Jewish World Review August 12, 2003 / 14 Menachem-Av, 5763

Daniel Sneider

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In brave new world of business process outsourcing, India has become Omaha


http://www.jewishworldreview.com | GURGAON, India - It is nine at night and things are just beginning to buzz in the cubicles at Daksh, a leader in the latest "new thing" in global business.

"Hi, I'm Anurag," a polite young Indian man says to someone drinking his morning coffee half a world away in the American Midwest. "But you may call me Andy."

In gleaming call centers like this one, and many more in major cities across India, young men and women are taking care of your medical insurance problems, putting money back on your credit card for returned merchandise or figuring out how much to pay for that fender bender you had the other day.

Welcome to the brave new world of business process outsourcing, or BPO. Thanks to the miracles of the Internet and telecommunications, work that used to be done in Omaha, Neb., or in the offices of some large corporation in New York can now be done across the globe. And done just as well and far more cheaply. You can employ five Indians to take calls for the cost of one American.

That means that jobs, hundreds of thousands of them, are moving offshore.

This is a growing source of tension. In New Jersey, legislation was introduced last year to bar outsourcing of public agency work to India, and other states are considering such laws. Employees of some companies such as Sun Microsystems and Microsoft are protesting, even suing, to prevent this kind of outsourcing, particularly at a time of downturn in the United States.

I don't discount the individual tragedies of those who have lost work. But there is also no stopping this new phase of globalization. The competitive pressures are too compelling to keep companies from going down this road. And I buy the argument made by many in India that the wealth we create there translates into more jobs here, both from products Indians consume and from helping to expand a global services industry.

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The service industry is following a well-worn path forged by manufacturing industry. Basic assembly line work shifted overseas to take advantage of cheaper labor. Companies created global chains of production, with the final product assembled thousands of miles from where the various parts were made. And Americans did the higher-paid design and marketing work.

The outsourcing of business services is not new. By now it is a huge business. Spending on this in the United States in 2002 was $450 billion, employing 4 million people.

But the outsourcing of this work overseas has exploded in the last few years, propelled by cheap, high-speed data transmission that allows someone to work at a computer terminal in Bangalore as easily as in Boston.

It started with the most routine jobs - back office paper work and telephone service calls. In some cases, large multinational firms moved work offshore to their own subsidiaries. Others, like India's Daksh, are contractors for companies that want to move some operations outside their walls.

Outsourcing has gone to Ireland and the Philippines, for example. But India is uniquely suited to seize this business opportunity. It has a vibrant computer software industry, built on the base of an excellent educational system that graduates hundreds of thousands of engineers a year. Indian software engineers did the grunt work of writing computer codes beginning in the 1980s and led the way for business process outsourcing.

English is widely spoken in India as one of the country's official languages. And it is the language of instruction in secondary schools, colleges and universities across India whose graduates are now being hired by the high technology and business service industries.

"You have a whole ecosystem in India that can do IT and can do business processing that is unparalleled anywhere else in the world," says Vivek Paul, vice chairman of India's Wipro, a leader in both fields.

The growth of BPO employment in India has been amazingly fast. The Indian software industry association put it at 171,500 in March, 2003, up about 100,000 in one year and likely to grow by that amount again by the end of the year. In five years, employment could reach as high as 2 million by some projections.

And the kind of work is expanding. New areas include health services, having Indian doctors remotely interpret cat-scans or X-rays overnight.

Now Indians are setting up satellite operations in other countries. GE Capital's Indian operation has helped set up an sister center in China where Japanese-speaking Chinese do work outsourced from Japan.

"With globalization, the labor force over here is becoming an extension of a global labor force which can be used anywhere," says Daksh co-founder Pavan Vaish.

It is indeed a brave, new world. Get used to it.

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Daniel Sneider is foreign affairs columnist for the San Jose Mercury News. Comment by clicking here.

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