Outsourcing hits US techies hard

Times of India ^ | MAY 26, 2003 | CHIDANAND RAJGHATTA

[Lessismore]

WASHINGTON: On a recent April afternoon in Silicon Valley, moments after he was told he had been laid off from his computer programming job at a Bank of America training centre, Kevin Flanagan stepped into the parking lot and shot himself dead.

Some of America's technology workers, who like Flanagan have also had to collect pink slips over the last several months, think they know why Flanagan took his life: Bank of America not only outsourced his job to India, but forced him to train Indian workers to do the job he had to give up.

In the weeks since his death, the techies have used the incident as fuel to fire a campaign against outsourcing to India, an issue that now seems poised to become a major sticking point between the two countries. Several US states are already considering legislation to ban or limit outsourcing.

Bank of America is one of several major US corporations – General Electric, Microsoft, Intel are among others - under scrutiny for outsourcing jobs to India. The Bank created what is called a "Global Delivery centre" in 2000 to identify projects that could be sent offshore.

Since then it has signed agreements with Infosys and Tata Consulting Services (TCS) to provide solutions and services.

In an e-mail exchange with this correspondent, Kevin's father Tom Flanagan said "a significant reason for which my son took his life was indeed as a result of his job being outsourced."

"Did he blame India for his job loss? No. He blamed the "system." He couldn't understand why Americans are losing jobs. Rather I should say he understood it economically, but not emotionally," Flanagan said.

Bank officials, who did not return calls relating to Flanagan's death, have said in the past that the deal with Indian companies would effect no more than 5 per cent of the bank's 21,000 employees, or about 1,100 jobs, in its technology and operations division.

According to some surveys, the US has lost at least 800,000 jobs in the past year and some 3.3 million jobs will move overseas over the next few years because of outsourcing, mostly to India.

The Bank has also acknowledged that it had asked local workers to train foreigners because such knowledge transfer was essential. According to Tom Flanagan, his son was "totally disgusted" with the fact that he and his fellow-workers had to train foreigners to do his job so they could take over. "That sir is a travesty," he said in one e-mail.

US tech workers are challenging the corporate world's claim that it is outsourcing work to improve bottomlines and efficiency. Some analysts have also pointed out that US corporations were being forced to tighten up by the same people who are moaning about outsourcing, and who, heavily invested in the stock market, demand better performance.

But on one website that discussed the Flanagan case, a tech worker pointed out that data processing consumed only a small per cent of revenues and was hardly a drain on the Bank's profit.

"(It is) a prosperous bank which has let greed trump any sense of patriotism or social responsibility," he fumed.

[Dave S]

Do you see European countries exporting their skilled jobs ? No, you don't, because their powerful unions would never stand for it. European workers have a strong voice to protect their standard of living.

Perhaps thats one of the reasons that unemployment in Europe is about double that in the US.

[Texaggie79]

I think one must have an entrepreneur mind-set or have economic education outside of college in order to understand the fundamentals of true capitalism. Many salary workers just fall too easily into the "they own me a job" mindset. I was in it when I was a clerk.

[El Gato]

You are missing the point. Military doesn't outsource, nor do they compete when it comes to manpower.

They don't outsource for the combat arms it's true, but they do outsource for many things, including IT services, that they once did in house. They don't outsource directly to foreign workers, but some of those they outsource to, do. If nothing else many of the cleaning staff (outsourced) are of questionable legality in so far as their presence in the country goes.

[EverOnward]

Re your post 114

You have stated the truth clearly. Thank you.

[oceanview]

China has a controlled economy and a rising standard of living. In fact all these economies that we are offshoring our jobs to do not practice free trade at all, yet they have a rising level of prosperity.

[Pukin Dog]

"I would question this deal if I was a Nike stockholder. "

Dont hate me, but I am.

Consider this, my friend:

Nike's market cap is 13.6 Billion dollars, with 264 Million shares trading. Current price today was somewhere near 52 Dollars a share. Iof LeBro28NKE) goes up a single point during the playing life of LeBron James, that contract will have been paid for close to three times over.

Do you still think it's a bad deal?

[LibertarianInExile]

Hey, why so glum, chum? It's just a matter of perspective, man. TRAIN people to do what you do! There are lots of people who would pay good money to learn what you have to teach. Nobody does that in DC--the world is your oyster!

</sarcasm>

P.S. Don't shoot yourself...that would make some people on this board feel bad. They'd have to sadly tell your surviving relatives, "He should have gotten a job training people."

[NoControllingLegalAuthority]

My solution is to lose gracefully.

Let's see how gracefully the millions being thrown out of work in America will act as they head downward toward third-world income levels.

We are not "losing" a fair contest. The global markets are rigged. China won't let us sell American-made goods over there. They won't play fair. Neither will most foreign countries let us have unfettered access to their markets as we have foolishly allowed them nearly complete access to ours. They lie, cheat and steal. Foreign governments have consistently refused to be fair in opening their markets.

American workers are getting screwed and they know it. They are not as dumb as many think they are. If this country continues its race to the bottom, you won't find many in any mood. We will have a nation of justifiably angry working people who are not being allowed to honestly compete to earn an decent living in what WAS the greatest country on earth until the mostly corrupt political class (both major parties) and corporate billionaires pissed it all away at our expense.

Depressions are made from this. Revolutions are made from this. Hitlers rise from this.

If the massive unemployment of hard-working American people is OK with you and just a "casualty" of free market economics, get ready for some reality orientation when millions of people with no money, no hope, plenty of time on their hands and a seething anger take to the streets. It won't matter to a furious mob of desperate people that they just don't have your grasp of certain economic theories.

I personally hope we do have a massive political upheaval in this country. It's long past time and there is way too much dead wood and corruption breaking the backs of decent people in America.

[RaceBannon]

Whatever happened to the American spirit that stands up to challenges and takes people through adversity and hard times?

It was regulated out, it was killed through corporate profit that called on cheaper labor to do the high skilled work, it was killed by increased costs and licences and fees...It was also killed by Unions raising wages over the top and corporations giving millions away in bonuses while the people who did the production got laid off.

It got killed by over regulation, it got killed by the creation of laws designed for revenue, not right and wrong.

Horatio Alger is impossible today, for it is not pluck or ability these days that can make a man, it is circumstance and divine providence in marketability of your skills.

Thank the last generation of congress critters for that, and thank the present batch for not seeing it.

Allow me to succeed in the things I am already capable of doing without having to fear regulation and I can succeed tomorrow in a few things right off the top of my head, but my present brainstorm are pipe dreams, I could not afford the insurance for my designs.

If all that mattered was brass balls and effort, we would all be millionaires.

[TaxRelief]

Don't be disheartened by one self-pitying thread. There are lots of great capitalists on FR (keep in mind out-of-work IT workers have a lot of time on their hands, and colleges have just released a lot of bored idealogues for the summer).

And don't let this moping group represent the rest of America in your mind. Remember the hard-workers are too occupied to spend a lot of time in forums.

{Present company excluded...}

[RaceBannon]

You could tell them about the other side of outsourcing. It can be quite lucrative if you don't mind the 125 degree summers. An electrical engineer with a BS can make about $180k by expatriating to an Arab state for a while.

Send me the applcation, if you please. Every agency I saw that advertised this was a sham outfit.

[LibertarianInExile]

Well said. I'm not in the industry but the people that spout off about 'low-level coding' prove that they couldn't tell COBOL from shinola--they would prefer to have 'low-level coders' dirty their hands with that icky computer stuff.

[FreedomCalls]

I posted this in a different thread. It's worth revisiting here.

---

It's not a question of a loss of jobs, it is a question of a loss in the capacity of the United States to maintain a technological superiority in research, development, and manufacturing.

There is an article in the May 16th issue of Manufacturing & Technology News that addresses this very subject.

DoD Technology Advisory Group Says Military Capability Is In Doubt Due To Loss Of Electronics Industry

The Department of Defense "faces shrinking advantages across all technology areas" due to the rapid decline of the U.S. electronics sector, warns the Pentagon’s Advisory Group on Electronic Devices (AGED). "Off-shore movement of intellectual capital and industrial capability, particularly in microelectronics, has impacted the ability of the United States to research and produce the best technologies and products for the nation and the warfighter. DoD is forced to rely on perceived system integration advantages to maintain superiority."

AGED, which was created in 1945 as a federal committee to advise the directors of Defense Research and Engineering (DDR&E), DARPA and other top military officials within the services, says DoD is now in the position of having to obtain the most advanced technologies from overseas. This situation "assigns those nations political and military leverage over the U.S.," says the briefing document. "We recommend that immediate corrective actions must be taken in order to sustain our technology leadership."

AGED also calls for DoD to monitor "the way chipmaking and the innovative aspects of chipmaking are being conducted," says one of the AGED briefing participants. "If you have the center of gravity of chipmaking go offshore, pretty soon it drags everything else with it. It is such a striking conclusion that there seems to be no issue about it. The bureaucrats get uneasy about something that seems to be correct and is gaining visibility. That makes them even more uneasy."

The question to be addressed is: Do we want our military to face an enemy with us having overwhelming technological superiority as we did in Afghanistan and Iraq, or do we want them to have to face an enemy of similar technological sophistication as the Russians are facing in Chechnya? If we want the technological superiority, we will have to keep the high tech R&D and manufacturing jobs in country.

[Pukin Dog]

Why do some of these posts get screwed up like that?

" Iof LeBro28NKE) "

Should read:

"If Nike share price"

[DAnconia55]

Average rents where I am are $750 for a 1 bedroom apartment

Then move.

You're not entitled to a $750/month apartment.
You're also not entitled to live where you want to.

Last post on the topic though. I'm not going to start arguing with a bunch of looters.

[Criminal Number 18F]

I'd just like to point out that a bank which has outsourced IT to a foreign nation, doesn't have control of IT. Their managers can't say with certainty anything about any of their operations that depend on IT, now. Nice, huh?

Bank of America will be passed by the Federal Bank Examiners because it's a big bank (I think it's federally, not state, chartered). De Gargantuous nil nisi bonum. But they will pass it without anything but the most superficial look at its IT operations. They sure as hell aren't going to go to teeming Mumbai to inspect things.

You might want to think about that if you have an account there. The reason they are moving this work is to cut costs, but they probably see evading oversight, both by regulators and auditors (not that most bank auditors do any better than Helen Keller would) as a side benefit.

d.o.l.

Criminal Number 18F

[DAnconia55]

You raise a good question. Clearly the answer is more trade protectionism by the US, including higher tariffs, quotas and tighter government regulation of our labor markets. After all, free markets simply exploit working families for the benefit of the rich. We need to be careful not to fall for those misleading arguments put forth by mean spirited conservatives that a rising-tide raises all boats and that situations like this are not a question of zero-sum gain.

LOL...

The average understanding of economics is on about a 4th grade level. ME ME ME ME ME ME ME...

[Lessismore]

How many Indian banks does Bank of America compete against? Answer: none. Indian banks can't get federally insured or licensed to do business here.

Actually, 90 day CDs at Bank of America pay 0.95%, while 90 day CDs at the NY branch of Bank of India pay 1.25%. You should do exactly what America's Fortune 500 CEOs are doing and put your money to work where it will earn the most.

http://www.bankofamerica.com/deposits/checksave/index.cfm?template=cd_10

http://www.boiusa.com/interest.htm

[philetus]

February 1, 2003
Offshore Outsourcing: Should You be Worried Yet?


By Lisa Vaas


Nowadays, IT professionals who are not angry about offshore outsourcing of IT work are likely a) still employed and b) not scared enough about the imminent loss of their jobs.
Judging by data presented at a conference on business process outsourcing within the financial services industry in Boston last week, it is high time to be frightened of the prospect of losing your job to offshore outsourcing. According to Forrester Research Analyst John McCarthy, the total number of U.S. jobs moving offshore will reach 3.3 million by 2015. Of that number, about 472,632 will be computer-related jobs.

Many IT people think what's being outsourced are low-skill, entry-level positions such as data entry—or what Shuhbro Sen, president and CEO of financial services company PowerShare Inc., referred to as the provenance of "the high-school dropouts of the United States." University of California/Davis Professor Norm Matloff, long an outspoken critic of the H-1B visa program and ageism in the IT industry, is of this mindset, recently citing in his e-newsletter various reasons why the United States will never outsource a substantial number of highly skilled IT positions such as that of software developer or software engineer. Most of the arguments against offshore outsourcing posing a serious threat to highly skilled IT workers boil down to difficulties in communication and project management in the offshore model.


Those are valid issues, but they are by no means stemming the flow of highly skilled IT work from our shores. Forrester research shows that 70 percent of enterprises that are turning to offshore outsourcing are sending out custom application development work. Sixteen percent are sending system analysis and architecture planning offshore. Thirty-two percent are using offshore outsourcing for system administration and support.

And just because many companies are still meekly adhering to the cautious route of moving offshore only low-skill work doesn't mean they don't have ambitions of getting more courageous. Affiliated Computer Services Inc. of Dallas, a business processing services outfit that sends work to countries including Ghana, is certainly counting on its clients moving up the food chain. Regional Sales Manager Charles Lavine, attending the recent conference, boasted that offshore IT labor costs can be as cheap as $1 per day. Lavine said ACS has plans to expand beyond business process outsourcing—activities such as order entry—to more highly skilled work. And he's confident that the supply of skills overseas will be adequate to meet the task at hand.

In the meantime, IT labor groups such as WashTech, or the Washington Alliance of Technology Workers, a Seattle-based organization of high-tech workers and the local affiliate of the Communications Workers of America, are mounting campaigns to raise awareness of the growing threat to IT workers posed by offshore outsourcing. The group on Jan. 24 put up a page on its Web site where concerned citizens can e-mail elected officials to prod them into launching a study of the IT offshore outsourcing trend.

WashTech's initiative makes sense. But WashTech and groups like it must bear in mind that money talks, and it now has a vice grip on the ears of decision makers. As ACS' Lavine said when he was recently asked about the State of New Jersey's recent attempts to outlaw offshore outsourcing of government contracts, "If we run into problems [with local decision makers], we hire them and make them into vice presidents."

[VadeRetro]

I have been reading "The Sky is Falling" stories about the American economy for four decades now. Somehow, most people seem to get better off, the standard of living seems to keep on rising, and most people live longer, healthier, mostly happy lives.

Over those four decades, the steel industry went first, then the rest of the manufacturing, now the computer tech jobs have gone overseas. There's nothing left but retail, fast food, and health care. We're at the bottom of the "somehow" barrel. Wages are shrinking, living standards are falling.