Shift of tech jobs abroad speeding up, report says

By Diane E. Lewis, Globe Staff, 12/25/2002

Spurred on by new technology and a shift in the way corporate America does business, employers will move about 3.3 million white-collar service jobs and $136 billion in wages overseas in the next 15 years as they seek lower costs, increased production, and higher profits, according Forrester Research Inc.

Leading the way will be the information technology industry — the sector often credited with fueling the US economic boom of the 1990s — says the Cambridge firm's forecast.

Back-office accounting and customer-calling work are already being shipped abroad. But in the future, professional positions in technology, law, art, architecture, life sciences, and business management will be, too, says Forrester.

Its report is one of the first attempts to quantify the jobs that will be lost to overseas operations.

"We estimate that of the 700 service job categories in the United States, about 550 will be impacted by offshore outsourcing in some way over the next 15 years," said analyst John C. McCarthy, the report's author.

"Companies are doing it because they feel they can get better quality work for 50 percent of the cost. This is another way of making the US economy more efficient, more competitive, and more prosperous," he added.

Global outsourcing is a growing business, said Bob Pryor, a vice president of Cap Gemini Ernst & Young and head of the firm's outsourcing practice in the Americas. In the past, he said, US companies relied on foreign workers with H-1B visas to reduce costs. "Now they are focusing on offshoring," or sending the work overseas.

In the services sector, basic information technology support services, computer programming, and office work are leading the trend.

In 2000, computer and back-office work accounted for significant portions of the 102,674 jobs shipped abroad, representing 27,171 and 53,987 positions, respectively, McCarthy said.

By 2015, he added, 472,632 computer jobs and 1.65 million office positions will have been shifted to places like China, India, the Philippines, or Russia.

Some US companies aim to maximize production by opening sites or contracting with foreign service providers in other time zones, which lets them triple the amount of work that's done by extending the work day to 24 hours.

Take mValent, a Tewksbury software company launched last year that's using funds from Charles River Ventures and IDG Ventures to expand.

Every four weeks or so, Raman Sud, vice president of engineering, travels to Pune, India, to interview technology professionals from an Indian firm that has agreed to supply top talent. The goal for mValent is to create parallel teams of highly trained employees in the United States and India that will provide the technology infrastructure.

Sud said technology workers in remote sites have fewer interruptions or distractions, because the corporate office cannot introduce work unrelated to the project at hand. Moreover, he said, with two teams, the work is never interrupted.

"It will be possible for the two teams to operate in tandem, so that when the sun is up here we are working, and when it is down they are working," he said.

"There are also cost benefits. ... For every one person you have here, you could have three to four in India — people with engineering degrees and computer science and the experience of five-plus years."

"We assign a mentor to them, and that helps to bring them up to speed within a month," he continued. "The mentor is here.

Once we have a critical mass there, the people there will mentor new people coming in. Our plan is, within the next six to nine months, to have close to 15 people. Right now, we have four and they are very highly compensated [by Indian standards]. So if you are a software developer, then you would be making about a third of what a developer gets here. For an administrator, it might be half."

mValent is hardly the first US company to rely on offshore outsourcing, though. For 30 years, hundreds of manufacturers have shifted at least some production overseas. But the trend is expanding, analysts say.

Forrester's McCarthy said US workers can benefit if they have the training and expertise to lead or manage offshore work from their stateside bases.

"There are definitely cost savings," said Suzy Punj, senior vice president of Strategic Research Institute in New York. "You would have to pay someone $40,000 here to do call center or back office work. There, they would make about $4,000, which is a good salary [in India]. There, they receive the perks of car services to and from the house, an apartment, and free lunch. So people stick around."

General Electric Co., Boeing Co., and Nortel Networks Ltd. are among the companies sending programming jobs to India, Ireland, Russia, and China, according to Gartner Inc. in Stamford, Conn.

Oracle Corp. has moved more than 2,000 software development jobs to India, while Capital One and Ford Motor Co. have moved back-office jobs, such as payroll processing, to India, currently the country of choice for many companies, McCarthy said.

"China is trying to get ready for this, but they are far behind because they do not have as many English-speaking people," Punj said. "Eastern Europe, the Philippines, and Latin America are all getting into this.

"A lot of [companies] don't want to talk about it because they are taking jobs away ... It is a no-win situation and it stems from the recession. Companies are saying if they can stay afloat, perhaps things will get better."

But thousands of computer professionals have been laid off in recent months, and unions and and other groups that represent workers say the news is far from encouraging.

"If we don't have these jobs, what will people do?" asked LeEarl Bryant, president of the 220,000-member Institute for Electrical and Electronics Engineers-USA. "Why did we dupe people into going to college and studying these fields if there will be no jobs?"

Peter Bennett, a laid-off computer programmer and California activist, founded the Web site nomoreh1b.com, to protest corporate use of immigrant guest workers under the H1-B visa program.

He said the transfer of work abroad is a continuation of that trend. "We have never in the history of immigration invited more than 3.3 million people here and given them our best jobs," Bennett said. "So, this is the start of a pretty disturbing pattern."

Diane Morello, workplace research director at Gartner Inc., warns that companies could experience a backlash from their US workers. Those that do not weigh the pros and cons could wind up hurting their ability to innovate, she said.

"For every person affected negatively in the United States ... there is someone elsewhere in the world for which this is a bounty — a huge opportunity," Morello said. "And we are seeing this emerge in other fields besides manufacturing. We are expecting a backlash from [US] employees who are, at one point, being pressed to work endless hours and being threatened that their jobs may go overseas. They may find that the only way they can fight this or be heard is through organizing or employee activism."

In Massachusetts and in other US tech centers, technology professionals who thought their jobs were secure are struggling to make sense of layoffs. Last year, for example, 695,581 high-tech job cuts were announced nationwide, representing 36 percent of all the payroll reductions proposed by US firms during that period, according to Challenger, Gray & Christmas Inc., an outplacement firm.

This year, between January and September, there were 334,650 job cuts announced, or 33 percent of all reductions, the firm said.

Forrester predicts more layoffs in basic technology support, computer programming, and a range of professional fields — tough news for white-collar workers.

Diane E. Lewis can be reached at dlewis@globe.com.