Outsourcing: America’s Economic Outreach to Developing Countries

1. Outsourcing: America’s Economic Outreach to Developing Countries pcweb.mycom.co.jp/news/2003/08/29/21.hml • With 45% of the population not being able to read, India still ranks very low in a comparison with other developing countries. However, India spends 3.1% of Gross Domestic Product on education. (1) • India’s high percentage of spending on education is surprising, but the majority of money goes to educating the English-speaking middle class. • Between 73,000 and 85,000 software engineers graduate annually from Indian schools with another 40,000 to 50,000 converted from other disciplines. (1) • India has 1,832 educational and polytechnic institutes, of these there are six Indian Institutes of Technology. In 1999, 98,000 students took the entrance exam, but only 3,000 made the cut. (1) www.indtravel.com • Bangalore is the most prosperous and shining example of IT outsourcing in India. The city has over 130,000 IT professionals, and that number seems to be growing exponentially. (1) • Although pay is good, call centers often time find it hard to stay staffed. Bangalore IT companies suffer a 15%-20% attrition rate annually. One Bangalore business had to hire 185 people over three years just to maintain a staff of 50. (1) • Bangalore is home to one of six Indian Institutes of Technology, where admission requirements are rigorous and all but the best students get rejected. svs.gsfc.nasa.gov/vis/ a000000/a002300/a002323/ • Outsourcing is defined as the sending out to an outside provider or manufacturer. • Outsourcing has attracted a lot of attention very recently because it seems to explain recent job loss. When most Americans hear the word “outsourcing” an image is conjured of someone in a call center in a far off place, trying to guide an impatient customer through a technical problem. • Though outsourcing of manufacturing jobs has occurred since the 1970s, technological outsourcing has risen as a hot button issue because of many consumers close contact with those employed. • Outsourcing and more specifically technological outsourcing has become more centralized in India because of the large number of well educated English speaking professionals. • Many Americans blame American companies for the loss of call center. However, Americans fail to look at the big picture, low paying jobs here, transfer into more efficient and more profitable jobs in India. irm.cusat.ac.in/cap1.jpg • Although agents are highly trained and speak English, most undergo an “accent neutralization” class. Hero Mindmine, the self-proclaimed largest trainer, has “helped” 25,000 students to become more “American.” The company uses such techniques of having students watch American sitcoms like “Friends” and simulate phone calls from customers. (3) • “We try to neutralize their accent so that there is no m.t.i. - mother tongue influence,” said Hero Mindmine spokesperson Sunil Wadhwa. (3) • In America, Sue Mounkes earned $9.50 an hour at a VarTec call center in Tulsa. She made $19,760 a year, barely enough to get by. That same job when transferred to India is manned by a highly qualified, highly educated person who makes $2,500 a year. That $2,500 a year job puts that Indian worker in the top 20% of all Indian wage earners. (4) • Call center jobs are hard, requiring employees to work at odd hours, with sometimes-abusive customers. • Even though many employees make $210 a month, a mark below the poverty line in America, that employee is making more than double the typical starting salary for Indian college graduates. (4) Rosenberg, David. Cloning Silicon Valley. Pearson Education. Harlow, Eng. 2002. pg. 113 • American companies save enormous amounts of money by outsourcing relatively unskilled jobs, such as call center work. Conseco Inc., an American insurance company, estimates they will save upwards of $60 million a year in call center costs after buying Indian based ExlServices for $52.6 million in 2001. (2) • One of the major players in call center operation in Bangalore is Wipro Spectramind. With clients like Compaq, Home Depot, Nokia, Delta Air Lines, Microsoft, and HP, Wipro employs 10,000 employees to answer calls. (2) • Although a large number of students graduate from college each year only 150,000 to 250,000 people work in call centers. This number may seem large, but it is only 0.1 percent of India’s 500-million person labor pool. (3) Rosenberg, David. Cloning Silicon Valley. Pearson Education. Harlow, Eng. 2002. pg 115 • The attrition rate in the IT business in India is high, due to the fact that America is such a draw. When America faced shortages of IT personnel in 2000, the U.S. government issued 200,000 H1-B visas. These visas allow qualified personnel to work in the United States for six years. Almost half of all H-1B visas issued at this time went to Indians, and many find ways to stay longer than six years. (1) • “It is more or less a fact that to get people with three or four years experience in India is impossible because everyone wants to go to the States.” said e-sim’s Bangalore operation manager Ari Bloch. “If you have two people engaged and the mother of the bride sees that the guy hasn’t received an offer to work in the States, she’ll say, “What’s wrong, you’re not doing well enough.” (1) • Works Cited • Rosenberg, David. Cloning Silicon Valley. Pearson Education. Harlow, Eng. 2002 • Heller, Matthew. "Call Center Fraud." Workforce Management June 2004: 95-98. • Pal, Amitabh. "Call Centers in India." The Progressive Aug. 2004: 29-34. • Heyman, J.D., et al. "Out of Work." Time 2004. 27 Sept. 2004     <http://web11.espnet.com.proxygw.wrlc.org>. Matt Plevelich Dean’s Scholar in Globalization GEOG 801.11, 13 October 2004