Outsourcing Variations Have Some Appeal
The business of finding low-cost substitutes for American workers is getting more complex -- and so is the terminology. They don’t just call it “offshoring” anymore.
At a recent conference in the palatial Venetian resort, the people who help U.S. companies shift white-collar work overseas offered potential clients a Vegas buffet of outsourcing options: “nearshoring,” for those willing to stray no farther than Canada or Mexico; “inshoring,” for those who prefer to bring foreign workers to America, and “rightshoring,” for those desiring a custom package of in-house and offsite, foreign and domestic.
For the faint of heart, there’s “microsourcing.” Don’t fire your entire computer department, advised David Elmo, president of Ohio-based Corbus Corp. Instead, farm out chronic backlogs and special projects to programmers in India.
“Getting rid of everyone puts you at a strategic disadvantage,” said Elmo, whose company will help supply the foreign talent. “You don’t know what’s going to happen tomorrow.”
As 100 or so advisors and providers courted about 200 potential customers during a three-day Outsourcing Strategies conference here several weeks ago, many participants were clearly worried about what has come to be known as “the backlash.”
Accused by pundits of engaging in economic treachery and blamed by workers for the loss of thousands of service sector jobs, companies interested in moving work overseas wanted to know how long the uproar would last, how much it would hurt and what kind of “mitigation strategies” might help them weather the storm.
“It’s like the elephant in the corner,” said Douglas Winter, chief executive of Objectiva Software Solutions in Encinitas, whose Chinese programmers do contract work for U.S. companies. “Everybody is aware of it, but they’re not really doing anything about it.”
Despite the hand-wringing, some experts said they see no evidence the movement of jobs is receding.
“You can’t put this back in a bottle,” said Michel Janssen, an executive at Everest Group, a Dallas-based outsourcing firm. While companies are looking for ways to lessen the negative fallout, he said, their chief financial officers remain as interested as ever in sending work offshore.
“The trend is just happening faster and faster, and the deals are getting larger and larger,” Janssen told conference participants. “So I see the politicians saying one thing, and I see the CFOs saying another. And we’re right in the middle of that story.”
Nearly half of Fortune 500 companies have transferred work abroad, and the size of deals is expanding: A record was set last year when Hewlett Packard inked a 10-year, $3-billion contract to provide technology support services, some of it offshore, for Procter & Gamble.
But in the marbled corridors of the conference hall, only a die’s throw from the craps tables and roulette wheels, several companies that help clients shift their work offshore acknowledged that the bad publicity was beginning to bite.
Anubhav Saxena, sales director for HCL Technologies America Inc., in Irvine, said two of his clients told him they were postponing plans to hire programmers in India until after the November election. “It’s very emotionally sensitive right now,” he said.
Navin Agarwal, whose family founded SRM Techsol Ltd. in Lucknow, India, four months ago, said the anxiety was crimping his ability to pitch his programming services.
“For me, the number of potential clients is going down,” Agarwal said. “They have this thing on their mind that it might stop or they might lose money.”
Gone are the days when those who help companies move jobs overseas could ply their trade with little regard for public perceptions, participants were warned.
“If you cannot deal with the politics of offshoring right now, then you shouldn’t be doing it,” admonished UC Irvine professor Vijay Gurbaxani.
Yet most seemed convinced that the complaints would not turn the tide.
“The backlash is powerless. The backlash doesn’t run companies. The backlash can’t fund political campaigns,” said Robert Lewis of IT Catalysts, a technology consulting firm in Eden Prairie, Minn.
“All the backlash can do is gripe.”
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Jobs at risk
Lower wages overseas have helped draw an estimated 300,000 U.S. jobs to other countries. About 14 million white-collar workers are in occupations considered vulnerable to such displacement.
Occupations at risk to displacement U.S. Employment 2002
Financial managers 563,020 Computer and information systems managers 264,790 Human resources managers 193,360 Accountants and auditors 888,690 Budget analysts 58,900 Credit analysts 65,700 Financial analysts 159,920 Tax preparers 54,330 Computer and mathematical occupations 2,772,620 Economists 13,290 Market research analysts 122,000 Survey researchers 18,350 Technical writers 44,780 Telemarketers 419,740 Office and administrative support 8,259,850
Total 13,899,340
Hourly wages for selected occupations, 2002-2003
Occupation U.S. India
Telephone operator $12.57 Under $1.00
Health record technologists/ Medical transcriptionists 13.17 1.50
Payroll clerk 15.17 1.50
Legal assistant/ paralegal 17.86 6.50-8.00
Accountant 23.35 6.00-15.00
Financial researcher/ Analyst 33.00 6.00-15.00 35.00
Average salaries of programmers
Country Salary range
Poland and Hungary $4,800 to $8,000 Russian Federation 5,000 to 7,500 Philippines 6,564 Malaysia 7,200 India 5,880 to 11,000 China 8,952 Canada 28,174 Ireland 23,000 to 34,000 Israel 15,000 to 38,000 U.S. 60,000 to 80,000
India wages are from interviews, business literature searches and review of employment want ads by the authors.
Sources: Bureau of Labor Statistics, CIO magazine, November 2002, Smart Access Survey, Merrill Lynch, Economy.com, UC-Berkeley
