While Business Process Outsourcing firms of India are all set for a boom period what with major US and UK companies sourcing out lower-level tech jobs in data entry and systems support, IT research firm Gartner Inc has some dire predictions in store for American workers.
According to Gartner, by 2004, one in ten American worker in IT services is set to lose his job. And only 40 per cent of those who have lost jobs are likely to be retrained and re-deployed by the firm.
Outsourcing has clearly become the fastest growing IT industry segment and that means for the US workers tough times have just begun.
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"It will probably get worse before it can get better," says Rita Terdiman, VP and research director, offshore sourcing, Gartner.
As more and more jobs are being moved away from the US, there is clearly an environment bubbling with tensions that many American politicians have recognised.
In the last few months, a spate of legislations to block everything from outsourcing of government contracts to L1 (business) visas and reduce the number of H1-B visas available have been introduced by the US lawmakers.
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Gartner says it is no longer an economic issue but a 'societal' one.
"Outsourcing has become a societal issue that the government, entrepreneurs and workers have to collaborate and find the answer to. They have to look at new ways to train people," says Terdiman.
Much of the legislation in the US against outsourcing is also seen to be politically motivated and as an attempt to capitalise on the emotive issue of local people losing jobs to outsiders.
Analysts and industry experts have, however, maintained that outsourcing is not new to the US, with manufacturing jobs having been outsourced before.
That is also one part of the story, agrees Terdiman. Undoubtedly, much of America's middle class working in the IT services is now worried about holding on to their jobs and their insecurity and fear is giving an impetus to the political efforts.
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This is largely because of the fact that unlike the blue-collar jobs of the manufacturing sector, it is the white-collared middle class American who stand to lose now.
"Right now, we are witnessing the slow destruction of one of the pillars that has made this country great -- the middle class. And it is outsourcing, in no small part, along with the seemingly inexorable rise of corporate influence on our government that has contributed to this trend," says a letter at Salon in response to their recent article on 'How Outsourcing Will Save The World.'
What is more unnerving is that a new wave of technology outsourcing -- involving tasks that require greater skills -- may prolong the three-year US economic downturn.
Though a section of the American audience does feel that outsourcing is all about hype and could go like the dot com bust, Gartner clearly feels otherwise.
For instance, as far as India is concerned, Gartner expects BPO revenues to touch the $13.5-billion mark in 2007, with global players contributing 65 per cent of the revenues and domestic firms 35 per cent.
"The significant cost saving typically associated with global sourcing and the continuing economic malaise in the US has created extraordinary interest among enterprises for cross border service delivery options.
"Consequently, this market segment is among the few, globally, that is getting venture capital and private equity funding," says Bob Hayward, senior vice president, Gartner Asia Pacific.
This interest in outsourcing is also likely to lead to acquisitions and consolidation among companies.
"What we will now witness is a trend wherein the large, global players acquire smaller companies with knowledge of local resource pools, culture and business practices. Many providers are evaluating acquisitions/joint ventures of smaller outsourcers looking for exit options," said Debashish Sinha, principal analyst, offshore BPO, Gartner.
China a major BPO destination
"The job loses will be not only to India, but to other countries, including China, Mexico, Philippines and Canada, due to the consolidation being experienced in the industry," Terdiman said.
China, she said, is emerging as the largest outsourcing destination, with over 90 per cent of enterprises sourcing jobs from that country.
She, however, cautioned that India's outsourcing journey is not without twists and turns and also predicted a gathering of "storm clouds" in the horizon.
Terdiman cited geopolitical concerns, including war, terrorism and SARS, backlash from government employees and over-reaction of the media in other countries, new competition and commoditisation of services as major concerns for the Indian outsourcing industry.
Meanwhile, Gartner research director Dion Wiggins said that China should not be considered as a threat but as partner to do business with.
IT services and software industry in India and China are estimated to be around $27 billion by 2006, while 40 per cent of the Chinese revenues would be from Indian firms operating in that country, Wiggins said.
Most of the IT companies would look forward to China, due to its geographical proximity with Japan, which is emerging as a leading IT nation in the Asia Pacific region, he said, adding, but with India's software skills and English speaking culture, the country would still be a leader.
India would be a big market for the US and other European nations, while China would serve the APAC region, he said.
Additional inputs from PTI
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