Posted on 10/26/2003 4:20:09 PM PST by Brian S
BY LIZ ENOCHS BLOOMBERG NEWS
Posted on Sunday, October 26, 2003
John Vlahos, standing barefoot on his porch in plaid pajama pants on a breezy morning in Somerset, N. J., puffs on a cigarette he has hand-rolled to cut costs and recalls how his ex-employer shipped his work to India.
"It shatters part of you," he said. Vlahos, 26, was fired in October 2002 as a computer programmer at Simstar Internet Solutions in Princeton, N. J. He had been designing Web sites for pharmaceutical companies.
At about the same hour in Bangalore, India, Mahesh Shankar Rao gives instructions to his six-man team and heads home. Rao, a 30-yearold project manager at Impelsys India Pvt. Ltd., was hired in December 2002 when Simstar contracted work to Impelsys to design a Web site for a pharmaceutical company. Now he and his wife plan to start a family and might buy a car. "I hope things work out" for Americans who lost their jobs, Rao said. "There could be someone who takes my job tomorrow. It’s survival."
Over the next 15 years, 3.3 million U.S. service-industry jobs and $136 billion in annual wages will move to India, the Philippines, China and Malaysia, among other countries, according to a study by Forrester Research Inc., a Cambridge, Mass., consulting company.
Vlahos and Rao are the faces of the latest migration of jobs in the global economy. Companies such as Microsoft Corp., Bank of America Corp., General Electric Co. and HSBC Holdings Plc are moving accounting, software engineering, stock analysis and medical research from the United States and United Kingdom to lower-wage countries including India, China and the Philippines.
For the United States the migration will "have a negative impact on GDP" for the next two years or so, said Paul Kasriel, chief economist at Northern Trust Corp. in Chicago.
The influx of jobs is accelerating growth in India, the Philippines and China. India’s service sector grew to almost half of gross domestic product in 2001 from 36 percent in 1980. The $470 billion Indian economy is expected to double by 2010, Merrill Lynch & Co. said in an August report.
In the United States, computer programmers earn an average of $75,000 a year, putting them in the top 4 percent of professions, according to the Labor Department. In India, programmers do the same work for about $12,500 a year, a sixth of the U.S. average.
The drive to lower labor costs "is now acting as a powerful structural depressant on traditional sources of job creation in high-wage developed countries such as the United States," said Morgan Stanley’s chief economist, Stephen Roach, in a research note Oct. 6. "America’s jobless recovery could well be here to stay."
After three years at Simstar, Vlahos was earning $55,000 annually, a third more than the average U.S. wage. While working at the company, he bought a bigscreen TV, a DVD player and a stereo. He once flew across the country to San Francisco for 48 hours "just because I could," he said.
Rao says he makes a little less than $17,640 annually, almost 40 times India’s per capita income of $450. His income has risen 20 percent since he joined privately held Impelsys. He and his wife, Radhika, 28, who is a software engineer, live with his parents in a twostory gray house with pink awnings and a stone facade on a tree-lined road in Bangalore. Vlahos grew up in Queens, N. Y., the son of a furrier who immigrated to New York from Greece. He graduated from Rutgers University in 1999 with a degree in computer science. His first job was as a contract Web designer for AT&T Corp. at $20 an hour. After a few months, the work ended, Vlahos posted his resume on the Internet, and Simstar called.
PILOT PROJECT "I was very excited to be working there," Vlahos said. "It just seemed like a no-frills, nononsense good place to work." Vlahos started as a junior programmer and a year later was promoted to Web developer, a job involving database programming for Web sites.
Simstar was founded in 1993 by David Reim, a former manager at Apple Computer Inc. and Sun Microsystems Inc. Based in Princeton, the company builds marketing Web sites for drug companies.
The company hired Impelsys for a pilot project to do software programming from December to April, said Sameer Shariff, Impelsys’ chief executive. "The understanding was that we did a great job, and once their business picks up then we can support them as an offshore team," Shariff said.
Andrew Friedman, chief financial officer of Simstar, described the contract as a way of "testing the capabilities" of Impelsys in Web development. "We wanted to see what abilities they had in the marketplace in case we ever wanted to do work with them — and that’s it," he said. "We do not outsource to India."
Over the past year, Vlahos lived on savings, unemployment insurance and about $4,000 from freelance programming. He moved from an $800-a-month one-bedroom apartment on a horse farm in the rolling hills of western New Jersey to a $470-a-month room in a duplex on a dead-end street that he shares with three friends.
His unemployment insurance ended in April, and he just drained $1,000 from his savings to catch up on student loan payments after falling three months behind.
Rao earned an engineering degree in 1995 in electronics and instrumentation at R. V. College of Engineering in Bangalore. In 1999, he began a succession of jobs there. Impelsys, which has grown from 30 employees to more than 65 since Rao was hired, creates Web sites and converts documents and books for customers such as Reed Elsevier Group Plc into electronic formats suited for computer discs, hand-held devices and Web sites.
DOT-COM SURVIVOR Shariff founded Impelsys in New York in 2001 after the dotcom crash forced Medsite. com Inc., another company he helped start, to search for ways to cut costs. Medsite. com, which makes Web sites with medical information targeted at doctors, survived by outsourcing work to Impelsys in India as it slashed jobs in the United States. Medsite. com was the first customer of Impelsys. Other industries are moving intellectual work such as securities research and radiology analysis to India. Morgan Stanley, the world’s second-biggest securities firm by capital, plans to hire as many as 50 researchrelated employees in Bombay this year, with some working as junior analysts, Morgan Stanley spokesman Gerry Kay.
In the first months after his dismissal, Vlahos sent out resumes and tended to a Web site cataloging his personal and professional life. He cruised New Jersey’s Route 1, a feeder road to New York City that is dotted with corporate office parks, scouting potential employers.
He spent time with friends, read philosophy, and took up guitar-playing to deal with the emotional wreckage from losing his job. "It was one of those opportunities you get to start over, clear off the table and just begin again," he said.
Now he plans to move to Boston in January to study for a master’s degree in information science and start a new career as an archivist, high school teacher or librarian.
For his part, Rao is delighted with the turn of fortune that has him designing Web sites at Impelsys.
He reports that his responsibilities have expanded.
Rao said he sympathizes with Vlahos and others who were thrown out of jobs when Simstar assigned their work to Impelsys. He discusses the competitive dynamics as he sips coffee in a shopping arcade under his office. "It’s sad, but numbers dictate what companies do," he said. Information for this article was provided by Rob Stewart, Sam Nagarajan, Rachel Katz, Ron Day, Rebecca Barr, Art Pine and Dan Goodin of Bloomberg News.
Perhaps he should've instead gone to school to better himself --- just 'cause he could've?
Thinks of some jobs that fit that description -- legal work (contracts), financial work (mutual funds), laboratory work (civil and criminal) -- basically any job that does not require face to face communication with the "customers" (or clients) or that does not have to be done "on site" for the customers or clients.
Can HR departments be outsourced overseas? Yes.
Can the corporate lawyers be outsourced overseas? Yes.
Can the accountants be outsourced overseas? Yes.
Can the call centers be outsourced overseas? Yes.
Can the sales force (telemarketers) be outsourced overseas? Yes.
Can medical records processing be outsourced overseas? Yes.
Can medical lab work be outsourced overseas? Yes.
Each and every paper pushing, computer using, phone and email communicating job will eventually be subject to being outsourced, or will have significant downward wage pressures.
...
His unemployment insurance ended in April, and he just drained $1,000 from his savings to catch up on student loan payments after falling three months behind.
This kid is 26 years old and doesn't have a clue.
Now, he will be able to travel the world, again... for UNCLE SAM making the world safe for Indian IT employees of AMERICAN owned companies. And, AMERICAN EMPLOYERS who don't give a GD about their fellow Americans!
Say, is the Indian Government providing ANY assistance for our troops in Iraq or Afganistan yet?
Nope. Didn't think so.
Ask hillary how she feels about her buddies at TATA consulting and how they take jobs from American IT professionals. She loves those TATA people. Why, they made Buffalo their home away from home.
Bitter about this? You bet!! People come here, take good jobs away from American veterans and give absolutely nothing in return to the fight against terrorists. In some of the H1B holders are from Pakistan. How do we know they are not in league with our enemies? We don't!
I am not in mood to argue with any of you on this. This nephew of mine is a great young man. It is not reasonable to expect him to give TWICE to the US Army, when so many do not give even once.
Especially considering that most foreigner programmers do give a damn about this country.
And you seem to specialize in shooting the messenger, instead of addressing the issue at hand. Why is that? Isn't it better to face problems head on, instead of hoping they'll go away if they're ignored? You know the Democrats will be demagoguing this issue to death this time next year. What's the best way to counteract that, in your opinion?
Many come here to get paid a higher wage in order to return to India and live like kings.
Hardly. It's an example of free enterprise at work optimizing the efficiencies of the marketplace.
You are missing the point. People in this country spend a good fortune educating themselves in these fields. How many times should a person have to change careers and re educate themselves in order to survive. How much debt need be incurred just to have a hope of getting a job that is currently not being outsourced or given to H-1B's? I know engineers with masters degrees that are going back to school to become accountants and lawyers. Only problem is that when they get finished with school they may still be unable to find a job. So what if we start importing doctors, 4 years of medical school becomes a waste of time and money. The time to go to school is after HS, before you have a morgage & children. Starting over agian after 20-30 years of a professional career is just not as finacially feasable as you are making it sound.
I bet that is what the southern plantation owners said many years ago. I bet you think hose damn yankees made a mess of that free enterprise.
I'm in business myself, and yes, the bottom line does usually dictate the way business is practiced. As a Capitalist I understand that the proper reward for using my mind is profits. That's the motivator in the end.
But notice the key word in the first sentence of the previous paragraph - usually. There comes a time when we MUST look after our own. There are a lot of developers out there that would have gladly taken a pay cut rather than be fired from their jobs given the choice. But the fact is most often they are NOT given the choice.
Indian coders are usually very maticulous and careful about their work, but they are very very slow. They give good code, but it takes a long long time to get it. This is not to mention the time difference, language barriers, and other little time consuming things that cost the business and the customer money. They all add up, and these are things that the bean counters woefully neglect to consider when they enact policy. Not only does it end up costing more money to get the code, customers are not being provided the services they deserve for their money. And in the end it's the customer that must be satisfied or you've got nothing.
When it comes to design, the Indians know very little about what Americans expect in a good web site. Actually they are very poor designers in the advertising/marketing sense that we Americans are accustomed to. I'm not saying it's total crap that their designers put out, but it borders on amateur.
The way things are going in America right now, this IS the time to look out for our own. It may be now or never.
Actually I think you are looking at it from the perspective of the CEO's and the VP's who are making millions while I am looking at it from the perspective of the middle class worker in America. In the long term it is only going to get worse for the middle class American and yes it will make other people quite wealthy.
Another aspect of all of this is that many people are realizing that becoming an engineer in America is not a good option. There are many hidden aspects of loosing our engineering base. I am not so much worried about IT, what concerns me more is our core technolgies that are at the heart of our current technological superiority. And if you think this is noot being exported you are wrong.
No, that's not what I think at all. Basic rights of the individual (e.g. freedom) are more important than marketplace efficiencies. Slaves did not have the right to share in the profits of that "system". Most likely, market forces may have been partly responsible in the outcome of the war - the North being better prepared industrially to fight a war.
In addition, after the war, there were many newly-freed slaves that were much more afraid of their economic future and ability to quickly adapt than the poster of this article. Many would have preferred to maintain the status quo with its safety and convenience (notwithstanding the obvious lack of personal freedom), not unlike those concerned about the outsourcing of jobs today.
If that is what you think, then it will be true (for you).
Have you forgotten? This is how people who are 26 years old get their clues. They do not buy them from old farts who say they shoulda-coulda-oughta. I know this because I am an old fart who knows he shoulda coulda oughta, and I also know that at age 26, I wouldn't have paid any attention.
Everybody has to get their own hard knocks. If it were otherwise, people would be smarter now than they were 1,000 years ago. That's not in the plan.
I share your concern. Like you, I am doomed to living my life as a peon. The Big People need to be taking care of us, and they're not. The government should force them to take care of us, because we're just not smart enough or good enough to get by on our own.
This whole problem is caused by the Big People not taking care of us little people.
I never said that. Anyone who can make millions from American policies is more than smart to do so. I never once said that CEO or VP of any company owes anything to the America worker. I am actually a proponent of these companies leaving America altogher if foreign workers are more their cup of tea. The fault lies in or govenrmment policies. Our government officials are not looking out for what is in the best interest of america or the masses of American. And it case you did not know it this is their function.
The hubris of one who doesn't fear for his job, is retired, or has a government teat to suck on.
Most of us find the average world-wide scale of living, the apparent goal of the "free"-traders, that of the Mexican peon, most unappealing.
DVD player and a stereo. Hmm.
You mean, he should have quit earlier and have gone to school? What field would you recommend?
I see that you do not approve buying a DVD player or flying to San Francisco.
People never think about the ramifications of destroying the engineering profession in this country. They do not realize how important a contribution engineers make to our technological supremacy. We need to take lessons from India, they know full well just how important a strong engineering community is to their future.
Companies like GE and Microsoft are global companies -- they do business in other countries. It's only natural that they will hire people in other countries to do some of their global work. Yes, even service jobs.
I suspect that we will lose several million specific service jobs over the next 15 years, but I bet these global companies and other global companies will hire even millions more here in this country to do other global service work.
Let's not be afraid of competition and let's not run crying to our nanny government to help us save jobs EXCEPT when we ask them to lower government interference to make this country more competitive AND EXCEPT when our national defenses are at risk.
Seems to me that the chief goal for free traders is to create an opportunity for some to become wealthy. They think that this is the apex of human achievement.
" For what shall it profit a man, if he shall gain the whole world, and lose his own soul?"(Mk:8:36)
" Thou fool, this night thy soul shall be required of thee: then whose shall those things be, which thou hast provided?" (Lk:12:20)
I suspect both wages and costs will go down.
I hate to tell you this but if we loose our technological edge our nationa defense will be at risk.
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