By: Hari Sud
harisud@hotmail.com
January 25, 2004

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The leading Democratic Presidential candidate Howard Dean has entered the anti BPO wave, joining what previously were only a media campaign in USA and a Unions backlash in UK.  The election year in USA and possible elections in UK (after unpopular UK’s participation of invasion of Iraq) has breathed a fresh life into the anti BPO lobby. Politicians in seven US states are working on some sort of legislation to stop the flight of these jobs, mostly to India, even if costs locally are much higher.  Not to be out done, UK’s unions are pressing the government to prevent loss of white collared jobs by holding noisy demonstrations.

Has this campaign got legs to stand on? 
I say, “NO”. 
I will give you reasons below. First let me explain the BPO.  

A.      What is BPO Outsourcing? 

In general terms, BPO is getting labor intensive, mundane back room day to day business processes performed elsewhere, where these tasks could be inexpensively undertaken. It requires knowledgeable personnel, some of them preferably with MBA or CA degrees. Main attraction for BPO outsourcing is lower costs. In uncertain economic times (2000 to 2003), it also reduces corporation’s headcount, hence liability upon job termination. In India, the West (USA & the Europe) has discovered a huge pool of trained manpower willing and able to do these tasks inexpensively. The current drive in USA and UK for BPO outsourcing started with an earlier urgent requirement of software engineers for the Y2K event. The West fell short on trained manpower and called for talent from India. The latter provided its best and the brightest and the Y2K event passed uneventfully. In two years since the Y2K (1997-99), India has been recognized as a resource pool. Business managers in USA have learnt that the same job, which will cost one dollar in USA, cost only 30 Cents in India. In terms of quality, it will be equal or better.  Hence, these two, become immediate reason to get work done in India. Not to be outdone Philippines, Australia and Ireland has joined India in grabbing these jobs. China is close behind but suffers a major drawback - lack of English-speaking work pool. 

A.1             Costs In India 

Costs are direct result of everyday wage and prices in India, which are much lower. In India a software engineer is paid about 25% of the wages, which his counterpart in USA will get paid. And the quality is same and delivery is timely. Hence, this becomes an important factor when decision to outsource is taken. A direct result this lower overall costs is higher profits to the corporation and better value to the shareholders.  

A. 2            Manpower situation in USA and UK

Take for example IT jobs; USA in next eighteen months will have 1.1 million software personnel shortfall. The revival of economic activity after a long recession is expected to fuel this shortage. There are no substantive measures in place at this moment, which will plug this gap. Current and expected Job retraining, admission to colleges & universities etc. will fall far short of the requirements.

Hence, businesses are left with no other choice but to look elsewhere for a talent pool. India comes natural in mind. It has the trained manpower, a good infrastructure and English speaking populace to fill the gap.   

Backroom office jobs although a big chunk are being re-organized and repositioned to cut costs hence lesser attention is being paid to train personnel. 

B.      Origin of the Backlash 

1)       No nation ever likes job loss or movement of business activity outside its borders. It is one of the patriotic duty of the rulers of the day to ensure prosperity of its subjects by way of keeping them employed and conduct affairs of the state in such a way that cash flows inwards instead of outwards. British built an empire, which lasted two centuries by virtually eliminating skills & jobs in the empire to provide jobs for factories in Birmingham, Liverpool and Sheffield.  Americans after WW II acquired the technological edge over others and kept jobs at home.  

Since the fall of the British Empire and narrowing of the USA’s technical lead over others this trend has reversed. In last 25 years USA in particular and the West in general has outsourced manufacturing to China and service jobs to India. Nobody complained as much when blue collared smoke stack industry jobs were exported to China, but there is a huge campaign against outsourcing when white collared office jobs to India. Why? 

2)       Statistically speaking, USA has a total work force of about 138 million. Of this, Software Engineers are estimated to be about 10 million, and BPO jobs are pegged at about 30 to 40 million. Currently India has about 250,000 to 350,000 software related jobs (a mere 2.0 to 2.5%% of IT jobs). Within five years this number will grow to 550,000 to 650,000. This latter is just a drop in the bucket. Much of the software development work is US centric. It will stay that way for next 10 to 15 years. Hence, media and political noises in US are worthless. 

3)       Similarly much of the BPO work is conducted in the nation’s back offices. It is the backbone of the white collared middle class of USA. Certain jobs, in this huge pool, require better-educated, computer literate, business process knowledgeable personnel. Cost of delivering these services is staggering $500 to $600 Billion a year. Business managers are always looking for ways to cut this cost.  Quantum jump in cost reduction is only possible if these can be outsourced to cheap labor countries (e.g. India, Philippines etc.). Advent of Internet and high-speed communication has made it possible to locate the back office jobs anywhere. In last two years India became one of the favored destinations.  The media and political frenzy now evident in USA and UK is concentrated on job losses only. It has not even given a bit of thought on cost reduction, which has already saved US alone $50 Billion in last two to three years. Situation in UK is similar, although I do not have detailed statistics. Hence, I ask why Media and politicians have jumped on the backlash bandwagon.

The answer: - it is a hot topic of the day and politicians wish to identify themselves with problems of the day to gather votes. 

C.      Call Center Backlash 

Dell withdrew and repositioned a few Call Center jobs from India, based on a complaint of heavy accent and lack of knowledge of Personnel in the Indian Call Centers. A few other companies did the same recently. Others may follow. It is not the accent or lack of knowledge which is responsible for this withdrawal. They are merely showing their patriotic fervor in face of heavy media propaganda. 

D.      Politics of the Backlash 

President Bush has not said anything one way or the other. His commerce secretary has refrained from any criticism of the outsourcing. The presidential team is fully aware of the advantages of outsourcing, hence will come out in favor or against it based on the direction of the political wind. 

On the other hand the same is not true about Democrats who are in the middle of a primary season and will latch on to any issue which can grab them votes. Media has provided them an issue – BPO outsourcing. They are happy to debate it, right or wrong. Only if they carefully examine the issue they will find it as a win-win situation for both India/Australia/Ireland/Australia and USA.  

E.      What will the Politicians in Power IN USA will do, if it becomes a political Hot Potato. 

1.       A few restrictions will be placed on taking jobs out of USA (security will be sighted as a reason)

2.       President bush will ask India to open its door to US products (it makes sense). 

3.       Some adjustments to the H1-B Visa regime will be made to let a few more IT personnel to come to USA instead of work exported. 

F.      What Should India Do to Push the Backlash out of the Media and Political Agenda

a)       Launch a friendly media campaign highlighting the positives of outsourcing (I believe NASSCOM is in the middle of this launch) 

b)       Learn Spanish and French to provide BPO services to Spain and Spanish Latin & South America.  Similarly fluency in French will help serve France and French North Africa. 

c)       Keep the cost structure low and expertise high in order to attract business. 

d)       To stay as a back office of the world, India has to make this as a national objective. This applies for the IT services also. 

G.   Conclusion:

In the end I am definite that this anti-outsourcing lobby is dead without the businesses support. Sooner or later, media will find another issue to flog. Politicians will find another favorite topic after win or loose elections this fall. India and other outsourcing destinations have to sit tight and stay out of controversy. As an immediate relief to the American worker, India has to do more to open up its market. Sooner it is done, better it is for everybody. Indian community in North America must support politicians like US Senator John Cornyn and Congressman Joseph Crawley who are more attuned to the time and do not oppose outsourcing. 

(The author is a retired Vice President from C-I-L Inc. and has lived in Canada for the past 34 years. A graduate of Punjab University and University of Missouri; Rolla, USA, the author is a former investment strategies analyst and international relations manager)

Hari Sud