Charlotte Observer Series on Outsourcing
Charlotte Observer Series on Outsourcing
Date: Saturday, December 20, 2003 12:47 PM
JOB DESTRUCTION NEWSLETTER
www.ZaZona.com
Sheila Hopkins published a very well researched series of articles on
outsourcing in the Charlotte Observer.
I put the last of the series at the top because it should be read as an
introduction. Right below the introduction, I put some snippets that
really caught my eye.
The series is quite long but it's well worth the time spent to read it.
It's fascinating reading although at times it's also quite depressing.
All the text is recreated below because I don't know how long the
articles will stay online. You are required to do a free sign-up to
read it online. There is one article that I didn't include just to give
you a reason to go to the online newspaper - it's titled "Biggest Names
in Carolinas Part of Offshore Outsourcing Trend".
Feel free to contact the author of this series, Sheila Hopkins, if you
have comments. You will find Sheila easy to contact and interesting to
talk to. Encourage her to continue this series and to write about H-1B
and L-1 and other nonimmigrant visas.
You might also consider contacting the newspaper to tell them that we
need more quality reporting like this.
http://www.charlotte.com/mld/charlotte/business/7488023.htm
Posted on Sun, Dec. 14, 2003
The Rush Overseas: There Go Our Computer Jobs
We've chronicled the demise of Carolinas textile jobs, lost to
lower-wage foreign workers. Now we're at the threshold of a drain on
higher-paying, white-collar jobs.
In the Carolinas, and nationwide, banking giants, utilities, software
firms, government agencies and others are using lower-paid workers
abroad for jobs ranging from call-center operators to software
programmers.
Companies say the move is critical to remain competitive -- even
survive -- in a global economy. Supporters also say that using foreign
workers frees U.S. employees for more valuable work. Researchers say
the growing shift abroad could cost the nation millions of middle-class
jobs and billions in wages.
Today, we'll show you how widespread the trend is in the Carolinas. In
the coming year, we'll cover efforts to protect personal information
when work is done abroad. We'll examine how the job exodus is reshaping
our economic future and explore strategies for ensuring secure
employment.
REPORTERSStella Hopkins (704) 358-5173
shopkins@charlotteobserver.com
Sarah Jane Tribble (704) 358-5159
stribble@charlotteobserver.com
PROJECT EDITOR | Patrick Scott
PHOTOGRAPHER | Layne Bailey
DESIGNER | Craig Paddock
COPY EDITOR | Forrest Brown
GRAPHIC ARTIST | Michelle Hazelwood
RESEARCH | Sara Klemmer, Marion Paynter
On the Web
See this report online: www.charlotte.com
Tell Us What You Think
We'd appreciate your thoughts on the trend of sending white-collar work
abroad. What should workers, schools, universities, government
officials and executives do as this job shift reshapes the Carolinas
economy? E-mail lead reporter Stella Hopkins or write The Charlotte
Observer, P.O. Box 30308, Charlotte, NC 28230-0308. Please include your
name, address and telephone number.
* The white-collar exodus could put more than 10 percent of the
nation's work force at risk of losing jobs to foreign workers,
according to a University of California, Berkeley study. That's more
than 14 million Americans.
* The white-collar exodus is often not as obvious as the shuttering of
a textile mill, but the economic ripples could be harsher. And these
losses are likely to be permanent, like the mill jobs before them. An
economic uptick won't reverse the move abroad, just as the economic
boom of the '90s didn't halt the loss of textile and apparel jobs.
* Smith, CIO of Duke Energy, wants local control of both because they
are critical during emergencies, such as storms that knock out power
and demand constant interaction. Still, he attends outsourcing sessions
at IT conferences and reads extensively on the topic, always looking
for savings. "I might patriotically like to, but I would never rule it
out," Smith said. "You have to face shareholders and employees and say,
`We're cost-effective.' "
* Inside a single-story Cornelius office building, high-power computers
encode medical information for patients nationwide and zap it to 3,000
transcriptionists in India.
* Imagine doing it [project management] across thousands of miles with
employees you've never met, who come from different cultures and are
going home about the time America wakes up. That's the job of a project
manager for companies sending programming work overseas. And the rush
abroad is creating big demand for the position.
* The respect of peers seems more important to Indian workers. Lehman
-- like others working with Indian programmers -- found they don't like
to disagree with bosses or raise questions, so they might say they
understand when they don't or go along rather than express concerns.
They also prefer more detailed instructions than American workers.
* Charlotte's call-center hub has seen growth this year, but it also is
showing early signs of vulnerability to the move of work abroad. Still,
those types of jobs are increasingly going to headset-wearing workers
in India, Malaysia, the Philippines and other countries where wages are
far lower.
* The Indian call-center industry took a hit last month when computer
giant Dell said it would stop sending some calls to a center in India
because of customer complaints about service. The move got a lot of
media attention, but Dell spokesman Barry French said "It's been blown
out of proportion." The Texas company continues adding workers in
India, he said.
* Only a few Lowe's credit-card customers have complained about calls
routed to India, said Chris Ahearn, a spokeswoman for the Mooresville
home-improvement retailer.
* In the late 1990s, Sam Wazan saw Indian firms charging $35 an hour
for computer work he billed at $175 or more. That told him he couldn't
beat the foreign outsourcing move. So he joined it. Wazan's lower-paid
staff in Lebanon enables him to undercut U.S. rates for such computer
work as writing code and developing custom software. He won't say what
he pays the workers or how many he has because he doesn't want
competitors to know. The Lebanese staff works 9 a.m. to 6 p.m., five
days a week.
* During the tech boom, Tim Clark never considered using lower-paid
foreign programmers at the Raleigh tech company he helped start. Now
he's selling for an Indian company, cracking the U.S. market for its
software. "It's incredible, the difference in cost," Clark said. he's
impressed with his Indian colleagues, many with graduate degrees. They
work long hours producing quality software at about 20 percent of what
similar professionals cost his last company, Clark said.
* Cox, 57, also is improving his software for county social services.
He could send those chores overseas. He says he won't, even if the use
of workers abroad spreads in his small industry.
http://www.charlotte.com/mld/charlotte/business/special_packages/outsource/7487968.htm
Posted on Sun, Dec. 14, 2003
OUTSOURCING: THE RUSH OVERSEAS
There go our computer jobs
STELLA M. HOPKINS & SARAH JANE TRIBBLE
Staff Writers
Huddled in their 16th-floor office uptown two years ago, Frances Queen
and her management team voiced the unthinkable: Was the Charlotte
computer-services firm doomed?
In one week after the 9-11 attacks, Queen Associates had lost five
long-term contracts worth $600,000 in sales. But a bigger threat
loomed, one an economic rebound couldn't fix. Customers increasingly
sought lower-paid software programmers overseas instead of hiring the
company.
RELATED LINKS:
Carolinas companies | Biggest outsourcers
What are some other big names doing?
Duke Energy: At home for now
Even medical records being sent to India
Outsourcing creates demand for U.S. coordinators
Charlotte's call-center hub vulnerable
He didn't try to beat the trend, he joined it
He's helping Indian firm create U.S. jobs
He'll keep costs low, keep jobs in this country
About this series: The Rush Overseas
Queen lay awake nights.
"Then I decided, we're not going to sit around and feel sorry for
ourselves. We're going to start an offshore division."
She lined up a team of programmers in Russia and plans a Philippines
operation.
"Offshore is becoming expected," said Queen, 53, the firm's CEO. "You
have to offer it to be competitive."
In the Carolinas and nationwide, more companies are reaching that
conclusion.
Nearly two-thirds of the Fortune 1000 companies headquartered in the
Carolinas -- 17 of 27 -- say they have sent computer tasks abroad,
mostly to India, according to an Observer survey. Among 100 of the
Carolinas' largest public companies, the survey found that a total of
25 say they have used the strategy.
Big-name Carolinas players include Bank of America, which eventually
expects to employ about 1,000 people at the center it plans in India.
Matthews discounter Family Dollar has programmers in India modifying
sales software. S.C. utility SCANA has done software work in India
since 1996. Wrangler-maker VF has an Indian help desk for workers with
computer problems.
The white-collar exodus could put more than 10 percent of the nation's
work force at risk of losing jobs to foreign workers, according to a
University of California, Berkeley study. That's more than 14 million
Americans, although the study's authors say all those jobs won't be
lost.
The move abroad -- often called offshoring or foreign outsourcing --
echoes the loss of manufacturing jobs to low-wage countries. After
decades of textile losses, that's a trauma the Carolinas know well. But
it's a new reality for service workers, long immune to the global wage
battle.
With the Internet, many computer jobs can now be done anywhere, often
for a lot less money. Workers abroad also process mortgage
applications, read X-rays, prepare tax returns and staff customer call
centers.
The job shift will continue, and it is reshaping the nation's economy.
But experts don't agree on the impact or how the economy will adapt.
Amid uncertainty and fear, there have been protests, congressional
hearings and states proposing anti-outsourcing legislation, including
an N.C. bill.
Supporters say the move abroad saves billions, gets work done faster,
resolves labor shortages and frees U.S. employees for more creative
work. Critics say it's eroding the middle class and wiping out
America's future.
"Everything is up for grabs, and the low-cost bidder wins," said Marcus
Courtney, president of WashTech, a union for white-collar workers.
"Where are you going to be able to get a job and build a secure
economic future?"
The Y2K effect
In the 1980s, U.S. companies began tapping tech talent in India, but it
was Y2K that taught Corporate America it could move more than factory
jobs overseas.In the late '90s, companies here and around the world
raced to fix software for the change of the century. Experts feared a
meltdown when computers, often using two-digit date codes, couldn't
tell 1900 from 2000.
That also was the height of the U.S. tech boom. Information technology
workers were in short supply, and wages were high.
India offered a huge pool of low-cost programmers for the rote work of
Y2K fixes. The Observer survey found Charlotte-based Duke Energy and
Raleigh-based Progress Energy were among the companies sending the
tasks abroad. Both say they have done no more foreign outsourcing.
As the economy staggered, the low-wage lure of India and other nations
became more apparent. Shipping data around the world grew cheaper and
easier with falling long-distance costs and growing webs of undersea
communication cables. Outsourcing -- a well-established practice within
the United States -- was moving abroad. Among the benefits:
Wages up to 90 percent lower for educated, English-speaking
professionals.
Savings of at least 20 percent, often more, on total project costs.
Round-the-clock production due to time-zone differences.
American outsourcers, such as giant EDS, are also abroad competing for
business.
"Offshore picked up a lot of momentum because it was a recession," said
Dean Davison, who leads outsourcing research at Meta Group, a
Connecticut IT consulting firm. "If they could cut 20 percent, they
would do it because they were desperate."
Front-runner in outsourcing
SCANA, owner of Gastonia's PSNC Energy and S.C. Electric & Gas, was a
Carolinas front-runner in outsourcing abroad.
The company, based in Columbia, typically turned to computer services
contractors so it didn't have to hire and fire as workload fluctuated.
In 1996, a contractor bidding on a complex project said the company
could save money and turn the job in half the time by using workers in
India.
Randy Senn, SCANA's chief information officer, was skeptical that
Michigan-based Covansys could deliver. But he couldn't ignore the
potential benefits, so he took a chance.
Covansys had added an Indian operation in 1991, making it one of the
first U.S. outsourcers to set up there. Today, one-half of the firm's
4,800 workers are in India.
Covansys did an outstanding job overseas for SCANA, Senn said, and the
two firms have worked together since. Their current project is to
improve the utility's customer-information system. Senn says the
company saves about 40 percent over the cost of doing the work
in-house.
"I didn't think it would work. It's part of our strategy now."
So far, big companies in the Carolinas and nationwide dominate
offshoring.
At the Fortune 500 level, 80 percent of Carolinas companies -- 12 of 15
-- have used offshoring. In the broader Fortune 1000 universe, 63
percent of Carolinas companies outsource abroad.
Among its biggest companies, Carolinas outsourcing outpaces world
estimates. By the end of next year, 40 percent of Global Fortune 1000
companies -- the world's largest -- will have tested offshore
outsourcing or will be using the strategy, according to Connecticut
researchers Gartner.
In addition to publicly held Carolinas companies, The Observer surveyed
20 other large Carolinas employers.
Those doing work abroad include Springs Industries in Fort Mill, S.C.
The textile maker, with 16,000 workers, said it has 19 programmers at a
firm in India working with its S.C. teams to modify software. US
Airways, based in Arlington, Va., has programming done in Brazil
through EDS. And Charlotte's Presbyterian Healthcare hired an Indian
firm in Bangalore late last year to help redesign its intranet.
Bank of America project
The Carolinas' biggest company, Bank of America, began outsourcing to
India early last year with a few test projects, including building
prototypes for Web sites.The move grew from the bank's increased focus
on how it operates after more than a decade of acquisitions.
"We got interested first because we heard that there were significant
cost savings," said Tim Arnoult, the bank's technology and operations
executive. "This is basically true. However ... we also found that the
quality of work was very good, we could gain speed-to-market
advantages, and it was a very effective way to staff special projects."
Typical offshore work now includes developing, testing and modernizing
software. The Charlotte bank gets about 20 percent of its software work
done offshore and expects to continue at that level, said Mary Waller,
senior vice president of media relations.
The bank, which would be the nation's second largest by assets after
the pending FleetBoston merger, says offshore outsourcing has saved it
$10 million. Now it is expanding in India. A subsidiary, set to open in
Hyderabad in April, will handle a wider range of work than software
projects, which will continue going to outsourcers.
Called Continuum, the center could, for example, work with Charlotte
staff to develop a product more quickly. The bank won't give specifics
about work intended for the center. Bank executives said they expect
the Indian unit will employ less than 1 percent of their 133,000-member
work force.
The bank has been cutting technology and operations staff for about two
years as part of its focus on how work gets done. Outsourcing to India
accounted for some cuts, including jobs at Charlotte's Gateway Village,
a hub of the bank's IT work.
But the bank can't quantify offshore-related job losses because it
doesn't track the reason for job cuts, Waller said. Losses may
continue.
"It's possible that some jobs are eliminated as certain processes are
performed through the subsidiary," Waller said. "It's also possible
that other jobs will be created by other initiatives at Bank of
America."
The bank's Indian unit makes it one of the first Carolinas companies to
take the next step in moving work abroad by setting up its own shop.
SAS, the world's largest privately held software maker, shares that
distinction. The Cary company opened its subsidiary, SAS India, three
years ago in Pune and has 50 software developers at the site.
SAS didn't outsource through an Indian firm because it wanted direct
control. The firm also wanted workers abroad to be part of its culture
and learn its quality expectations. This month, a crew of 14 SAS
workers met with colleagues in India for three days.
"We're trying to tightly integrate the two staffs, trying to get to the
point that it doesn't matter if they're in India or they're here,"
Fritz Lehman, the SAS project manager in Cary for Indian work, said
before leaving.
SAS, with its data-analysis software running at 90 percent of Fortune
500 companies, said it turned to India because of the tight U.S. tech
labor pool in the late 1990s. Lower costs enable SAS to put more people
to work on new projects, so their software gets to customers sooner.
The company, with 9,100 employees worldwide, doesn't plan layoffs among
its 1,200 developers in Cary, near Raleigh, because of foreign
expansions, said Chief Technology Officer Keith Collins. But he expects
growth will be largely overseas for several years.
SAS plans to double its Indian programming staff in the next year. It
also is eyeing Eastern Europe, Ireland and China.
The job churn
Sometimes outsourcing means layoffs, but it's also about jobs not
created.
VF, the world's largest clothing maker, laid off 17 people this year at
its Greensboro headquarters when it hired an Indian firm to staff its
computer help desk in Noida.
When VF started a software project about two years ago, it also turned
to India rather than hiring in Greensboro. The company didn't want to
add employees for short-term stints, said Eric Anthony, VF's vice
president of IT services. Offshore staffing on the project peaked at 70
people but has been far lower at times.
This year, another Indian firm, Quinnox, won VF programming work using
as many as 12 people.
"I was meeting with everybody from India, getting to understand the
players, the capabilities," Anthony said. "One of the big things you
... learn is all these guys can do it. It's who you like working
with."
At Family Dollar, a test project in India this year meant a little less
work for U.S. programmers.
Come January, cash registers will record sales in the discounter's
5,100 stores using software modified by Indian outsourcer Satyam in
Hyderabad. The offshore software project is small compared with the
growing chain's other IT work, said Chief Financial Officer Jim Kelly.
The Matthews chain, with nearly $5 billion in annual sales, is on
target to open an average of about 50 stores a month through August.
The company's IT staff of more than 250 has doubled in the past four
years, and Kelly said it will keep growing.
But when Family Dollar has extra IT demands, it also turns to
contractors, and more of that work may go overseas. The savings from
working abroad propels growth, which produces U.S. jobs, Kelly said.
"Technology enables you to contract long-distance," he said. "But
working eyeball-to-eyeball still has advantages."
White-collar worries
Just how worried should white-collar workers be?There is no tally that
separates jobs eroded by offshore outsourcing from those that vanished
because of the weak economy and the bursting of the dot-com bubble.
There also is no way to measure jobs not created when companies send
work abroad.
But white-collar workers have been hard hit by this economic downturn,
making up a greater portion of the unemployed than in the past.
Professionals and managers, a group that includes IT workers, accounted
for nearly one in five unemployed people in November, according to the
Bureau of Labor Statistics. These workers accounted for slightly less
than one in 10 unemployed people in November 1992, a comparable point
in recovering from an economic downturn.
The trend is jarring. Just a few years ago, white-collar jobs held the
promise of a secure employment future. Service jobs, especially in the
tech sector, were touted as offsetting factory losses.
Now the jobs of as many as 14 million Americans could be at risk,
according to the UC Berkeley study, released in October.
"Even in the worst case, we don't think all those jobs will go, but
that's all the jobs that could possibly be outsourced," said Cynthia
Kroll, a senior economist and the report's co-author. "Anything that
involves sitting at a desk, talking on the phone and working at a
computer is vulnerable."
Kroll and co-author Ashok Bardhan say last year's heavily cited
estimate of 3.3 million jobs lost to offshore outsourcing by 2015
"already seems conservative." That projection, by Forrester Research,
also called for a drain of $136 billion in wages.
Forrester's estimate includes nearly 473,000 computer jobs lost by
2015. In the broader pool of all IT jobs, another firm, Gartner,
estimates 500,000 jobs could be lost by the end of 2004.
Charlotte's banking hub could be especially vulnerable. Based on its
survey of 100 U.S. financial services firms, consultant AT Kearney
estimates the industry will move the work of 500,000 people -- 8
percent of its current work force -- abroad by 2008.
Bank of America and Wachovia are the only Carolinas banks of 18 in The
Observer's survey that said they are sending work abroad. Wachovia does
IT development and testing overseas but won't describe specific
projects.
"We consider outsourcing on a case-by-case basis," said Wachovia
spokeswoman Christy Phillips. "It's not a key business activity for
Wachovia at this time."
Keenly felt losses
The white-collar exodus is often not as obvious as the shuttering of a
textile mill, but the economic ripples could be harsher.
"It's worrisome because these people are generally more educated, tend
to vote more and make more money, so the loss of their incomes is felt
more keenly by the economy than the blue-collar types," said Irwin
Kellner, an economist with Hofstra University in New York.
And these losses are likely to be permanent, like the mill jobs before
them. An economic uptick won't reverse the move abroad, just as the
economic boom of the '90s didn't halt the loss of textile and apparel
jobs.
Economists and researchers compare the move to past job shifts such as
the migration from farm to factory. Textile jobs relocated from the
Northeast to the Southeast and then to low-wage nations. Half the
Carolinas' textile jobs -- 136,000 -- disappeared in the past decade.
"The cost to individuals and communities is clear," said Erica Groshen,
an economist with the Federal Reserve Bank of New York. "Workers lose
earnings while out of work and, on average, don't get jobs that pay as
well as the jobs they're displaced from."
Yet historically, the nation has weathered such changes and created
jobs -- an average of nearly 2 million a year for the past 20 years.
"We specialize in innovation," Groshen said. "Outsourcing ... gives us
the opportunity to move on to the next big thing, whatever that will
be, and I don't know what it is."
Talk of the next wave includes wireless, biotech and nanotechnology,
all of interest to the Indian tech sector as well.
Outsourcing supporters say the money saved allows companies to invest
in creating jobs. By one estimate, two-thirds of every dollar
outsourced to India comes back to America, and, with new jobs and
investment, grows to $1.12-$1.14, according to the McKinsey Global
Institute, the research arm of international consultants McKinsey & Co.
India's global exports of software and IT services hit $9.5 billion
last year, and are expected to top $12 billion this year, according to
the National Association of Software and Service Companies, the Indian
IT industry's trade group. Outsourcing is a partnership that benefits
the economies and workers of both nations, said NASSCOM President Kiran
Karnik.
NASSCOM Vice Chairman Jerry Rao, CEO of Indian outsourcer MphasiS,
added: "Innovative companies win, and innovative employees land on
their feet."
Trying to stem the tide
Fears of political or consumer backlash, especially in an election
year, could slow the trend.Offshore outsourcing isn't going away, but
"you've got a push-back, a buy-American attitude coming into play,"
said Alan Pelz-Sharpe, a vice president with Ovum, a London-based
technology research and consulting firm.
Members of Connecticut-based The Organization for the Rights of
American Workers, or TORAW -- mostly laid-off IT workers -- joined
similar groups this year protesting at outsourcing conferences in New
York and Connecticut.
"Our goal is to put our American people back to work and to stop this
nonsensical offshoring," said TORAW President John Bauman, a laid-off
programmer who took a holiday job driving for Federal Express. "We
can't as a country afford this. There will be no middle class."
N.C. Sen. Eric Reeves, D-Wake, introduced legislation in April to ban
foreign call centers on state contracts, saying the work of states
shouldn't be done overseas. The proposal from Reeves, co-chair of the
Senate's information technology committee, passed the Senate and awaits
House consideration.
At least five other states have had anti-outsourcing proposals.
In August, Gov. Mike Easley ordered a review of many state contracts to
determine whether work is done abroad. The order followed an Observer
report that food-stamp recipients in 40 states, including the
Carolinas, rely on help desks in India. On Nov. 6, Easley's office said
the review found two contracts, totaling $687,000, with a Canadian
firm.
At the federal level, the General Accounting Office is studying the
impact of offshore outsourcing.
"It's a very important, strategic, emerging issue," said Randy Hite,
the GAO spokesman on IT.
Despite the outcry, Gartner researcher Diane Morello doesn't expect
much will change.
"There will be a lot of noise around this, but it will not stem the
movement of work to lower-cost labor markets," she said.
Divided loyalties
Frances Queen, founder of the Charlotte computer-services firm, had
planned to work with an outsourcing firm in the Philippines, homeland
of her partners in the offshore venture. Then they found a Russian
company charging $10 an hour less for programmers. If there's enough
demand for offshore, they plan a foreign shop of their own, which will
further cut costs. They see the Philippines as the best location.
Business is picking up with the economy, and potential clients are
interested in the offshore option. As a business owner, Queen is
pleased.
But after more than 25 years in Charlotte's IT world, she has a lot of
longtime tech friends -- some out of work. She worries about them as
she and others turn to foreign help.
"There's a little part of me that almost hopes none of this is
successful because there are so many people out of work here in the
Carolinas," Queen said. She will hire locally "if we have the option."
But now she's also optimistic that money saved by working abroad will
generate new jobs. She's sleeping easier.
"IT is still a great place to be," she said. "It's just different."
"Business will never be the same."
http://www.charlotte.com/mld/charlotte/business/7488022.htm
Posted on Sun, Dec. 14, 2003
What are some other big names doing?
In addition to 100 public Carolinas companies surveyed about offshore
outsourcing, The Observer polled 20 others, including privately held
firms and large employers not based in the states.
Some, such as Observer parent Knight Ridder, Food Lion and home textile
leader Milliken & Co., say they are not using the cost-cutting
strategy.
The group's big name companies working abroad range from offshore
newcomer BellSouth to General Electric, a trend leader.
Atlanta-based BellSouth, which has 8,900 Carolinas workers, is testing
outsourcing to India as a cost-cutting tool. This involves work already
outsourced to Accenture, not the work of BellSouth employees, said
company spokesman Clifton Metcalf. Accenture, a consulting firm that
offers outsourcing, has about 4,000 of its 83,000 workers in India.
General Electric, with about 10,000 Carolinas employees, opened GE
International Services in India in 1997. The unit has more than 18,000
workers and is growing.
Services include call centers, help desks, software programming and
administrative functions, such as planning and analysis.
While GE's foreign employment has grown, its U.S. employment has been
steady at about 165,000 people since 1992, said Peter Stack, a
spokesman for the company based in Fairfield, Conn. That's slightly
more than half of GE's global work force.
http://www.charlotte.com/mld/charlotte/business/7488024.htm
Posted on Sun, Dec. 14, 2003
Duke Energy: At home for now
Duke Energy is on a cost-cutting mission, including layoffs, but so far
isn't sending computer work abroad.
The Charlotte company, owner of Duke Power, used programmers in India
to make Y2K software fixes. That went well, but the company has had no
other IT need big enough to warrant the hassle and expense of managing
work on two continents, said Cecil Smith, chief information officer.
Foreign outsourcing usually isn't worth considering on a project unless
it requires at least 15 people, he said. A lack of specific skills also
could send him searching for foreign expertise.
Customer call centers and internal help desks are prime candidates for
sending abroad. But at Duke, Smith wants local control of both because
they are critical during emergencies, such as storms that knock out
power and demand constant interaction.
Still, he attends outsourcing sessions at IT conferences and reads
extensively on the topic, always looking for savings.
"I might patriotically like to, but I would never rule it out," Smith
said. "You have to face shareholders and employees and say, `We're
cost-effective.' "
http://www.charlotte.com/mld/charlotte/business/7487731.htm
Posted on Sun, Dec. 14, 2003
Even medical records being sent to India
STELLA M. HOPKINS
Staff Writer
Inside a single-story Cornelius office building, high-power computers
encode medical information for patients nationwide and zap it to 3,000
transcriptionists in India.
In as little as two hours, neatly typed records of surgery, illness,
recovery and death zip back across the oceans to Arrendale Associates
and on to 40 U.S. hospitals and clinics, none in the Carolinas.
Arrendale is the link to one of India's largest medical transcription
firms, CBay Systems, and illustrates the range of U.S. work moving
abroad. The partnership also represents two commonly cited offshore
drivers: cost-cutting and U.S. worker shortages.
"We much prefer U.S. transcriptionists because they are more productive
and more accurate," said Del Arrendale, who co-founded the
medical-software company with his wife, Judy. But, "There's a
shortage."
The Arrendales launched the business in 1989 in Chicago, writing
programs to manage medical records for hospitals and clinics. The
business moved to Cornelius in 1996 and grew with demand for health
care and the electronic records documenting treatment.
Medical records originate when a patient arrives to see a physician,
and they follow the person through treatment. The record includes
information doctors dictate as they care for patients.
As the Arrendales developed software, they kept hearing from clients
who longed for a better system to handle dictation -- and more medical
transcriptionists, or MTs.
Initially, Arrendale software gave MTs nationwide access to giant
answering machines loaded with dictation. In the late '90s, Del
Arrendale envisioned a better system, an online system, but he couldn't
find the programmers.
The dot-com frenzy and Y2K conversions made IT workers hard to come by
and pricey. Programmers for Java, the computer language Arrendale
wanted to use, were especially scarce.
He knew other medical software executives who used programmers in
India. He'd also read about India's supply of the MTs his clients
wanted.
Late in 1999, he went to check both, spending three weeks to visit
three firms and touring the country. Impressed, he took the first step,
contracting with a firm to start his new software.
Two years later, he switched to CBay, which has a development arm in
addition to its MT business. Last year, CBay bought a one-third
interest in Arrendale.
Today, Arrendale's staff of 28 includes 17 software developers -- nine
in Bangalore, five in Cornelius and three in Tennessee. Together, the
developers created the Arrendale system, which captures doctors'
dictation, transmits the voice file to MTs and posts the medical
records online. The records are easily available to medical personnel,
insurers and other authorized users. That speeds up payments.
More than 100 clients use the Arrendale system, which has the capacity
for at least seven times that many. Fewer than half the clients also
use CBay MTs.
All transcription -- foreign and domestic -- moves through the
Cornelius computer room. Security is tight, with constant video
surveillance. Only three people have access and only via a thumbprint
scan. There are back-up phone lines and a generator to ensure power
stays on.
The computers encrypt patient information for privacy, Del Arrendale
said. The software allows MTs to receive dictation and return it online
but not to download or copy files. MTs here or abroad could circumvent
the system, but Arrendale said he knows of no incidents.
For now, the Arrendales market CBay's MT service, but they're entering
the business of supplying MTs.
Growing industry
The U.S. medical transcription industry is estimated at $15 billion and
growing, with as many as 300,000 transcriptionists, according to the
American Association for Medical Transcription.
Some MT firms in the Carolinas say they have no problem finding
workers. More say the shortage is serious, and industry publications
routinely cover the problem.
"We could do a lot more work if we had the qualified people," said Dan
Drinkard, who helps with his wife's M.D. Data Management, a Hickory MT
firm.
MT is high-pressure and tedious, demanding speed and accuracy. An MT
with extensive training and experience averages $25,000 to $40,000 a
year, Del Arrendale said.
To ease the shortage, the couple plan an 18-month, on-the-job MT
training program in Cornelius early next year. They would like a team
of about 80 for quick turnarounds. For example, a patient awaiting
airlift to a trauma center needs a medical record in a hurry.
The Cornelius team also would do quality checks and manage MT work in
India. Del Arrendale expects the foreign work to grow as rising demand
further strains the U.S. MT supply.
Experts estimate that 1 to 2 percent of U.S. MT work goes overseas
today.
CBay already has a franchise-like network of 34 Indian sites, employing
about 3,000 MTs at an average of $3,000 to $5,000 a year, Del Arrendale
said.
Indian MTs are less proficient because they struggle with American
speech patterns. They average about one-third the production of their
U.S. counterparts, he said. The work also needs more accuracy checks,
which adds to the cost.
However, Judy Arrendale said of Indian MTs: "There's quite a pool to
select from, all with college degrees, even nurses and doctors."
And within the past 18 months, the company has seen growing acceptance
for work done abroad.
"The stigma is there," said Kozie Phibbs, a former hospital medical
records director now selling for Arrendale, "but a lot of people are
becoming more comfortable with it."
http://www.charlotte.com/mld/charlotte/business/7487870.htm
Posted on Sun, Dec. 14, 2003
Jobs in foreign lands create demand for U.S. coordinators
STELLA M. HOPKINS
Staff Writer
Managing people is hard enough.
Imagine doing it across thousands of miles with employees you've never
met, who come from different cultures and are going home about the time
America wakes up.
That's the job of a project manager for companies sending programming
work overseas. And the rush abroad is creating big demand for the
position.
"It's an emerging class of workers and skills," said Cynthia Carlson, a
principal with executive recruiters Campbell/Carlson in Charlotte.
Headhunters seeking project managers court Keith Dicken a couple of
times a month. He got his start managing work abroad four years ago at
Arrendale Associates, a small Cornelius medical software firm, where he
is a vice president. The company turned to Indian programmers because
of U.S. shortages and high wages.
Dicken wondered how the setup could work.
"Being a programmer is hands on," he said. "When you're working on an
issue, there's nothing like being able to walk into a room and talk.
You don't have that when you move across the world."
English is widely spoken in India, but accents can make communication
difficult. Some things just don't translate. Nobody got Dicken's jokes.
Calls came in the middle of the night on phones that often
disconnected.
Slowly, Dicken developed an ear for the accent. The Indians got a few
of his jokes. The late-night calls grew fewer as Dicken built rapport
among the staffs -- nine abroad, five in Cornelius, three in Tennessee.
The foreign workers delivered high-quality work, erasing Dicken's
biggest concern. The time-zone difference pays off, too, as the U.S.
staff hands off to India at the end of the day.
"We'd go home, and any problem was solved by morning."
Project managers are like translators, bridging the gap between what a
business wants to do with technology and the programmers who make that
happen.
Randy Senn, chief information officer for SCANA, credits the utility's
success with working abroad to longtime lead project manager,
Krishnarao Vinnakota, an engineer with a master's degree in computer
science.
Vinnakota's office is at SCANA headquarters in Columbia. But he works
for Covansys, a Michigan firm providing the company with software work
overseas since 1996.
Covansys has more than 100 project managers in the United States, some
coordinating work in India and some handling all-domestic cases.
Average salaries range from $80,000 to $120,000, said Ted Vahan, who
lives in Huntersville and heads project management for Covansys.
At SCANA, the first offshore project with Covansys called for
modernizing an accounting system. Senn didn't think an outsider could
grasp the intricacies, let alone communicate them to foreign
programmers. In the mid-90s, there weren't even many people to talk
with about making outsourcing work abroad.
To learn SCANA's system, Vinnakota talked with employees, watched
people at work, made copious notes. Then he meticulously detailed work
for programmers in India and those on-site.
Since successfully completing that project, he has been at SCANA full
time, coordinating up to 30 Covansys employees abroad and 25 in
Columbia. Today, for SCANA, Covansys has four workers in India -- three
in Chennai and one in Mumbai, formerly Bombay -- coordinating with 15
in Columbia.
Vinnakota monitors work daily, reviewing all software before it's used.
In addition to e-mail and phone discussions, the two groups have
regular video conferences. That's easy to do with a direct satellite
link from Covansys' Michigan headquarters to India. The calls are
typically at 8:30 in the morning, near quitting time in India.
"Krishna is the reason we've been successful," Senn said.
Cultural details
One day in October, Fritz Lehman couldn't understand why his usually
prompt staff at SAS Institute's Indian office wasn't responding to
e-mails.Then the manager at the software giant's Cary headquarters
remembered that Oct. 2 is a national Indian holiday. They were
celebrating the birth of Mohandas Gandhi, who led the country to
independence from the British in 1947.
That's the kind of detail Lehman has to keep up with to make work flow
smoothly between the two staffs. He's been at SAS 19 years, and in
October began coordinating all Indian projects.
To get the best work from the Indian staff of about 50, Lehman has made
understanding motivational differences a top priority.
The respect of peers seems more important to Indian workers. Lehman --
like others working with Indian programmers -- found they don't like to
disagree with bosses or raise questions, so they might say they
understand when they don't or go along rather than express concerns.
They also prefer more detailed instructions than American workers.
"I don't want to dig into their private lives, but I need to understand
the culture," he said. "How else do I know what affects people
positively or negatively?"
Lehman also has been reading up on cricket, a national obsession in
India. He planned to play during a trip this month to SAS India, but
shoulder surgery kept him out of the game. Maybe next time -- he
expects his new job will take him to India at least four times a year.
How Much Do They Make?
The Project Management Institute doesn't track by industry, but the
professional association had issued its Project Management Professional
certification to 70,759 people as of Sept. 30, up from 18,110 in 1999.
Average U.S. salaries for project managers handling offshore
outsourcing range from $41,000 to $118,000, starting with a mid-career
manager and rising to the top, according to nextSource, a New York
staffing, work-force management and wage-tracking firm. At the top end,
the average reaches $150,000 in New York, according to the company's
People Ticker, a real-time, national wage database. The Charlotte
high-end average is $88,000.
http://www.charlotte.com/mld/charlotte/business/7487732.htm
Posted on Sun, Dec. 14, 2003
City's call-center hub vulnerable
Charlotte sees growth this year, but challenge from abroad lies ahead
STELLA M. HOPKINS
Staff Writer
Charlotte's call-center hub has seen growth this year, but it also is
showing early signs of vulnerability to the move of work abroad.
In the 1990s, Mecklenburg County emerged as a popular destination for
centers handling customer calls for service and information --
everything from mutual funds to utility bills. The Charlotte Chamber
counts 32 such centers, employing 12,000 people in Mecklenburg.
As the economy picks up, Chamber Vice President Justin Hunt said he is
getting more queries for customer service centers.
Just this year, real-estate services provider Trammell Crow moved some
call-center operations uptown from Rhode Island. Also this year, online
loan matchmaker LendingTree added more than 60 people, an increase of
nearly 70 percent, at its Charlotte center.
And mutual-fund giant Vanguard, with nearly 1,000 people at its
Charlotte call center, says it has no intention of moving the work
abroad. The same is true for pension and investment heavyweight
TIAA-CREF, which is still ramping up at its Charlotte center, said
spokeswoman Stephanie Cohen Glass.
Still, those types of jobs are increasingly going to headset-wearing
workers in India, Malaysia, the Philippines and other countries where
wages are far lower. Forrester Research estimates 343,000 U.S. customer
service rep jobs will be lost overseas by 2015. That's nearly one in
five.
Consider:
In Bangalore, India, about 15 people are handling work from
Charlotte's national operations center for Equitable Life insurance
policies. The Equitable test project involves policy service, such as
entering changes of address and marital status, said Jeff Tolvin, a
spokesman for Equitable parent AXA Financial.
There have been no Charlotte layoffs related to the Indian test, and
AXA doesn't plan to close the center with about 700 workers, Tolvin
said. Charlotte workers displaced by the Indian project have moved into
other jobs, often created by a typical turnover rate of 10 percent a
year, he said.
Also in Bangalore, about 150 Microsoft employees began taking
customer calls at a pilot center on Oct. 13. Some U.S. jobs could be
lost to lower-paid workers in India. But Microsoft has been hiring
full-time and temporary workers at its U.S. call centers, which include
a Charlotte site with about 800 customer service reps, said Stacy
Drake, a spokeswoman at Microsoft's headquarters in Redmond, Wash.
"In the future, there may be some impact, but right now, we're growing
all sites," Drake said.
Microsoft also has an Indian software center in Hyderabad, where it
expects to increase staffing to 500 from 200 by 2005.
The offshore move has drawn attention from politicians, who have
introduced legislation that would require call-center operators for
U.S. companies to tell callers where they are located. Some operators
abroad are instructed not to reveal their location.
The Indian call-center industry took a hit last month when computer
giant Dell said it would stop sending some calls to a center in India
because of customer complaints about service. The move got a lot of
media attention, but Dell spokesman Barry French said "It's been blown
out of proportion."
The Texas company continues adding workers in India, he said.
Only a few Lowe's credit-card customers have complained about calls
routed to India, said Chris Ahearn, a spokeswoman for the Mooresville
home-improvement retailer.
GE Consumer Finance services Lowe's credit cards, including handling
calls from cardholders. More than 90 percent of those calls go through
GE's American help desks, including a large Charlotte center, Ahearn
said. However, when the U.S. lines are busy, overflow calls go to
operators in Hyderabad.
Lowe's operates its own call center in Wilkesboro, with about 140
employees answering customer calls. Services range from gift-card sales
to critical needs, such as water-heater replacements. The company
brought the operation back in house about two years ago after trying
domestic outsourcing and does not plan to send the work abroad.
"We could handle the function less expensively," Ahearn said. "We have
more control and can keep our fingers on the pulse of what customers
are saying."
Staff writer Sarah Jane Tribble contributed
http://www.charlotte.com/mld/charlotte/business/7488016.htm
Posted on Sun, Dec. 14, 2003
He didn't try to beat the trend, he joined it
In the late 1990s, Sam Wazan saw Indian firms charging $35 an hour for
computer work he billed at $175 or more.
That told him he couldn't beat the foreign outsourcing move.
So he joined it.
Instead of India, Wazan turned to his native Lebanon. During a visit in
late 2000, he talked with programmers and laid the groundwork for a
business providing computer services.
Contemplating the venture, Wazan lay awake nights in his Charlotte
home, near panic. Was he nuts? His wife, Megan, was pregnant with their
first child. He would lose a six-figure salary.
But more friends were being laid off. He'd been laid off in 1999, and
he knew his MBA and experience developing computer systems no longer
guaranteed a job.
"It was only a matter of time."
Early in 2001, he quit to open his Charlotte computer services firm,
Stripling & Beck.
Wazan's lower-paid staff in Lebanon enables him to undercut U.S. rates
for such computer work as writing code and developing custom software.
He won't say what he pays the workers or how many he has because he
doesn't want competitors to know.
The Lebanese staff works 9 a.m. to 6 p.m., five days a week. At 2 every
afternoon, a white light flashes on, signaling that it's 7 a.m. on the
East Coast. Workers call it "air time" and know to expect calls and
e-mail from clients.
Rita Khawand, 22, joined Wazan's office in Lebanon a year ago as a
programmer.
"What amazes me ... is the continuous change," she said. "I cannot
imagine the IT industry not moving and evolving constantly. There
always is something new to discover."
Wazan, 39, also hires locally, tapping the pool of unemployed friends
for projects that need on-site work.
He targets companies with sales under $500 million and projects of
$500,000 or less. He guarantees costs for several years and quotes
fixed prices for work. That helps win business because he bears the
chance of cost overruns.
Shortly after going on his own, Wazan's previous employer went under.
One of his final checks bounced, two never came and his health
insurance disappeared, just before his wife gave birth. The faltering
economy crashed after the 9-11 terrorist attacks.
By the end of 2001, Wazan had run up $55,000 in credit-card debt
keeping his company alive. Still, he turned down a job offer, believing
he would be vulnerable to another layoff. He'd survived Lebanon's civil
war and emigrated to Chicago at 25 with $600, half of it borrowed.
Last year, in June, he reached break even. In September, he hired four
more developers in Lebanon. In October, he added another six.
"I want job security. I want to be happy," he said. "But I see the
(outsourcing) trend taking over. I'm doing something about it."
Stella Hopkins
http://www.charlotte.com/mld/charlotte/business/7487996.htm
Posted on Sun, Dec. 14, 2003
He's helping Indian firm create U.S. jobs
During the tech boom, Tim Clark never considered using lower-paid
foreign programmers at the Raleigh tech company he helped start. Now
he's selling for an Indian company, cracking the U.S. market for its
software.
"It's incredible, the difference in cost," Clark said.
It's a job he never imagined. And it's an example of a global pairing
that is creating at least a few U.S. jobs.
The Greensboro man's tech career began in the military in the 1960s. He
has sold software, been a computer consultant and started two tech
companies, including the Raleigh software firm he co-founded in 1998.
The dot-com bust, recession and terrorist attacks shriveled that
company, and he was out of a job. He couldn't even get a call back for
the few tech jobs available.
"I was frightened to death," said Clark, who is 56, married and the
father of two young adults.
An unemployed techie friend called about a start-up seeking an
executive salesperson. The software product was similar to what Clark's
company had produced. He admired the company's founder, a former
Hewlett-Packard research scientist, who holds a doctorate and a dozen
or so patents.
There was just one thing. The founder was from Chennai, on India's
southeastern coast, and had started eG Innovations after returning home
to be with family. Clark wondered about working for someone from such a
different world.
"I was apprehensive, but I needed a job, so I took it," he said.
That was 15 months ago, and he has no regrets. There have been rough
spots with communication. Cell phone connections come and go, and
sometimes understanding co-workers' accents has been difficult.
Time-zone differences make for weird work hours.
But he's impressed with his Indian colleagues, many with graduate
degrees. They work long hours producing quality software at about 20
percent of what similar professionals cost his last company, Clark
said.
He's also sold on the product, used mostly by firms that manage,
monitor and repair computers for other companies in a range of
industries. The eG software identifies and diagnoses problems and
sounds an alert when a fix is needed.
Clark's industry friends have been supportive of his decision to join
eG. Those hunting work ask whether eG has openings.
While he knows the movement of software work to India is eroding U.S.
jobs, he's proud that his new employer is creating jobs. So far, 10
people have completed training in New Jersey to install and operate eG
software.
Those jobs make him confident he didn't waste $15,000 for his son's
computer training.
"People still need someone to walk through the door, smile and say,
`I'll fix it.' "
Stella Hopkins
http://www.charlotte.com/mld/charlotte/business/7488015.htm
Posted on Sun, Dec. 14, 2003
He'll keep costs low, keep jobs in this country
Tom Cox says his Charlotte software company won't ship programming work
abroad and doesn't have to.
Five years ago, when he first looked at outsourcing overseas, he
decided against it because the savings didn't appear to offset the
effort and cost of managing that work. Today, Cox is adamantly opposed
to the practice that he says saps American jobs.
"The deal is, we train workers for the high-tech jobs of the future
with the faith those jobs will be there," he said. "All of a sudden,
you lift your head, and those jobs are gone."
This summer, his Cox & Co. underbid a competitor that uses lower-paid
programmers in India.
Cox bid $165,880, the lowest of five offers to supply Alamance County's
new property tax software. The system from a Durham firm, Intelligent
Information Systems, would have cost $458,180 in the first year,
according to the county. IIS has about 40 of its 100 workers in India.
Cox credits lean staffing and minimal overhead for his ability to
profit on low bids. He's president and salesman, and his staff of seven
has long worked together writing and installing county software
programs. They understand the complex business of recording property
values, generating county tax bills, tracking collections and mapping
tax parcels.
The company got the first N.C. county running on its system in 1991 and
now has 10 counties using the system. (Cox, Republican chairman of the
Mecklenburg Board of County Commissioners, doesn't sell to the county.)
"We have fully functional software," said Cox, who worked 15 years for
IBM in Charlotte before going on his own. "That's why we can price
aggressively."
Still, the company has ongoing programming needs as it enhances its tax
program. Cox, 57, also is improving his software for county social
services. He could send those chores overseas. He says he won't, even
if the use of workers abroad spreads in his small industry.
Government IT users lag business in adopting the offshore strategy. On
the Alamance project, IIS was the only one of five bidders with an
offshore site. The company ranked third in cost.
IIS co-founder Sucheta Jain said the company does not aim to be the
lowest bidder but rather to provide greater flexibility by using the
latest technology. That, she said, costs more.
"The programs are not all the same," she said.
Last month, the county chose the highest bidder, Cole Layer Trumble Co.
of Dayton, Ohio, at $759,400. The Cox and CLT systems were equally
functional, but the Cole program is the most compatible with the
county's Microsoft Windows network, said Jeff Causey, the county's
chief financial and information officer.
Disappointed but undeterred, Cox is on the road selling three days a
week.
"There are plenty of people looking for tax systems."
Stella Hopkins
Support this Newsletter and ZaZona.com by donating:
www.zazona.com/Donations.htm
To Subscribe or Unsubscribe send an email to
Back to archives