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India's IT sector braces for US
backlash
By Jayanthi Iyengar
"US economy in the worst hiring slump in
20 years"
- New York Times, February 2003
"1.1 million IT jobs to be created in
India by 2008"
- Cyber News Service, February,
2003
NEW DELHI - The Business Process
Outsourcing (BPO) controversy first started as a limited
protest against US government orders and jobs going to
outsiders, particularly to India and Indians. It was
kicked off by Senator Shirley K Turner, who moved a bill
last year in New Jersey seeking a ban on government
technology-related work from going to countries like
India. This bill is yet to be passed, but the idea
mooted by Turner is fast gaining ground.
Four
more states, including Maryland, Missouri, Wisconsin and
Connecticut are now reportedly contemplating similar
bills. US labor unions, too, have joined in the fray,
egged on undoubtedly by continuous lay-offs, worker
frustration and attention-grabbing headlines, which have
created the impression that India's IT growth is at the
cost of the US worker.
Such impressions have
changed the complexion of the debate, taking the focus
off US government tech business going to India. Instead,
it is fast taking on the shape of greedy, profit-hungry,
US multinationals collaborating with overseas partners
and foreign migrants to deny the American public its
due.
Fueling such sentiments is the sustained US
slowdown. The overall unemployment level has touched 6
percent. In Silicon Valley, it has reached 8 percent.
Laid-off workers, particularly immigrants, have flooded
US universities, hoping to sit out the slowdown rather
than return home. The potential of a war in the Middle
East has exacerbated uncertainty, adding to the overall
uneasiness.
The net result is that US senators,
politicians, labor leaders and pressure groups are now
demanding more than legislative intervention to stop
what they see as profit-crazy multinationals from
relocating operations abroad, benefiting foreign
nationals. And the focus has spread to the larger issues
of migration, globalization and raising entry barriers
by slashing H-1B visas (US work permits).
Leading
such a campaign are web sites like www.H1B.info, which
claim that they are not anti-immigrant, but seek to
educate the American people on how "the H-1B technical
visa program is costing American jobs and undercutting
your wages". The portal, sponsored by Representative Tom
Tancredo (Colorado and chairman of the Immigration
Reform Caucus) and Representative Cass Ballenger
(Republican, North Carolina), explains, "The H-1B visa
program allows American companies and universities to
import foreign scientists, engineers and programmers.
Unfortunately, it has no serious safeguards to protect
American workers from being replaced and is abused to
provide cheap foreign labor.
"Moreover, H-1B
workers continue to flood a terrible job market. In
October 2000, Congress bowed to high-tech lobbyists'
claims of a desperate worker shortage and raised the
H-1B visa cap to 195,000. Now, despite widespread
unemployment, the number of H-1B visas continues to
grow. 163,000 new visas were issued in 2001 and 79,100
in 2002. It's ridiculous to import so many foreign
workers during a period of high unemployment. Congress
needs to increase domestic worker safeguards,
significantly reduce the number of H-1B visas issued and
crackdown on visa violations and fraud."
The
portal, which surely reflects to a great extent the
average unemployed American's concerns, further spells
out a five-point formula for what a US national could
do. These measures include "telling" the US area senator
and representative the following:
Reduce the maximum number of H-1B visas to 15,000
annually and tie any potential increase to improvements
in the unemployment rate.
Don't let President George W Bush cancel the H-1B
domestic worker training program and use its money for
expedited processing of foreign worker visas, like he's
proposed in the 2003 budget.
Require all employers to certify that no domestic
workers are available before hiring an H-1B, and require
recertification after a major layoff. No exceptions.
Set minimum salaries for H-1B workers based on the
Bureau of Labor Statistics occupational wage data
averages rather than rely on business to determine the
prevailing wage.
Enforce existing laws that prohibit unemployed H-1B
workers from staying and seeking reemployment.
Clearly, in just weeks, the mood has shifted
from just being anti-BPO to anti-foreign workers,
particularly tech workers. This is beginning to make
countries such as India - one of the largest
beneficiaries of BPO and the IT services wave - nervous,
despite Indian IT pressure group, NASSCOM, and the
Indian Minister for IT and Communications, Arun Shourie,
maintaining until recently that the New Jersey bill is
unimportant since the bulk of India's BPO business is
"non government" in nature.
The Indian position
has thus far been backed by expert opinions.
International IT outsourcing and BPO consultants such as
Michael F Corbett, who holds the view that outsourcing
is "one of the greatest organizational and industry
structure shifts of the century" have made the point
that while government outsourcing (privatization) itself
grew by 65 percent during 1996-2001 to touch US$400
billion in the US alone, it still remains "a good 10
years behind private sector outsourcing across the
globe".
The solace drawn from such statements
is, however, beginning to wane, with significant changes
to the BPO controversy. Already, there is talk of a
quiet government-to-government dialogue between India
and the US on the issue. Some of the arguments that the
Indian side is arming itself with include
non-compatibility of trade barriers with the World Trade
Organization (WTO) and the subtle threat that India
could take the US to the WTO redressal disputes forum if
the federal government hampers market access (ie,
prevents US companies from outsourcing to India.)
Simultaneously, anti-liberalization sentiment
within India has begun mounting its onslaught on how the
developed nations should resist globalization when it
impacts their interests. Providing grist to this mill
are developments in Europe, with the United Kingdom and
Germany also now considering restrictive action to
safeguard domestic interests. Such a move is being
considered through a protectionist measure called TUPE
(Transfer of Undertakings and Protection of Employees),
which could negatively impact IT flow to India.
Meanwhile, die-hard trade and pro-globalization
economists like Jagdish N Bhagwati, University of
Columbia, have begun promoting the idea that since
migration cannot be stopped, it would be better for
countries which face a brain drain to tax nationals who
migrate, while importing nations should assimilate and
accommodate the new population. The taxation idea has so
far not found takers. Nor has the idea of adoption of
the migrant population found immediate favor with
importing nations.
Also, industry pressure
groups in India and the US have joined hands to stem the
tide of popular opinion against India and the Indian
technology worker. NASSCOM has begun a campaign to
"educate" the American people and policymakers on the
aggregate benefits to the US economy as a result of
collaboration with Indian IT companies. Sunil Mehta,
vice-president (research), NASSCOM, recently made
statements to the effect that "after an internal
analysis on the respective benefits to the US economy,
NASSCOM has begun a relentless campaign in that country.
The banking and financial sector alone has been able to
save around $8 billion in the last four years due to
outsourcing their requirements, " he said.
Mehta's views have been seconded by
international outsourcing consultant Nigel Roxbough.
Speaking at the same seminar as Corbett in Chennai,
Roxbough noted that IT infrastructure and BPO cut costs
by 12 percent and offshore outsourcings offered 40 to 50
percent cost reductions. The seminars at which Roxbough
and Corbett made their presentations were, predictably,
organized by NASSCOM.
Interestingly, NASSCOM's
lobbying is finding resonance at the US end with the
Information Technology Association of America (ITAA)
launching its own pro-BPO campaign. The ITAA represents
the interests of the US technology industry, which
stands to lose as much by legislative curbs on
outsourcing, offshoring or importing of tech-savvy
manpower into the US.
The ITAA recently released
a report that highlighted the fact that the IT workforce
in the US was stabilizing. "Both hiring and dismissals
are far below January numbers, which may signal a
stabilization of the IT workforce after the roller
coaster of recent year," ITAA president Harris Miller
said, in a tone aimed at pacifying detractors. "We're
also seeing more optimism than last quarter on the part
of hiring managers as they anticipate their needs over
the next year." ITAA's report shows that US tech
recruitment has gone up by 2 percent during the first
nine months of 2002, up from 9.9 million in January to
10.1 million in October.
The US tech industry
association is also predicting that the IT industry's
human resources demand will touch an additional 1.1
million workers in the coming months, which is being
dismissed by independent technology recruiters like
Frances Quittel, better known on the Internet as
Careerbabe. Speaking to Information Week, Quittel
states, "Companies are waiting, they are not making any
plans, they are in hold mode and are trying to figure
out how they can wrap up the fourth quarter before
moving along." She further adds that companies are not
innovating; there's no new technology that companies
feel compelled to have, as they felt compelled to
implement the Internet in the 1990s. "When you're in
maintenance mode, you don't need to hire a lot of IT
people. You can outsource those jobs. There is nothing
driving this economy that is a huge wave of must-have
technology," she states.
While this debate on
the veracity of the ITAA's projection continue, the
Arlington, Virginia-based ITAA and the Oakbrook Terrace,
Illinois-based Computing Technology Industry Association
have indicated that they will begin lobbying in the
spring to boost the number of H-1B visas. Nobody is yet
making their position public, but the IT industry
expectation is that the introduction of a bill would
either keep the H-1B visa cap high or eliminate it
altogether.
In the US, the IT industry is
considered powerful and there are expectations that it
could swing the verdict in its favor. Soon after the H1B
quotes were enhanced in 2000, an editorial in the
Christian Science Monitor noted, "Such generosity to one
industry - albeit one driving the economy - is thanks
largely to its increasing political clout. The industry
gives campaign contributions to Democrats and
Republicans in roughly equal amounts. The total will
exceed $22 million this year, more than double the $8.9
million of four years ago."
Not to be left out,
the Indian media, too, have jumped into the fray to
"protect" Indian interests. Just a week ago, the
Economic Times, India's largest-selling daily, for
instance, splashed expert opinion from Sidney Weiss,
president, US Customs and International Trade Bar
Association, to the effect that legislation such as the
New Jersey bill fundamentally "violates the provisions
of the US constitution and the WTO agreement". Weiss
told the Economic Times that Indian companies or
representative industry organizations could challenge
the bill if it were enacted in the US and before the
WTO. "The constitution does not grant powers to the
states to enact laws that are under the realm of the
federal government," he said.
Weiss further said
that the US Chamber of Commerce is interested in
negotiating free trade agreements with about 12
countries, including India. "The federal government
understands the importance of international trade and
would not allow any adverse move," he said. His
statement is now being read by India's IT industry as a
proof of the federal government's endorsement of
offshoring, outsourcing and import of technical
workforce into the US, even if the states are opposed to
such a move.
Significantly, despite such
statements, the issue is likely to hinge largely on how
the US economy performs. As Vin O'Neill, senior
legislative representative for the Institute of
Electrical and Electronics Engineers, a Washington,
DC-based professional group told COI Magazine, "If
unemployment continues, Congress will be more
attentive." The institute's 235,000 members hold the
distinction of having lobbied Congress to study the
effects of H-1Bs and offshore outsourcing.
The
US president has also spelt out his priorities for the
coming year. In his State of the Union address early
this month, Bush termed improvement of the job market
his "first goal" for the coming year and asked Congress
to pass a $670 billion, 10-year tax cut. "We must have
an economy that grows fast enough to employ every man
and woman who seeks a job," he said. "With unemployment
rising, our nation needs more small businesses to open,
more companies to invest and expand, more employers to
put up the sign that says, 'Help Wanted'."
For
India, any significant change in the US position on
offshoring, outsourcing and technology worker imports
could spell disaster. A NASSCOM survey on IT industry
employment in India has projected a 24.4 percent growth
in 2002-03, up from 522,250 jobs in 2001-02 to 650,000
IT jobs in 2002-03. Of these, 205,000 would be in IT
software exports, 160,000 in IT enabled services, 25,000
in the domestic software market. Another 260,000 jobs
would be in user organizations. NASSCOM has further
predicted that the IT services growth would touch the
magic figure 1 million IT jobs by the year 2008.
BPO, worth about $1.6 billion a year in India,
has become an important driver of IT services in the
country. Last year, India's IT services as a whole grew
29 percent. This is the fastest in the world, but slow
as compared to the over 60 percent growth notched during
the previous decade. Interestingly, the 29 percent
overall growth hides a variance. IT services, such as
software development, grew only by 22 percent, but
IT-enabled services, such as outsourcing, have notched
an over 65 percent growth. Indian companies that have
recorded phenomenal BPO revenues include Wipro's
Spectramind, HCL's BPO subsidiary E-Serve, Mphasis'
MsourcE and Citigroup's E-serve International.
(©2003 Asia Times Online Co, Ltd. All rights
reserved. Please contact content@atimes.com
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