The India jobs timebomb: ThePost.ie


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The India jobs timebomb
Sunday, January 11, 2004
Ivaga

By Adrian Weckler
Outsourcing `middle-class jobs' to India is set to become a a real threat to the Irish economy, according to trade unions, policymakers and analysts. The warning was sounded last weekby David Begg,the general secretary of the Irish Congress Of Trade Unions. Begg told the Tanaiste's Enterprise Strategy Group that outsourcing high-skilled jobs in financial services, IT and engineering to countries such as India was now ``a considerable worry''.

The deputy national secretary of the white collar union Amicus said that offshore outsourcing is one of the union's top three concerns. ``We have made it clear to financial companies that if they visit offshore outsourcing on Ireland, we will resist it strongly,''Jerry Shanahan told The Sunday Business Post.

One US IT multinational company confirmed that its Irish facility was not under threat from its expansion in India. ``Ireland isn't at the point of non-competitiveness for us,'' said Chuck Molloy, vicepresident of communications for Intel. ``Once you have a community in place,you want to continue to use that asset.''

Intel employs 3,200 people in Kildare and 1,000 in a research and development facility in New Dehli.

But US companies with large employment bases in Ireland have been scrambling to set up or expand white-collar operations in India.

Oracle began work on a 600,000 square foot technology campus in Hyderabad last month, which will employ 4,000 research and development workers by the end of this year.

It recently cut its Irish workforce to 950 workers, citing difficult market conditions, and its Irish manager Nicky Sheridan has warned that Ireland is becoming uncompetitive compared to other investment locations.

Perot Systems, the outsourcing specialist which previously ran Bank of Ireland's IT division, last month announced its expansion in India with the purchase of a hightech Indian company, HCL Technologies.

Irish-based multinationals that have developed large high-skill bases in India include IBM, Intel, HP, Microsoft, SAP and Adobe. Dell, which employs 3,000 people in Limerick and Bray, recently abandoned an outsourcing project in India due to customer complaints.

Analysts such as Gartner, Forrester and Deloitte believe that India will claim between three and six million white-collar jobs, mostly transferred from US multinationals, in the next six years.

But unlike the low-skilled callcentre and technical support jobs typical of previous outsourced multinational operations, these jobs will be tagged as being `up the value chain', as defined by the IDA.

Such jobs include financial services, engineering, design, IT research and development, drug discovery and data analytics, as well as high-end network consulting and IT programming jobs.

Multinational companies are attracted to Indian hubs such as Bangalore, New Dehli and Mumbai (formerly Bombay) by low employment costs and highly skilled workforces.

India produces 200,000 engineering students, 120,000 trained doctors and 40,000 management students every year. It is estimated to have an English-speaking population of about 50 million people, which makes it attractive to monolingual American companies.

In line with its policy of becoming ``the back-office of the world'', the Indian government announced last week that it was abolishing tax for foreign companies with outsourced operations in India.

``The companies we're dealing with, in lots of instances, are asking us why should they go to Ireland rather than India,'' said Gus Jones, manager of the ICTdivision in the IDA.

``India is a very strong competitor at the higher end. It's a well-educated workforce with a lot of investment and a solid track record,'' said Jones.

``There are certain kinds of projects where we can't compete with India. If a company wants a 5,000 back office operation for a bank, it probably doesn't make sense to put it in Ireland when you can do it for a fraction of the cost in India. So, yes, we will be affected.''

However, some of Ireland's longest-established high-tech multinational companies appear satisfied.

``Our Irish sites are doing some of the leading edge manufacturing processes in the world,'' said Intel's Molloy. ``When you make an investment like the Fab 24 plant we're opening in Ireland this year, you find that there are things that are intangible but that are reflected in tremendous yields. Once you have a community in place, you want to continue to use that asset.''

Molloy said that Intel would continue to grow employment more in India than in Ireland or America.

``We will definitely continue to invest employment in the fastestgrowing markets,while in the more mature markets we'll stay flat,'' he said. ``It would be irresponsible for us not to invest in these markets, because 70 per cent of our sales are outside of the US.''

One report by market intelligence specialists Evalueserve suggests that Britain and Ireland will be the biggest losers in lost or deflected white-collar jobs to India over the coming year.

``Definitely [Britain] and Ireland, due to their British base, are far more likely to be vulnerable,'' said Marc Vollenweider, chief executive of Evalueserve and former McKinsey partner. ``We're getting a lot of enquiries right now.''

Evalueserve advises companies on moving operations to India.

The practice of offshore outsourcing has become a heated political issue in the US and Britain.

Wisconsin and Indiana ^ have proposed legislation to ban or limit foreign outsourcing from the states. Recent corporate decisions by British banks LloydsTSB and HSBC to switch thousands of low-end call centre jobs to India resulted in headline news and fury among British unions.

However, most commentators, unions and analysts see a proliferation in offshore outsourcing as inevitable.

``We're going to lose this,'' said one Irish-based investment consultant. ``It's just a case of how we're going to manage it.

``In these job sectors, India wants to take Europe's lunch and dinner ^ and they'll do it. I just don't know how we're going to compete.''

``It does amount to a significant threat in terms of employment,'' said David Begg. ``In one sense, globalisation has been just manufacturing jobs, so it didn't excite the same level of attention as, for want of a better term, middle class jobs.

``The possibility now of higher level jobs going is a considerable worry. It is a real and obvious fear.''

Begg's submission to the Enterprise Strategy Group included reports of a leaked British document which claimed that ``30,000 executive positions in Britain's finance and insurance industries are likely to be transferred to India over the next five years''.

Referencing a separate research report from American research company Forrester, the submission said that ``the US would lose 3.3 million white collar jobs between now and 2015, most of them to India''.

The submission quoted favourably the view of political commentator G eorge Monbiot, who claimed that ``for the first time in history the professional classes of Britain and America find themselves in direct competition with the professional classes of another nation''.

``Over the next few years we can expect to encounter a lot less enthusiasm for free trade and globalisation in the parties and newspapers which represent them,'' said Monbiot.

The news is not all so gloomy, however. A research study in December by Evalueserve claimed that there was a `gap' in highskilled jobs in western markets, and the Indian labour pool was simply addressing this.

``It is not just driven by issues of cost,'' said the company's chief executive, Marc Vollenweider. ``Quality counts at this level.

``And in India the high levels of quality are increasing. If a project has to be completed on time, it gets done on time. My guys synchronise their watches withthe atomic clock.

``If I have asked them to call me at one o'clock, I can pick up the phone receiver on the second and be confident that they'll call.''

Vollenweider said that western analysts were misinterpreting India's rise in high-skill jobs.

Amicus's Shanahan is not convinced. He has requested that the Department of Enterprise Trade and Employment set up a task force to monitor the situation.

``In the financial services sector we have seen jobs go from the UK to Bangalore, Mumbai and New Dehli,'' he said. ``I think India has placed itself competitively.

``Obviously they're selling lowcost accommodation and salaries of about 20 per cent of what a graduate here would cost.''

Shanahan said that Amicus had raised ``strong concerns'' in recent months with the Department of Enterprise Trade and Employment and Enterprise Ireland. ``Our view is that it's something that needs to be closely monitored,'' he said.