Giant Sucking Sound

The new Electronic Data System office in Mumbai (formerly Bombay) is half a world away from company headquarters in Plano, Tex. Getting to this Indian office requires a bumpy two-hour drive from downtown Mumbai. At every stoplight women dressed in rags and holding emaciated, dull-eyed infants tap car windows to beg. In the slums lining the roads, thousands of people live crammed into dirt-floored rooms, sheltered from monsoon rains by plastic sheets.

At the end of the drive is a heavily guarded, new office tower that rises above the slums. This is where Amit, 24, works. "This is Andy. How may I help you?" he says politely, hour after hour, to the Midwesterners who have forgotten their e-mail passwords or need the phone number of a colleague. EDS (nyse: EDS - news - people ) hired Amit and 500 of his colleagues--young men and women dressed in khakis or saris--to answer phone calls and e-mails on behalf of American companies that have outsourced tech work or customer service calls to EDS.

Amit and colleagues are paid $1.25 an hour. His counterpart in the U.S. would get $10. On that difference rests whether or not EDS can wiggle itself out of deep trouble. Victimized by cheap outsourcing by competitors, EDS is playing the low-cost-labor game itself now. It is rushing to hire thousands of mostly Asian college graduates like Amit, who are desperate for the kinds of jobs found in the U.S. Frantic to cut costs, EDSplans to hire 13,800 workers by the end of next year--a tenth of its current global work force of 137,000--in low-wage countries like India, Malaysia, Hungary and Mexico, places where starting pay is as low as $2,400 a year. Meanwhile, EDS plans to lay off at least 2,750 higher-paid workers, mostly in the U.S. and Europe.

Companies as varied as General Electric (nyse: GE - news - people ) and Morgan Stanley (nyse: MWD - news - people ) are making the same calculation. White-collar jobs--in engineering, programming and accounting--are leaving America's shores for low-cost locales at a pace of nearly 4,000 a week, according to Forrester Research. The U.S., Europe and Japan combined are losing 600,000 a year, says McKinsey & Co.

Cheap labor is the motivation for these companies; for EDS it's the heart of new Chief Executive Michael Jordan's strategy to catch up with the competition. Low-cost outsourcing companies like India's Wipro (nyse: WIT - news - people ) and Infosys (nasdaq: INFY - news - people ) are snatching away business, while such rivals as IBM (nyse: IBM - news - people ) and Hewlett-Packard (nyse: HPQ - news - people ) are aiming squarely at EDS' core business--running the computers of big corporations. Hurt also by the slowdown in tech spending and unprofitable contracts, EDS' second-quarter earnings dropped 56% to $138 million and its credit rating was cut to just above junk.

"The concepts of low cost and high value must be present in every action we take, in every service we provide, in every piece of new business we pursue," Jordan told employees in July. Jordan took over when Richard H. Brown was fired in March after unexpectedly disastrous third-quarter results led last year to a Securities & Exchange Commission investigation, which continues.

Jordan plans to triple the number of Indian workers to 3,500 by the end of next year. Indian programmers are maintaining old software written in the U.S.--some of it in Cobol--and making it work alongside newer programs. Indian keypunchers are typing in address changes for American workers who notify their companies they have moved. Others are updating computerized records to keep paychecks and 401(k) benefits going to the right place. EDS' U.S.-certified CPAs in Chennai (formerly Madras) are preparing corporate tax returns for an American manufacturing giant and doing bookkeeping tasks outsourced by other big companies. (EDS won't name its clients.)

The picture is the same companywide. In the same month that Jordan said hewould lay off thousands in the U.S. and Europe, EDS announced the opening of the Mumbai office and another in Auckland, New Zealand. It is scouting for bigger offices in Malaysia, where 100 jobs will be added in the next 18 months to the 400 already there. Workers do such jobs as processing bills for phone companies, handling expense report payments and writing code to keep computer systems from overloading. "I can offer someone the same capability at half the price," says Michael Stockwell, managing director of EDS Malaysia.

Why half the price when wages are just one-tenth? Higher expenses for new computers and long-distance phone bills account for some of the spread. Wider profit margins are part of the picture, too; suppliers don't pass along all their labor savings.

Jordan's strategy is even playing out at EDS unit A.T. Kearney, its troubled management-consulting firm. Jordan isn't hiring cheap consultants in India--not yet, anyway--but he is hiring the back-office support they need. So far Kearney has hired 50 workers for a new office in New Delhi. They sit next to 75 empty cubicles that are scheduled to be filled by the end of the year as layoffs claim the jobs of Kearney's staff elsewhere. The consultancy, based in Chicago, employs 5,000 people.

Half the Indian workers prepare PowerPoint presentations for the firm's six-figure consultants in the U.S. or Europe. Others help maintain Kearney's computer network and Web sites. The techworkers earn about $4,500 a year compared with about $45,000 a year for workers doing similar jobs in the U.S.

To overcome resistance from U.S. managers, Kearney's Indian executives had researchers do work overnight that couldn't be finished the same day in the U.S. When the quality of the overflow work proved first-rate, more responsibilities were assigned to Delhi. "It is very addictive, once companies learn what is possible," claims Chandramowli Srinivasan, head of EDS and A.T. Kearney operations in India.

There are obstacles big and small, the least of them American pseudonyms like "Andy." Indian workers who take phone calls for EDS clients attend weeks of classes to learn to speak with American accents and idioms. And it's too early to say whether certain white-collar work can be done so many miles and time zones away without foul-ups.

There's also a price to be paid in angry and anxious workers. "I'm sure I lost my job to offshoring," says Richard Randall Mohler, 51, an EDS programmer from Midland, Mich. who earned $68,640 a year until he was let go last year. That job in India pays about $6,500 a year. Mohler remains unemployed and says his former colleagues at EDS are worried, too. "They are all scared to death," Mohler says. "When you can get the same job done for a fraction of the cost, it puts everybody on edge."

Is Jordan the bad guy? If he doesn't export jobs, someone else will.

welcome to mid age unemployment!

>>>>Mohler, 51, an EDS programmer from Midland, Mich. who earned $68,640 a year until he was let go last year. That job in India pays about $6,500 a year

>>>>Mohler, 51, an EDS programmer from Midland, Mich. who earned $68,640 a year until he was let go last year. That job in India pays about $6,500 a year

We need job retraining programs for people with degrees to teach them how to do menial work.

Wouldn't it be nice if we had some kind of central government to watch out for our interests in matters of international trade and so forth so we wouldn't have to stand by and watch our once might nation sink into the mire of third world poverty? Just think, an entire city of loyal Americans standing up for us and preserving our sovereignty. Wouldn't that be wonderful?

It is becoming very sad. The skilled unemployed can't find skilled jobs, and many would be grateful to get the menial jobs.

However, they can't convince employers to hire them for the menial jobs, for the employers feel they won't stick around.

The question I have for those employers: How many of the unskilled, whom you prefer, end up sticking around, and is the quality of their work satisfactory?

The skilled who take the menial jobs can grow within those organizations. They will remember the employer gave them a break.

Nowadays, there sure isn't any job-hopping. It seems like a giant game of musical chairs. Don't give up your chair until they take it away from you!

I don't know what the government can do, or should do, but if the President doesn't start to notice there is a problem, I fear President Hitlery may be here soon.

Mohler, 51, an EDS programmer from Midland, Mich. who earned $68,640 a year until he was let go last year.

Mr. Mohler, and thousands like him will not be buying that new Lexus this year or any time soon, even if he does get a job. That goes for the plasma TV and all the other goodies normally bought by those making that kind of money.

And yet we have the economists say that "the economy has turned around." Yeah sure.

"There are obstacles big and small, the least of them American pseudonyms like "Andy." Indian workers who take phone calls for EDS clients attend weeks of classes to learn to speak with American accents and idioms"

What tish, I can't understand a word they are saying, they can't understand enough english to understand the problem, and when and if they finally figgure out what I am saying they still don't know how to address the problem.

It's a mess, I end up asking to speak to someone who speaks english.

I have decided the answer is not to do business with anyone who torments their customers in such a manner, and obviously from the drop in computer sales, so have alot of other Americans.

There is some good news in this, unlike most outsourcing articles.

- Dick Brown was fired.

- Considering that EDS is one of the worst managed IT companies around, this may do nothing but retard the development of Indian IT workers.

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