the export of service-related jobs from the United States continues,
Indians work for $200 a month.

Kelly



The New York Times

December 25, 2002

India Is Regaining Contracts With U.S. By SARITHA RAI

BANGALORE, Dec. 24 - After slowing in the wake of the Sept. 11 terrorist
attacks, outsourcing by American companies to Indian concerns or to their
own Indian units has begun to pick up.

The new contracts span the technology-related spectrum, going well beyond
the software code writing of the last decade to include chip design,
product development, call centers, consulting and other support services.
They give Indian companies the opportunity to expand their repertory with
work that holds much promise for future growth. And they account for a
significant chunk of business in India, especially here in Bangalore and
the country's other high-technology cities.

In just the last few months, dozens of Indian concerns have garnered
contracts from big American companies to take over pieces of their
operations. A unit of the Bangalore-based Wipro, India's third-largest
software and services exporter, will be handling some of the worldwide
reservation services for Delta Air Lines, a move that Delta expects will
save $12 million to $15 million annually.

India's top software company, Tata Consultancy Services, or T.C.S., part
of India's Tata conglomerate, has signed up Lehman Brothers - in a $70
million-a-year deal shared with Wipro - as well as J. P. Morgan Chase,
Fidelity Investments and GE Medical Systems. The local unit of Cognizant
Technology Solutions, a custom software developer and services provider
in Teaneck, N.J., has contracts for projects from MetLife, to upgrade its
human resources administration system and streamline some computer
applications, and from the UnitedHealth Group and Sallie Mae, the student
loan provider.

For the American companies, which account for more than two-thirds of the
work coming to India, the country has several advantages. Though wages in
India have been rising, they still tend to be much lower than in the
United States. That is particularly attractive in the current global
economy, cost-sensitive executives say, as they follow the outsourcing
path set in the early 1990's by technology companies from Silicon Valley
seeking cheaper software coding operations.

India also has a large, well-educated, English-speaking work force with
one of the world's largest clusters of engineers and programmers.

Even Bill Gates, the Microsoft chairman who is widely revered here, has
given his imprimatur. "A couple of years ago, the biggest American
corporations would have considered it risky to outsource mission-critical
work to India, but it is now becoming a common-sense proposition," Mr.
Gates said on a visit to Bangalore last month.

Microsoft is expanding its development center in the high-tech city of
Hyderabad and is outsourcing some back office work to Wipro.

The software and back-office services outsourcing is one of India's
fastest-growing businesses. In the year ended March 31, it accounted for
nearly 3 percent of India's gross domestic product, up from 0.3 percent
three years earlier, and is expected to increase to 7 percent in 2008. It
has also contributed substantially to the country's healthy state of
foreign exchange reserves in recent years.

According to Gartner Inc., a research firm based in Stamford, Conn.,
India is leading the world in offshore outsourcing services, with annual
revenue of $8 billion, and outsourced projects from American companies to
Indian concerns will become increasingly common.

Gartner has, however, warned that American companies that rush into
outsourcing deals with Indian companies solely to cut costs are usually
soon in trouble and that India's competitive edge over places like China
could vanish if India does not continue to upgrade the infrastructure and
stay on top of quality control.

India's three top software exporters - Wipro, T.C.S. and Infosys
Technologies - said that with the post-Sept. 11 lull ended, they are busy
fending off Irish, Philippine and other competitors. But they think they
have the global edge.

"No country is able to offer the cost-to-quality advantage and scaling up
opportunities that India does," said N. G. Subramaniam, T.C.S.'s vice
president. Companies that start with a few dozen people in a pilot
project could increase to thousands in a matter of months, he said.

Many also have been working toward becoming one-stop shops. "Early Indian
services companies typically gained backdoor entry as code cutters but
moved up the value chain to take on strategic parts of the client's
business," said Vivek Paul, vice chairman of Wipro. For instance, he
said, his company's first task for Home Depot was to maintain
applications, but Wipro moved up by writing software to run computerized
tasks and maintaining it in all Home Depot outlets.

As the scope of work farmed out to India has broadened, so has the
spectrum of American companies doing the outsourcing. Companies in the
credit card, insurance and financial services industries were among the
first, in the early 1990's, but new converts include even some older,
highly regulated industries like utilities.

Back-office and information technology service operations, like
processing employee payrolls or fielding phone calls from customers, are
now moving to India at an even brisker pace than outsourced software
projects. Acknowledging the influx, the National Association of Software
and Services Companies, the industry trade group known as Nasscom, has
raised its projections for the country's back-office services industry to
$21 billion, from $17 billion, by 2008.

Software companies like Wipro and Satyam Computer Services, meanwhile,
are taking on the big consulting firms for large-scale consulting deals.

The mostly back-office and services jobs have been flooding across India,
beyond the high-tech hot spots and into big cities like Delhi and Bombay,
even as American companies continue to announce layoffs. That has spurred
some criticism in the United States. Recently, when New Jersey state
senator Shirley K. Turner discovered that a welfare and food stamp
contractor had moved its customer service center to Bombay from
Wisconsin, she sponsored a bill to require that workers on state
contracts be American citizens, or legal aliens, or have some specialty
for which such workers cannot be found. The bill was approved this month
and forwarded to the state Assembly.

Back in India, outsourcing companies have been busy recruiting. One,
ICICI oneSource, a Bangalore-based back-office concern owned by the
Indian financial services giant ICICI Group, has attracted thousands of
young "customer jockey" hopefuls for its call center with ads in the
local newspapers saying "The C.J. Hunt is on!"

Such jobs are changing the lives of the thousands of young, urban men and
women who fill the positions, toiling largely at night, synchronizing
their work schedules with Americans halfway across the globe.

Saranya Sukumaran, 21, who is just out of college and three months into
her first job, takes home 10,000 rupees, or just over $200, a month from
her job on the help desk at the local unit of an American Internet
service provider in a country where nearly half the population survives
on less than $1 a day. From 10:30 p.m. to 7:30 a.m. five days a week, and
calling herself Sharon "no last name," she responds to calls that have
been routed to Bangalore. The money enables her to help her father, a
junior official with the state-owned phone company who earns 15,000
rupees a month, support the household.

It also allows her to grab a $1 coffee at the hip cafes dotting Bangalore
and splurge on luxuries like Levi's jeans and a Nokia cellphone.

"As a teenager I wished for so many things," she said. "Now I'm my own
Santa Claus."

Copyright 2002 The New York Times Company | Permissions | Privacy Policy


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