom to invest $25m in India
Article 9:
http://www.hinduonnet.com/bline/stories/2003072402150100.htm
UK's ebookers To Add 1,500 Staff In India
Article 10:
http://makeashorterlink.com/?Y4D022955
UK firms will continue to outsource jobs to India: High Commissioner
Original link wrapped to 2 lines:
http://www.newindpress.com/Newsitems.asp?ID=IEH20030721074801&Title=Top+Stories&rLink=0
Article 11:
http://www.freelancestar.com/News/FLS/2003/062003/06172003/1006147
Capital One reaps profits here, but takes jobs overseas
Article 12:
http://www.abs-cbnnews.com/abs_news_body.asp?section=Business&oid=28218
American firms look at Phillipines as global outsourcing hub
http://www.businessweek.com:/print/magazine/content/03_31/b3844132_mz033.htm?mz
AUGUST 4, 2003
INTERNATIONAL -- ASIAN BUSINESS
Outsourcing: Make Way for China
It's fast becoming an important hub for IT services. Move over, India
If you visit Tom Reilly's office in Guangzhou, you may have trouble
hearing above all the construction noise. Workers at the Cap Gemini
Ernst & Young facility in the southern Chinese city hammer away even as
employees tap at their computer keyboards. Since it began in 2001 in a
tiny, windowless room, the Cap Gemini center has grown to employ 120
people doing everything from entering sales data for a Hong Kong
convenience-store chain to processing cargo information for a Norwegian
shipping line. And Reilly expects the staff to reach 500 within 18
months. "It's the smell of progress," he says, sniffing the fumes of
wet paint permeating the office.
That progress is starting to spread across China. After emerging as the
world's hottest manufacturing hub, China is joining English-speaking
countries such as India and the Philippines as a key destination for
outsourced service jobs. Near Guangzhou's airport, a call center run by
Hong Kong's PacificNet Inc. employs 2,000 Chinese manning the phones
for telecom and insurance companies in Hong Kong, Taiwan, and China.
PacificNet plans to have a staff of 5,000 by the end of next year.
Accenture Ltd. has opened a software-development unit in the northern
coastal city of Dalian that will soon boast 1,000 staff. And at its new
center in Shanghai, BearingPoint Inc. (formerly KPMG Consulting) aims
to quadruple its staff, to 600, by yearend 2004.
So far, China's role is largely focused on providing back-office
support for financial service, telecom, software, and retail companies
in neighboring Asian countries. Operators can easily talk to people in
Hong Kong and Taiwan in their own languages. China also has plenty of
Japanese and Korean speakers. But it is making inroads as an
outsourcing base for English-speaking nations, a business dominated by
India, because of the influx of Western multinationals who now are
bringing back-office work to China. ConnectITChina, a Shanghai
consultancy, estimates China's software outsourcing revenue will more
than double, to $5 billion, by 2005. Gartner Inc. predicts that by 2007
China will pull in $27 billion for IT services, including call centers
and back-office work, matching India.
China's ascent could inflame an already heated debate in the U.S. about
companies sending work abroad. With the U.S. economy still struggling
and the jobless rate at 6.4%, lawmakers in several states want to make
it harder for governments to contract work to low-wage countries. India
is the center of attention. But China, which many Americans view as a
political and economic rival, is likely to be a bigger lightning rod
for outsourcing foes.
The economic forces driving work to China are powerful, though. There
is huge demand inside China for skilled service workers to meet the
needs of both the country's own booming economy and of the thousands of
multinationals that have set up manufacturing bases on the mainland.
Many companies in Greater China are, for instance, turning to outside
providers for information technology needs rather than doing the work
in-house. "There's massive need for data entry from banks, insurance
companies, and hospitals," says PacificNet CEO Tony C.W. Tong.
Operators at Tong's call center start at salaries of $150 per month; in
Hong Kong they average $1,300. PacificNet serves Chinese cellular
carriers and is mulling a Dalian office for Japanese clients.
Chinese officials aim to give this burgeoning industry a push, by
forging partnerships with multinationals to train information
technology engineers. For example, IBM has signed deals to train
100,000 software specialists in various Chinese cities over three
years. Indian computer-training companies are teaching 20,000 students
in more than 100 centers across China. Gartner figures China needs 4
million more IT professionals to meet future demand.
Foreign IT services companies also are using China as a base for
winning business in Asia. One reason Accenture picked Dalian for its
rapidly expanding software-development office, which opened in
mid-March, is that the city is a major hub for Japanese and Korean
multinationals. When it comes to working in those languages, says
Accenture China manager Gong Li, "it's much easier for our people in
China" than for those in India or the Philippines.
China's low-cost talent is another edge. Although India is a powerhouse
in high-end IT services, latecomers these days must pay higher wages
for experienced engineers. That's one reason BearingPoint chose
Shanghai for its new software-development center, says the company's
Greater China President, Bryan Huang. BearingPoint pays $500 a month
for engineers in Shanghai. In India, he says, the pay would be $700,
and $4,000 in the U.S. "Where can we sustain our cost advantage for the
next 40 years?" Huang asks. "We're convinced that China is the only
place."
American manufacturing companies are discovering that cost advantage,
too. Sweetheart Cup Co., an Owings Mills (Md.) maker of plastic plates,
cups, and utensils for customers such as McDonald's and Wendy's
International, hired consultancy E5 Systems of Waltham, Mass., to
develop a system to track production processes at its 14 North American
factories. E5 is doing the job in Shenzhen, where it has a joint
venture. Sweetheart figures it saves 40% by sourcing in China rather
than India. In a business where pennies matter, "cost is a
consideration in everything we do," says John McGregor, Sweetheart's
chief information officer.
Several big Indian IT-services companies are determined to tap China
for their own advantage. In fact, Gartner predicts Indian firms will
eventually control 40% of China's IT services exports. Satyam Computer
Services Ltd., India's fourth-biggest supplier, set up a 27-person
development center in Shanghai last year with plans to expand. Satyam
Asia-Pacific Chief Virender Aggarwal says his sales team is telling him
that China presents more opportunity than any other country, mainly
from multinationals that need reliable software support for their
expanding mainland businesses. India's Tata Consultancy Services has a
100-person software center in Hangzhou, near Shanghai. Midsize Indian
players are moving to China, too. In February, iGATE Global Solutions,
a $90 million Bangalore software provider, set up in the eastern city
of Wuxi. So did $91 million MphasiS Group, which in October bought a
50-employee Chinese software developer in Shanghai. So far, 14 Indian
companies have set up shop in China, says India's National Association
of Software & Service Companies.
No big Chinese rivals for the multinational outsourcing firms have yet
emerged -- although that may soon change. Piracy fears, relatively poor
English, and a lack of high-level international quality certification
have held Chinese upstarts back. But with training and experience, such
obstacles are surmountable. And expertise in written and spoken Asian
languages will remain an edge. By honing skills in burgeoning markets
close to home, China's IT outsourcing industry is sure to get up to
speed fast.
By Bruce Einhorn in Guangzhou, with Manjeet Kripalani in Bombay
http://www.philly.com/mld/philly/business/6466311.htm
Posted on Wed, Aug. 06, 2003
Maytag to add a third Mexican plant
The appliance-maker, an American classic, has drawn ire for moving jobs
out of the country.
By David Pitt
Associated Press
DES MOINES, Iowa - First, Maytag Corp. moved two parts plants to
Mexico; now, a refrigerator plant is headed there.
The relocations to Reynosa, Mexico, all announced in the last two
years, have intensified fears that Maytag might export even more jobs
to countries with cheap labor.
Maytag, of Newton, Iowa, which grew from a small-town farm equipment
manufacturer to the third-largest appliance manufacturer in North
America, is drawing bitter criticism for moving jobs outside the United
States.
Chief executive officer Ralph Hake, who joined the company in June
2001, is getting much of the blame.
"Maytag has always sold their name as the American classic," said Sue
Wilson, a former Maytag employee who now works for the International
Association of Machinists and Aerospace Workers, one of the unions that
represents Maytag workers. "Maybe Hake doesn't understand the heritage
he's inherited, but the board of directors certainly understands that,
and, to me, they've sold the soul of their name to the lowest bidder."
Hake, who declined to be interviewed for this article, told analysts in
a conference call last month that Maytag had no plans to shut more U.S.
factories. He stressed that most of Maytag's large appliances continued
to be assembled in the United States, although some parts were made
offshore.
And even with the Reynosa plant in operation next summer, about 90
percent of Maytag's refrigerators will still be made in the United
States, Hake said.
"Our goal is to grow enough to have all our plants running well," he
said. "I do not anticipate multiple plant shutdowns or restructuring
here."
Keeping production local may be difficult, however.
The last two years have been challenging for appliance manufacturers
across the industry as consumers have become increasingly
cost-conscious - and less concerned about whether a product is
manufactured in the United States or abroad.
"Particularly in this environment, people are really focused on value
right now," said David MacGregor, an analyst at Longbow Research, who
said he believes that Hake is doing a good job. "If consumers can
realize significantly and tangibly better value, even if it is made in
Mexico, the priority is on value."
Lower prices mean less profitability unless companies such as Maytag
can find ways to cut costs. On July 15, Maytag said second-quarter
earnings dropped 63 percent to $25.2 million from $68 million in last
year's second quarter.
Since January, Maytag has cut 510 jobs from its workforce of 20,200.
That followed more than 300 cuts in 2001.
Maytag has two parts factories already in Reynosa, and is preparing to
move some refrigerator manufacturing operations to a
160,000-square-foot plant being built on 62 acres recently purchased in
a Reynosa industrial park.
Mexico has become a popular destination for manufacturers. About 204
companies, including Black & Decker Corp. and Whirlpool Corp., one of
Maytag's biggest rivals, employ 70,000 workers in the Reynosa area.
There are about 10 industrial parks in Reynosa filled with
"maquiladoras" - companies from outside Mexico that take advantage of
special government programs offering low taxes, little regulation, and
low-cost labor.
Workers in the Mexican industrial plants earn from $2.60 to $3 an hour,
including benefits. The average wage at the Galesburg, Ill., plant,
site of the current refrigerator operations, is about $15 an hour.
"Maytag fits the type of company that tends to locate production
facilities more with an eye toward reducing the cost of producing the
product," said Stuart S. Rosenthal, an economics professor at Syracuse
University. "If the production cost is an especially important part of
the cost of doing business, and if wage rates are sufficiently low in
other places, that's a pretty attractive draw."
Wilson started her new union job the day Maytag announced it was
planning to close the Galesburg plant, despite the union's efforts to
keep it open.
"I was involved in the negotiations of a contract six months before the
announced closing. I sat there as they gutted our contract, things they
said they needed to stay," she said. "Provisions that had been there
for 45 years, things that people had gone on strikes and fought hard
for. We had to sit there and watch all that stripped away."
For now, the union plans to make Maytag the "poster child" of a
campaign to anger consumers by painting corporate officials as greedy,
she said.
"On the products they bring back, they do not pass that lower cost of
the labor on to the consumer," she said. "They still sell a
refrigerator for $2,000. What's in this for the consumer?"
http://www.internalmemos.com:8080/memos/memodetails.php?memo_id=1757
BellSouth
Project Horizon
Project Horizon
The purpose of Project Horizon is to reduce costs associated with the
ongoing maintenance and enhancement of IT applications. In order to
accomplish this goal, BellSouth will utilize offshore resources and
take advantage of the differential cost savings. BellSouth will
accomplish this while having the transition transparent to the
customers and applicable Business Units. While utilizing offshore
resources, BellSouth will ensure that current service levels are
maintained.
This cost savings initiative will enable BellSouth to reduce IT
expenditures and save an estimated $275 million over a 5-year timeframe
(2003-2007.)
India was chosen as the initial pilot site for a variety of reasons
including: access to highly skilled, low cost resources; more than 60%
of companies with best in class process maturity (CMM level 5) are
located in India; and more than 40% of Fortune 500 companies utilize
India for their application support. Our IT Strategic Partner,
Accenture, currently has over 800 employees and supports more than 40
clients in India (Oracle, Nortel, Verizon, Lucent, Dow, Dupont, Bank of
America, et. al.)
Various initiatives are being implemented to ensure a high level of
data and physical security.
The initial phase of the program is a 4 1/2 month pilot (4/16/03 -
9/01/03) in Bangalore, India. The pilot includes 17 Accenture resources
(FTPs) delivering maintenance and enhancement services for applications
in a Non-U.S. location. After successful completion of the pilot,
BellSouth plans to additionally transition 634 FTPs offshore
continuously through the year 2007. The applications selected in each
wave of transition reflect a variety of business units and
technologies.
Project Horizon Frequently Asked Questions
What is Project Horizon?
BellSouth is facing the challenge to reduce expenses across the board.
Project Horizon is the program whereby BellSouth will utilize resources
offshore to provide IT maintenance and development work on their
applications. This program will allow BellSouth to reduce IT costs
while still maintaining the same workload and service levels.
Why are we sending work to a non-US location?
BellSouth and Accenture reviewed many different options to reduce
BellSouth's information technology costs. One of the options selected
for further investigation was the movement of some development and
support work to a non-U. S. Accenture delivery center. The next step in
reviewing this option is a pilot, which will occur from 4/16/03 -
9/15/03.
What type of savings is BellSouth expecting?
This cost savings initiative will enable BellSouth to reduce IT
expenses and save 45% - 70% in outsourcing costs which translates into
an estimated savings of $275 million over 5 years (2003-2007).
What type of offshore resources will we be using? Accenture is able to
employ high caliber resources and depending on the specific job
requisition, will determine the level of resource engaged. India has a
significant number of high quality colleges and universities, which
allows Accenture to pool from highly qualified candidates.
What will happen to the people affected by the transition?
Not all roles will transition to the Bangalore Delivery Center.
However, as roles do transition Accenture will move people to other
opportunities within their organization based on business need and
skills.
What offshore location was chosen?
The following six countries were evaluated as part of the selection
process: India, Spain, Canada, Philippines, Brazil, and Australia.
BellSouth chose India because of the high quality and low cost of
technical resources, a stable infrastructure with redundant
communication links built to international standards, and the country's
pro-U.S. business environment. India is also home to 62 of the 91 CMM
Level 5 (best in class) organizations (globally.) The Accenture
resources supporting BellSouth will be located in Bangalore, India.
Given the current geo-political climate is it wise to move any work
offshore?
In order to mitigate risks associated with moving work offshore,
BellSouth and Accenture reviewed the security, safety, government
stability, disaster recovery capabilities, and infrastructure of the
countries. Based on this assessment, offshoring was found to be a
viable alternative. In addition, we are establishing processes and
procedures to further mitigate risk.
What about the tensions between India and Pakistan?
Current tension between India and Pakistan is mostly isolated in the
Kashmir region, over 1,000 miles away from the Bangalore Delivery
Center. India is the world's largest democracy, where numerous Fortune
500 companies have had operations for years. Accenture has two offices
in India that were established in 1988.
Due to the conflict in the Middle East, how safe is the Bangalore,
India facility?
Bangalore is located in the south central area of India. The primary
threat to India is along its border with Pakistan. Bangalore is over
1,000 miles away from this border.
What about the security of BellSouth information in a Non US location?
BellSouth conducted a security site visit to India. We concluded that
the India Delivery Center's physical security meets BellSouth
requirements. Accenture employee background checks are conducted based
on their policy and procedures. The offshore communication network
access has a higher level of security than our on-shore network access.
Where will the BellSouth data reside?
All BellSouth data will stay in the USA. A 'no download' policy of data
is enforced via additional security components built into the
communication infrastructure for India.
What is the disaster recovery plan for the work that moves to India?
The India Delivery Center has a full disaster recovery plan. BellSouth
and Accenture reviewed and tailored the plan to comply with BellSouth
security policies and standards.
Will we be using the same tools and processes or will we roll out new
ones to accommodate the facility?
We will use standard processes and tools during the pilot. However, a
higher degree of consistency and some modification are required to
ensure clear communications.
What is the scope of the pilot?
The pilot involves transitioning 17 development and support roles from
three applications to the Bangalore Delivery Center (BDC). The pilot
covers a period of 5 months with the following goals: (1) proving
development and support in a non-U.S. location will be transparent to
the BellSouth Business Units, (2) measuring the resources required to
ensure a smooth transition of the work to the new location, and (3)
measuring the savings to BellSouth. Our current business case suggests
moving 1/3-1/2 of our IT application work offshore. This equates to
600-900 positions over the next four years.
If the pilot is successful how many more jobs will be moving offshore?
BellSouth and Accenture will work together to determine the long-term
strategy and pace of moving forward with additional non-U.S. work after
reviewing the results of the pilot.
What criteria were used for selecting the pilot applications?
A formal process has been used to rank applications based on eleven
categories (including headcount, complexity, stability, and impact to
the BellSouth business customer). Evaluation of the results by the
Accenture Tower Leads and the BellSouth CIO team resulted in the
selection of the three pilot applications: OSPCM (Network), BellSouth
Works (Customer Markets) and Management Accounting (Shared Services.)
How will we communicate across so many time zones?
As we do today, we will employ a number of mechanisms to communicate.
While face-to-face meetings are not feasible for obvious reasons,
conference calls, video conferencing, e-mail, and other technologies
will be used depending on the type of interaction required.
What is the time difference between Birmingham, Atlanta, and the India
Delivery Center?
The time at the Ban galore Delivery Centre in Standard Time is 10.5
hours ahead of Atlanta, 11.5 hours ahead of Birmingham. During Daylight
Savings Time, the time is 9.5 hours ahead of Atlanta, 10.5 hours ahead
of Birmingham.
http://www.theinquirer.net/?article=10881
HP Indian outsourcing meets grief as Aussie support staff re-hired
Outsourcing tales of our day
By Charlie Demerjian: Wednesday 06 August 2003, 08:34
A FEW MONTHS back the beancounters at HP had a plan which meant that
support would be outsourced and the firm would save dollars, lots of
dollars.
But today we can report that it's not all roses, roses on the HP
outsourcing front, and there's thorns in the thicket the firm's
created.
HP Australia, and the support division bore the brunt of this plan, and
in May, lots of HP support staff were told they were no longer
necessary. The replacements that were slated, all happened to live in
the same area in India, and by chance, worked much cheaper than the
Aussies did. Brilliant plan, HP.
Unfortunately, reality has this nasty way of intruding on the best of
paper plans, and it intruded big time here. No sooner had HP told
everyone in several support centers that they were redundant, or
retrenched as HP spin calls it, than the problems started. A friendly
almost ex-HP staffer wanted to keep in touch with his friends, so he
made a web site to keep in touch with his fellow soon to be ex-staffers
(See here). That nice gesture was given the big thumbs up by HP, in
fact they were so happy, that they canned him early, and escorted him
out of the building. Parading people around by security guards is
generally a signal to others, and that signal was received loud and
clear.
As you can expect, for that remaining week or so, morale plummeted from
its already low depths, and the site's hits went through the roof. Sure
enough, days later, the call center phones still rung, but they were
answered a few thousand miles away, with a decidedly curter accent.
Then something funny happened. A few weeks later, the call centers down
under were reopened, and the same worthless, overcharging hacks were
asked back, temporarily, presumably minus one unlucky soul. It seems
that the Indian call centers were not up to snuff for reasons no one is
talking about. More importantly customers noticed, and complained, but
again, no one is talking. Pity, I am sure there are some interesting
stories there.
The stopgap measure of hiring everyone back was only for a few weeks,
and when the last week rolled around, it was extended. And extended,
and extended. Looks like the outsourcers are in need of a little help
getting up to the 'below snuff' level that HP support so often boasts
of. There is still no end in sight for the poor souls in HP AU, but
they tough it out. In fact, they are actually enjoying themselves.
Why? Let's see, they have management by the short hairs, and if they go
away, what options are there? Replace them for a week with highly
trained people that know they are on death row? Make HP India magically
better? Let them have a little fun, and look the other way more often
than the HR policy calls for? I think we have a winner there.
>From the sound of it, both literally and figuratively, they are not
taking life all that seriously. One technician told me "It's great.
I've downloaded the Half-Life 2 game-preview movies and I'm working on
my D&D .pdf collection. Life couldn't be better!" Another learned of
details that made him smile, "It's been amazing. The customer feedback
is all in favour of speaking to Australians. The Indian call rates are
still through the floor, phones times are higher than previous records.
Many of the software calls we would resolve over the phone, the Indians
are sending to the Field. So it's safe to say the Indian support is
costing more in intangibles than it's designed to save. As long as the
Indians keep sucking, we'll be here. And I think that will be for quite
some time." It looks like HP has finally hit on the magic formula for
employee happiness. Good for them, they needed a boost.
There is only one dark side, as Rhody's Law of Karmic Universality
goes, karma is a finite universal constant, it can neither be created
or destroyed, it just is. If something good happens to me, someone else
must be having a bad day. HP's techs are loving life, so where does
that leave their customers? That is a story for another day. 5
http://www.projo.com/business/content/projo_20030803_off03x.68c8d.html
Job flight
U.S. businesses transferring work to foreign sites
08/03/2003
With second-quarter revenues relatively flat, American corporations are
under increasing pressure to cut costs to maintain profits.
One way to save, they have learned, is to move jobs and labor costs out
of the country.
In decades past, millions of American manufacturing jobs moved
overseas, but in recent years the movement has also shifted to the
service sector, with everything from low-end call-center jobs to
high-paying computer chip design jobs migrating to India, China,
Russia, the Philippines and other countries.
IBM is the latest company with plans to accelerate efforts to move
white-collar, often high-paying, jobs overseas.
IBM's top employee relations executives said that 3 million service
jobs were expected to shift to foreign workers by 2015 and that IBM
should move some of its jobs now done in the United States, including
software design, to India and other countries.
"Our competitors are doing it and we have to do it," Tom Lynch, IBM's
director for global employee relations, said in a conference call to
colleagues around the globe, according to the New York Times.
Among area companies with large domestic work forces that are moving
jobs overseas:
Honeywell said it will shut down assembly operations at its Pawtucket
thermal-control business and move the work to China and Mexico.
Initially, the company said it would eliminate 374 jobs, but a package
of state and local government incentives convinced the company to save
50 of the jobs and move them to a Honeywell plant in Woonsocket.
Texas Instruments in April announced it was eliminating 800
manufacturing jobs at its Sensors & Controls business in Attleboro and
moving the work to company plants in China, Malaysia, Korea and Mexico.
The company said the move would cut shipping and labor costs.
On Semiconductor, which operates a plant in East Greenwich, said it was
moving support functions to central Europe and Asia as it announced the
elimination of 300 U.S. jobs late last year.
A.T. Cross, of Lincoln, about a week ago said it would cut 140 local
jobs as it moved some manufacturing to Asia. The company said weak
demand for its high-end Cross pens and a subsequent need to lower costs
forced the move.
IBM's internal discussion about moving jobs provides a revealing look
at how companies are grappling with a growing trend that many
economists call off-shoring.
Officials at IBM and many other companies argue that creating more jobs
in lower-cost locations overseas keeps their industries competitive,
holds costs down for American consumers and helps to develop poorer
nations, while supporting overall employment in the United States by
improving productivity and the nation's global reach.
"It's not about one shore or another shore," said Kendra R. Collins, an
IBM spokeswoman. "It's about investing around the world, including the
United States, to build capability and deliver value as defined by our
customers."
But in recent weeks many politicians in Washington, including some in
the Bush administration, have begun voicing concerns about the issue
during a period when the economy is still weak and the
information-technology, or IT, sector remains mired in a long slump.
At a congressional hearing on June 18, Bruce P. Mehlman, the Commerce
Department's assistant secretary for technology policy, said, "Many
observers are pessimistic about the impact of offshore IT service work
at a time when American IT workers are having more difficulty finding
employment, creating personal hardships and increasing demands on our
safety nets."
Forrester Research, a high-technology consulting group, estimates that
the number of service-sector jobs newly located overseas, many of them
tied to the information-technology industry, will climb to 3.3 million
in 2015 from about 400,000 this year. This shift of 3 million
represents about 2 percent of all American jobs.
"It's a very important, fundamental transition in the IT service
industry that's taking place today," said Debashish Sinha, principal
analyst for information technology services and sourcing at Gartner
Inc., a consulting firm. "It is a megatrend in the IT services
industry."
Forrester estimated that 450,000 computer-industry jobs could be
transferred abroad in the next dozen years, representing 8 percent of
the nation's total computer jobs.
For example, Oracle, a big maker of specialized business software,
plans to increase its jobs in India to 6,000 from 3,200, while
Microsoft plans to double the size of its software development
operation in India to 500 by late this year. Accenture, a leading
consulting firm, has 4,400 workers in India, China, Russia and the
Philippines.
Critics worry that such moves will end up doing more harm to the
American economy than good.
"Once those jobs leave the country, they will never come back," said
Phil Friedman, chairman of Computer Generated Solutions, a
1,200-employee computer software firm. "If we continue losing these
jobs, our schools will stop producing the computer engineers and
programmers we need for the future."
In the IBM conference call, which took place in March, the company's
executives were particularly worried that the trend could spur
unionization efforts.
"Governments are going to find that they're fairly limited as to what
they can do, so unionization becomes an attractive option," Lynch said
on the recording. "You can see some of the fairly appealing arguments
they're making as to why employees need to do some things like
organizing to help fight this."
The IBM officials also warned that when workers from China come to the
United States to learn to do technology jobs now being done here, some
American employees might grow enraged about being forced to train the
foreign workers who might ultimately take away their livelihoods.
"One of our challenges that we deal with every day is trying to balance
what the business needs to do versus impact on people," Lynch said.
"This is one of these areas where this challenge hits us squarely
between the eyes."
Lynch warned that with the nation's economy in an "anemic" state, the
difficulties and backlash from relocating jobs could be greater than in
the past.
"The economy is certainly less robust than it was a decade ago, and to
move jobs in that environment is going to create more challenges for
the reabsorption of the people who are displaced," Lynch said.
The IBM officials said openly that they expected government officials
to be angry about this trend.
"It's hard for me to imagine any country just sitting back and letting
jobs go offshore without raising some level of concern and
investigation," he said.
Those concerns were pointedly raised on June 18, when the House Small
Business Committee held a hearing on "The Globalization of White-Collar
Jobs: Can America Lose These Jobs and Still Prosper?"
"Increased global trade was supposed to lead to better jobs and higher
standards of living," said Donald A. Manzullo, R-Ill., who is the
committee chairman. "The assumption was that while lower-skilled jobs
would be done elsewhere, it would allow Americans to focus on
higher-skilled, higher-paying opportunities. But what do you tell the
Ph.D. or professional engineer, or architect, or accountant, or
computer scientist to do next? Where do you tell them to go?"
The technology workers' alliance is highlighting IBM's outsourcing
plans to help rally IBM workers to the union banner.
"It's a bad thing because high-tech companies like IBM, Microsoft,
Oracle and Sun are making the decision to create jobs overseas strictly
based on labor costs and cutting positions," said Marcus Courtney,
president of the group, an affiliate of the Communications Workers of
America. "It can create huge downward wage pressures on the American
work force."
Mehlman, the Commerce Department official, said companies are moving
more service jobs overseas because trade barriers are falling, because
India, Russia and many other countries have technology expertise, and
because high-speed digital connections and other new technologies make
it far easier to communicate from afar.
Another important reason for moving jobs abroad is lower wages.
"You can get crackerjack Java programmers in India right out of college
for $5,000 a year versus $60,000 here," said Stephanie Moore, vice
president for outsourcing at Forrester Research. "The technology is
such, why be in New York City when you can be 9,000 miles away with far
less expense?"
Company officials say this strategy is a vital way to build a global
company and to serve customers around the world.
General Electric has thousands of workers in India in call centers,
research and development efforts and in information technology. Peter
Stack, a GE spokesman, said, "The outsourcing presence in India
definitely gives us a competitive advantage in the businesses that use
it. Those businesses are some of our growth businesses, and I would say
that they're businesses where our overall employment is increasing."
David Samson, an Oracle spokesman, said the expansion of operations in
India was "additive" and was not resulting in any jobs losses in the
United States.
"Our aim here is not cost-driven," he said. "It's to build a 24/7
follow-the-sun model for development and support. When a software
engineer goes to bed at night in the U.S., his or her colleague in
India picks up development when they get into work. They're able to
continually develop products."
http://media.guardian.co.uk/Print/0,3858,4726840,00.html
Jobs under threat as Reuters looks to India
Chris Tryhorn
Tuesday August 5, 2003
The Guardian
Information provider Reuters is reportedly planning to shift business
to India under a cost-cutting strategy recently unveiled to workers.
Developing products at new offices in Hyderabad or Bangalore is likely
to mean job cuts in the UK, the US and other bases around the world.
Staff fear redundancies because the company is committed to shedding
3,000 jobs under its Fast Forward plan, reducing its overall headcount
to 13,000.
Those in danger of being axed include 300 workers at Reuters' office in
Tiverton, Devon, and another 65 staff in Edinburgh.
Companies such as BT have shifted call centre jobs to India, where well
educated, English-speaking staff can be employed at a much lower cost
than in Britain.
But Reuters would be going even further by moving jobs at their content
division - which produces financial data for screens in the City - to
the subcontinent.
The financial data business accounts for 93% of Reuters' core revenues
and has been under pressure over the last year from rival Bloomberg,
which has overtaken Reuters' market share.
Revenues from data subscriptions were down by 10% in the six months to
the end of June compared with last year, the company reported last
month.
A move to India would be aimed at giving Reuters a keener competitive
edge as it tries to claw back customers from Bloomberg and other rivals
such as Thomson.
A Reuters spokeswoman confirmed the company's bosses had let staff know
that plans to move some of its business were under consideration.
"The group is making staff aware that they are looking at this
possibility, to be upfront," she said. "There might be some changes."
She said Reuters could not yet say whether jobs would go but any
redundancies would be part of the 3,000 allocated under Fast Forward.
"This is something we are looking at, but no decision has been made. I
don't want to speculate on plans that have not been decided. But we are
looking to be more efficient and profitable."
Reuters turned the corner in the first six months of the year,
reporting a slender profit after making the first loss in its 151-year
history in 2002.
But with revenues falling and rivalry with Bloomberg intensifying,
there is still a long way to go for the company's chief executive, Tom
Glocer.
7 To contact the MediaGuardian newsdesk email
editor@mediaguardian.co.uk or phone 020 7239 9857
http://chestertontribune.com/Business/visclosky_and_bayh_still_working.htm
Visclosky and Bayh still working to prevent move of Magnequench to
China
U.S. Rep. Pete Visclosky, D-1st, and U.S. Sen. Evan Bayh, D-Ind., have
made another move in their efforts to prevent the closure of the
Magnequench facility in Valparaiso and its re-location to the
Peoples Republic of China.
According to a statement released Friday, Visclosky and Bayh have
requested the U.S. Department of the Treasury to release the facts of
its investigation into its review of Magnequenchs sale in 1995 to a
consortium which included Chinese interests and Magnequenchs
acquisition in 2000 of the Valparaiso facility.
Visclosky also asked the House Armed Services Committee to review the
contracts which Magnequench currently holds with the Department of
Defense.
The closure of the Magnequench facility in Valparaiso would cost the
jobs of 225 Northwest Indiana residents and transfer sensitive
bomb-making technology to China, the statement said. According to the
Department of Defense, 80 percent of the rare-earth magnets used in the
production of smart bombs come from the Valparaiso facility. In
addition to costing more than 200 working families their livelihoods,
the transfer of the facility to China raises serious industrial base
concerns.
It is our obligation as public servants to pull out all the stops for
the workers and their families who will lose their livelihoods,
Visclosky said. I do not intend to leave anything on the table. I will
use every resource at my disposal, and I am very grateful to have Sen.
Bayhs full support and cooperation in this effort.
The workers at Magnequench deserve a full explanation as to why their
jobs are headed overseas, Bayh said. Moving 225 jobs out of Indiana, at
a time when the economy is already in a weakened state, disregards the
needs of hundreds of Hoosier families. We deserve answers not only
about the economic impact of this move, but also about the potential
threat to national security that it creates.
Visclosky and Bayh added that the potential transfer of these
operations to China raises new questions about maintaining both a
significant source of domestic production of rare-earth magnets and
U.S. technological leadership.
Posted 8/6/2003
http://sify.com/finance/fullstory.php?id=13207065
UTStarcom to invest $25m in India
Wednesday, 23 July , 2003, 14:38
Telecom equipment maker UTStarcom said on Wednesday it would invest $25
million in India to double its employee strength to 150 over the next
two months.
The California-based firm, which sells most of its telecoms gear in the
Chinese market, has two research and development centres in India which
support UTStarcom's products based on code division multiple access
technology.
"The expansion of the Bangalore development centre raises our aggregate
investments in R&D in India to $50 million," Ruchir Godura, director of
UTStarcom's South Asia operations, said in a statement.
"With the expansion of the facility, approximately 50 per cent of
global development work relating to these product lines will now be
handled in India," the statement said.
Many global firms outsource their research and development work from
India to leverage the country's low cost and highly educated software
workforce.
") 2003 sify.com India Limited. All Rights Reserved. This material
may not be published, broadcast, rewritten, or redistributed."
http://www.hinduonnet.com/bline/stories/2003072402150100.htm
UK's ebookers To Add 1,500 Staff In India
ebookers to add 1,500 staff in India -- UK's online travel co seeks to
cut costs
Abhrajit Gangopadhyay
Bangalore , July 23
THE UK's online travel company ebookers plc, with its 2002 sales
topping #500 million, plans to add close to 1,500 employees to its
Indian back office operation as it seeks to cut costs and swell
earnings through serving third parties. However, the company is not
likely to cut its European business process jobs.
"We have close to 620 employees in India now and plan to hire more,"
the company spokesman, Mr Oliver Strong, told Business Line from
London. The strategy to ship more work to India is aimed to cut costs
and offer newer services at cheaper rates to boost "critical
profitability", he added.
The company plans to offer 13 functions through its outsourcing
operations located near Delhi. ebookers has recently added 62,000
square feet office space in Delhi to its existing 22,000 square feet,
which could house 750 employees. Interestingly, the company has close
to 33 European employees working at Delhi call centre, a significant
number of them being Finnish.
In a recent `India-Strategy' presentation to analysts, ebookers said
that business process outsourcing saves 20-40 per cent costs and
in-source savings nearly doubles. Moreover, falling communications
costs in India, which shrank by 30 per cent over last three years, also
favours outsourcing efforts.
http://www.newindpress.com/Newsitems.asp?ID=IEH20030721074801&Title=Top+Stories&rLink=0
Monday July 21 2003 17:18 IST
UK firms will continue to outsource jobs to India: High Commissioner
By Kamlendra Kanwar
NEW DELHI: Many thousands of jobs will come to India from the UK as
British firms increasingly outsource services in the wake of the
growing shortage of skilled workers in their country, says the British
High Commissioner to India, Sir Rob Young.
``This is already a fact. But, in the years to come, there would be an
increasing trend towards this kind of internationalisation of business
activity,'' he said in an exclusive interview with this websites
newspaper.
Asked whether he saw trade unions in his country acting as an
impediment to the outsourcing of jobs to India, Sir Young said the
unions were, of course, concerned about the export of jobs from UK to
India and that was understandable.
But if British firms felt that it would make them more competitive in
terms of costs and quality of services such outsourcing would be
carried through in the long-term interests of the British economy.
On whether his country was looking up to India to make good the
impending shortage of skilled labour all across the developed world, he
said there already were a large number of Indian IT engineers working
in the UK.
In the past, a lot of Indian doctors had also been recruited. ``India
has shown the way to the world in IT, engineering, teaching, nursing
and many other fields and we shall certainly need Indian help.''
Sir Young, who would be laying down office this October after a ``very
satisfying'' four-and-a-half-year stint in New Delhi expressed optimism
that as the Indian economy grows and restrictions on foreign investment
are eased, more and more British companies will set up 100 percent
subsidiaries in India.
Asked whether there were any roadblocks to British investment, the High
Commissioner said these applied to all countries operating in India _
high external tariffs, bureaucratic red tape and problems of land
ownership.
They varied from state to state. ``Some states have an efficient single
window system for foreign investments but there are others which have
not yet caught up with the best practice.''
Sir Young said the success of the Indo-British Partnership (IBP)
initiative launched in 1993 was borne out by the fact that since then
about 1,600 to 1,700 joint ventures had been agreed upon between Indian
and British firms.
``We have seen enormous increase in British investment in India and
vice versa. Around 450 Indian firms are in the UK now. Indeed, IBP has
been one of the motifs of our relationship.''
In reply to another question on how he viewed comparisons between India
and China, the High Commissioner said there was a greater understanding
among foreign investors today that while it may be easy to get into
China, the returns on capital investment were less good than in India.
``You don't see many foreign firms leaving India once they are
established here,'' he added.
Sir Young expressed surprise that many Indians were obsessed with China
and the Chinese economic performance.
``It is true that China has been more successful in attracting FDI, but
a lot of that comes from overseas Chinese. Happily, the overall mood
has changed in India over the last two years. There's more confidence
here now that India can compete with China in a whole range of sectors,
not just in IT and pharmaceuticals,'' the British High Commissioner
said.
Sir Young said he saw a real chance of FDI in India catching up with
the sort of levels seen in China if India continued on the path of
reforming its economy.
India is truly an extraordinary country'
I would come back to India at least once a year. It would indeed give
me and my wife enormous pleasure to come back to a country which we
have loved so much,'' said the British High Commissioner.
``India is truly an extraordinary country. It has so many layers of
interest, so much diversity, so much stimulus t anybody coming from the
West with an open mind and interest in human relations, religion, arts,
politics, economics....India has such an extraordinary civilisation,
diverse environment, society but you need a lot of time to get to know.
We have only been here for four-and-a-half years, so we need to come
back to deepen our understanding of the country.''
The High Commissioner said he enjoyed Indian food provided it wasn't
too spicy.
``There are parts of India including the South where it can be very
spicy. Normally speaking we enjoyed it a lot. We are beginning to
understand regional differences in cuisine. Of course you realise
quickly that Indian food in India has no relation to Indian food in the
UK.''
http://www.freelancestar.com/News/FLS/2003/062003/06172003/1006147
Capital One reaps profits here, but takes jobs overseas
June 17, 2003 1:07 am
As I recently read in the paper about Capital One closing its local
office ["Cap One closing center," June 11], I felt a compelling need to
express my views.
Capital One has chosen to outsource to India many of its customer
calls. Of course, India has a lower wage than American workers, but
then, I wonder how many Indians have Capital One credit cards? So who
is Capital One serving?
Once again, the American workers suffer because a company wants to make
millions in America and hire cheap labor. I, for one, intend to cancel
my Capital One cards. If a company cannot reinvest in the country that
is their "bread and butter," I want nothing to do with them.
They can say what they want about an attractive severance package, but
they are doing the dedicated workers here in Fredericksburg a huge
disservice, not to mention the millions of American card holders who
will have to deal with the language barrier.
Thom Magargal
http://www.abs-cbnnews.com/abs_news_body.asp?section=Business&oid=28218
Monday, July 14, 2003 10:54:0 p.m
American firms look at RP as global outsourcing hub
More and more American firms are looking at moving key business
processes to the Philippines. Thanks to aggressive marketing by the
countrys outsourcing industry, raising hopes for the Philippines to
become a global outsourcing hub for western businesses.
There is acceptance of the Philippines as a viable outsourcing
destination and we are now in the radar screen of US companies, said
Rosalie Montenegro of Philippine Long Distance Telephone Co., which has
been wooing more US corporate clients for its thriving call center
business.
The PLDT senior vice president recently pitched American businesses on
the benefits of outsourcing to the Philippines, when she spoke at a
seminar for chief executive officers and executives in New York by
Outsource Philippines, the industry body selling the country as
outsourcing destination.
Many Americans came just to look at the Philippines after that seminar,
and they were talking to us. All of a sudden we are with India, said
Montenegro, comparing the level of interests in the Philippines with
that shown to its more established rival.
Among those scouting out the country are major US banks like J.P.
Morgan, which would look to set up Philippine units to provide
back-room and customer services, the way global financial giant
Citibank has done for years.
Already, many US firms used dedicated Filipino call centers to provide
customers service, generating jobs for over 30,000 Filipinos and dollar
revenues reaching $173 million a year. Among these companies are major
names like American Online, American Express, Microsoft, Barnes and
Noble, Dell Computer, Sun Microsystems, Procter & Gamble and
Bristol-Myers Squibb.
That is but a drop in the bucket for a booming global business reckoned
by India to reach as much as $1.3 trillion a year. The Philippines,
seeing how its deep pool of knowledge workers and low labor costs make
it a more ideal outsourcing center than its rivals, is eyeing a chunk
of that pie.
Outsourcing is a niche where the Philippines qualifies and we would
like to get our fair share of it, said senior presidential adviser
Roberto Romulo, who helped Outsource Philippines secure government
backing and seed funding for its marketing drive.
Romulos hope is for the country to become a global powerhouse in
outsourcing particularly in the fields of business process outsourcing,
medical and BPO transcription, animation, application development and
software engineering.
Helping to make the sale blitz a success were the testimonies from
global firms Procter & Gamble and AIG, which said they outsourced
strategic services to the Philippine because of its large pool of
skilled workers, excellent connectivity and low labor costs.
Our Manila service center has exceeded our expectations for both cost
savings and quality of service delivery. We continue to more additional
global work to Manila as a strategic business services location, said
P&G vice president Randy Reedy.
Accordingly, P&G had compared five sites in Asia before picking the
Philippines in 1999. Its studies has shown the country offered the
highest workforce quality, next only to Australia and Singapore, as
well as the most cost advantage, far more than either India or
Singapore.
Similarly, AIG, which operates the widest property casually and life
insurance network of any insurer in the world, decide to move some
back-end services to the Philippines as a cost-effective solution amid
the increasing volume and complexity of its business.
It set up a joint venture its local unit to provide services like data
entry, mail management, post-sales servicing indexing of documents,
licensing and contracting for its global insurance operations.
The joint venture, which had 150 seats at start up and is now targeting
to have 500 by next year, has generated cost savings estimated at 40
percent to 45 percent per seat.
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