Dude, Where's My Job?
Hi International Magazine
While the American economy shows signs of improving, jobs in the manufacturing
and some service sectors are being exported to other nations. For developing
countries, exported jobs are a boon - but what does outsourcing mean for
Americans, and the rest of the world?
By Nick Kolakowski
Ted Seeber saw it coming. The 33-year-old computer programmer knew that his
Oregon software company was looking at outside vendors to take over some of its
work, but when the ax finally fell and he lost his job, the timing couldn't have
been worse. "It was kind of a surprise, because I had been out a week before
burying my mother-in-law," he says.
That was in October 2001; he would remain unemployed for another 26 months. "It
was a bad two years in there," he says.
Now he works on a contract basis, programming for the Oregon Department of
Transportation. But the sting of losing his job is still there, just under the
surface: "I felt thrown away." Like something out of an evil fairy tale, his job
flew away across the ocean, to a country he doesn't know.
Seeber is just one high-tech worker who's been a victim of outsourcing, in which
jobs like computer programming are transferred overseas to countries such as
India and China. And it's another sign that the new globalization - in which a
company's headquarters can be in Nebraska, its call center in Pakistan, and its
factory in China - has arrived with a resounding boom. Now, thanks to fading
regulations and satellite and fiber-optic networks, even customer service calls
can be done cheaply from the other side of the world.
Which is precisely where the jobs have gone: to places like Bangalore, a
bustling metropolis in India, where a woman talks on the phone to a man in New
York about his software problem. Here in a call center of 24/7 Customer, a
four-year-old Indian company that already employs over 3,500 people, dozens of
young Indians process claims and take customer service calls. And they're glad
to have the work.
"We pay 50 percent higher salaries than what they would get if they were working
for a traditional old-economy company," Shimonti Sikdar, a spokesman for 24/7
Customer, says of these workers. "Since they have more disposable income than
ever before, they are able to enhance their lifestyles."
Though high by Indian standards, these salaries are still a fraction of what an
American would be getting for a comparable job. That's the human conflict of
outsourcing. On one side of the equation, you have American workers who are
suddenly out of what were once regarded as 'safe' jobs because their company
wanted to cut costs. On the other side, you have young workers overseas doing
high-tech jobs for more money than they could otherwise have ever dreamed of
getting, even with a college degree.
Outsourcing has led to a lot of soul-searching on the part of many Americans. On
one hand, it's good for companies, giving them higher profit margins and
increased efficiency. But is the United States, so long dominant in the field of
computer science and programming, finally losing its edge because of it? Is this
the beginning of a downward spiral, one that will end with rampant unemployment
throughout the country?
Politicians, economists, and ordinary Americans have all spent sleepless nights
over those issues. And their opinions range widely. Some think outsourcing is a
good thing, ultimately creating a demand for American goods and services.
Others think that outsourcing is more of a Trojan horse, saving companies a lot
of money in the short term, at the cost of catastrophic job losses for Americans
in the future.
In the world of offshore outsourcing, one country in particular dominates.
"India has a solid lead, about 70 percent of the worldwide offshore market,"
says Marc Hebert, executive vice president of offshore outsourcer Sierra
Atlantic and former CIO of Oracle. "Companies that are forward-thinking like
General Electric do 90 percent of their offshore business with India."
Herbert explains that the phenomenon didn't happen overnight. "There's a long
history that led to this explosion of activity. In this case, India has an
amazing educational system, they graduate twice as many scientists as the U.S.,"
he says. "A large percentage of people who graduated over the last 10 to 20
years, that really generated the whole software business." It also helps, of
course, that English is one of India's primary languages, a leftover of British
India dominates now, but countries in the Middle East and Asia have the
potential to claim a large piece of the outsourcing pie. Already, company back
offices, technology centers and customer call centers have sprung up in the
Philippines, China, Bangladesh, and several other countries.
One of those evolving countries is the United Arab Emirates, which has had a
tradition of importing workers for many of its businesses. These days, the
country may be in a position to bring work to its workers, through outsourcing.
"The United Arab Emirates in particular is emerging as the Hong Kong of the
Middle East," says Stephen Roulac, a business strategist and location assessment
expert. "There's the commitment to first-world infrastructure, and the
development of resorts and entertainment. It offers easier entry, and you can
live a quasi-western lifestyle if one wishes."
Countries like Egypt are also in a position to seize their own share of
"Egyptians, I wouldn't be surprised, [are] potentially in the top ten countries
to outsource a lot of back office operations," says Amar Vakil, founder of the
Foreign Investment Promotion Council and a U.N. expert on outsourcing. "Dubai,
Mauritius and Turkey also have the right ingredients in terms of people,
business and financial resources needed to emerge as leaders in the region.
Nigeria has potential. It all depends on the strategic initiatives developed and
deployed by their respective governments."
Vakil, who is based in Chicago, recently attended a high-level session at the
United Nations that focused on helping least-developed countries emerge. Vakil's
belief is that corporations can improve economies throughout the developing
world by setting up outsourcing facilities in those areas. The
management-consulting firm he's a principal of, Lintas, assists U.S. companies
in setting up such facilities throughout Asia.
One thing is clear: outsourcing is here to stay. "The United States will not
take these jobs back. We are at the beginning of a big cycle of job movement
offshore, especially in IT," says Marc Hebert. "I think that's just a long-term
And while India may end up being just another competitor in that global trend,
right now it's the world's No. 1 - and hungry for even more business. Meanwhile,
outsourcing has changed that country from the ground up.
'Nameste' Means 'Hello' in India
When the famous American journalist Thomas Friedman recently visited India, he
found himself in the midst of a revolution. An economic one, that is, symbolized
by things like traffic signs sponsored by Texas Instruments and a Pizza Hut
billboard claiming its pizzas have 'Gigabites of Taste!' "How did India, in 15
years," he wrote, "go from being a synonym for massive poverty to the brainy
country that is going to take all our best jobs?"
Indeed, in places like Bangalore, the image of a poverty-stricken, overcrowded
India seems to have given way to something resembling America's Silicon Valley.
India's high-technology sector is currently growing at 30 percent a year.
Nasscom, the association of Indian software companies, claims that the amount of
work outsourced to India has gone up 50 percent in the last year alone.
This technology boom hasn't just helped Indian programmers. At call centers
across India, rooms of workers handle 'inbound' calls - questions from Americans
wrestling with a company's software or airline passengers trying to trace lost
luggage. Other workers deal with 'outbound' calls - selling credit cards and
various services. They read from pre-prepared scripts, fiber-optic cables and
satellites letting the calls cascade out.
"From an Indian perspective, their natural resource is their human capital,"
says Bill Vance, who was responsible for determining Indian call center
locations for SITEL, a global call center company headquartered in Nebraska.
"They do have people who are well-educated. You can get a college-educated
employee for less than you would pay a high-school-educated employee in the
Still, a job in a global call center requires some unconventional forms of
education. "With Indians, you have to train them in American culture and
American slangs," Vance says. "You have someone talking to someone from Georgia,
you have to understand the dialects."
This leads to slightly surreal scenes in the classrooms run by call centers,
with, according to Friedman, dozens of young Indians repeating English
"A bottle of bottled water held 30 little turtles. It didn't matter that each
turtle had to rattle a metal ladle in order to get a little bit of noodles, a
total turtle delicacy. The problem was that there were many turtle battles for
less than oodles of noodles."
The workers struggle to soften "t" sounds and to roll that "r." Some companies
will even convince a new worker to change their name, Vance says, to one more
pronounceable by Americans.
And many are more than happy to do it. 24/7 Customer, for example, plans to grow
to 7,000 employees by the end of fiscal year 2004-2005, after having grown 300
percent in the past year. "Before this industry came up with jobs, youngsters
used to aspire for jobs in the traditional old-economy companies," says Sikdar.
"Alternatively they would take up part-time jobs, enter the family business."
All for much less money than they earn working in programming or in the call
This global company has the potential to create a huge international middle
class. Given that, it's no surprise that countries are scrambling to emulate the
outsourcing model. Yet how safe is this headlong rush, for both the United
States and other countries?
Every Action Has a Reaction
Many American companies have reacted to outsourcing like anyone discovering
something that saves them time and money, wondering happily why they hadn't
thought of it before. ZoeMed, a physician-managed network of online medical
centers, began outsourcing its content editing and data-entry to India six
months ago. "There's a lower cost," says John Murray, their vice president of
business development. "And if you need knowledge of the English language, India
is the place to go."
Indian workers could also produce at a much higher rate than the American
students that ZoeMed had previously employed. "Basically, it was the attitude of
the students: the work wasn't really challenging enough for a college grad, so
we tried to work with college students, high school seniors," Murray says. "They
didn't want to put the effort into it and produce at a rate that we needed."
Outsourcers aren't just aggressive about their tasks at hand. Many
representatives for American companies recount how assertive their overseas
counterparts are about taking over more advanced services like Web hosting.
Murray says that when he was in India, conversations with companies focused not
only on the projects at hand, but also on offering long-term services, things
that ZoeMed might only need five years from now.
It's reached the point where even small firms like Philadelphia's Mindbridge,
which handles intranet software, feel they have two options: outsource or be
overwhelmed. "We've been affected by outsourcing. Our competitors have been
outsourcing; we've had to make changes based on what they've done," says Scott
Testa, Mindbridge's vice president of marketing. "We've looked into outsourcing
to lower our own costs." The company has outsourced some of its work to India,
and is looking to do more.
Such competition can also lead companies into a 'death spiral,' a process in
which the urge to outsource and cut costs becomes so extreme that it ends up
being potentially disastrous. "Companies need to understand and work on becoming
more competitive," says SITEL adviser Vance. "By chasing costs lower and lower,
it might be a nice short-term solution, but you're going to run out of
English-speaking countries to support."
Outsourcing may also sometimes be the wrong tool for the job. It works well if
what you're outsourcing is something scripted or rote. That means things like
customer service calls, some kinds of software programming and medical
transcription work. Having tasks not clearly as defined can lead to problems.
Belle Kulick is vice president of operations for Everdream, an American
corporation whose software allows users to manage their desktop environment. In
2003 the company outsourced its customer service to Costa Rica, but brought it
back to U.S. shores just a year later.
"Our type of help desk service, we give a lot of autonomy; they're not just
scripted. We take any issue, we explore issues beyond what the customer told
us," she says. "We found it is not an easy activity to outsource because it is
not scripted precisely. You have to listen and understand what the customer is
telling you in context."
How many American jobs have actually been lost to overseas outsourcing? Whatever
the number, those jobs aren't likely coming back. A Maytag plant in Galesburg,
Illinois, was shut down and its production moved to Mexico, where workers earn
more than $12 less per hour than their American counterparts. For many
companies, moving jobs back to the United States would make as much sense as
bringing back the 19th century steam engine just to hire people to shovel coal.
Despite the American controversy over outsourcing, despite the debates and
people threatening lawsuits to prevent jobs from leaving, a report from the
Bureau of Labor Statistics shows that the loss of jobs overseas is relatively
small. Less than 2 percent of mass layoffs in the first quarter of 2004 were due
to overseas outsourcing. More Americans were laid off because their jobs moved
to a different location within the United States.
Furthermore, the Bureau of Labor Statistics predicts that the American economy
will add over 21 million jobs by 2012, dwarfing the approximately three million
jobs that independent analyst firms predict will be lost to overseas outsourcing
during the same period. Even if there's nothing to fear from outsourcing but
fear itself - an empty hysteria akin to that which greeted Japanese economic
dominance in the late 1980s - there's still another aspect that needs to be
A lot of medical transcription work is outsourced, as are businesses involving
credit card numbers. That provides a tempting target for hackers and identity
thieves. "You have all these client records located outside of the U.S., in a
country without stringency," says Vance. "It's tough for a U.S. company to go
over to India and pursue someone who stole credit card numbers."
That's not to say that India is a high-tech version of the Wild West: there's
strong rule of law, and, according to Marc Hebert of Sierra Atlantic, not the
same tradition of piracy as in some other countries. Some companies avoid
security concerns by simply denying their outsourcers access to sensitive
Bruce Fenton is president of Atlantic Financial, an investment firm with
corporate and individual clients. "Our client data is handled by our clearing
firm, owned by Fidelity," he says. "We don't even put the Indian outsourcers in
any position; the most confidential thing is some advance news on a product."
Another big way to ensure security is to look for a professional firm. When
searching for an outsourcer, Fenton made "absolutely positively" sure to ask for
references and a portfolio. "That's what's easy about computer programming, you
can ask them for ten Web sites that they've done," he says. "You can tell the
difference between an amateur site and a professional site."
There's also the legal aspect. "Looking at strictly legal issues, property-right
protections, the laws are not quite as developed," says Jim Stone, chair of the
Employment Law Group at the law firm of McDonald Hopkins in Cleveland. "Most
American companies know that, but they underestimate the difficulties involved."
Companies tend to underestimate costs, Stone says, not only with regard to
employment and other areas, but also in terms of ensuring intellectual property
protection. An outsourcing outfit has the potential to cost twice as much
because of these issues, something companies must consider, unless they want to
wait for regulations to tighten with time.
What Goes Around
On Slashdot.org, a news Web site for technophiles and Web geeks, a pseudonymous
programmer recently posted the unique way to make money from outsourcing. "About
a year ago I hired a developer in India to do my job. I pay him $12,000 to do
the job I get paid $67,000 for," they wrote. "He's happy for the work. I'm happy
that I only have to work 90 minutes a day, talking code."
The programmer is so happy with his own take on outsourcing, he writes, that
he's considering taking a second job to double his income. And while this story
is likely apocryphal, it shows that the potential is there, albeit in more
conventional ways, for outsourcing to ultimately benefit Americans.
Vakil, of the Foreign Investment Promotion Council, believes in 'insourcing,' or
the theory that outsourcing ultimately creates new opportunities and jobs for
Americans. "What outsourcing enables [is,] if you reduce your costs, you have
money to apply towards research and development," he says. "Then you hire a
different kind of workforce, or reclaim the same workforce."
In Vakil's example, there's a small pharmaceutical company in Chicago, with a
workforce of 25 programmers working back-office functions like accounting,
maintenance and support. If those jobs are outsourced to another country, the
extra revenue from it could be used to retrain those programmers to work in
clinical trials." Training," Vakil says. "It's not rocket science. And it means
the company could launch new products onto the market."
As a drive through Bangalore or any other major city shows, there's a demand for
all sorts of western products - and with outsourcing, people and companies in
developing nations will have the income to buy them.
The increased demand is already apparent. An employee at a customer call center
in Bangalore may take your call on a phone made by Lucent, type your order on a
computer made by Dell, and on their lunch break have a Coke and a Marlboro.
Total exports to India by U.S. companies have grown over 60 percent between 1990
A recent study by the McKinsey Global Institute reveals that for every $100 of
activities moved offshore, at least $146 of value was created. Suppliers in
developing countries capture about $33 of that, with the U.S. gaining $113.
That's money flowing into the American economy.
Whether high-tech outsourcing is good or bad, it's an inevitable transition, in
the same way that textiles and some manufacturing ended up going overseas. Those
jobs have given young workers across Asia and in other countries a kind of
lifestyle that they could have only dreamed of before.
That may be of little consolation to the high-tech workers in America who
suddenly find themselves unemployed. Their hope is that their education and
experience will allow them to survive whatever brave new world is around the
corner. Because maybe all this is not an end but a beginning - a better one for
everyone around the world.