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Silence is golden for outsourcing

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CIOL Bureau
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Anupama Chandrasekaran



NEW YORK: Mum's the word for U.S. companies exporting jobs to India and other countries in a presidential election year. They are rooted in fear. First, there's the fear of becoming the latest whipping boy for destroying American jobs as the campaign for the White House heats up.



Democratic presidential candidate Sen. John Kerry has made U.S. job losses to India and other low-wage countries a major theme of his campaign to unseat President George W. Bush.



And television programs such as "Lou Dobbs Tonight" on CNN, with its "Exporting America" series of reports, have condemned U.S. companies that send work overseas.



"This is clearly an issue that is very highly charged, very emotional, very politicized, and, of course, the backdrop is the national election," said Bruce Josten, executive vice president of the U.S. Chamber of Commerce. "But companies will continue to use (various) means and mechanisms," including the shift of some jobs overseas, "to slice and dice costs."



That leads to the second fear behind the wall of silence surrounding offshoring, which usually refers to the transfer of clerical jobs from the United States to India or other countries.



Executives, who have recently become much more reluctant to talk about outsourcing or offshoring jobs, also fear for their own jobs. They worry that their jobs will be next on the chopping block -- if they don't cut costs fast enough.



The upshot? The media, investors and analysts are often kept in the dark.



"The public discussions are significantly lessened, but that doesn't mean that the activity is going away," said Peter Allen, president of outsourcing consultant TPI.



Allen added that companies are more likely to recruit American service providers such as IBM Corp, with offices in India, instead of going directly to Indian service providers such as Infosys Technologies Ltd. This can help them mask where the jobs are going, he said.



The fear of political backlash -- and media exposure -- also is driving more clients to ask service providers not to disclose offshoring deals to the media.



WEIGHING REPUTATION VS COSTS


But there is a silver lining to this cloud over the U.S. job market.



One positive outcome of the controversy is that companies are taking more of an interest in seeking to place employees they lay off in other jobs or training, experts say. In fact, service providers are taking damage control measures by offering to retrain and recruit client staff and training their managers to be more sensitive.



"The political pressure has created a step back in thinking and people are being more considerate in their decisions. They aren't just doing a cost-benefit analysis of offshoring, but are also looking at the reputation of the company," said Kelly Gay, chief executive of search engine and research firm KnowledgeStorm Inc.



Still, there is little sign of any slowdown in the number of companies switching to the use of lower-cost labor abroad to cut costs.



For example, billing software maker Convergys Corp currently has 8,800 people in India and the Philippines -- three times the number it employed there a year earlier.



And technology services company Electronic Data Systems (EDS) Corp, expects the number of its employees in low-cost locations like India to rise to 20,000 by 2006 from the current roster of 9,000.



Investment banking and financial services companies such as Goldman Sachs Group Inc and J.P. Morgan Chase & Co are examining the benefits of moving research jobs to countries like India. And even global pharmaceutical companies are looking east -- Far East -- for early drug development work.



But companies are fast realizing that talking to equity analysts or the media about any new offshoring or even outsourcing arrangement in the current climate could be a public relations disaster.



Convergys learned its lesson when Florida's Republican Gov. Jeb Bush, the brother of the president, hired it to perform some payroll and benefits processing jobs for the state.



Democrats accused Convergys of sending jobs abroad even as the contract specified that the jobs would stay in the state. This incident has added to pressure that to keep quiet about contracts the company wins.



"It is, obviously, a political year and no one wants to be involved in the political debate," Convergys Chief Financial Officer Earl Shanks said.

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