11 Outsourcing/Offshoring Articles
11 Outsourcing/Offshoring Articles
Date: Sunday, November 02, 2003 2:50 PM
JOB DESTRUCTION NEWSLETTER
www.ZaZona.com
Article 1:
http://www.businessweek.com/technology/content/oct2003/tc20031027_9655_tc119.htm
The Hidden Costs of IT Outsourcing -
While moving software development and tech support offshore is all the
rage, many companies find the overall savings aren't that great
Article 2:
http://www.businessweek.com/magazine/content/03_43/b3855070.htm
All The World's A Call Center -
Outsourcing doesn't just save cash. It can lift quality Outsourcing
jobs is a touchy business. Executives would rather not talk about the
job losses at home, preferring to focus on the cost savings. Here's
another thing they don't like to talk about: those manning the phones
at call centers overseas often provide better customer service than
their American counterparts.
Article 3:
http://www.outlookindia.com/full.asp?fodname=20031027&fname=seema&sid=1
The New Indian Stereotype -
The American worker harbours strange misgivings about a faraway country
called India where he believes a giant suction machine is in operation.
And it is swallowing his job and thousands of others.
Article 4:
http://www.techsunite.org/news/techind/031027_congress.cfm
Silicon Valley Tech Worker Challenges Beltway Politicians -
In many respects Natasha Humphries is the model Silicon Valley
high-tech worker: bright, articulate and highly motivated. And now
unemployed after her job was outsourced to India. But her willingness
to testify before a House Small Business Committee hearing last week
about high-tech jobs being offshored definitely does not show up in any
company handbook.
Article 5:
http://sacramento.bizjournals.com/sacramento/stories/2003/10/13/story1.html?page=3
Oracle sends 175 Rocklin jobs to India -
Rocklin has stiff new competition as a low-priced home for Oracle Corp.
back-office jobs: India. Oracle will shift 175 financial services jobs
to India from its Rocklin site -- 27 percent of its 650 employees there
-- over the next seven months, said sources close to the company. The
company has also taken steps that would make it easier to sell real
estate it owns in Rocklin.
Article 6:
http://channels.netscape.com/ns/pf/story.jsp?idq=/ff/story/0002%2F20031013%2F101089485.htm
Bank of America Steps Up Outsourcing -
Bank of America is to take emerging markets outsourcing one step
further with plans to set up an Indian subsidiary next year, enabling
it to cut costs by moving more jobs offshore.
Article 7:
(viewing requires membership http://www.unison.ie/irish_independent/)
How the Tiger finally found its way home -
The continent in question is Asia. The bustling city is Bangalore, in
India. And Sean's real name is Sanjeev. The Tiger has found its way
home and some Irish unions are worried. Sanjeev works in a call centre
in Bangalore. He sits at a workstation in a vast open-plan office the
size of two or three football pitches. Wearing a telephone headset, he
handles flight reservations and inquiries for a big
American airline. He speaks to hundreds of customers a day, six days a
week, virtually all of whom think that they're through to an office in
the United States. Sanjeev has even been trained to sound American. If
a customer asks his name, it's Steve.
Article 8:
http://www.kingcountyjournal.com/sited/story/html/147268
Jobs going overseas in recovery -
Two days from now, you'll be hearing economic news that won't seem
right. On Thursday, when the government releases its official economic
review of the third quarter, you'll be told once again that the
recession is over and that the economy is in full recovery. Not only
that. For the first time in several years, you might also hear words
such as ``blistering'' or ``roaring'' to describe the rate of
expansion. So where are the jobs?
Article 9:
http://www.infomaticsonline.co.uk/News/1144655
U.K. Government urged to promote outsourcing -
Employees should be shown the potential benefits, says National
Outsourcing Association
Article 10:
http://www.itworld.com/Man/2701/031009outsource/
CEOs defend moving jobs offshore at tech summit -
Moving IT jobs outside of the U.S. is necessary if technology companies
want to remain competitive in a world market, a group of software
vendor chief executive officers (CEOs) said Thursday.
Article 11:
http://www.enquirer.com/midday/10/10142003_News_4mday_convergys.html
Convergys opens two Philippine call centers -
Convergys Corp., a U.S.-based billing and customer services giant,
opened its first two call centers in the Philippines on Monday and
announced plans for a third, creating more than 3,000 jobs.
http://www.businessweek.com/technology/content/oct2003/tc20031027_9655_tc119.htm
OCTOBER 27, 2003
NEWS ANALYSIS:TECHNOLOGY
The Hidden Costs of IT Outsourcing
While moving software development and tech support offshore is all the
rage, many companies find the overall savings aren't that great
Keith Franklin, president of Empowered Software Solutions in Burr
Ridge, Ill., loves offshore outsourcing. It means more work for his
40-person company. Just last year, ESS, which specializes in developing
applications for Microsoft's .Net platform for Web services, earned
$500,000 in revenues from fixing buggy software written in India. It
took ESS five months to repair a glitch-filled application for a Web
portal. Most pages on the site weren't connected, turning updating into
a nightmare. Some code was missing.
The shoddy work didn't come cheap, either: The Indian outsourcer went
$1 million overbudget. Franklin says he could have done the project for
less than $900,000 -- right here in the U.S.
Indeed, offshoring -- sending work overseas -- isn't always all it's
made out to be. Particularly with information technology, which can be
a lot more complicated than moving traditional manufacturing operations
overseas. IT quality is much more difficult to gauge, says Atul
Vashistha, chairman and CEO of info-tech offshoring consultancy neoIT
in San Ramon, Calif. And since IT is an integral part of every business
process, it requires more communication and management.
Offshore IT outsourcing started to soar during the economic downturn.
With their companies' sales squeezed and shareholders screaming bloody
murder, many CEOs began mandating that some IT work be sent overseas.
They were following the lead of big companies, including chipmaker
Intel (INTC ) and software giant Microsoft (MSFT ), that already do
considerable software development in India and Russia. With the trend
gaining momentum, more than 40% of U.S. companies will develop software
or test it, offer tech support, or provide storage functions overseas
by 2004, according to market consultancy Gartner (see BW, 10/27/03,
"All The World's A Call Center").
"DIRTY LITTLE SECRET." On paper, it looks extremely attractive. A
Russian programmer charges 80% less than an American. But when you
parse it all out, the total cost of offshoring a given IT job is
generally comparable to getting the work done domestically, says Tom
Weakland, a partner at management consultancy DiamondCluster. It's just
that few companies are aware of these real costs. "Most companies can't
accurately measure their productivity and costs prior to and after
outsourcing," says Weakland. "Most look just at wages."
A few companies have learned the lesson the hard way. A year ago, 100%
of neoIT's business came from consulting companies wishing to go
offshore. Today, about 25% to 30% of its business relates to fixing
problems, says Vashistha. Most companies don't want to advertise the
problems they've run into, of course. "It's a dirty little secret,"
says Michael Mah, managing partner at software consultancy QSM
Associates, based in Pittsfield, Mass. "There could be more crashed
projects in the next 6 to 12 months."
One weakness of moving support functions overseas is that it leaves no
one on-site to help customers. Take publishing-software maker Quark.
For the last year it has based its English-speaking tech-support staff
-- people you call if your app keeps crashing -- in India. Kamar
Aulakh, Quark's president, claims that the move hasn't affected service
quality or caused any customers to flee. He says his support staff is
able to resolve problems over the phone. But the trend leaves some
customers worried.
BACKWARD PRIORITIES. As Empowered Software has discovered, programs
developed by offshore outsourcers are also often buggier than software
programmed domestically -- usually 35% to 40% more so, estimates Mah.
"If a company makes software for flying airplanes, I wouldn't want [it]
to be created with the priority of the deadline coming first and
quality coming second," he says.
And if a financial application used by, say, a bank distorts crucial
information such as trading data, a customer could sue or withdraw its
business. Should such problems arise, the U.S. company can't easily
turn around and sue its applications-development outsourcer overseas.
Fixing even small bugs can cost up to 10 times more after the software
is written than at the design stages, Mah says. And some
offshore-outsourcing companies charge extra for fixing bugs after
delivery. In a worst-case scenario, a company could end up feeling like
it's in that old Dilbert cartoon in which the pointy-haired boss
promises $10 for every bug fix -- and a programmer decides to code
himself a new minivan.
MIDNIGHT OIL. Costs add up even when offshoring is done right. Many
companies tend to send expatriates to set up their operations abroad --
and their wages usually run high. Then there's the price of additional
executive travel. And, ideally, offshore employees are also brought
into the U.S. for several months for extensive training in language and
culture.
More important is the cost and inconvenience of managing offshore
crews. When privately held software maker Elance outsourced some of its
development to India last October, its domestic engineers had to work
past 10 p.m. every day to communicate with the Indian team. Even now,
they have to work late a couple of nights a week, says Fabio Rosati,
Elance's president and CEO.
Some companies also have to change their internal processes to
accommodate offshore partners. Some decide to open branches abroad,
where they have more control over how work is done. And others are
diversifying their offshore outsourcing. Last November, Electronic Data
Systems (EDS ) unveiled its Best Shore Initiative, designed to help
clients pick the best offshore location. The locations have to pass
tough guidelines for quality of work, infrastructure, and low cost.
One reason for the initiative, says Dan Zadorozny, EDS's vice-president
for application-services delivery, is that labor costs in traditional
outsourcing powerhouses such as India are escalating. Already, an
entry-level programmer costs more there than in Argentina, he says --
which is where he's increasingly sending clients.
DOMESTIC SOURCES. Software companies that facilitate communication
between customers and their offshore vendors are also prospering.
Elance's software, already used by shipping giant FedEx (FDX ), General
Electric (GE ), and cell-phone maker Motorola (MOT ), allows companies
to track specifications, compile an audit trail of what was
communicated to whom, and measure performance against hundreds of pages
of contracts. The company declines to disclose its annual sales, but
Rosati says they're doubling every year.
Other companies hope to lure disillusioned outsourcing customers back
home to the U.S. In October, RTTS, a privately held test-automation
consultant, unveiled a testing service that works just like one
offshore -- only it's delivered out of New York. By doing the testing
remotely, as Indian outfits do, rather than on-site, RTTS can match the
price of Indian companies.
"It's the same model as India, but there are no time-zone and language
issues to deal with," explains Bill Hayduk, director of professional
services for RTTS, whose customers range from pharmaceutical to
insurance companies. "Customers going offshore aren't happy with the
quality they're getting. So we think there's a big opportunity for us."
The outsourcing trend is unlikely to reverse any time soon, however.
Pressured by lower-cost competitors, U.S. companies like the instant
gratification of savings on wages. But as the real costs of IT
outsourcing become apparent over time, many companies may come to
realize that it's no panacea.
By Olga Kharif in Portland, Ore.
Edited by Thane Peterson
http://www.businessweek.com/magazine/content/03_43/b3855070.htm
OCTOBER 27, 2003
NEWS: ANALYSIS & COMMENTARY
Commentary: All The World's A Call Center
Outsourcing doesn't just save cash. It can lift quality
Outsourcing jobs is a touchy business. Executives would rather not talk
about the job losses at home, preferring to focus on the cost savings.
Here's another thing they don't like to talk about: those manning the
phones at call centers overseas often provide better customer service
than their American counterparts. That's especially true in India, now
by far the most popular destination for offshore customer service jobs.
An exec at one multinational gloats that everything from customer
satisfaction to error rates are vastly better. "But we'll never talk
about that for competitive reasons," he adds.
Call it a hidden benefit of globalization. Certainly, companies try to
maintain high quality at every call center -- whether it's in the U.S.
or abroad. But knowing that such front-line workers can make or break a
customer relationship, many say they find it easier to get consistently
fast, efficient, and courteous service from employees overseas.
Why is that the case in India? For one thing, such workers are better
educated than their U.S. counterparts. According to Elio Evangelista, a
senior analyst at independent research firm Cutting Edge Information,
virtually all Indian call-center workers have college degrees. By
contrast, many of their American counterparts are high school grads.
More education can be helpful as consumers increasingly need complex
technical or financial information.
More important, call center work is considered a lucrative, successful
job in India, not a dead end. That often translates into a more
helpful, friendly phone manner. Patrick Hanlin, CEO of LiveBridge Inc.,
a Portland (Ore.) company that handles customer service for major
corporations worldwide, says he gets 80 applications for each position
in India and about four in the U.S. Moreover, only a fraction of his
Indian employees leave each year; annual turnover at U.S. centers is
six times higher. That means Hanlin's training dollars go further
because his employees stick around longer to apply their customer
service skills.
For now, the outsourcing debate is focused mainly on lower costs and
lost jobs. But for many companies, tapping into a large, educated
talent pool and a strong service culture can mean a better experience
for customers back home. As Hanlin says: "Consumers care about how well
their call is handled, not whether it's answered in Little Rock or New
Delhi." Clearly, the benefits of globalization can extend well past the
bottom line.
By Diane Brady
http://www.outlookindia.com/full.asp?fodname=20031027&fname=seema&sid=1
Web | Oct 27, 2003
The New Indian Stereotype
The American worker harbours strange misgivings about a faraway country
called India where he believes a giant suction machine is in operation.
And it is swallowing his job and thousands of others.
SEEMA SIROHI
Outsourcing is not a four-letter word but it has acquired the
connotations of one for the American worker. He harbours strange
misgivings about a faraway country called India where he believes a
giant suction machine is in operation. And it is swallowing his job and
thousands of others. Not a day goes by without an emotional story about
laid-off computer professionals languishing in some corner of this
large country. Working as limousine drivers, waiters, delivery men
while CEOs of Big Blue and other Fortune 500 companies "oursource" more
and more jobs to Indian companies.
[It would be too easy to say "Revenge of the Colonised" -- if you won't
allow free movement of labour, then the jobs will flow to wherever the
costs are low. Simple economics would say that.]
Then Andrew Grove, chairman and co-founder of Intel Corp. decides to
light his own match to the already smouldering scenario. He told a
global technology summit early October that the United States could
lose its dominant position in key technology sectors to India and China
by 2010 because of low costs and high education. His remarks doubled
the Forrester fright -- a Forrester Research study estimates the number
of US jobs moving overseas will grow from about 400,000 this year to
more than 3 million by 2015. Many of these will be in the IT sector.
The study has been cited ad nauseam by all sides, multiplying fear as
it bounds through the ether.
The unemployed techies are part of the growing voice of labour unions,
Internet being the great organizing medium. Any US politician who dares
to speak in favour of outsourcing is immediately spotted, "linked" to
other websites and bombarded with e-mails. If he happens to be from
Washington state, he may as well leave town as Jay Inslee, a Democrat,
discovered while on a trip to India. Inslee confidently held forth on
how US companies would continue to send jobs overseas because in all
likelihood no laws would move far on Capitol Hill. His statement made
to the Indian press was immediately "googled" and put in cold print for
all to see. The news stories were culled from different sources,
archived and sent out to the "victims" of outsourcing.
[The Indian stereotype is no longer a snake charmer but a humorless IIT
graduate who works endless hours, solves complex equations in his head
and never complains.}
If Seattle was a hub of the techie world in the dotcom boom of the
rah-rah 90s, it is today a throbbing centre of unionism.
The backbone is the Washington Technical Workers Alliance, better known
as WashTech, which does consciousness raising around the clock. No
sound bite ever misses its keen trackers who watch both legislators and
legislation. Subscribers to its e-letter have grown from 2,000 early
this year to 16,000 this summer. Its moles in high-tech companies
listen keenly is any red-button words are used -- India and outsourcing
being the reddest. WashTech busted IBM this summer when it got a
recording of a conference call where the executives had discussed
outsourcing. It then coolly passed the tape on to the New York Times.
It was a "grand salami." What was a simmering, subterranean sea of
discontent became an open lament on the business pages of the newspaper
of record. No one could ignore it -- not CEOs, not the Congressmen,
The fear has spread so far on Capitol Hill that many members of the
India Caucus, specially the Democrats, are no longer willing to defend
outsourcing in public which would instantly lose them labour votes and
support. Union websites are encouraging their members to find out if
their Congressman is an India Caucus member and if so, there are open
suggestions to ask him some tough questions about sending jobs to
India. The whole problem unfortunately has acquired an Indian face, no
matter that China, Ireland and Russia are taking away jobs too. The
Indian stereotype is no longer a snake charmer but a humorless IIT
graduate who works endless hours, solves complex equations in his head
and never complains. Of course, we like this one better even though it
comes loaded with baggage.
Unemployment among highly skilled workers is painful, no doubt, but
this verbal Ganga against outsourcing is overdone. It would be too easy
to say "Revenge of the Colonised" -- if you won't allow free movement
of labour, then the jobs will flow to wherever the costs are low.
Simple economics would say that. The world economy is arranged in a
hierarchy which those at the bottom always try to break for obvious
reasons. At the lower end are the cotton growers, the textile
producers, the small exporters from Africa and parts of Asia -- the
ones who got shafted at Cancun, just a few weeks ago because the rich
countries couldn't find it in their hearts to help the poorest of the
poor. They want to climb higher and become the manufacturers with big
factories while those producing steel and cars want to move higher
still and barge into the world of high technology and sophisticated
goods. At the very top are the most developed countries led by the US
which innovate, experiment and find the next frontier. The ladder grows
as frontiers open.
At the moment there seems to be no next frontier for the thousands of
unemployed skilled workers in California and Washington states. True,
they may have to retrain. But instead of begrudging call centre and
programming jobs going to India, they could start a campaign for better
education and new industries. The CEOs could also take a pay cut and
sell those extra Gulfstreams. Before going all out to plug a small hole
that is creating employment for a good number of Indians, the unions
might ask their top management to do some slimming down. It is a
question of who needs what more -- do the corporate chiefs really need
$10,000-dollar shower curtains and five mansions more than a young
programmer in India needs his job which costs little?
http://www.techsunite.org/news/techind/031027_congress.cfm
October 27, 2003
Silicon Valley Tech Worker Challenges Beltway Politicians
By Jeff Nachtigal
In many respects Natasha Humphries is the model Silicon Valley
high-tech worker: bright, articulate and highly motivated. And now
unemployed after her job was outsourced to India.
But her willingness to testify before a House Small Business Committee
hearing last week about high-tech jobs being offshored definitely does
not show up in any company handbook.
In Washington D.C., Humphries spoke passionately about the issues she
and her fellow workers now face since their jobs were sent to India,
and how this short-sighted perspective of companies trying to save a
dollar today will have lasting negative impacts on the industry in the
future.
"Its corporate profiteering at its worst, and thats all it is,"
Humphries said.
"One reason I was so interested in testifying is that while
corporations have their lobbyists, to have a private citizen tell their
anecdotal experiences about what is happening from an insiders point
of view makes it really hard for them to refute your testimony," she
said.
Humphries was a senior quality assurance engineer at Palm, Inc. for
three years until her position was offshored to India in August.
"A lot of people are afraid to come forward because of blacklisting,
which is a very real fear for a lot of people, and is one of the
reasons Silicon Valley needs a labor union of some sort," she said.
For Humphries, the choice to speak out wasnt hard.
"If its be blacklisted versus one or two years of unemployment,
whats the difference? Give me the dice, Ill throw them!"
Humphries said Palm offices in Andover, Boston and Seattle have been
closed and that at least half of Palms U.S. positions have been
offshored. A study by Forrester Research Inc. estimated that U.S.
employers will move about 3.3 million white-collar service jobs and
$136 billion in wages overseas in the next 15 years, up from $4 billion
in 2000.
Humphries, 30, doesnt shy away from challenges and willingly admits
she has an assertive personality and tends to challenge the status quo
- beginning with her managers at Palm, Inc. who, in her words,
"answered evasively, dodged the questions, threw out fictitious
numbers, and tried to blow me off," when she asked what she needed to
do to save her job.
Despite her tenacity, Humphries is also a bit of a Pollyanna in that
she has always worked hard and stuck to the corporate game plan, hoping
that as long as she worked hard she would keep her job.
After graduating from Stanford she worked for Avistar, Infotech and
Apple before landing the position at Palm, where she tested Palm OS
software applications, Palms calculator and wireless applications.
At Palm, Humphries worked hard, often staying late and working weekends
even though her salary had not gone up in her three years with the
company. She said she put any thought about a salary merit increase out
of mind until the company returned to profitability.
And even when the company made extensive plans to offshore jobs and she
knew she was likely to be cut, Humphries willingly went to Bangalore,
India, in December 2002 to train Indian software quality assurance
engineers, hoping there might yet be a place for her if she stayed
loyal to Palm.
She admitted at the hearing in Washington D.C. that, "I may have
engineered my way out of a job."
It happened fast, but she wasnt surprised when the ax finally fell.
"We were told on Monday at 3:30pm of a layoff, and notified on
Wednesday that we were terminated."
"How did I get duped?" Humphries said. "I was aware this (layoff) was a
possibility, but I miscalculated the time horizon, I thought that the
India team would take at least three years to perform my job as well as
I do... I thought they would still need people like me at headquarters.
But they beat me to the punch."
But that was then, and now Humphries has given up on playing nice with
Silicon Valley companies intent on sending high-tech jobs offshore as
fast as possible.
"Im sorry I wasnt this galvanized when I was there, but this is a
serious problem."
"Im not angry in the sense that I no longer work for Palm, I think
Ive outlived my purpose there," Humphries said a day after she
returned from Washington D.C. where she testified, her throat scratchy
from a cold. "I felt my skills and talent were underemployed there, so
Ive welcomed the new opportunity in that regard."
Nevertheless, she isnt walking away without a parting shot at Palm.
She turned down Palms severance package and has sued Palm for
wrongful termination on the basis of violation of good faith and fair
dealing, and has filed a reverse discrimination case - based on her
U.S. citizenship - with the Department of Justice.
Now she is working with other Silicon Valley employees who are
organizing through TechsUnite, a project of the Communications Workers
of America.
"I see this as a fundamental shift in the labor market its going
to be really different and Congress doesnt know how to tackle the
program. Meanwhile, thousands of jobs are being hemorrhaged overseas,
while Congress tries to decide what to do."
Humphries is considering attending law school next fall, with
employment law one possible area of study.
"Its one of the reasons Ive decided to exit the industry. I want
an offshore-proof job."
Jeff Nachtigal is a freelance journalist who lives in Berkeley,
California
http://sacramento.bizjournals.com/sacramento/stories/2003/10/13/story1.html?page=3
Oracle sends 175 Rocklin jobs to India
Mark Larson
Staff Writer
Rocklin has stiff new competition as a low-priced home for Oracle Corp.
back-office jobs: India.
Oracle will shift 175 financial services jobs to India from its Rocklin
site -- 27 percent of its 650 employees there -- over the next seven
months, said sources close to the company. The company has also taken
steps that would make it easier to sell real estate it owns in Rocklin.
Oracle spokeswoman Deborah Lilienthal would not comment on the job
shift or whether additional jobs could be moved.
"As a global company with more than 41,000 employees worldwide, we
continue to grow in key strategic markets," she wrote in an e-mailed
response to Business Journal inquiries. "Certainly China is one key
market, and so is India. We are always deploying talent where it makes
most sense for our business, given that we do business in more than 87
countries around the world."
Lilienthal also forwarded a quote of Oracle chief executive Larry
Ellison in the India Executive Summit publication from July. "(W)e have
over 3,000 people in India right now," Ellison said. "That's
considerably larger then the population we have in China and we plan to
more than double that in the fairly near term to be over 6,000 people
in India. So we're going to continue to invest heavily in India ..."
While the shift of call-center jobs to India is well-established, the
technology industry has seen opportunities to cut more costs by
shifting jobs that require more technical skills to Asia as increasing
numbers of workers there gain those skills and employers become more
adept at integrating offshore work centers. That has led to growing
complaints about the export of high-paying jobs from the U.S. tech
sector.
The Rocklin jobs being shipped to India pay $35,000 to $45,000 a year.
They will cost Redwood Shores-based Oracle -- the world's
second-largest software company, behind Microsoft Corp. -- as much as
50 percent less per job in India than it would pay here, by some
estimates.
"There are some very upset people at Oracle," said Cindy Schaer,
Rocklin's economic development manager. "To make things worse, they're
sending 36 to 40 Indians here to be trained by the very people losing
their jobs to them. That's brutal. That's nothing against the Indian
people, it's just devastating to the people here."
"We have heard nothing of this, but it would be a blow to our
information-technology industry," said Ed Graves, Placer County's
economic development director.
Schaer said the company plans to take an "entire division" out of
Oracle's second Rocklin office building, a 123,000-square-foot space
where it leases 40,000 square feet to Addison Avenue Credit Union. Last
year the credit union, formerly called Hewlett-Packard Credit Union,
signed a 10-year lease for the space.
"They don't need a second building," said Schaer, who expects the big
office space to be put on the block. Oracle also recently submitted a
parcel map to split its Rocklin property into four sections. That, said
Schaer, makes it easier for the company to sell off what it doesn't
want.
The company has already won approval to build two more
100,000-square-foot buildings at its site, but those plans look like
they'll stay on the shelf.
Rise and fall: Early on, Oracle made its first Stanford Ranch building
-- put up in 1997 -- its back-office site for payroll and other chores.
The 100,000-square-foot site was initially expected to employ only
about 350.
But the company moved other businesses from the Bay Area to the new
site, including tech support and sales and marketing. The building
filled and room had to be made to squeeze more workers into the
basement. It was filled at 477 employees. Oracle then leased nearby
space for an overflow of 200 employees that had also migrated from the
Bay Area.
In April 2002, Oracle finished construction of the second building on
its Rocklin campus, and moved the 200 employees there from the leased
space. Addison Avenue Credit Union moved in about six months later.
Now, Oracle's local presence is receding back to one building. At this
point it's unclear whether more jobs will be shifted from the site to
India.
Oracle (NasdaqNM: ORCL), an $8 billion-a-year player in the global
market for business software, is in a highly competitive market and in
the midst of a $7.3 billion hostile takeover bid for competitor
PeopleSoft Inc. For its first quarter ended Aug. 31 the company
reported net income of $440 million, or 8 cents a share, on revenue of
$2.03 billion. That compared to a first quarter 2002 net of $342.7
million, or 6 cents a share, on revenue of $2.07 billion.
First-quarter software license sales for Oracle were off 7 percent.
Several quarters of license sales declines have reflected pressure from
competitors IBM and Microsoft, which industry analysts say are trying
to get a piece of the corporate database software market Oracle has
long dominated.
But Oracle isn't alone in looking to other states, nations or
continents to cut its costs.
Hewlett-Packard Co. this year shifted 500 server manufacturing jobs
from Roseville to Houston to save costs. Another 340 jobs were cut by
two H-P subcontractors in Roseville that provided warehouse and
logistics services for the server manufacturing operation, TNT
Logistics and Teleplan International.
Big manufacturers have been shifting assembly duties to other states
and countries with lower cost structures for years. Now, because
countries such as India, China and Russia have greater numbers of
educated talent available, they're luring new kinds of jobs from
companies like Oracle and Intel Corp.
Santa Clara-based Intel, which employs 7,000 in Folsom, has 60 percent
of its work force in the United States, but over the past year it
reportedly has added 1,000 software engineers in China and India as a
way to cut labor costs.
A different kind of export: Mark Zandi, chief economist for
Economy.com, estimates that 995,000 U.S.-based jobs have been lost to
other countries since March 2001, when the tech industry began to
implode.
Cutting costs became the formula for survival among tech companies;
labor is a major cost, they found, that can be cut through job shifts
overseas.
Forrester Research and others estimate that about 550,000 U.S. jobs
were exported over the past 30 months, mostly in manufacturing. But
Forrester projects that by 2015, globalization will have figured in the
loss of 3.3 million U.S. jobs to other countries.
Zandi said several factors are at work when companies shift service
jobs to India. Not only will workers do the job for less money, but
operations can be set up without many of the regulations and legal
restrictions they face in the United States.
And these days, most East Asian currency is undervalued, "making it
very attractive for a company to move operations to China, India,
Singapore, Malaysia and the Philippines," he said. Managed currencies,
such as those in India and China, don't adjust to the values of other
currencies, he said, making them a bargain for incoming companies that
want to save overhead costs.
"We're losing pink collar, back-office jobs very rapidly," said Zandi.
"It's painful, but it's probably not going to end."
The key, he said, is how fast all this happens. If all the jobs go in
two to three years, he said, "we've got a problem," because the economy
won't be able to generate replacement work in such a short time. If the
shift is spread over 10 to 20 years, he added, "We'll be better off."
But once these jobs leave the country, he said, "It's unlikely we'll
get them back."
He sees the trend evolving so that jobs in the United States will
require higher skill levels, with a company's lower echelon chores
going to low-cost foreign countries.
For those laid off at home because of this shift, said Zandi, the only
recourse will be to retool and retrain for what jobs are here.
"That's really the only way out of that," he said.
http://channels.netscape.com/ns/pf/story.jsp?idq=/ff/story/0002%2F20031013%2F101089485.htm
Bank of America Steps Up Outsourcing
LONDON (Reuters) - Bank of America is to take emerging markets
outsourcing one step further with plans to set up an Indian subsidiary
next year, enabling it to cut costs by moving more jobs offshore.
The bank, which has already outsourced a number of jobs to emerging
markets, will set up a subsidiary in India next April, spokeswomen
Elisabeth Woods said on Monday.
"It will help provide faster high quality, less expensive solutions to
our customers," she said.
The move will mean some job losses from BoA's global operations.
However, employees will have to wait to find out if their jobs are at
risk, as BoA says it has not yet decided exactly which functions will
be moved to India.
BoA has already faced protests over decisions to outsource jobs abroad.
Yet analysts say that two thirds of U.S. banks now outsource work to
developing countries such as India, China and Russia.
In Europe, HSBC, ABN AMRO and Deutsche Bank have been among the
companies to shift work abroad.
BoA, which is set to report third quarter earnings on Tuesday, has
chosen to use a subsidiary rather than outsource work to other firms
because it offers greater protection of the company's intellectual
property, said Wood.
"India was chosen because it is a leader in information technology and
processing, and has a large English speaking workforce and good
infrastructure," she added.
In November or December of this year Bank of America will also combine
two of its London offices at a new location at Canary Wharf in east
London.
The bank will keep its operations in Bromley and Croydon, both south of
London.
10/13/03 10:10
How the Tiger finally found its way home
Saturday November 1st 2003
The Tiger economy has been good to Sean. He's in his late 20s, holds a
university degree and has a prestige job with a company that's going
places.
The work itself doesn't stretch his talents, in fact he often catches
himself clockwatching but the money is excellent and he won't be there
for ever. He sees the job as a stepping stone to something more
challenging and
personally rewarding in advertising, marketing or PR.
One good thing about his current line of work is that the job-skills
are easily taken abroad. He'd like to get the wanderlust out of his
system before he settles down.
But the economic upturn has come with a down-side as Sean is only too
aware. Even with the money he's on, buying a house seems an impossible
dream. He remarks: "Until recently I was paying almost half of my
salary just to lodge with a family. And I could touch both walls of my
bedroom with my outstretched arms! Admittedly, it was in a very
fashionable area of the city just a stone's throw from the sea."
Sean's workmates are all in their twenties and early thirties. They're
college educated to a man, except that a slight majority of them are
women. Few, if any, of his colleagues intend staying in the job for
more than a
couple of years but for the time-being the money more than compensates
for the hi-tech drudgery of the working day.
Young, free and unburdened with unattainable mortgages, the workmates
regularly blow some of their disposable income with a night on the
town. Sometimes they'll go for a meal after work or to a gig but most
nights start
out, or end up, in the pub. That's only as it should be, given that
they live in a city which the tourist brochures proclaim to be 'the pub
capital of the continent'.
The continent in question is Asia. The bustling city is Bangalore, in
India. And Sean's real name is Sanjeev. The Tiger has found its way
home and some Irish unions are worried.
Sanjeev works in a call centre in Bangalore. He sits at a workstation
in a vast open-plan office the size of two or three football pitches.
Wearing a telephone headset, he handles flight reservations and
inquiries for a big
American airline. He speaks to hundreds of customers a day, six days a
week, virtually all of whom think that they're through to an office in
the United States. Sanjeev has even been trained to sound American. If
a customer asks his name, it's Steve.
Sanjeev owes his well-paid job to the new economic orthodoxy of
'outsourcing'. The communications revolution has provided big companies
with an access-all-areas pass to new workforces across the globe. These
new workforces are willing and able to provide tele-services at a
fraction of the wage bill that would be incurred in the United States
or Europe. In addition to describing Bangalore as 'the pub capital of
Asia', the city's tourist blurb also boasts that it is now a true
'global village'.
Bangalore is just one of several Indian cities at the heart of that
country's call-centre boom. Tele-business is also thriving in Delhi,
Mumbai (formerly Bombay) and Hyderabad with several southern centres
currently trying to attract multinational custom by undercutting their
neighbours.
An entry-level graduate can expect to earn from 8-10,000 rupees a month
which works out at around "f200. Pay rates vary with experience and
commission, and from firm to firm.
Sanjeev, who takes home 20,000 rupees a month ("f400), points out:
"The exchange rate is about 50 rupees to the euro but 10 rupees to an
Indian has the spending power that one euro has to a European." To a US
or European
employer, however, Indian staff come at a fraction of the cost of their
western counterparts.
It is the business of undercutting that has some Irish unions making
dire predictions of a flight of jobs from this country. Amicus, which
represents workers in the financial sector, has warned that three out
of four Irish
insurance companies will be outsourcing jobs to India within five years
time. The union has even called for an Oireachtas investigation into
the possible damage caused by outsourcing.
Amicus commissioned a report, by Deloitte & Touche, which estimated
that up to 5,000 jobs in banking and insurance could be lost to
lower-cost economies by 2010. The union pointed out that India can call
on 10 million
degree-educated workers with good English who will perform call-centre
work for 25pc of the salary of an Irish worker.
The irony which somewhat undermines these cries of 'Foul!' is the fact
that India, China, the Philippines, South Africa and other hotbeds of
outsourcing, are merely following a business trail blazed by Ireland
over a decade ago. Ireland's success in selling the attractions of
outsourcing work to our young, educated, English-speaking workforce was
one of the key factors that kick-started the Tiger economy.
What is indisputable is that Ireland is indeed in danger of falling
victim to its own success in attracting the sort of jobs that move to
where the price is right. A survey by market analyst Datamonitor
established that the
Republic's workforce has the highest proportion of call-centre staff in
Europe at 3.6 pc.
Last May Ebookers, Europe's biggest online travel agency, announced
that it would be laying off 26 staff at its Dublin office. The agency's
chief financial officer was upfront about the fact that the firm "can
employ staff
in IT, telesales and accounting for 25pc of the (Irish) cost in India".
The following month it emerged that American Airlines, which runs all
its reservations operations for the whole of Europe from Dublin, had
sent managers to South Africa to scout out the advantages of
outsourcing there, or of even relocating lock, stock and barrel.
Meanwhile back in Dublin, Datapage International, which specialises in
providing high-level data-management services to the scientific
publishing industry, was telling its 50 staff that their jobs were no
longer secure after the firm lost a major contract to India. Only
months earlier, Datapage itself had set up a subsidiary in India to
take advantage of cheaper costs there.
The call-centre business in India is a mere five years old but from the
very outset the Indians went at the task on a scale unimaginable in
Ireland. Some call-centre complexes accommodate not thousands but tens
of thousands of workstations. For a time, however, it looked as if the
Indians had lumbered themselves with some very expensive white
elephants.
The dot.com crash at the turn of the millennium led to a slump in the
call-centre business worldwide. Across the subcontinent,
state-of-the-art buildings stood half idle. The crisis in India passed,
however, as the global downturn actually brought new business as the
multinationals sought ways to cut costs.
Even the ill wind of September 11 brought an uplift for the sector,
sparking a new demand for 'continuity outsourcing', especially among US
firms. Companies based in America began looking to foreign call centres
as places where they could install back-up services in the event that
their headquarters were unable to function for any reason.
And where American jobs and services go, American culture inexorably
follows. A training industry worth an estimated $2.3bn annually has
shot up around the call-centre sector, offering crash courses in how to
sound and
even think like an American. Candidates are screened at the initial job
interview to ensure that if they don't already sound the part, they can
be trained-in with minimal cost and effort.
As part of their conditioning, recruits receive grammar and elocution
lessons. They're taught tongue positions that will make them sound more
American, and when and how to take their breath before or after
specific words. They watch American movies, TV shows, sports and news
programmes to familiarise themselves with the language, culture and
lifestyles of their customers.
When their training is complete, India's call-centre staff are expected
to sound American and to be able to tell what part of the States a
caller comes from. The object of the exercise, literally and
figuratively, is that they should be able to know where their customer
is coming from. According to Sanjeev: "New recruits are encouraged to
try to adopt a Californian accent which is more neutral than a southern
accent, such as a Texan accent."
Ten years after Ireland pioneered the business strategy of outsourcing,
thousands of workers here harbour valid fears that the same strategy
might soon leave them high and dry. The baton has passed to India but
even as new
jobs and cash pour into the subcontinent, there's an awareness that the
ebb and flow of boom and bust has become very, very fickle and
unpredictable.
Sanjeev reflects: "The call centre industry is booming right now but
following the collapse of the dot.com bubble, people are a little more
wary. Most of the people I work with are in it to rake in as much money
as they
can while the going is good. Nobody expects it to last for ever.
Everything's changed."
?Irish Independent
http://www.unison.ie/irish_independent/ & http://www.unison.ie/
http://www.kingcountyjournal.com/sited/story/html/147268
Jobs going overseas in recovery
2003-10-28
by Tom Wolfe
Editor
Two days from now, you'll be hearing economic news that won't seem
right.
On Thursday, when the government releases its official economic review
of the third quarter, you'll be told once again that the recession is
over and that the economy is in full recovery. Not only that. For the
first time in several years, you might also hear words such as
``blistering'' or ``roaring'' to describe the rate of expansion.
So where are the jobs?
Journal business reporter Cydney Gillis can tell you that:
* Woodinville's largest employer, Loud Technologies Inc., sent 201 jobs
to Asia.
* Kent-based Raleigh America Inc., sent 150 jobs to Asia.
* The Tally Printer Corp. of Kent announced two months ago that its 75
to 100 jobs were headed to Mexico.
It's called a jobless recovery.
Since early 2001, more than 2.6 millions jobs have disappeared from the
U.S. economy, and one in 15 American workers is unemployed. Under
pressure to stay competitive, American companies are shifting jobs
overseas, and it's not just the big guys, the Boeings, the Microsofts
and the Weyerhaeusers.
In a front-page report in Sunday's Journal, Gillis reported that all
U.S. manufacturing jobs are vulnerable, along with jobs in computer
programming, accounting, call centers and various professional
services.
In fact, Gillis reported, ``One by one, any American job that can be
boxed and shipped to Mexico, China or India will be.''
What jobs are the most secure? Gillis found that jobs in health care,
sales and marketing are the most likely to stay. ``Otherwise,'' she
warned, ``no one is safe.''
Jobs of tomorrow
Health care is the hot industry of the moment.
But remember the 1980s? The hot ticket then was the MBAs, the masters
of business administration, later parodied as masters of the universe.
Now, after the corporate scandals of the past several years, MBAs are
toning it down and learning something useful.
Remember the 1990s? The hot ticket then was any form of Internet
technology. Today, thousands of unemployed Web programmers are finding
they need to round out their business and people skills -- either that
r go on living in their parents' basements and playing Everquest.
In other words, lifelong employability is a function of versatility,
and versatility is a function of lifelong learning.
Job insurance
For young people thinking about a career, the best advice can be found
on a bumper sticker: ``You think education is expensive? Try not having
one.''
Unemployment figures from the Bureau of Labor Statistics bear this out.
Nationwide last month, 7.9 percent of high school dropouts were
unemployed. That compares with 4.8 percent of high school graduates and
just 3.3 percent of college graduates.
Bottom line?
The most important thing we can do to ensure economic vitality in this
state isn't to land the next generation of Boeing airplanes. It's to
educate the next generation of taxpayers.
Tom Wolfe is editor of the King County Journal. His column runs every
Tuesday. Readers can reach him by phone 425-453-4230, 253-872-6670
e-mail tom.wolfe@king countyjournal.com or fax 425-635-0603.
http://www.infomaticsonline.co.uk/News/1144655
Government urged to promote outsourcing
By Rachel Fielding [20-10-2003]
Employees should be shown the potential benefits, says National
Outsourcing Association
IT suppliers and customers are calling on the government to promote the
benefits of outsourcing to employees, in order to help UK outsourcing
companies better compete with their overseas rivals.
Supplier and customer body the National Outsourcing Association (NOA)
said that changes to employee-related legislation are needed to address
widespread concerns from staff about the implications of being
transferred to an outsourcing supplier.
NOA chairman Nigel Roxburgh told vnunet.com that embracing the trend
towards outsourcing, rather than introducing protectionist measures,
would be key to a thriving UK economy.
"The government needs to be aware of the potential of outsourcing for
the UK economy. We should see this as a trend rather than being the
machine breakers of the knowledge economy," he said.
The call comes as banking giant HSBC Holdings announced plans to move
4,000 call centre and back-office processing jobs to India, Malaysia
and China over the next two and a half years.
HSBC will close five back-office processing centres around the country
by the end of 2005, enraging unions which have pledged to fight the
plans.
Employee concerns, and the emotional reaction provoked by outsourcing,
have tainted the industry's reputation.
Roxburgh believes that extending TUPE, the legislation to protect
employees' rights when a business is sold or merged, to include pension
rights would go some way to addressing fears.
The knock-on effect would be to bolster support for, and investments
in, outsourcing.
"We would be better at this if we had a tight, regulatory environment
and less fear about being displaced by an outsourcer," said Roxburgh.
"Constant learning, re-skilling and redeployment also need to be
priorities for the UK government. Having strong outsourcing companies
will bring employment back to the UK."
But Lee Whitehill, a spokesman for union Amicus MSF, said: "We have to
move the UK into an ideas economy, and training and education
definitely have a role to play.
"But I don't think anyone in their right mind would say that
encouraging outsourcing, which has led to the loss of 4,000 jobs at
HSBC, can be good for the UK economy."
The union has called on the government to set up an independent
commission to examine the likely effects on the economy and levels of
unemployment.
Analysts and consultants predict that 200,000 UK jobs are likely to be
lost to offshore firms as the trend towards outsourcing gathers pace.
http://www.itworld.com/Man/2701/031009outsource/
CEOs defend moving jobs offshore at tech summit
IDG News Service 10/9/03
Grant Gross, IDG News Service, Washington Bureau
Moving IT jobs outside of the U.S. is necessary if technology companies
want to remain competitive in a world market, a group of software
vendor chief executive officers (CEOs) said Thursday.
Most of the 11 CEOs defended moving some IT jobs outside of the U.S.
during a panel discussion on "the next wave of innovation" at the
Business Software Alliance's Global Tech Summit in Washington, D.C.
Moving low-level IT jobs outside the U.S. doesn't take away jobs from
U.S. workers, argued Tom Noonan, chairman, president and CEO of
Internet Security Systems Inc., because outsourcing allows cost savings
and drives companies to focus their U.S. workforces on higher-paying IT
jobs.
"The economic advantage is created by accelerating more jobs here in
the U.S. because you move the day-to-day labor offshore," Noonan said.
"This is not a displacement of jobs, in our mind, this is an enabler of
good jobs."
Panel moderator Lou Dobbs, a CNN anchor, questioned whether moving IT
jobs offshore was simply about companies trying to pay the lowest
possible wages. Art Coviello, president and CEO of RSA Security Inc.
said he worried about the political fallout over moving jobs from the
U.S. to other countries.
"I absolutely think it's driven by the short-term profit margin,"
Coviello said. "But I think the unintended consequence is innovation."
As low-wage jobs go overseas, the U.S. has been forced to invest in
higher-wage, more innovative industries such as biotechnology and
health care, Coviello added.
Moving IT jobs offshore, and the number of visas allowed to IT workers
coming into the U.S., are becoming a hot debate in Washington this
year, as Congress considers whether to raise the number of H-1B visas
allowed for 2004.
Driven by a stagnant economy and concerns over security, some state
legislators across the U.S. have also tried to stop the relocation of
jobs by introducing bills prohibiting state governments projects from
using offshore IT workers.
But the CEOs on the panel said the offshore moves provide several
benefits, including access to highly skilled employees who want to
work. "Those of us who are first in India, for instance, are seeing
masters degreed engineers that will do call-center work," said Carol
Bartz, chairwoman, CEO and president of Autodesk Inc. "We're seeing
people eager to have these jobs, not just showing up. Sure, it's cost
cutting, but we are seeing very high-quality labor, let's not diminish
that."
Other IT CEOs on the panel argued that moving IT jobs is necessary in a
global market, where 50 percent or more of some software companies'
sales are outside the U.S. The biggest fear that some IT CEOs have is
that foreign markets will close their borders to U.S. products, said
Gregory Bentley, CEO of Bentley Systems Inc. U.S. companies hiring
workers in countries outside the U.S. encourage those countries to be
open to U.S. products, he said.
While about two-thirds of his company's 1,500 jobs are in the U.S.,
jobs in Pakistan help create a stable and U.S. friendly economy there,
Bentley added. "There are some jobs that can't be done at U.S. wages,"
Bentley said, "All those (U.S.) jobs are at stake if we lose foreign
markets. The long-term view is that it's essential for the growth of
software to have global markets remain open markets."
The outsourcing debate was among the most lively during the innovation
panel discussion, with most of the rest of the discussion centering
around the CEOs' optimism about the future of IT. Moderator Dobbs also
raised questions about cybersecurity, asking what responsibility tech
CEOs have to ensure security.
The panel agreed that security needs to be a top priority for all
companies deploying IT systems. A series of cyberattacks in August
should have served as a wake-up call to CEOs and government leaders,
said George Samenuk, chairman and CEO of Network Associates Inc.
"The security business is in a revolutionary period right now, not an
evolutionary period, a revolutionary period," Samenuk added. "It's no
to attacks. You have to be proactive."
After launching the security discussion, Dobbs took the software CEOs
to task for not stopping spam from reaching his e-mail in-box. Spam is
a bigger issue for him than other cybersecurity debates, Dobbs said.
"We need to deal with that issue, and frankly ... you're disappointing
the hell out of me," Dobbs told the software CEOs. "You guys told me
the Internet was great."
The CEO panel suggested a combination new legislation creating criminal
penalties for sending some spam, digital signatures that credential
Internet users, and other technologies could solve the spam problem. At
least two of the panelists suggested some kind of fee for sending
e-mail would discourage spammers. Fees for sending bulk e-mail wouldn't
have to be legislated, but could be charged by corporations receiving
the e-mail, said William Conner, chairman, president and CEO of Entrust
Inc.
"If California would impose a 10-cent tax per e-mail, and they
collected the fees, that would actually then almost (free) them from
their deficit," said Dale Fuller, president of CEO of Borland Software
Corp., apparently joking.
Later in the day, Tom Ridge, secretary of the U.S. Department of
Homeland Security, suggested that it may be time to require public
companies to report their cybersecurity efforts in filings with the
U.S. Securities and Exchange Commission. All companies need to be made
aware of the benefits to their businesses if they improve
cybersecurity, Ridge said.
"I believe the marketplace is ready to reward security in a big way,"
he said. "Security means reliability. How much is this reliability
worth to a customer who buys software or hardware from your companies?"
Grant Gross is Washington correspondent for the IDG News Service.
http://www.enquirer.com/midday/10/10142003_News_4mday_convergys.html
Convergys opens two Philippine
call centers
The Associated Press
MANILA, Philippines - Convergys Corp., a U.S.-based billing and
customer services giant, opened its first two call centers in the
Philippines on Monday and announced plans for a third, creating more
than 3,000 jobs.
The centers provide general support and advanced technical help-desk
services to a variety of Convergys clients via telephone, e-mail and
the Web, the Cincinnati-based company said.
Communications from all over North America arrive at Convergys'
facility in Salt Lake City, then are transmitted to the Philippines.
Jack Freker, president of Convergys customer management group, told
reporters in Manila that the investment was part of a push to make
Convergys' global operations generate at least 30 percent of group
revenue.
In February 2002, Convergys opened operations in India with 200
employees. Its work force in India now exceeds 6,000.
Freker said future expansion to other locations in Asia will be
determined by "demand for multi-lingual support."
Jean-Marc Hauducoeur, a senior vice president at Convergys, said the
company's growth in India could be replicated in the Philippines.
"There is such a potential for growth," he said.
Hauducoeur refused to say how much Convergys has invested and will
invest in the Philippines, but said typically each contact center
requires an investment of between $5 million and $10 million.
Convergys employs more than 48,000 people in 50 customer contact
centers, data centers and other offices in the United States, Canada,
Latin America, Europe, the Middle East, and Asia.
In morning trading on the New York Stock Exchange, Convergys shares
were down 72 cents, or 3.5 percent, to $19.87.
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