Coming and Going
As offshoring evolves, Indian firms even hire Americans
It doesn't take an economics degree to conclude that one of the main U.S. exports of the 21st century is likely to be jobs. And by many accounts, India is at the head of the receiving line. Microsoft Chairman Bill Gates recently announced that the software giant will nearly double its workforce in India, to 7,000, and invest $1.7 billion there. IBM has added at least 10,000 Indian workers this year and could employ more than 50,000 Indians by the end of 2006. Accenture, EDS, and other consulting firms are following close behind. By 2015, 3.3 million jobs will have been sent overseas, according to Forrester Research. As the offshoring trend matures, U.S. firms will contract out increasing amounts of white-collar work like accounting, drug research, technical R&D, and even cartoon animation.
A small crosscurrent is beginning to flow, however. While some of America's most well-known companies are suddenly rushing to India, the big Indian offshoring firms that started the whole trend--companies like Tata Consulting Services, Wipro Technologies, and Info-sys--are starting to hire in the United States, where some of their biggest customers are based. The Indian firms have earned billions by helping Fortune 500 companies slash the cost of running call centers or performing basic information technology work, relying on a huge pool of well-educated, English-speaking Indian workers who earn one-fifth what their counterparts in the West do. But to expand beyond basic IT work, the Indian firms are finding that they have to hire Americans who have local connections and understand western business climates. "You can't be global if you only hire your fellow citizens," says Jessie Paul, Wipro's chief marketing officer.
The numbers are small so far, and nobody expects a major reversal of the offshoring trend. But factors that used to tilt jobs toward India and other low-cost countries are now shifting. Political pressure in the United States has forced many companies that do government contracting, for instance, to keep jobs here. Defense giant Northrop Grumman plans to set up a "homeshore" operation, hiring hundreds of software engineers, in rural Virginia--where costs are higher than in India but lower than in prime U.S. cities. Science Applications International Corp., another defense contractor, recently opened a tech center in Kentucky. Other states, like Nebraska and Indiana, are offering tax and other incentives that make them look like an affordable alternative to Bangalore.
In India, meanwhile, the talent pool is starting to get tapped out in spots, leading to wage increases, frenetic demand for the best workers, and job hopping. More important, the Indian IT firms are aiming upmarket just as their bigger American competitors, like IBM, Accenture, and EDS,are aiming down. "They are certainly trying to move up the chain," says Ron Hira, a professor at Rochester Institute of Technology and coauthor of Outsourcing America. "Higher-level consulting services are very relationship based, so it makes sense that they're hiring more Americans."
Big numbers. For more than a decade, the Indian IT firms were content to fish the bottom for data-entry work, call center operations, and other basic back-end tasks that big companies could move overseas without much risk or notice. As U.S. firms like JPMorgan and Met-Life got more comfortable with offshoring, they began sending more sophisticated work like software development and computer programming overseas. Before long, that had spawned a few of the fastest-growing juggernauts in the global economy. Wipro, for instance, which is now a $1.8 billion company, doubled its staff over the past three years and has a profit margin of nearly 20 percent. (IBM's profit margin, by contrast, is about 9 percent.)