Out Of India
The Sunday Age
Sunday February 29, 2004
Call centres aren't the only thing that are cheaper to run in India. Now jobs in IT, accounting and journalism are joining them. Kate Nancarrow reports.
Imagine the joy felt by chief executives everywhere when they discovered that in a land far, far away there lived many people who were well-educated, computer-literate and English-speaking - but willing to work for peanuts.
The resounding cry of "whoopee" could be heard echoing from the boardrooms of Wall Street, Silicon Valley, London and now Australia as company after company discovered that India, the Philippines and, increasingly, China were home to thousands of young professionals who, through the wonders of modern technology, could be employed in first-world call centres and data processing jobs while based in Asia earning third-world wages.
When computers, email and sophisticated telecommunications systems took off in the mid-1990s, it was assumed many Australian workers would be telecommuting by 2000. Few recognised, though, that the same computers and phone systems could provide access to millions of well-educated IT professionals in low-wage centres such as Delhi, Mumbai, Bangalore, Manila or Shanghai.
Now experts predict thousands of technology jobs will be lost from Australia to Asia over the next five years and more than 1 million from the US over the same period.
Two weeks ago when Telstra announced that it was outsourcing IT jobs to India, its chief executive, Ziggy Switkowski, defended the move, saying the company was only doing what everyone else was doing - "if anything, we're behind the times".
He suggested that all large companies now outsourced "non-core" activities, such as IT support, and that some of the best providers were based in India.
"Now that some Indians are genuinely world class, more and more IT organisations are working with Indian suppliers. That's inevitable," Switkowski said on Channel Nine's Today show.
Nowhere did he mention that Indian workers' wages were about one-sixth of Australian workers, which is really why Indian software-services company Infosys will next month take over many of Telstra's IT functions, formerly carried out by IBM Australia. It is expected to eventually result in 1500 jobs moving to India.
Martin Conboy, chief executive of callcentres.net, one of Australia's leading providers of research and information on outsourcing in Asia, doesn't have to be so coy about the lovely cost savings. He sees this outsourcing as significant as the 19th century industrial revolution in the way it has turned work practices on their head.
"Globalisation is a force that cannot be stopped. If we were having this discussion at the beginning of the industrial revolution we would have to decide whether to lie in front of the steamroller or climb on board and steer the steamroller in the direction we want it to go."
To Conboy, the outsourcing of technology-based labour to Asia has an irresistible, unstoppable economic logic: "In the US, a call centre costs $US25 an hour per agent. In Australia, it's $US21 and in India it's $US10 per agent per hour. Trying to stop it is like the boy trying to put his finger in the dike."
Conboy suggests corporations are under increasing pressure to cut costs and part of that process is recognising "what business they are really in" and contracting out the rest. A bank, for instance, may be about retail banking and corporate lending. Secondary activities, such as processing millions of cheques each year, could be done by someone else. And they have been for years, by teams of lowly paid workers in Malaysia.
"Do you care where your cheque is processed?," asks Conboy. "Do you think about it even for a nanosecond?"
With 54 per cent of the world's population living in the increasingly affluent and well-educated Asia-Pacific region - 1 billion people in India, and another 1.5 billion in China - there is a vast pool of people willing and able to undertake computer and phone-based outsourcing work from the US, Britain and Australia.
Conboy rattles off the statistics: "Did you know that India now has 700,000 new graduates each year? That in China there are over 80 million people who can afford to buy holidays in Europe and drink coffee on the Champs Elysees?"
So, what can they do for us?
Basically, anything that can be done by phone, internet, email or through digital imaging or recording. The work divides neatly into front-office and back-office work. Front-office work is the trickiest to outsource, dealing as it does with the public in the home country, Conboy says. It can involve everything from help desks for IT functions, database management, customer-complaint lines, telemarketing and debt collection - "Indians are world-champion debt collectors; they won't take no for an answer."
Front office is the area that is the most difficult for companies that choose to outsource their complaints departments and other call-centre functions. "Only 50 million people in India speak English but much of it is Indian-English and therein lies the problem. The cheapness of the price is negated by issues of cultural assimilation."
What really annoys customers is poor local knowledge and communication skills.
Coles Myer's store card provider, GE Consumer Finance, received negative publicity last year when it was revealed that some customer-service staff handling Myer Card were based in India. Callers to talkback radio complained about poor service and communication and bemoaned the loss of Australian jobs.
The call centres were quickly and quietly returned to Australia - although there is still some sensitivity surrounding the issue.
Conboy says "cultural-assimilation" training (like knowing what the temperature is in Melbourne, or dropping Australian colloquialisms into conversation) may overcome some of these issues, but he does acknowledge there have been some high-profile companies abandoning Asia recently. These include Dell Computers, which stopped sending technical support service calls from the US to India after complaints from customers, and British catalogue company Shop Direct, which will close its Indian call centre next month and move 250 jobs back to Britain after customer complaints.
Harish Rao is president of the Australia-India Chamber of Commerce and head of Melbourne-based Business Outsource Solutions, which organises domestic and international outsourcing for finance and accounting firms. He is a soul mate of Martin Conboy: international outsourcing is unstoppable.
"My personal view is that India will become the back office of the world in the next 10 years." Rao says much of the world's back-office work, such as data input and processing, transcription services - anything that is computer-based but doesn't require local knowledge or communication - will eventually move to Asia because it is so much cheaper - up to 40 per cent in many cases.
"Much of that saving is in labour costs but there is significant value-added savings. In India, work is 9am until 6pm, six days a week, so immediately companies get extra value."
Rao says the IT revolution has created these possibilities and their potential growth is limited only by technology. "It couldn't even have happened five years ago; it's all IT driven." He admits Australian companies are still relatively conservative about using the "opportunities offered in India but US firms don't think twice about it".
According to Rao, many Australians don't realise the breadth of activities that could be shifted to Asia - anything that doesn't require physical proximity can go: graphic design, financial analysis and medical and legal transcription. India already has more than 300 firms dedicated to medical transcription alone and is expected to employ 170,000 transcribers by 2007. US-based medical-transcription company HealthScribe has 1200 Indian employees. Medical staff dictate letters that are then electronically transferred to India where the transcribers type the letters and email them back to the doctors in the US within 24 hours.
What seemed future-shock territory a few years ago now passes without comment. Three weeks ago, news agency Reuters announced it would employ six journalists in Bangalore, India, to report on 3000 small to medium-sized American companies. The reporters will extract basic financial information from company press releases and earnings reports. More complex work and interviewing will be done by journalists in the US. "India is a place where you can get people who understand English, understand financial statements, understand journalism and who are educated to a very high standard and eager to do this kind of work," Reuter's global managing editor, David Schlesinger, told The New York Times. The reporters will join 200 of Reuter's data-entry staff in Bangalore, who have replaced staff in the US and Britain.
The speed of the development of third-world telecommunication skills and the wounds it has caused to IT industries elsewhere, have turned what was, only two or three years ago, a quaint oddity, into a major issue throughout the world.
Already, Labor leader Mark Latham has vowed that no government contracts will go to companies redirecting work to cheaper Asian providers. The ACTU, concerned at the potential for job losses in rural call centres, has organised rallies against the outsourcing of Australian jobs. In the US, presidential wannabes watching the demise of Silicon Valley are vowing to save American jobs.
The fight to retain these US jobs has hit the headlines. Internet sites such as yourjobisgoingtoindia.com provide a forum for those nonplussed at how such a modern industry could abandon them so quickly: US group Forrester Research estimates more than 3 million white-collar IT jobs, which represent more than $100 billion in wages, will move offshore in the next 15 years.
Melbourne's factory workers would know how they feel, having watched much of Australia's clothing and shoe manufacturing and food processing move to Asia over the past 20 years.
But those with an eye on history and an eye on the future know there is no stopping change. "My grandfather was a farmer and then there was no future in that, so my father got a job in car manufacturing. Soon, there was no future in that, so he encouraged me to go to get a job with computers. Now, I can't even imagine what I'm going to encourage my son to do," Jim F., of Seattle, wrote on one website.
To people fascinated by change, like Conboy, it's a waste of time trying to stop the inevitable. He thinks the only way to survive is to think laterally. "Who made money during the gold rush?" he aks. "Not the miners. It was the people selling shovels; that's who."
© 2004 The Sunday Age