March 09, 2004
This is Part 2 of the report on the subject
BPO Backlash in USA & UK and
Elections Year Politics
India must say to
America - Thank you for your confidence in India and the skills of its
young men and women, who 24/7, are providing you not only the IT services
but are maintaining your back offices also. It all began in 1996 with the
looming Y2K crisis when need for additional IT programmers was felt. These
bright young men and women headed America’s call and came to its shores to
address the issue. They worked closely with the industrious American work
force and remedied the situation. America compensated them well and sent
them back home (a few stayed back). Hardly could they imagine that the
expertise they have acquired, while on the job in America is going to
serve them well, later. Corporate America wished that while in their home
country, could they undertake a few mundane & repetitive tasks for which
immense amounts of monies are spent every year? American corporate leaders
and President Bush’s Economic Advisors, forced by the 2001-03 bad economic
climate, 9/11 and war in Afghanistan & Gulf, were looking for ways and
means to cut costs. They found their answer in India. The winning formula
was, to have these tasks done in India where labor costs are a third of
the costs in America and quality is as good as any. Hence the BPO Boom was
Europe is doing the
same. In their infinite wisdom, the Europeans are following in the
footsteps of the Americans and are getting their back office tasks done
round the clock in India.
Well Done India!!!
Are Out sourcing
Fears are Misplaced?
Yes, these are!
major ST Microelectronics president Pasquale Pistorio also believes that
these fears are misplaced. So do other business leaders in America.
Companies must be able to grow outside and inside. They should be capable
of combining all the opportunities in all the environments they operate
in. Mr. Pasquale also believes that innovation should be the driving force
behind outsourcing, which is possible only thru innovative and skilled
Chief Alan Greenspan has come in defense of outsourcing including free
trade. He has warned that protectionist sentiments presently advanced by
the media and the politicians to deal with country’s job insecurities will
worsen the free trade environment. He has advanced the well-treaded path
of job retraining to displace the old jobs with new one.
by various organizations have concluded that outsourcing delivered
significant benefits both to corporate America, worker and economy on the
whole. They have even advanced the theory of strategic advancement of
corporate interest, which combines multi-location, multi-vendor and both
in-house as well as outsourced solutions for IT and business processing.
So this is win-win situation.
Some are calling this
Boom as Exporting Jobs, Is this truth or Hogwash?
I am inclined to say
Outsourcing is not
exporting jobs. It is simply re-adjusting your working environment, taking
into account the new and revised labor situation. Economists are saying it
time and again that it is for the greater good of America that these tasks
are done elsewhere at a lower cost. These cost savings become higher
profits and higher profits become new investment. The latter create more
and higher paying jobs.
Hence, why is there
so much noise in the media that politicians have been drawn into the
Partly, it is lack of
understanding by the media of the dynamics of changing labor economics.
They have taken a very short-term view of the situation. Yes, there is a
temporarily job loss. But the American worker is smart. He or she is to be
retrained. With retraining, he or she will step into a potentially better
If you do not believe
me, then look at the economic statistics of the nineties. America exported
close to 10 million manufacturing jobs to China or the East Asian
countries in nineties alone. Yet the unemployment rate with so many
workers unemployed stayed at 4%. This was the lowest recorded unemployment
rate in 30 years. The American GDP grew at a staggering rate of 4%
annually and stock market hit the roof. Did anybody complain about
millions of unemployed then? The answer is No. Reasons – America was
retraining its redundant manufacturing labor force into better paying
service jobs. The service sector was the shining example of success.
President Clinton’s economic theory worked. Everybody was happy, including
Hence, take the good
advice and quit taking the myopic view of exporting America. Think long
range and look at the benefits American economy is going to get.
Trade, and more
specifically Trade in Service Sector.
merchandising trade deficit has gone thru the proof. Reasons are too many
to count. They include higher dollar, wars and using China as a hub for
American manufacturing etc. The bright spot is service sector exports. It
has recorded a surplus. The point is that better trained American workers
are turning out services needed by the rest of the world in greater
numbers. This is possible because working in smoke stack industries of
fifties, sixties and seventies in no longer in vogue. People wish to take
better jobs, which is possible only if they are retrained. This forgoing
happened only 10 years back. It will happen again in the immediate future.
Job retraining is the stepping-stone.
In the end, America
provides the world with high-end services, China becomes the manufacturing
hub and India maintains their back office.
trade deficit, which America has suffered in last thirty years with
Canada, Europe and Asia, is serious. Addressing it will require a better
and more prolific service sector, political will to force a change and
better-trained labor force.
Technology is making
Twenty years back,
when desktop and laptop computers had not been abundant use and Internet
together with high-speed communications was still a dream, the BPO was not
possible. Technology made it possible and technology is going to move it
forward. It is the wave of the future. With the technological revolution,
currently underway, costs will continue to tumble. Savvy operators will
see the advantages early on and latch on to it. Reduced costs, higher
profits will drive the engine of economic growth all over the world. Again
to quote Mr. Pasquale – It is the innovation, which is driving the
Take this Issue Out
of the Political Agenda
Democratic Party presidential candidates have made the outsourcing as an
election year issue. Pushed too far, President Bush has started to panic a
bit. His economic advisor was made to retract his earlier statement on
outsourcing. All this points to a major debate on the issue in this
election year. India, China, Mexico etc. have become their favorite
whipping boys. Although their own studies and their own economists are
favoring outsourcing, yet the media keeps the subject front and center.
The latter is only concentrating on the short range. The bigger picture is
missed. Should America decide not to outsource, chances are that in this
age, global competition with lower cost will kill them and then America
will be at a greater disadvantage.
Hence, take this
issue out of the political agenda and let the economics deal with the
debate is not good for anybody. It will impede progress. Already 11 states
have politicians excited about it. They have either passed laws or are
debating various measures to prevent outsourcing. Are they helping
Corporate America? No, as a matter of fact they are hurting the progress
of business. They should be busy in schemes in job retraining, improved
education etc., to improve the worker’s lot. Instead the easier way out
has been taken.
Don’t Blame on
India Alone for Job Losses
Today, the media &
the Politicians (economists are an exception) have made India as the
target of their anger. Nobody is thanking these men and women 10,000 miles
away for keeping America’s back offices running inexpensively. Rather
outsourcing and India are uttered in the same breath with a lot of
But do not blame all
of it on India alone. From 1980 to 2001, about 15 million American
manufacturing jobs were lost to China, because their manufacturing base
was more modern and their labor cost was cheap. Jobs, which are leaving
for India, are a tiny percentage (3%) of what has already been lost to
China. So why does media targets India in their discussions and not China?
It is plain simple – China’s strategic importance as a counter weight for
Russia is much greater than India. That alone dictates who is to be made a
Thank you for your
Confidence in India. God Bless you, America
India has to thank
America for its benevolence for making it as its back office. India has
gained about four hundred thousand jobs in last three years. This is too
small a number to make any difference to the American economy. But it has
transformed a slow moving Indian economy into a powerhouse. Strategic
partnering has entered into the thinking process of both the nations. Soon
it will transform into peace and prosperity for both the nations. India
will become the bulwark of stability for the Indian Ocean littoral states.
This peace and stability will ensure prosperity for India, good value for
America and peace in the sea-lanes from Suez to Singapore for a
(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. The Views
expressed are his own. email-
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