Moving jobs abroad
Corporate America takes interest, notes on moving jobs overseas
Published: Thursday, January 22, 2004 at 6:01 a.m.
Last Modified: Thursday, January 22, 2004 at 12:58 a.m.
NEW YORK- More than 150 corporate executives, many paying $1,400 a head, listened intently for tips on how to move jobs overseas effectively. Outside, on a frigid Manhattan sidewalk, a group of fewer than 20 spirited demonstrators protested the "offshore outsourcing" conference that opened Wednesday.
With the loss of jobs to other countries once again being thrust into the spotlight by a presidential campaign, the newer trend of moving white-collar positions overseas has grown so controversial that attendees from major corporations such as Microsoft Corp. and Cisco Systems Inc. declined to discuss the conference.
One speaker unexpectedly decided to bar the media from his presentation. His topic: Is offshore outsourcing unpatriotic?
"I'd prefer not to comment," the speaker, Jeffrey Cohen of the big consulting firm McKinsey & Co., said impatiently when asked why the session had been closed.
But despite the hesitance of participants to draw attention to themselves or their companies, the size and makeup of the crowd pointed to a rising tide of jobs destined for overseas.
"I have yet to be at an outsourcing conference with this many people, where there are so many people interested in learning about offshore sourcing," compared to consulting firms trying to sell outsourcing services, said Lisa Ross, founder of Ross Research, an outsourcing research firm based in Cambridge, Mass. "There are huge-name companies here trying to build up their knowledge, as well as smaller organizations and nonprofit organizations."
The debate over offshore outsourcing, which in the past centered on the loss of factory jobs to nations with lower wages, has gained new vigor now that the technology and service industries that thrived in the 1990s are sending many non-manufacturing operations abroad to cut their costs.
Increasingly, U.S. corporations are farming out programming, customer support, data entry and various back-office jobs to lower-paid workers in countries as diverse as India, Romania and Ghana. The average programmer commands $60 an hour in the United States, six times the rate in India.
In a research report in mid-2003, Gartner Inc. predicted that at least one out of 10 technology jobs in the United States would move overseas by the end of 2004. Forrester Research predicts at least 3.3 million white-collar jobs and $136 billion in wages will shift from the United States to low-cost countries by 2015.
The threat of unemployment was serious enough for Steve Ward, a computer programmer in Philadelphia, to take a day off from work, drive two hours to Manhattan, and picket outside the Times Square hotel where the conference is being held.
"The consulting firm I work for is sending jobs to India," said Ward, who came to the protest with a former co-worker who was laid off last year. Ward, holding a sign - "Will Code For Food" - dismissed the notion that everyone benefits from the corporate savings generated by offshore outsourcing. "Companies are predatory institutions, and they have to be controlled," he said.
However, economists and outsourcing proponents warn that more harm than good is done by protectionist policies such as President Bush's recently lifted tariffs on foreign steel, failed initiatives in eight states to ban the use of taxpayer money on contracts with foreign workers, and certain proposals by Democratic presidential candidate John Kerry.
They contend that the flow of work to the lowest-cost supplier is a healthy market process that eventually pays off for the country losing jobs by giving companies the financial might to develop new products and technologies. At the same time, they say, higher employment in developing nations puts more money in the hands of foreign consumers, spurring demand for U.S. products.
"In the short term you have pain, but in the medium term you get more jobs. We are an innovative society. We are going to create jobs, and investments are going to come back into the community," said Atul Vashistha, chief executive NeoIT, an outsourcing consulting firm in San Ramon, Calif., that was a sponsor of the conference.
The value of operations NeoIT has helped outsource to foreign companies nearly quadrupled from $275 million in 2002 to about $1 billion in 2003.
Had those operations not been moved from the United States last year, they would have cost the firms involved about $1.5 billion, Vashistha said, warning that such decisions carry a dire risk.
"I have examples of firms that went bankrupt because they didn't go offshore," he said.
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