Office of Tomorrow Has an Address in India

Task by task, function by function, the American office is being hollowed out and reconstituted in places like this, a makeshift facility on the sixth floor of a shopping arcade.

OfficeTiger Ltd., one of the most prominent and aggressive of a new breed of outsourcing companies, has hired 2,000 Indians, most of them young and all of them relentlessly gung-ho.

They work as typists, researchers, librarians, claims processors, proofreaders, accountants and graphic designers. Their clients are U.S. brokerage firms, investment banks, law firms and even copy shops.

The Indians take on jobs both big -- 100-page investment reports requiring weeks of work -- and small. Iayaraja Marimuthu, for instance, is designing a program for next month’s wedding of Ann and John, a Texas couple proclaiming their joy in being “together for life.” It will take him less than an hour.

Outsourcing, which started with U.S. firms laying off software programmers and call center workers and hiring cheaper employees overseas, is now stretching to encompass almost any kind of work that is done on a computer and is orderly and repetitive in structure. That’s a vast category that stretches from copy editing to financial analysis to tax preparation.

Just as voice mail reduced the need for receptionists and word processors transformed the traditional role of secretaries, outsourcing is beginning to reshape the American office, eliminating some jobs and redefining others. Its proponents say it will lift the burden of tedious chores from millions of office workers, giving them more time to spend on challenging and creative enterprises.

“We’re allowing employees to delve deeper, to learn more, to push the boundaries of what had been standard work,” says OfficeTiger’s American co-founder, Joe Sigelman.

That’s one side of the argument.

But for other employees, outsourcing means the permanent threat of dismissal in favor of someone who can do the same job for one-tenth the salary.

It also means revamping the methods of entering certain professions, including law and finance. There’s a time-honored tradition in those fields of making new associates do the drudgery. It teaches them the subject and winnows the number of aspirants to the truly dedicated. That won’t happen if the drudgery is shipped elsewhere.

Some economists say outsourcing is so pervasive that it helps explain why the U.S. economy is doing a poor job of creating employment. Analysts expected a net increase of 200,000 positions in July, but payroll growth totaled 32,000. The August employment report will be released Friday.

Sigelman said he was doing his best to keep American corporate hiring down.

“We hope to be leading the move of white-collar jobs from the U.S.,” he told the Economic Times, an Indian paper, in December.

Although many Indian firms, as well as American multinationals, are setting themselves up as outsourcers, OfficeTiger is particularly striking because it has come so far so quickly on so little.

Founded four years ago by two New Yorkers in their early 30s who had no expertise in the Internet, bureaucracy in India or even starting a business, the firm says it will have revenue of $40 million this year. Eight of the best-known financial firms in New York and London have signed on as clients.

Most started tentatively, with just a few employees doing data processing. But they rapidly scaled up, moving more jobs and more complex jobs. Stock market analysts are among the latest to see their work realigned.

Among other things, associate analysts prepare information on possible corporate acquisition targets. They go to databases, pull documents and put numbers into templates that can compare the company with its competitors.

“Once you’ve done it a couple of times, it’s highly repetitive,” says an OfficeTiger client, an executive with a New York investment bank. “You can’t be an idiot, but you don’t have to be Albert Einstein.”

As this work, too, gets shifted to India, the executive predicts that there will be “fewer but happier analysts. They’ll be doing more brainpower work.”

The process is already moving beyond the associates.

Vinitha Venkat is an OfficeTiger manager whose team assembles data for a Wall Street brokerage firm that declined to be named. She and a colleague are going to New York, where they will enroll in the broker’s analyst training program.

“I’m waiting for them to send everything to us,” says Venkat, 27. “I don’t think it will take that long.”

During the flush times at the end of the 1990s, when it seemed the dot-com boom would go on forever, any young person with an ounce of ambition wanted to start his own company.

Sigelman and Randy Altschuler, best friends since their first day at Princeton University, had good jobs on Wall Street -- Sigelman with Goldman Sachs, Altschuler at Blackstone Group -- but dreamed of setting out on their own. The eureka moment came one evening when they were both waiting for documents to come back from the word-processing pool.

Junior investment bankers have to do this a lot, and it’s one of the more frustrating parts of the job. They live by the presentations they make for their bosses and clients, and every word must be checked and double-checked. If too many documents are submitted at once, the wait can be interminable, like it was that evening.

To fill the time, the friends were chatting on the phone, as they often did. Then their impatience and ambition merged, and they started talking about using technology to create an off-site support center to process documents.

Sigelman and Altschuler scraped the initial funding together. Then they got lucky: The tech stock bubble burst. Financial firms shrank, and then shrank some more.

“The recession forced people to push the issue of outsourcing faster and further than they would have in a boom,” says Peter Lowes, an outsourcing specialist with consulting firm Deloitte & Touche. “Now that there’s a recovery, there’s no slowdown. In fact, it’s accelerated.”

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At Odds Over Numbers

How many jobs are being transferred is a matter of dispute. In the government’s first effort to come up with an official tally of jobs sent outside the U.S., it concluded a mere 4,633 employees in the first quarter were laid off because their jobs were moved to another country.

Morgan Stanley chief economist Stephen Roach thinks such numbers greatly understate the job shift. “A new force has come into play that is now altering the fundamental relationship between domestic demand and domestic employment in the United States,” Roach recently told clients.

He termed it “global labor arbitrage” -- the high-tech “efficiency tactics” that allow U.S. companies “to substitute high-wage domestic workers with like-quality, low-wage foreign workers in goods-producing and services-providing functions alike.”

Roach sums up: “Subpar job creation in the U.S. could well be here to stay.”

Part of the reason it’s difficult to measure the effect of outsourcing is because nearly every company doing it, including all but one client of OfficeTiger, declines to be publicly named. Some sense of the speed with which companies warm to the process can be seen in the announcements of Reuters, the financial news giant.

Late last year, Reuters said it would send 200 data-processing jobs to India. In February, it said it would hire six Indian journalists to do basic financial analysis of U.S. companies, a move a Reuters executive said would “free up” journalists in the West. Three weeks ago, Reuters said it would cut 20 journalism jobs in unspecified high-cost locations and hire 40 journalists in India to do their work and more.

Editorial work in the form of copy editing is already an Indian fixture. A few blocks from OfficeTiger is Alden Prepress Services, a division of an English printer that dates to 1832. Alden prepares for publication dozens of U.S. and European journals, including Foot and Ankle Surgery, the Journal of Molecular Biology and the International Journal of Fatigue.

Alden began in India five years ago with five employees, and now has 100 editors and 270 other employees. They review articles for consistency and intelligibility, and query authors by e-mail if there’s a question they can’t straighten out on their own. Alden then typesets the material and transmits the finished journal to the printer.

This means that the editors of, say, Pain, the official journal of the Seattle-based International Assn. for the Study of Pain, can concentrate on finding the best articles. Alden recently announced it would expand its Madras staff by 60% this year.

Examples like these are why business forecasters are forced to keep updating their calculations. Forrester Research just boosted its estimate of the number of jobs that will be outsourced by the end of 2005 by nearly 50%, to 830,000 from 558,000. In one year, 43 financial multinational companies quintupled the number of offshore workers they employed to 1,500, a survey by Deloitte Research found.

Over the longer term, Celent Communications, a consulting firm, calculates that 2.3 million financial jobs are at risk. Researchers at UC Berkeley think that as many as 14 million jobs of all types are vulnerable.

In reaction to such numbers, measures are being proposed to limit outsourcing. Last week, both houses of the California Legislature passed a bill that would prevent the state from hiring contractors that use outsourced workers. Gov. Arnold Schwarzenegger has not said whether he will sign it.

“I hate it when Americans lose jobs, obviously,” says OfficeTiger’s Altschuler, who works out of New York. “I’m an American, and think that’s terrible.”

He makes the standard argument in favor of outsourcing, one endorsed by many economists: “If you put up barriers to save jobs, the exact opposite will happen. As companies get less profitable, more Americans will lose jobs.”

Outsourcing, however, isn’t only about money. Proponents say it’s often about quality, too, which would make them even more unhappy to see protectionist barriers enacted.

Allen & Overy, a large English law firm, has 74 people working for it full time at OfficeTiger, which allowed it to lay off 50 people back home this year. Yet the firm’s head of operational services, Steven Chernikeeff, says the firm “didn’t come here for cost cutting. The main driver was getting a better value for the money. When we advertise for document processors in England, we don’t get people with master’s degrees. And they’ve got passion for their work here. You don’t always see that in the West.”

India has so many educated people and so few office jobs that people often do outsourcing work they’re overqualified for. And they’re happy to do so.

Unemployed and poorly paid lawyers and paralegals are eager to come to work for OfficeTiger to type revisions of Allen & Overy’s legal briefs. Because these employees have legal training, it also makes sense for OfficeTiger to try to get some assignments doing more complicated legal work.

“I have a friend who’s a lawyer in the States who says appeals cost $30,000 because of all the work that needs to be done in researching precedents. All that could be done here,” says OfficeTiger executive Lou Fox.

The first lawyer to successfully outsource to India the actual writing of a brief will either make a handsome profit or be able to undercut the competition to win a lot of business. To get a slice of this business, OfficeTiger formed an alliance in June with a New York legal consulting company.

Fox contends that just about every corporate job has elements that can be outsourced, even if part of it -- litigating in a courtroom, making a sales call -- must be done in person. Outsourcing is inevitable, he says. “There’s going to be a big job shift. Geography doesn’t make a difference anymore.”

Madras is a perpetually humid city on India’s southeastern coast with a population of 6 million. Unlike Bangalore or Hyderabad or other high-tech centers, it’s a conservative place where traditional Indian life holds sway. Grown children live with their parents. Arranged marriages are the rule. A new couple moves in with his folks. Only watchmen work at night.

“My mom used to call me, ‘When are you coming home?’ ” says Vidhyavathy Munnuswemy, a manager on an investment banking team.

To a cynical American’s ears, employees like the 25-year-old Munnuswemy sound unbelievable.

How many people in the U.S. would say, “For three years, I didn’t go on vacation; I didn’t feel like it,” as she does?

This sort of zeal is widespread at Indian outsourcing companies, if little understood. At Wipro, one of the biggest companies, the phenomenon has a nickname: the Hafim generation, after slang for a drug. The Hafims act as if they’re drugged, as if they take enthusiasm pills every morning.

It can’t be the ambience that is making them this way. OfficeTiger’s offices are high-tech, with rooms accessible only by electronic card swipes. The chairs would flunk any ergonomic test. There are three shifts, which means no one can personalize his desk, and no natural light. Not many clocks, either. Sigelman compares it approvingly to a casino: It’s a place without distractions.

This is Munnuswemy’s life, all night long. Her college dreams of being an aeronautical engineer are forgotten. “The more you work, the more you enjoy it,” she says. “Well, except for drinking and dancing, but it would be boring to do that every day.”

Of course, the company’s been good to her too. She won’t reveal her salary but starting wages are $1,000 a month, and she’s moved far beyond that. With her savings and a loan, she’s buying a $90,000 apartment for herself and her parents. It’s bigger than the place the family has now, with a pool and security.

Still, the passionate attachment to the outsourcing companies by their employees goes far beyond the money.

“In New York, people do this work as a means to an end -- housewives, students, actors,” says OfficeTiger executive Lonnie Sapp, an American. “It’s a quick way to make a buck. Here, they’re not driven by the paycheck.”

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Prestige and money

Part of it is the appeal of working, even indirectly, for a brand-name corporation, a mark of high achievement here. Another is the sense that the rigid Indian business culture, where rising through the ranks is a glacial process, is being broken up. If you choose to work hard, you’ll get somewhere -- and will make good money too.

“I took a pay cut to come here,” says Sangeetha Ravi, an OfficeTiger administrator. “Now I’m making twice as much as I was, and it’s only been a year and a half.”

The last time OfficeTiger ran a help-wanted ad -- it intends to double in size to 4,000 people by the end of next year -- it received 1,500 applications for 15 jobs.

It sounds ideal, this setup, the beginning of a long-term relationship. Yet perhaps part of the urgency among the OfficeTiger employees is that they know how suddenly this romance could end, how soon they could be like the American workers no one wants.

“OfficeTiger is not about India,” Sigelman says. “It’s about scouring the world to find the best cross-section of value and talent.”

The company is opening an office in Sri Lanka, its first in South Asia outside India.

There will be others. Sigelman is keeping a particular eye on China. After all, they’re learning English there.

“In five years,” he says, “all this may change.”