India confronts backlash against outsourcing jobs
By Michael Oneal, Chicago Tribune, 2/22/2004
BOMBAY -- The escalating debate over white-collar US jobs moving to India is alive and well -- in India.
The growing election-year backlash against outsourcing drew standing-room-only crowds last week at an international conference put on by the country's leading technology trade association.
"This is certainly something we should be concerned about," said Nandan Nilekani, chief executive of Infosys Technologies, one of the nation's largest outsourcing companies. Indians worry that a protectionist sentiment, fanned by election year rhetoric and sluggishness in the US job market, will result in legislation restricting the kind of outsourcing work that has driven India's tech boom.
State measures limiting the export of government jobs have drawn sharp attention. A recent move in the US Senate to curb federal job outsourcing has caused more anxiety.
Indian executives see the backlash as more than a little ironic. The rise of India's high technology sector, they point out, is a direct result of the country's economic liberalization in 1991, a program launched with US government support. In recent years, India's deep pool of low-wage, highly skilled, English-speaking "knowledge workers" has proven irresistible for US companies looking to cut costs.
Indian companies are reinventing the way programming is done, said Arvind Thakur, president of NIIT Technologies in Delhi, India. By breaking what is widely considered a highly intuitive creative process into repeatable steps that can be done by less-skilled engineers, India is trying to create high-quality software factories, not unlike what the Japanese did with the assembly line.
US executives routinely say they find the quality of work in India to be as good as or better than the work done at home. That's partly because even low-level employees who answer phones in call centers are likely to have college degrees. The draw is strong enough that the number of companies putting their own operations in India has increased sharply, as positive results flow in from such pioneers as Motorola Inc., General Electric Co., and Intel Corp.
By next month, according to the National Association of Software and Services Companies in India, the nation's software and services sector will post total revenue of $15.57 billion, up from $5.54 billion in March 2000. Over the same period, the industry's employment has grown to 813,500 from 284,000.
The group estimates that exports of software and services -- mostly to the United States -- will rise to $12.20 billion in March from $3.96 billion in 2000, despite the sharp downturn in the US economy. If growth trends hold, the association predicts exports could reach $40 billion or more by 2009.
By itself, the industry represents only 3.8 percent of the country's gross domestic product. But the tech boom's impact on India's economy and psyche is much more profound.
Consider Bangalore, a city of 6 million in southern India. It has been the country's Silicon Valley since companies such as Texas Instruments Inc. and Motorola put electronics plants there in the late 1980s.
There's no vacancy this month at the Leela Palace, a 254-room, five-star luxury hotel completed 2 1/2 years ago. There are no rooms anywhere in town. Hundreds of buses ferry thousands of young technology workers to and from their jobs. Mahatma Gandhi Road, with its neon signs and shopping malls, looks like a small but no less crowded version of New York's Times Square.
Despite the opulence, poverty is overwhelming and always nearby. On the other side of a wall enclosing the lush pool and gardens at the Leela lies a barren field where poor neighborhood kids play cricket. Cows and goats sift through a smoldering pile of garbage scavenging for food. But the tech boom is fueling hopes that India's economic resurgence finally can begin to address the country's epic struggle with squalor. Other industries are showing vast improvement too.
Tata Motors, the nation's largest carmaker, has begun exporting to Britain. Bajaj Auto, a maker of scooters and motorcycles, is staging a similar renaissance.
Indian executives point to a widely distributed piece of research by McKinsey Global Institute that shows that $1 spent on outsourcing may generate $1.14 in benefit for the US economy. This comes from savings to the company plus goods and services, such as computers, bought by the Indian operations in order to provide the service. The study also relies on an assumption that US workers who lose their jobs eventually find productive new ones.
The key word is eventually, said Steven Clemons, a conference speaker and executive vice president of the New America Foundation think tank. But there can be a long period of pain, as evidenced by the large number of people whose unemployment benefits are running out before they find a new job. "These are the crown jewels of the American value chain you're losing here," Clemons said of the loss of white-collar jobs. "If you begin losing the upper end, you affect a lot of people on the chain."
So what can be done? Clemons, who opposes protectionism, said Congress and the Bush administration should focus on encouraging innovation.
The United States is woefully short on engineering talent, he said, and is only making the situation worse by cutting off visas in the post-9/11 environment. In India, where education is inexpensive, the knowledge pool is building up. Some 20 million people graduated from various degree programs in 2001, but only 2.5 million found jobs in 2002, meaning the rest are young, educated and ready to go.
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