3.3 m US services jobs will go offshore by 2015: Forrester

TV Mahalingam

BANGALORE: By the year 2015, about 3.3 million US services industry jobs and $136 billion in wages will move offshore to countries like India, China and the Philippines. According to Forrester Research, in the near term, about 4 lakh US jobs would have moved offshore by end of 2003. About 70% of these — or 2.8 lakh jobs - will come to India. In 2000 that number stood at one lakh US jobs moved offshore. The wage bill associated with it was $ 4 billion.

Says John C McCarthy, Group Director of Research at Forrester, "A growing base of companies are shifting a range of IT, back office, customer service and sales operations offshore to cut their costs by up to 50%. Recent announcements across a range of offshore services in a mix of different industries, typify the shift that is afoot."

The Tech Strategy report by Forrester lists some offshoring moves in recent times that signal the trend. According to the report, Oracle that already has about 2000 people in India is planning to move more jobs to the country; Dell consolidated Malaysian and Australian customer support jobs to its existing center in India; Delta Airlines is outsourcing reservations jobs to Sykes Enterprises in the Philippines and Spectramind in Bangalore; HSBC will have about 4000 staff in call centers in India, Malaysia and China by 2003.

In recent times offshoring has been driven by two key factors: lack of sufficient or sufficiently skilled manpower in the host countries and the huge cost advantages that Asian countries offer. Says McCarthy, "like the shift of manufacturing jobs in the last half of the 20^th century, the huge cost advantage of low-wage countries like India, South Africa and the Philippines will increasingly favor the use of overseas services staff."

However, much like the resistant to off-shore contract manufacturing earlier, there is a growing resistance to offshoring of services out of the US — both among trade unions and the political class. Speaking to Dataquest, Marcus Courtney, member of WashTech, an IT workers trade union in the Washington Area said, "this trend concerns us because we see this development occurring strictly on the issue of cost of labor. We cannot compete with labor costs in developing nations no matter what we do. The education costs to even break into the field alone are mind boggling. However we have representation in the company and the ability to impact the trend of work moving overseas."

Similarly, recently in Australia the premier of New South Wales Bob Carr had a stand-off with the country’s Minister for Foreign Affairs, Alexander Downer who had suggested that Australian IT companies outsource to India and exploit the low wages of Indian workers. The Australian Labor Party spokesperson Craig Emerson's reaction to this issue, that was reported widely in the Australian press was, "the vigorous promotion of a report designed to get Australian business to relocate offshore is a slap in the face of Australian workers trying to compete for jobs in the new economy. At this rate, Australia’s biggest export under the third Howard Government will be jobs."

Similarly, recently when Prudential Insurance in UK decided to shift 850 back office jobs to Mumbai, a local trade union called Amicus said "selling" 850 UK call center jobs to India was "disgraceful." The union general secretary Roger Lyons said, "The only reason being given is an 80% saving on wages, but no thought has been given to customer impact or the devastation this will cause to those affected."

According to McCarthy however, in the long run the unions will have little affect. A bill in the New Jersey state senate that attempts to prevent the state government from offshoring jobs outside the US has also been pending for some time now. Many believe that just as the manufacturing industry in the US resolved similar issues that arose when it began to sub-contract out of the US, so will the IT industry. Says McCarthy, "The choice for companies is to evolve or die. The companies will continue to outsource despite rising protest."