Impatient Jobs

The big guns of the American IT industry finally spoke—and they did it vehemently in favour of outsourcing. Compete, not retreat; open doors, not erect barriers in the face of global challenges—they told US policymakers last week. They fired their first shot last week in the highly emotional and very political battle with a slick report that warned of an "all-out trade war" if the US clamped down on offshoring to India or elsewhere. "There is no job that is America's God-given right anymore," said Carly Fiorina, chief executive of Hewlett-Packard.

Last week's report was issued by the Computer Systems Policy Project (CSPP), a lobbying arm of the top eight IT companies. It argued that US companies "must hire qualified workers around the world to meet customer demands and expand their capabilities". Incidentally, 60 per cent of the revenues of the American IT giants come from overseas, which keeps "Americans working to create new products". The report, titled 'Choose to Compete', could not have been more blunt. While a bad economy may spur the impulse to protect certain sectors, it said "these measures often backfire". Countries that resort to protectionism end up hampering innovation and crippling their own industries, which ultimately leads to higher unemployment, it said by way of reasoning.

Instead of whining, the report asked for the government to increase spending on R&D, support innovation and improve the crumbling American school system. Craig Barrett, Intel's CEO and chairman of the CSPP, summed it up: "I can't understand why we continue to pour resources into the industries of the 19th century." The tough language was reflected in the report too. It warned that Americans may lose future jobs if they continue to come out of high school "without basic reading, writing and mathematics skills". It also slammed college graduates for lacking competence in math, science and engineering.

An industry insider who participated in the strategy debates told Outlook that 25 business organisations, some with offices in all 50 states, are analysing the outsourcing issue from all angles. "There are a million ways to make mischief—from country of origin labelling to outright bans on foreign outsourcing to 'buy American' campaigns. The battlelines haven't been drawn yet but we are well armed," he said. "The next few weeks will show a fairly systematic and aggressive campaign to change the perceptions of the debate." Some time next month, the IT aristocracy of HP, Dell, Intel, IBM and Motorola is expected to hit town and do the rounds of Capitol Hill, talking to Congressmen and senators who are reeling under pressure to stop outsourcing of jobs. Simultaneously, studies have been commissioned, consultants hired and of course, there is the big war chest. The key players will include the US Chamber of Commerce and the National Manufacturers Association of America.

There is also a conscious effort not to engage in the loaded game of numbers—the oft-quoted Forrester Research estimate that 3.3 million white-collar jobs worth $136 billion in wages will move overseas by 2015 has done enough political damage. In December, it was revealed that ibm planned to move 4,730 jobs to India and China. Other biggies like Microsoft are now under the microscope. "We have no interest in getting those numbers because it is not a one-to-one relationship. A job lost here doesn't mean a job gained in India. Productivity levels are not equal," the industry insider said.

The backlash against outsourcing is real, even though the reasons may not be. And like it or not, the problem has got an Indian face. Suddenly, Indian call centres are being debated as passionately as Michael Jackson's whacko ways. India is the scapegoat of today, after China which grabbed manufacturing jobs in the 90s and Japan which dented the American automobile industry a decade earlier.Television stars with salaries big enough to finance a couple of call centres of their own are rushing to Bangalore to tell the story. American fears about losing the technological edge are so rampant that every news story of a job shift seems to get preferential treatment. Things went into a spin when Andy Grove, the revered guru of the tech revolution and co-founder of Intel, said the US software industry is headed the way of steel—that it will lose its marketshare unless the government develops a rapid action plan.

Outsourcing has also become an election issue with Democratic presidential hopefuls, in full metal jacket, staking out politically convenient positions. Dick Gephardt, a pro-labour Congressman from Missouri who is making his last bid at the presidency, talks passionately about jobs going overseas during debates. Gen Wesley Clark, also a candidate, has declared: "We'll take away any incentives for companies that want to outsource or leave the country." Candidate John Kerry, a patrician senator from Massachusetts, moved a bill requiring call centre operators to identify themselves and their location.

At least eight bills are pending in the US Congress and another eight in various state legislatures that in some ways restrict the use of foreign workers or prevent government contracts from going overseas. Last year, a torrent of heart-wrenching articles about laid-off workers lit political fires nationwide which then spread through an explosion of websites and turned into a blaze of anti-outsourcing activism. Joining hands was Lou Dobbs, the anchor of a widely watched CNN business programme, who has become a mainstream vehicle for the anti-outsourcing camp. He aggressively harangues guests who dare to defend the practice. In these economically jittery times, foreign workers are easy targets, from New Jersey to North Carolina, from Florida to Maryland.

Such is the heat from outsourcing that in December, the state of Indiana finally cancelled a $15 million contract with Tata America for computer upgrades even though the bid was $8 million lower than the next one. The unions and the omnipresent Washington Technical Workers Alliance, the main coalition of laid-off high-tech employees, have framed the issue in black-and-white—outsourcing is the mother of all evil. Even as all this was happening, the information technology industry simply watched hoping the anger would dissipate.

Last week's report shows the IT industry is now fully awake to the reality, and is willing to get its pristine hands dirty with a down-in-the-trenches fight. But where does the Bush administration stand on the issue?

"Ideologically, they are with us (the industry), politically who knows?" he answered. Bush's master strategist, Karl Rove, is yet to make his opinion known on the issue. But it is safe to assume that Bush will side with the industry bosses in the end. Besides, seasoned bureaucrats in Washington don't favour blocking outsourcing because it would give the rest of the world yet another reason to cringe at US policies. "The US does have treaty obligations under the wto rules. We would be held accountable," said an analyst.

Arun Shourie, India's IT minister, has already fired a warning shot. Speaking recently at a regional forum in Hyderabad, he said: "It can't be that wherever we gain strength, protective walls are set up. How can you expect us to go on opening up our markets? Things can't be one-sided."