Inside OffShoring : Job Losses and the Backlash

By Andy McCue


Two of the most contentious aspects of the offshore outsourcing debate is the
argument about the loss of jobs from western economies such as the UK and US
and the quality of customer service from Indian call centres. As we see more
and more headlines screaming about thousands of call centre and software
development positions being offshored to India, the backlash becomes more and
more hysterical.

But it is a threat that many IT workers feel is real. For the first time a
significant proportion of silicon.com readers said they felt their job was
under threat from offshoring in our Skills Survey 2004. Other figures, at
first glance, are equally alarming, with Gartner claiming a quarter of
western IT jobs will move offshore by 2010. Another report by research firm
Evaluserve says 250,000 UK jobs will be offshored in the same period.

In the short term there is undoubtedly an impact on some local communities if
work is moved overseas but the debate is far more complex than simply
accusing multinationals of selling UK workers down the river to save a quick
buck by hiring cheaper staff in countries like India.

On a recent fact-finding trip to India to explore the offshore industry,
silicon.com found that on the ground in India there is more concern with the
US backlash than the UK, and the expectation is that once the US presidential
elections are over this November it will drop off the radar of politicians
keen to score points with the electorate. The general consensus is that the
UK government is supportive of the offshoring trend and that it is an
irreversible market force.

We put the key points in the jobs and backlash debate to the main Indian IT
companies and Indian IT trade body Nasscom while travelling around Bangalore,
Hyderabad and New Delhi. To get the full picture we then put their views to
finance union Unifi back here in the UK. Here are their responses.

Are significant numbers of jobs being lost as a result of offshoring?

The argument from the anti-lobby here is that offshoring results in a direct
displacement of the UK workforce and has a negative impact on the community
and economy. Sudip Banerjee, president of enterprise solutions at Wipro,
argued UK companies are struggling to fill these jobs anyway. "It is not as
if people are queuing up to take these jobs. And they do it in a
disinterested manner. They don't see it as a career," he said.

It is a position backed by Sunil Mehta, VP at Nasscom. He said: "There is a
growing recognition there is a demographic issue in Britain. By 2010 there
will be a shortage of people within the working age group."

Dai Davies, communications director at Unifi, said that doesn't take into
account the full picture and he said: "The total number of jobs remains
fairly stagnant. If you start shifting them to Asia, that comes down."

Offshore backlash - tabloid hysteria or real threat?

Akshaya Bhargava, CEO of Infosys' BPO subsidiary Progeon, believes the UK
backlash is confined to the pages of the Daily Mail. "Somebody in Amicus
comes and makes a statement and then they show a photo of a train packed with
people," he said. "The UK economy is doing so much better and house prices
are doing great so there is a general feeling of well-being and I guess some
people don't like it but by and large the economy is fine."

Over at Wipro's BPO Spectramind, chairman and MD Raman Roy said the upcoming
US elections have created a backlash climate in the short term but that there
are advantages for India. "A lot of companies didn't even know India existed.
There is a heightened awareness," he said.

But Unifi's Davies claims the backlash is very real and that companies
considering offshoring need to take it seriously. "We're already seeing
marketing angles coming from companies not offshoring, seeking to create a
competitive edge. It is not a racist nationalist issue, it's a consumer
choice issue," he said.

Yet the overwhelming consensus from India is that offshoring is an
irreversible trend that no backlash can stop. Saurabh Srivastava, executive
chairman of Xansa India, said: "The only way to stop it is to close the
borders and that doesn't work - the best example there is India. Before that
the economy never grew by more than two per cent. Now it is [growing at] 10
per cent."

Articles and commentary on IT offshoring and BPO in India and elsewhere will
be appearing on silicon.com over the coming weeks. You can find them all
here.


Which brings us to the economic argument - India and other offshore countries
obviously benefit, but what about western economies?

Nandan Nilekani, CEO, president and MD of Infosys, said it is part of
globalisation and that there are benefits for everyone. "It makes western
companies more competitive and it helps countries like India become part of
the global economy, which will help them from an ideology sense of improving
the quality of life but also help in creating markets for western products,"
he said.

The development of western economies after manufacturing moved to cheaper
overseas locations during the 1970s to service-based economies is often cited
by the pro-offshoring lobby as an example of how things will pan out this
time around. Unifi's Davies is not so sure.

"Manufacturing had a safety net in the service sector. We can't see that
safety net here," he said. He added that the 'India Shining' economic miracle
is also not all that it seems and that the BJP party paid the price for it in
the recent elections. "One billion poor people in India are not getting the
benefit of this influx of investment in India. It is also taking graduates
out of social sciences such as medicine and engineering which they need for
the future," he said.

But offshoring has the potential to give the UK a competitive edge over other
European countries, according to Xansa's Srivastava. "The UK is ahead of
Europe so the UK gains more and loses less. Because UK companies are
beginning to understand how to create advantages in performance through
outsourcing, they'll put pressure on competition in Europe who will not be
able to compete. That in time will create more jobs," he said. Srivastava
argued that non-English speaking European countries will not be able to
leverage the cost advantages of offshoring to India.

Are questions about the quality of offshore service legitimate or just
anecdotal?

Stories such as Dell's decision to redirect calls from its Indian facility to
the US and Capital One's dropping of telemarketing services from Wipro
Spectramind raise questions about the quality of offshore service. Other
people have horror stories about dealing with agents in Indian call centres -
though much of this is anecdotal and it ignores the quality of service
experienced from call centres based here in the UK.

Wipro's Banerjee said people are jumping on every little mistake or problem
without putting it into the context of how much work is done from India. "It
is just disproportionately high publicity for something which is a very
normal occurrence in the industry," he said.

Sound independent metrics are hard to come by but Rajesh Magow, CFO at
ebookers' Tecnovate BPO in New Delhi, said four of the company's top ten
sales people are in India. "In our telesales for UK the conversion rate
started at 9 per cent and has gone up to 29 per cent, which is compared to
the UK call centre at 21 to 25 per cent."

Progeon's Bhargava is more scathing of criticism of Indian IT and call centre
workers' language capabilities and said people use it as a convenient excuse
to criticise service. "I watch Welsh TV in London and I don't know what the
hell they are saying," he said.

How bad is the attrition amongst Indian call centre and IT workers who
typically are graduates doing repetitive monotonous work and long shifts?

Again this is an area where the Indian companies feel they have been unfairly
portrayed - staff turnover figures of 100 per cent are often bandied around -
and that the problems they experience are no different to those in the UK. At
ebookers BPO facility Magow said the annual attrition rate is just 10 to 15
per cent.

Xansa's Srivastava said that turnover is no more of an issue than in any
other country for this type of work but the difference being the quality of
workers in India. "The UK work is done by less qualified staff. Here, for a
whole class of people it is aspirational. It is the best job they can get in
terms of work environment," he said.

Progeon's Bhargava claims it is important to distinguish between attrition
rates in call centres and in IT-based operations and that the only way to get
a true picture is to compare those figures with the UK and US. "There's
somebody I know who runs a very large call centre operation in the UK heading
16 call centres. This lady tells me her attrition rates are somewhere in the
region of 135 per cent," he said. "What you've got to remember is that call
centre jobs in the west are not the most attractive jobs you can find. They
are staffed by temporary workers, by people in between jobs, by people on the
edge of social security, barely finished high school and that's the kind of
profile you get."

Unifi's Davies agreed to some extent but claimed that simply using poor UK
conditions as an excuse to cut costs and offshore the operation is wrong.
"They are poorly managed, there is difficulty in recruiting, there is
difficulty in the skill set and that's a management problem. You cannot
simply export that," he said. Davies argued that companies should take
advantage of technology to improve their UK operations rather than just use
it to export business processes.

Articles and commentary on IT offshoring and BPO in India and elsewhere will
be appearing on silicon.com over the coming weeks. You can find them all
here.