Companies fear publicizing savings from outsourcing
By David Zielenziger, Reuters
U.S. corporations are picking up the pace in shifting well-paid technology jobs to India, China and other low-cost centers, but they're keeping quiet for fear of a backlash, industry professionals said. Morgan Stanley estimates that the number of U.S. jobs outsourced to India will double to about 150,000 in the next three years. Analysts predict that as many as 2 million U.S. white-collar jobs such as programmers, software engineers and application designers will shift to low-cost centers by 2014.
But the biggest companies looking to "offshoring" to cut costs, such as Microsoft Corp., IBM and AT&T Wireless Services Inc., are reluctant to attract attention for political reasons, observers said this week.
"The problem is that companies aren't sure if it's politically correct to talk about it," said Jack Trout, a principal at marketing and strategy firm Trout & Partners. "Nobody has come up with a way to spin it in a positive way."
This causes a problem for publicly traded companies, which would ordinarily brag about cost savings to investors. Instead, they send vague signals that they are opening operations in India and China, but often decline to elaborate.
Moreover, on the threshold of a U.S. presidential election year, job losses are a hot-button issue. A company that highlighted a major job transfer could wind up in the campaign debate.
Multinationals find that when they trumpet expansion overseas, they cause problems at home. When Accenture Ltd. executives in India this month announced plans to double their staff to 10,000 next year, they triggered a flood of calls to the company's U.S. offices about U.S. job losses.
Offshoring companies "are paying Chinese wages and selling at U.S. prices," said Alan Tonelson, at the U.S. Business and Industrial Council, a trade group for small business. "They're not creating better living standards for America."
The U.S. sales director for one of India's top computer services providers said his company has won business from customers such as The Walt Disney Co., Time Warner Inc.'s CNN and the Fox division of News Corp. -- none of which want public disclosure.
In India, some technology companies have recently adopted lower profiles. Microsoft has been removing its name from minibuses used to ferry engineers on overnight shifts. Major Indian beneficiaries of U.S. business such as Infosys Technologies Ltd., Wipro Ltd. and Satyam Computer Services Ltd. have stopped identifying new customers.
While there have been reports that IBM intends to ship 4,700 high-end jobs to India and China next year, that marks a rare instance when figures "have been reported in black and white," said Linda Guyer, president of Alliance@IBM, a union that has tried to organize IBM employees.
Those numbers weren't released by IBM but rather disclosed by The Wall Street Journal, which had obtained an internal memo. The company has declined to comment.
Guyer said she believes that as many as 40,000 of IBM's 160,000 U.S. jobs will be transferred overseas by 2005, a figure she said was gathered from phone calls by IBM employees.
Previously, IBM has pointed to a report by the McKinsey Global Institute that concluded that the U.S. economy ultimately will benefit. The report was commissioned by Nasscom, a group made up of Indian tech companies as well as IBM's Indian services unit -- showing an effort by those invested in offshoring to sway public opinion.
Recently, AT&T Wireless told the U.S. Securities and Exchange Commission that it would lay off 1,900 employees this year. Communications Workers of America members obtained an internal memo prepared by Tata Consultancy Services in India that discussed how it would assume those U.S. jobs.
Subsequently, AT&T Wireless officials acknowledged that the company was exploring the job shifts, but they didn't offer details.
While some companies, such as Electronic Data Systems Corp., Cap Gemini Ernst & Young and Sapient Corp., acknowledge that they shift jobs abroad to exploit cost advantages and round-the-clock work, IBM asserts that it isn't moving jobs but creating new ones.
COMPUTERWORLD
U.S. corporations are picking up the pace in shifting well-paid technology jobs to India, China and other low-cost centers, but they're keeping quiet for fear of a backlash, industry professionals said. Morgan Stanley estimates that the number of U.S. jobs outsourced to India will double to about 150,000 in the next three years. Analysts predict that as many as 2 million U.S. white-collar jobs such as programmers, software engineers and application designers will shift to low-cost centers by 2014.
But the biggest companies looking to "offshoring" to cut costs, such as Microsoft Corp., IBM and AT&T Wireless Services Inc., are reluctant to attract attention for political reasons, observers said this week.
"The problem is that companies aren't sure if it's politically correct to talk about it," said Jack Trout, a principal at marketing and strategy firm Trout & Partners. "Nobody has come up with a way to spin it in a positive way."
This causes a problem for publicly traded companies, which would ordinarily brag about cost savings to investors. Instead, they send vague signals that they are opening operations in India and China, but often decline to elaborate.
Moreover, on the threshold of a U.S. presidential election year, job losses are a hot-button issue. A company that highlighted a major job transfer could wind up in the campaign debate.
Multinationals find that when they trumpet expansion overseas, they cause problems at home. When Accenture Ltd. executives in India this month announced plans to double their staff to 10,000 next year, they triggered a flood of calls to the company's U.S. offices about U.S. job losses.
Offshoring companies "are paying Chinese wages and selling at U.S. prices," said Alan Tonelson, at the U.S. Business and Industrial Council, a trade group for small business. "They're not creating better living standards for America."
The U.S. sales director for one of India's top computer services providers said his company has won business from customers such as The Walt Disney Co., Time Warner Inc.'s CNN and the Fox division of News Corp. -- none of which want public disclosure.
In India, some technology companies have recently adopted lower profiles. Microsoft has been removing its name from minibuses used to ferry engineers on overnight shifts. Major Indian beneficiaries of U.S. business such as Infosys Technologies Ltd., Wipro Ltd. and Satyam Computer Services Ltd. have stopped identifying new customers.
While there have been reports that IBM intends to ship 4,700 high-end jobs to India and China next year, that marks a rare instance when figures "have been reported in black and white," said Linda Guyer, president of Alliance@IBM, a union that has tried to organize IBM employees.
Those numbers weren't released by IBM but rather disclosed by The Wall Street Journal, which had obtained an internal memo. The company has declined to comment.
Guyer said she believes that as many as 40,000 of IBM's 160,000 U.S. jobs will be transferred overseas by 2005, a figure she said was gathered from phone calls by IBM employees.
Previously, IBM has pointed to a report by the McKinsey Global Institute that concluded that the U.S. economy ultimately will benefit. The report was commissioned by Nasscom, a group made up of Indian tech companies as well as IBM's Indian services unit -- showing an effort by those invested in offshoring to sway public opinion.
Recently, AT&T Wireless told the U.S. Securities and Exchange Commission that it would lay off 1,900 employees this year. Communications Workers of America members obtained an internal memo prepared by Tata Consultancy Services in India that discussed how it would assume those U.S. jobs.
Subsequently, AT&T Wireless officials acknowledged that the company was exploring the job shifts, but they didn't offer details.
While some companies, such as Electronic Data Systems Corp., Cap Gemini Ernst & Young and Sapient Corp., acknowledge that they shift jobs abroad to exploit cost advantages and round-the-clock work, IBM asserts that it isn't moving jobs but creating new ones.
COMPUTERWORLD
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