The Dark Side of the Outsourcing Revolution

Two years ago, I lost my credit card on a trip. Dialing the American Express 800 number, I asked the polite customer rep to read the list of recent charges. As she went through each charge, I noticed something familiar about the way she said words like "Duane Reade" and "Blockbuster."

"Excuse me," I interrupted. "Where are you?"

"Oh, we're the American Express Call Center in Bangalore, India," she replied.

Over the coming months, I started noticing this phenomenon more often. When I called AOL trying to cancel my account for the fifth time, the helpful woman giving instructions was in India. Palm Pilot's "Level 1" help desk seemed to be in America, but when they were stymied and bumped me to "Level 2," an unmistakably Indian voice came on. Recently, I even started getting sales calls hawking credit cards from India.

A few months back, a new pattern began to emerge. Suddenly, the customer service reps weren't eager to divulge where they were from. "Oh, we're not allowed to disclose location," said one nervous voice. It was very cloak and dagger. Maybe it's some new security measure, I thought to myself.

Then the New York Times article, titled "We're From Bangalore (But We're Not Allowed To Tell You)" revealed all. Indian call centers now had to acquire American accents and generic Anglo names, displaying a new-found nervousness in the face of an incipient backlash: Dell was closing its Indian call center in the face of protests; New Jersey was trying to pass a bill blocking outsourcing to India; and an angry Indiana politician huffed, "I represent Indiana, not India!"

All Roads Lead to India

India is at the red-hot center of the Outsourcing Revolution. Thirty percent of all new Information Technology (IT) work for U.S. companies is now done abroad, mostly in India. McKinsey Consulting estimated that three countries received $20 billion in outsourcing revenue from the U.S. in 2002: Ireland ($8.3 billion), India ($7.7 billion) and Canada ($3.7 billion). Analysts forecast that by 2008 Indian IT services and back-office support will grow to a $57 billion a year industry with four million workers.

International multinationals have had offices in India for almost a decade, and they include Morgan Stanley, Citigroup, Intel, IBM, Cisco, Motorola, HP, Oracle, Yahoo, Ernst & Young, HSBC, and, of course, the trailblazer in "discovering" India, Microsoft. But Indian offices whose main business is outsourced work from the U.S. are a relatively new phenomenon. Recent high profile firms include MphasiS, which processed tax returns of 20,000 Americans this year (analysts predict that 200,000 U.S. tax returns will be processed in India next year). Then there is OfficeTiger, which employs 1,200 people to do research and analysis for eight Wall Street firms. Finally, GE Capital's four Indian centers design statistical models, prepare data for GE annual reports, write software, and process $35 billion of global invoices

India dominates outsourced IT, accounting and financial services. Ambitious firms have now expanded to food-stamp paperwork, auto engineering, drug research, airline industry and work for the U.S. Postal Service. India has two key strengths: hundreds of thousands of technology graduates each year and the use of English at all stages of education. Armed with this combination, India's potential is huge as knowledge-based service work expands. China dominates in manufacturing, which is only 14 percent of the U.S. economy. By contrast, the service industry, where India has laid its stake, makes up 60 percent of the U.S. economy.

White Collar Labor Wars

Of course U.S. firms are not outsourcing work out of benevolent desire to help Indian workers. These new moves come in an ever-expanding desire to cut costs and increase profit margins. The stage is set for a struggle between western and Asian white-collar labor. Just as the success of H-1B visa workers during the Internet boom led to an anti-immigrant backlash, the outsourcing revolution faces its own pushback.