India - threat or promise?

Peter Judge: IT pros in the West may get the jitters when Indian firms offer to slash our costs by 50 percent, but they will have to live with it.

Outsourcing to India could be an emotive issue for IT pros over the next few years. While techies in Europe and the US are getting laid off, there are massive recruitment drives in India. While we look forward to flat spending, India has an IT industry that is growing at 30 percent per year.

And the two things are connected. The Indian IT industry is growing by outsourcing large parts of the West's IT. When you are told that your company can no longer afford your services, there will be several reasons. But for some of you, one of those reasons may be that there are people in India who can do it cheaper.

There are other places doing the same thing, including the Philippines, China and now Eastern Europe, but India has the best-established pedigree. For 20 years now, software and other products have been developed in India, because the sub-continent has plenty of people with engineering skills.

And it is moving on to the next stage, one which promises to "hollow out" many IT departments -- and other parts of companies -- in the West. Now the business skills are there too, and Indians are beginning to offer "business process outsourcing" (BPO) which takes over whole functions within western companies.

Some call centres will go there, with staff working shifts to deal with people in Europe. In other cases, customers will still talk to people in their home country, but all the back-end parts of the job -- the legwork, the forms and the processing -- will be done by people and IT systems in India.

This is not a fantasy. The speakers at the FT's Outsourcing to India conference this week had many examples to back up their ideas. And when the conference opened up to questions, it was clear that the delegates were not seeing this as some theoretical issue.

The questions from the floor focused on the practical issues: "How do I sell this to my board?" asked a speaker from a bank. "What functions should I move to India first?" asked a man from a finance house. It was clear that these people are thinking of taking this further.

Even with the rate of redundancies we are currently seeing, outsourcing to other countries could add to the gloom for some people in IT departments over here. If this affects you, and your job is one of the ones that might get outsourced, you may respond with outrage. Which is why the discussion at the conference focused on how to sell this idea to the companies involved.

The management strategy will be to make it "non-threatening". First take functions that are already outsourced and move them to India, as this does not affect people within the company. Then move functions which are distinct, and which are likely to be able to stand alone.

Senior management have to be convinced, of course, and this will be done through visits to India, where they outsourcer will show them that the Indian staff are just as knowledgeable and skilled as their western counterparts. "Once you take the leaders to India, they will agree," said Sid Khanna, a senior partner at Accenture.

And where possible, the Western employees will be kept on -- reducing by natural wastage, and moved to "customer facing" jobs.

But if this is about cutting costs in the West, or even if it is about shifting jobs to India for better quality, then it will impact jobs here. And how should we respond to that?

If the costs are as good as we were told at the conference, then surely the workers out there are exploited, you may say. Well maybe, but probably they are earning far more than the average wage, and have a career. Big outsourcers are unlikely to operate the kind of sweatshop for which some clothing manufacturers are justly criticised.

But it is certainly true that they are operating in the same kind of economic gravity-well that makes those sweatshops so lucrative. People there get paid less, so are prepared to do work for less than people here would want for it. This is an almost physical force pushing IT work in the direction of the developing world. Given better communications, it is just inevitable that much of "our" work will be done out there.

In the process, one would hope that the inequalities get ironed out a little. For sure, the global companies won't pay their employees in the developing world any more than they have to. But even big multinational outsourcers can't keep all the money in their pockets, and the outsourcing process inevitably leads to more money in the developing country, which is good.

The sour part of this, for IT pros in the West, is that it means less money in our pockets. But, taking the longest view, this may be inevitable anyway.

Overall, it would take many more planets than we've got to give everyone in the world the lifestyle we enjoy in the West. By cutting out waste, we could still all live comfortable lives, say the development experts. But moving to a fairer world is a process which must have an effect on the West.

Outsourcing to India is being driven by hardnosed business people wanting to stay in business, not by idealists wanting to make the world fairer. But on balance, the end results may well be positive for the world as a whole.


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