Backlash and Elections Year Politics
leading Democratic Presidential candidate Howard Dean has
entered the anti BPO wave, joining what previously were only a media
campaign in USA and a Union's 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
this campaign got legs to stand on? The Answer is 'NO'.
First let me explain the BPO.
What is BPO Outsourcing?
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.
Costs In India
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.
2 Manpower situation in
USA and UK
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
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.
office jobs although a big chunk are being re-organized and
repositioned to cut costs hence lesser attention is being paid to
Origin of the Backlash
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.
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?
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.
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.
in UK is similar, although I do not have detailed statistics.
I ask why Media and politicians have jumped on the backlash
answer: - it is a hot topic of the day and politicians wish to
identify themselves with problems of the day to gather votes.
Call Center Backlash
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.
Politics of the Backlash
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.
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.
will the Politicians in Power IN USA do, if it becomes a
political Hot Potato.
A few restrictions will be placed on taking jobs out of USA
(security will be cited as a reason)
President bush will ask India to open its door to US products
(it makes sense).
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.
Should India Do to Push the Backlash out of the Media and
Launch a friendly media campaign highlighting the positives
of outsourcing (I believe NASSCOM is in the middle of this launch)
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
Keep the cost structure low and expertise high in order to
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.
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 lose 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.
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.
This article was originally published by SAAG.