New York Times December 25th 2002
India Is Regaining Contracts With U.S. December 25, 2002 By SARITHA RAI BANGALORE, Dec. 24 - After slowing in the wake of the Sept. 11 terrorist attacks, outsourcing by American companies to Indian concerns or to their own Indian units has begun to pick up. The new contracts span the technology-related spectrum, going well beyond the software code writing of the last decade to include chip design, product development, call centers, consulting and other support services. They give Indian companies the opportunity to expand their repertory with work that holds much promise for future growth. And they account for a significant chunk of business in India, especially here in Bangalore and the country's other high-technology cities. In just the last few months, dozens of Indian concerns have garnered contracts from big American companies to take over pieces of their operations. A unit of the Bangalore-based Wipro, India's third-largest software and services exporter, will be handling some of the worldwide reservation services for Delta Air Lines, a move that Delta expects will save $12 million to $15 million annually. India's top software company, Tata Consultancy Services, or T.C.S., part of India's Tata conglomerate, has signed up Lehman Brothers - in a $70 million-a-year deal shared with Wipro - as well as J. P. Morgan Chase, Fidelity Investments and GE Medical Systems. The local unit of Cognizant Technology Solutions, a custom software developer and services provider in Teaneck, N.J., has contracts for projects from MetLife, to upgrade its human resources administration system and streamline some computer applications, and from the UnitedHealth Group and Sallie Mae, the student loan provider. For the American companies, which account for more than two-thirds of the work coming to India, the country has several advantages. Though wages in India have been rising, they still tend to be much lower than in the United States. That is particularly attractive in the current global economy, cost-sensitive executives say, as they follow the outsourcing path set in the early 1990's by technology companies from Silicon Valley seeking cheaper software coding operations. India also has a large, well-educated, English-speaking work force with one of the world's largest clusters of engineers and programmers. Even Bill Gates, the Microsoft chairman who is widely revered here, has given his imprimatur. "A couple of years ago, the biggest American corporations would have considered it risky to outsource mission-critical work to India, but it is now becoming a common-sense proposition," Mr. Gates said on a visit to Bangalore last month. Microsoft is expanding its development center in the high-tech city of Hyderabad and is outsourcing some back office work to Wipro. The software and back-office services outsourcing is one of India's fastest-growing businesses. In the year ended March 31, it accounted for nearly 3 percent of India's gross domestic product, up from 0.3 percent three years earlier, and is expected to increase to 7 percent in 2008. It has also contributed substantially to the country's healthy state of foreign exchange reserves in recent years. According to Gartner Inc., a research firm based in Stamford, Conn., India is leading the world in offshore outsourcing services, with annual revenue of $8 billion, and outsourced projects from American companies to Indian concerns will become increasingly common. Gartner has, however, warned that American companies that rush into outsourcing deals with Indian companies solely to cut costs are usually soon in trouble and that India's competitive edge over places like China could vanish if India does not continue to upgrade the infrastructure and stay on top of quality control. India's three top software exporters - Wipro, T.C.S. and Infosys Technologies - said that with the post-Sept. 11 lull ended, they are busy fending off Irish, Philippine and other competitors. But they think they have the global edge. "No country is able to offer the cost-to-quality advantage and scaling up opportunities that India does," said N. G. Subramaniam, T.C.S.'s vice president. Companies that start with a few dozen people in a pilot project could increase to thousands in a matter of months, he said. Many also have been working toward becoming one-stop shops. "Early Indian services companies typically gained backdoor entry as code cutters but moved up the value chain to take on strategic parts of the client's business," said Vivek Paul, vice chairman of Wipro. For instance, he said, his company's first task for Home Depot was to maintain applications, but Wipro moved up by writing software to run computerized tasks and maintaining it in all Home Depot outlets. As the scope of work farmed out to India has broadened, so has the spectrum of American companies doing the outsourcing. Companies in the credit card, insurance and financial services industries were among the first, in the early 1990's, but new converts include even some older, highly regulated industries like utilities. Back-office and information technology service operations, like processing employee payrolls or fielding phone calls from customers, are now moving to India at an even brisker pace than outsourced software projects. Acknowledging the influx, the National Association of Software and Services Companies, the industry trade group known as Nasscom, has raised its projections for the country's back-office services industry to $21 billion, from $17 billion, by 2008. Software companies like Wipro and Satyam Computer Services, meanwhile, are taking on the big consulting firms for large-scale consulting deals. The mostly back-office and services jobs have been flooding across India, beyond the high-tech hot spots and into big cities like Delhi and Bombay, even as American companies continue to announce layoffs. That has spurred some criticism in the United States. Recently, when New Jersey state senator Shirley K. Turner discovered that a welfare and food stamp contractor had moved its customer service center to Bombay from Wisconsin, she sponsored a bill to require that workers on state contracts be American citizens, or legal aliens, or have some specialty for which such workers cannot be found. The bill was approved this month and forwarded to the state Assembly. Back in India, outsourcing companies have been busy recruiting. One, ICICI oneSource, a Bangalore-based back-office concern owned by the Indian financial services giant ICICI Group, has attracted thousands of young "customer jockey" hopefuls for its call center with ads in the local newspapers saying "The C.J. Hunt is on!" Such jobs are changing the lives of the thousands of young, urban men and women who fill the positions, toiling largely at night, synchronizing their work schedules with Americans halfway across the globe. Saranya Sukumaran, 21, who is just out of college and three months into her first job, takes home 10,000 rupees, or just over $200, a month from her job on the help desk at the local unit of an American Internet service provider in a country where nearly half the population survives on less than $1 a day. From 10:30 p.m. to 7:30 a.m. five days a week, and calling herself Sharon "no last name," she responds to calls that have been routed to Bangalore. The money enables her to help her father, a junior official with the state-owned phone company who earns 15,000 rupees a month, support the household. It also allows her to grab a $1 coffee at the hip cafes dotting Bangalore and splurge on luxuries like Levi's jeans and a Nokia cellphone. "As a teenager I wished for so many things," she said. "Now I'm my own Santa Claus." http://www.nytimes.com/2002/12/25/business/worldbusiness/25INDI.html?ex=1041829368&ei=1&en=2d8f32f69d0dc9a3
