Euphemism is alive and well again when it comes to axing jobs in America.

For much of the past two years, the business world has been happy to trumpet the benefits of sending technology work and other tasks offshore to lower-cost labor markets such as India and Russia. But as labor advocates and politicians have fumed over the "offshoring" trend, businesses are changing their terms, if not their tune.

It's not too different from the way corporations in an earlier era employed softer words for "layoffs," like "downsizing" and "rightsizing." "Offshoring" is giving way to phrases such as "co-sourcing" and "global sourcing," said John McCarthy, analyst with Forrester Research.

"It's all part of everyone going into the offshore witness protection program," McCarthy quipped. "They're changing the title, but the activity is the same."

Earlier this year, McCarthy reiterated his view that more than 3 million U.S. services jobs will go offshore between 2000 and 2015. And he bumped up his estimate of near-term lost jobs by some 240,000, meaning he expects a total of 830,000 positions to have moved offshore by 2005.

Defenders of offshoring say it ultimately benefits the U.S. economy and U.S. workers, and that protectionist measures would result in lower economic growth and higher unemployment.

Critics respond that offshoring costs U.S. workers jobs and threatens the country's long-term technology leadership.

The exact scope of offshoring has been hard to assess. A recent report by Congress' research arm concluded that government data offer limited insight into the extent of offshoring and its effects.

Meanwhile, companies involved with sending work offshore have come up with alternative labels for what they do--labels that avoid touching the latest political third rail. For example, India-based Infosys Technologies touts its "Global Delivery Model." When serving a U.S. client, some Infosys employees work at the company's site. But the majority of Infosys' employees are in India.

IBM, which has been expanding its operations in India, has moved away from the related term "outsourcing." Outsourcing refers to a business farming tasks out to companies like IBM--which may complete the work abroad. Big Blue avoided using the word "outsourcing" in announcing deals with two energy companies and with two German banks that all involve IBM taking over certain operations.

Big Blue described some of the deals as "business process transformation services" agreements and said the phrase refers to an emerging market category.

Corporate language transformations related to offshoring rile populist commentator Jim Hightower. "Excellent news, Americans! U.S. corporations say that they are no longer 'offshoring' our middle-class jobs," Hightower wrote in an essay published Friday. "Does this mean that greedheaded CEOs are no longer shipping our manufacturing, professional, and high-tech jobs to India, Pakistan, Russia and other low-wage centers? Of course not. It simply means they no longer say the word 'offshoring.'"

CNet Asia

Offshore outsourcing of U.S. jobs is a growing trend that cannot be ignored, according to a final report released today by the General Accounting Office (GAO). The GAO plans at least four additional studies in the coming months to further investigate this issue.

The GAO got involved after two Seattle-based labor unions, SPEEA-IFPTE and WashTech/CWA requested congressional action and research into the explosive new trend of high-end manufacturing and service job moving overseas.

"This study is a good first step," said Charles Bofferding, executive director of SPEEA. "It recognizes that outsourcing is growing and a troubling trend for our workers and our country."

"The GAO has clearly stated in this report that outsourcing of U.S. jobs abroad can not be ignored, and the government needs to act in order to address the issue in terms of data collection and policy solutions," said Marcus Courtney, WashTech president.

Released in Washington, D.C., the study was made at the request of Washington state Reps. Adam Smith (D-9th District) and Jay Inslee (D-1st District). The congressmen were prompted to make the request by the Society of Professional Engineering Employees in Aerospace (SPEEA), IFPTE Local 2001 and the Washington Alliance of Technical Workers (WashTech), CWA Local 37083.

SPEEA represents technical workers and engineers primarily at The Boeing Company. WashTech represents high-tech workers in the software industry. Both unions have experienced union members losing jobs as companies send more work to lower cost workers overseas.

The study does not make recommendations regarding the outsourcing trend. Union officials said they will continue to work with lawmakers to find solutions that encourage corporations to keep jobs in the U.S.

"We thank our congressional leaders for pushing for this study and welcome their help as the study continues," said Bofferding.

The actual scope of the study was reduced by the GAO to look primarily at service jobs. The GAO plans four additional studies to examine corporate offshore outsourcing's effect on federal procurement, trade and international affairs, critical capital/infrastructure and income security for workers. No release dates have been set for the additional reports.

In addition to job loss, the unions are concerned about the transfer of technology that occurs when corporations send high-level work overseas.

"Not only is Boeing creating jobs overseas, we are teaching them how to make airplanes," said Dave Landress, a member of SPEEA's Executive Board. "We're creating another competitor for our own products."

SPEEA, IFPTE Local 2001, AFL-CIO, represents 20,000 technical and professional workers at Boeing in seven states.

WashTech is a local of the Communications Workers of America and is actively organizing high-tech workers in the U.S.

TMCnet

Among those considering a bid is U.S. private-equity firm Texas Pacific Group, which has had a long relationship with GE, it said, adding that GE provided the financing for Texas Pacific's first deal, its purchase of Continental Airlines. Other investment firms and outsourcing companies have looked at the business during the past year, including Warburg Pincus.

General Electronics a pioneer in business processing in India, is looking to cash in on its giant offshore operations there, setting a price tag of as much as US$1 billion, the Asian Wall Street Journal reported, citing sources familiar with the situation.

It said GE is in talks to sell all or part of GE Capital International Services (GECIS), a division it started in 1993 in Delhi as part of GE Capital. The division employs 17,000 people, with 12,000 at four centers in India and another 5,000 at operations in Hungary, Mexico and China, it said.

Largest Western Operation in India

With revenues in 2003 of $400 million, the newspaper said it is the largest business-processing operation in India by a U.S. or European company.

Earlier this year, GE Chairman and Chief Executive Jeffrey Immelt told investors that GE could save as much as $1 billion annually by simplifying its organizations and outsourcing.

The move comes at a time when outsourcing by U.S. companies is speeding up and the industry is consolidating in India, giving the company an opportunity to profit from some of its investments, the report said.

GE could also save money by outsourcing more of its operations instead of having a captive unit, said John McCarthy, a researcher with Forrester Research in Cambridge, Mass.

Texas Pacific, Warburg May Bid

"What GE does today, the rest of the world will be doing two years from now," he said.

The report said that, while no deal appears imminent, discussions are continuing as potential buyers weigh the value of business and the terms of any transaction.

Among those considering a bid is U.S. private-equity firm Texas Pacific Group, which has had a long relationship with GE, it said, adding that GE provided the financing for Texas Pacific's first deal, its purchase of Continental Airlines.

Other investment firms and outsourcing companies have looked at the business during the past year, including Warburg Pincus and one of India's leading outsourcing companies, Wipro Ltd. For many, however, the price was too high, according to people familiar with the situation.

GECIS started out handling basic insurance claims and answering calls from customers of GE's commercial- and consumer-lending units and has moved into developing sophisticated software for analytics, data mining and business modeling.

Most Clients GE Businesses

The majority of its clients are GE businesses, but it also works with major companies in the financial, transportation and retail industries.

Since GE is the main customer, the conglomerate may prefer to sell to a financial company or another complementary player rather than an industry buyer that would be considered a competitor.

GE has also told some bidders that it would guarantee only 18 months of work before doing competitive bidding with other companies, the report said, citing one person familiar with situation. At the same time, a buyer will be able to attract new customers from outside GE, using the extensive capabilities developed at GECIS over nearly a decade.

Any deal could be affected by political factors in the United States, where outsourcing is a significant campaign issue, the report said. Several states have vowed not to give contracts for work that would be done offshore, which could initially slow down any buyer's efforts to expand the business beyond GE.

Sources

India is still the most desirable location in terms of cost and quality for call centre offshoring, but Britain continues to be seen as a lower risk option while China is being snubbed.

The results - from a survey conducted by specialist law firm Technology Law Alliance and call centre publication CCF - also confirmed that offshoring from Britain was continuing despite criticism.

Some 44 per cent of respondents said they had either engaged offshore outsourcing companies or were thinking of doing so in the next 12 months.

Two-thirds of those considering outsourcing said they were looking to move the function to India while the remainder were evenly spread among Europe, South Africa and Australia.

Legal director of Technology Law Alliance Jagvinder Kang said India's success went hand in hand with it delivering a cost-effective, high quality service.

China presented problems for British firms, he said.

"There was a lack of responses to China being a preferred destination for offshore call centres, which seems to tie in with the view that although China is making inroads into the technology offshore outsourcing sector, language and accents are still presenting themselves as obstacles."

Indian Abroad News Service (IANS)

Global sourcing of product development will no longer be an optional strategy by 2007-08, according to a study conducted by META Group. With offshore outsourcing being accepted as a key strategy to stay competitive in the globalised economy, the production cycle for technology-centred products will require global resources and global delivery, a study by Wipro Technologies has said. 

The study details Wipro's engagement with one of the world's largest semiconductor makers in the area of System on Chip (SoC) development. Wipro's SoC centre (based out of India) provided extensive SoC integration activity, along with customisation and development of design modules and helped in 20 per cent reduction in product realisation thus improving client's time to market for its chipset with a first silicon success rollout, the study said.

"Next-generation products will be developed with the globalisation model already deployed by large companies, and will extend down to regional and specialty players enabled by offshore outsourcing," said Dean Davison, Vice-President and Director at META Group. "Indeed, products developed without global resourcing will be late to market at uncompetitive costs by 2008-09."

Commenting on the findings, Ramesh Emani, President, Embedded & Product Engineering, said that "the study validates the trends we are witnessing in our business. Wipro, with its vast expertise spanning over two decades in several domains is committed to help its customers benefit from its global delivery model."

First manufacturing jobs went offshore, now tech and high-level business jobs are following, according to eMarketer's latest report, Offshore Business Process Outsourcing.

International research agency Gartner has predicted that India's overall share in the offshore business process offshoring market would slip from the present 80 per cent to 55 per cent by 2007.

Sujoy Chohan, vice-president and research director of Gartner's "Offshore BPO", said even though India would continue to be a dominant player, other countries would come up fast.

"The skill set required for BPO services is available in abundance across many English-speaking countries and even basic non-language dependent work can be offered by countries whose native language is not English.

"This has thrown up a number of countries which can and are directly competing with India. These different countries together will erode India's competitive market share," Chohan said.

Gartner said the global offshore BPO market was likely to be around $ 27 billion by 2007. India's pie would rise from $2.3 billion to $14 billion during the same period but its overall share will fall.

Chohan pointed out that the Indian IT industry and government would have to work together so that there was abundance of people with English-speaking skills.

"The issue is being addressed by the private sector but needs greater government involvement. The ministry of education needs to step in and work closely with the industry to assess what needs to be done," he said adding that the most important element for offshore BPO industry was to ensure the continuous flow of trained workforce.

He said the situation was not alarmist and could be rectified if the government puts into pace a strategy and timeline to achieve certain growth and infrastructure targets to compete in the marketplace.

The good thing, however, is the industry has already begun to admit that government assistance is essential and required to tackle the immense infrastructure issue facing the industry. "The industry did not want to accept this just two years ago," he pointed out.

A number of countries such as China, South Africa, Philippines, Australia, New Zealand, Mauritius, Malaysia have woken up to the job creating potential of BPO business and trying to put together integrated strategies to develop BPO business.

MUMBAI, India (CNN) -- After the excitement of a 10 percent economic growth rate at the start of 2004, India's economy is settling back into a pattern that is predictable if vaguely unsatisfactory.

This year Asia's third largest economy will grow by at least 6 percent, according to the latest forecasts by the government.

In virtually every other country in the world, that would be a cause for celebration. But India's needs are more pressing.

Yes, say economic observers, 6 percent is good. But it is not enough if India is to find jobs for the millions of people who join the workforce every year.

India needs at least 7.5 percent to bridge the employment gap, according to experts such as Morgan Stanley's chief economist for India, Chetan Ahya.

Others have even higher goals.

Leading Mumbai businessman Adi Godrej, head of the Godrej Group, told CNN: "This country can and should grow at 10 percent year."

He says that with more reform, including in the labor market and an overhaul of the indirect tax structure, "10 percent gets to be realistic."

That rate is more than being achieved in hot sectors such as IT services, outsourcing, pharmaceuticals, health services, retailing and automotive, but there are woeful inadequacies in the overall picture.

The biggest deficiency is in physical infrastructure. In the key areas of roads, rail, ports, power and water, India lacks the prerequisites for sustained high growth.

Ahya told CNN that there are pockets of good performance in the economy.

He pointed to a "sea change" in telecommunications and IT infrastructure over the past five years that had created the right conditions for business process outsourcing, one of the areas where India's economic prospects are brightest.

But according to Ahya, two fundamental problems are holding back India's economic performance: its well-documented infrastructure shortcomings, and a savings rate that is way below that of Asia's other economic giant, China.

Ahya believes India needs to lift physical infrastructure spending from 6 percent of GDP now to at least 9 percent, or $65 billion a year. In 2002, he notes, China spent $260 billion on power, construction, transport, telecoms and real estate, compared with $31 billion in India.

He says that India's savings rate of 24 percent of gross domestic product (GDP), allied with a relatively low inflow of offshore investment money, puts a brake on capital formation and restricts GDP growth to about 6 percent.

Godrej agrees. He says while the private sector is saving well, the government is dis-saving.

"If we can change this, with the right policies we could get to 10 percent," he says.

High-growth strategy

Another leading businessman, Tata Sons executive director R. Gopalakrishnan, is also an advocate of a high-growth strategy, arguing that India needs 9 to 10 percent a year to absorb labor and help reduce income disparities.

Gopalakrishnan, whose Tata Group is one of the mainstays of the Indian economy across sectors such as automotive, IT, resources, power and tourism, agrees that the government's savings rate has to be improved.

"We lose two to three percent of GDP through this," he told CNN.

Gopalakrishnan also wants the tax base widened -- something that will likely happen next year when the government is due to introduce a broad-based value-added tax.

Ahya's target is more restrained than these business sector advocates. Even so, he thinks the growth rate could rise to 7 percent-plus over the next 10 years, if India pushes through "big shift" reforms to cut its fiscal deficit and lifts savings for infrastructure investment.

These twin steps could make India a global competitor of China in manufacturing exports and create a "virtuous circle" that would see growth rates emulating the 1994-96 peak.

But first, India has to get the basics right. Ahya says the electricity sectors needs a "serious and immediate overhaul" to overcome losses in transmission and distribution which, combined with virtually free power for farmers, means there is no profitability in the business.

Unless this situation changes, he warns, there is no incentive to invest in the power sector.

Ahya says he is "cautiously optimistic" about India's prospects in the near term, but says it will require the Indian government to have the political will to make the changes.

He points to the contrast with China, where the central government has driven high-speed economic development through massive spending on infrastructure, embracing labor flexibility and foreign investment. For its part, India has followed a gradualist consensus approach that amounts to a "democracy tax" on economic progress.

10 years behind

Ahya says that India is about 10 to 13 years behind China in per capita GDP.

Long-term, it may be able to bridge the gap if it follows a program that includes developing its human capital; boosting its savings rate; increasing capital formation through foreign direct investment and privatization; kick-starting infrastructure investment; reforming the tax structure; improving labor flexibility; and decentralizing authority to encourage reform.

For now, the new government of Manmohan Singh has plenty of immediate challenges, including an inflation rate that is creeping up. Last month, wholesale price inflation came perilously close to 8 percent, driven by rising oil prices.

Even so, India has done enough recently to earn a revised ratings outlook.

Late last month, ratings agency Standard & Poor's revised its outlook on India's BB long-term foreign currency rating to positive from stable. It also upgraded the outlook on the BB+ long-term local currency rating from negative to stable.

But S&P warned India's high public debt weighed on its sovereign rating.

"The country's fiscal weakness is the worst among rated sovereigns, leaving it particularly vulnerable to economic cycles and any decline in growth rates," S&P said.

CNN

The next back-office job that goes to an Indian outsourcing company may not be moving as far as you think.

In a bid to tap new markets and satisfy customers keen to outsource to more than one location, India's back-office service providers are setting up shop overseas.

Infosys Technologies Ltd's back-office subsidiary Progeon has opened a centre in the Czech Republic, while MphasiS BFL Ltd's arm MSourcE has a contact centre in Mexico.

WNS Global Services, India's largest independent back-office services firm, is opening a centre in neighbouring Sri Lanka.
It is more from a customer perspective," said Raju Bhatnagar, president of ICICI OneSource, an outsourcing firm majority owned by India's ICICI Bank and one of its subsidiaries.

"If the vendor, however reliable, has a single delivery centre, it forces the customer to look for a second vendor outside India, rather than put all his eggs in one basket," said Bhatnagar, whose company announced the purchase of a Chicago-based business on Wednesday. "If I can bridge that gap, I can keep business from going to another vendor."

Research director of consultancy Gartner India Sujay Chohan said geographical diversity was also important for backing-up data for disaster recovery purposes and the ability to offer different language skills.

LEARNING THE LANGUAGE

"Today, Indian companies are guilty of servicing mainly English-speaking countries," Chohan said. "If you are going to support customers in Europe, you have to have something in Central Europe. It does not have the same cost levels (as India), but it has comfort levels, language skills."

A push for non-English speaking clients is what led Infosys to the Czech Republic and MphasiS to Mexico. The expansion overseas is also part of a wider global push by Indian companies, some of which are making foreign acquisitions.

Revenue from India's outsourcing industry has grown to $3.6 billion, mushrooming in and around key cities such as Bangalore, Mumbai and New Delhi. It employs 245,000 people, six times as many as five years ago.

While India has 80 per cent of the offshore outsourcing business today, Gartner estimates the country will see its market share halved by 2007.

"There are today 28 countries that have emerged on the screen in the past year," Chohan said.

"Who is going to take business away from India?" he said, pointing to countries such as Malaysia, Vietnam, the Philippines and South Africa. "It is these countries chipping away. It does not matter that some of these are high cost ... If cost was the only driver for BPO (business process outsourcing), then India would have been doing $10 billion today."

The Philippines, which already has a strong industry offering back-office services, is high on the list of overseas locations for India companies. Daksh eServices, recently acquired by IBM, and Hinduja TMT have operations there.

The need to find skilled workers is another attraction of overseas locations. Nearly half the workers in some Indian outsourcing companies change their jobs or leave the industry every year. Quality suffers as firms focus more on recruitment than on training.

Talented youngsters often leave the industry in frustration. Companies who hired aspiring, English-speaking 20-something workers have found these staff are hard to keep.

With such challenges at home, Indian firms would do well to look for talent in other countries, Chohan said.

That is exactly what WNS did by going offshore.

"Sri Lanka is a boutique business process outsourcing destination that offers highly qualified English-speaking staff with specific expertise in professional services such as finance and accounting and commercial law," said group chief executive officer of WNS, Neeraj Bhargava.