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India rallies to IT challenge from New
Jersey
By Anil Sharma
JAIPUR
- India has reacted sharply to a bill moving through the
New Jersey legislative assembly seeking to bar
government departments in the state from shifting
information technology operations abroad to take
advantage of cheap labor.
India is the world's
premier outsourcing destination, with more than 100,000
people employed in the Rp 80 billion (US$1.6 billion)
sector, with many leading US companies taking advantage
of the country's cheap, skilled labor force to run
selected business operations from India.
Although the New Jersey initiative, even if it
becomes law, is unlikely to have any significant effect
on India in the near term (most US IT business - 97
percent - in India is from the private sector),
officials are concerned of a precedent being set, and
ultimately pressure being brought to bear on the private
sector to limit its use of cheap labor destinations.
India's Commerce and Industry Minister Arun
Shourie has said that India's concerns over the New
Jersey bill have already been conveyed to US
authorities, while the National Association of Software
and Service Companies (NASSCOM), the apex industry body,
plans to take up the matter with both the federal
government and New Jersey officials to ensure that a
similar move is not made by other US states. NASSCOM is
also working with the IT Association of America and the
US business community as the move will have an impact on
US companies as well.
The body is in the process
of appointing a public relations company in the US to
strongly put forward India's views. "Even then, if the
outcome is not favorable, we shall approach the World
Trade Organization, although we would prefer not to do
that," commented Kiran Karnik, the president of NASSCOM.
Banning outsourcing, he says, is a clear violation of
WTO principles, which stand for the free movement of
goods and services in order to reap the best economic
benefits. "We cannot afford to sit back and relax. We
have to act and do it in a diplomatic manner since there
is an emotional issue involved," Karnik added.
Indian IT experts have also appealed to the
government to raise the issue at the WTO as they feel
that these matters can be resolved only at the
government-to-government level. They have termed the New
Jersey bill as anti-business and market protectionist,
and a step that will undermine free enterprise.
According to Cambridge, Massachusetts-based
Forrester Research, over the next 15 years, 3.3 million
US services industry jobs and $136 billion in wages will
move offshore to countries such as India and China.
Late in December, the New Jersey senate approved
a bill that will require workers on state contracts to
be US citizens or legal aliens, unless they have a
specialty for which American workers cannot be found.
The bill will now go to the state assembly for final
approval.
The sponsor of the bill, Senator
Shirley Turner, said that she introduced the measure
after reports that eFund Corp of Scottsdale in Arizona
state had won a seven-year $326,000-a-month contract to
process electronic welfare and food stamp cards for
194,000 New Jersey residents. The company then moved its
customer service center from Green Bay in Wisconsin
state to Mumbai in India, where workers are paid two to
three dollars an hour, far less than US workers, she
claimed.
"We shouldn't be sending
taxpayer-funded jobs for state contracts to foreign
countries when our citizens need work," Turner said. "We
should be looking out for our own people instead of
developing a cheap labor force in countries where
benefits are rarely provided."
Before the vote,
the bill had been amended to allow foreigners who are in
the US on work visas to be eligible for the employment
pool for state contracts and to allow non citizens to
work for specialized services that cannot be run by US
workers.
India's information technology services
industry has grown over 29 percent in the past year,
despite a tough US market. The real surprise, however,
has come from the IT-enabled back office and call center
services. Thanks to cheap labor rates, low cost
bandwidth, standardized business applications and
Internet-based collaborative tools such as instant
messaging, the sector grew over 70 percent last year.
India's software and allied exports, which bank
on a growing pool of low-paid engineers and
English-speaking graduates, rose 29 percent on a
year-on-year basis to about $7.5 billion in the year to
March 2002. The industry expects 30 percent growth in
2002-03 (April-March). American clients account for more
than 60 percent of India's software exports.
"This bill, though moderately, would certainly
affect the growth of India's 'sunshine industry'," one
industry analyst said, who backed the pro-active
measures that the country is taking to the threat.
The business done by India's teleworking majors
can be classified into four broad segments. The lowest
is the data entry and conversion segment. These are
low-value services done across huge distances. This
primarily involves secretarial work. The time difference
is crucial here, as work is shipped at night from
America and shipped back before dawn breaks there. This
segment accounts for Rs 40 billion of business and
employs 40,000 people, including 10,000 medical
transcribers.
Next in the order is simple
rule-based processing jobs. Here the teleworkers are
required to make simple decisions on the basis of preset
rules. This would include credit-card operations where
teleworkers make a call on whether or not the limit
needs to be extended or relaxed. Accounting for Rs 2.1
billion and employing 3,000 people, this is a rather
small component of India's teleworking sector.
The customer-interaction call centers come next.
They are the mascots of Indian teleworking industry,
employing about 33,000 people raising Rs 16.5 billion in
revenues. Sitting in India, teleworkers give reminders
to Americans on their skipped credit card payments,
bills and premium and mortgage payments.
At the
apex come sophisticated and valuable "expert" services
that not only command premiums but also provide high
entry barriers to competitors. This may include an
Indian lawyer doing research for his American or British
counterparts or Indian engineers designing structures
for engineers abroad. These are worth Rs 21 billion and
employ 30,000 people in all.
(©2003 Asia Times
Online Co, Ltd. All rights reserved. Please contact content@atimes.com
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policies.)
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