Contact l Sitemap

home industries issues reasearch weblog press

Home  » Issues » Human Rights

India: An Outsourcing Giant Fights Back

by Saritha RaiNew York Times
March 21st, 2004

To his compatriots, Azim Premji is the Bill Gates of India. By transforming his family-owned vegetable oil business into a global technology powerhouse, Mr. Premji has become the country's richest citizen, with a net worth hovering around $8 billion.

Outside India, however, Mr. Premji is not exactly Mr. Popularity these days. A British newspaper recently went so far as to describe him as "the man who wants to take away your jobs." That has to do with the nature of Mr. Premji's business: his company, Wipro, is one of the biggest outsourcing concerns in the world.

At Wipro's sprawling suburban campus near Bangalore, enthusiastic young engineers in blue-and-cream cubicles write code, build software and maintain computer systems for a host of American companies, including Lehman Brothers, General Motors, Home Depot and Boeing. And they do it for a small fraction of what it would cost these companies to do the work.

But in the United States and elsewhere, Wipro and the rest of India's growing technology services industry are increasingly denounced as a major cause of job losses. Senator John Kerry of Massachusetts, the likely Democratic presidential nominee, has called chief executives who shift work overseas "Benedict Arnolds."

Mr. Premji, 58, contends that Americans are blowing the issue out of proportion. Still, as he sits in his elegant office, gazing through its huge glass windows at the eucalyptus trees in the distance, he allowed that he is feeling the pressure. "How can you ignore such rooftop shouting against outsourcing unless you are an ostrich with your head stuck in the sand?" he said.

So the dapper, ordinarily reclusive Mr. Premji has reluctantly turned himself into one of the industry's chief spokesmen and defenders. Early this month, he set out on a 48-hour mission to the nation's capital, New Delhi. In meetings with India's most influential policy makers, including Prime Minister Atal Bihari Vajpayee, he conveyed a succinct message: the political backlash in the United States is potentially explosive, and India needs to deal with it as a national priority.

As his audience in New Delhi understood well, protectionist measures in the United States could choke the industry. Legislation could curb the outsourcing of government work, and caps on the number of visas issued to foreign workers limit Wipro's ability to place Indian programmers and managers at American sites.

Although Secretary of State Colin L. Powell, in New Delhi last week, assured Indians that the Bush administration would not try to halt outsourcing of high tech jobs to their country, Mr. Premji isn't taking anything for granted. He has asked government ministers to publicize India's purchases of American products and to underscore the advantages of doing business with India. For example, he said, the United States financial services sector alone has saved $8 billion in the last four years by outsourcing to India.

Mr. Premji, Wipro's chairman, has also spent the last few weeks collecting a variety of statistics. In an interview, he rattled off a few of them: India's technology industry employs 800,000 people, he said, while the American technology industry employs 10.2 million. And 300,000 people work in Indian call centers, compared with six million in the United States.

The point, he said, is that Americans are unduly worried. "We are not dealing with cold reasoning here,'' he said, "but with emotions of Americans whose personalities changed after 9/11 and who feel threatened by anything that hurts their security, their wealth and their jobs.''

Like many others, Mr. Premji argues that shifting jobs to lower-cost countries will benefit the United States in the long run. "Offshore outsourcing is another example of U.S. innovativeness to stay competitive by reducing costs and cycle times," he said.

Still, the heightened sensitivity is hard to miss, even with Mr. Premji's best customers. At many American corporations, top executives are concerned that even an inkling that they are meeting with Wipro will put employees on red alert, said Wipro's president, Girish S. Paranjpe.

According to Mr. Paranjpe, a prospective customer who was catching a flight recently to Bangalore received a call from his 86-year-old mother, who asked if he was taking American jobs with him.

"That call must have played on his mind all through the trip," Mr. Paranjpe said. Increasingly, he said, customers seem conflicted. "The head wants to offshore, but the heart holds them back," he said.

So far, at least, there are few signs that the controversy is hurting Wipro's business. On one recent day, the company had 17 clients visiting at once, and a mad scramble ensued for conference rooms. Over all, the company said it expects revenue to reach $1.3 billion in the 12 months through March, up 44 percent from the previous 12-month period.

The story of Wipro is as unconventional as that of its chairman. Upon the death of his father in 1966, Mr. Premji dropped out of Stanford to return to India and take care of the family's cooking oil company.

Western Indian Vegetable Products, as the company was then called, was founded in 1945. It was small, unfocused and, much like other family-run Indian enterprises of the time, not professionally managed. For several years, Mr. Premji struggled to keep the business afloat.

The break came after India's government kicked I.B.M. out of the country in 1977. Wipro eventually stepped in with a homegrown alternative. The large research and development team assembled by Mr. Premji would later offer technology services, billed by the hour, to big American companies like Intel and Texas Instruments.

As the global market for outsourcing ballooned, Wipro flourished. To be closer to customers, it set up an American headquarters in Mountain View, Calif., in February last year. In 1999, it hired Vivek Paul, a former General Electric manager, as its chief executive and was listed on the New York Stock Exchange. With $125 million worth of acquisitions in the last two years - including a call center business, Spectramind, and two boutique high-technology consulting businesses in the United States - Wipro has moved closer to its goal of becoming a full-service outsourcing company.

Today, software and related services account for 92 percent of Wipro's revenue, though most Indians identify the company's brand by other products that it now makes: soap, diapers, light bulbs and medical equipment.

"Looking back, neither did we dream that outsourcing would be so big, nor did we imagine that we would face such fierce opposition to our business," Mr. Premji said.

In the last 11 months, as the debate about layoffs at American corporations has reached fever pitch, Wipro has roughly doubled its work force, to nearly 30,000. Most of its workers speak the same impeccable English as Mr. Premji and perform a wide variety of tasks for United States companies, from staffing telephone help desks for the baggage-claim services and frequent-flier program of a top airline to designing the car navigation system for a leading carmaker. Some workers even interpret X-rays for a Boston-based hospital. (Increasingly, Wipro's clients are asking it not to reveal their names.)

"They are undoubtedly the top layer,'' Lakshmi Narayanan, chief executive of Cognizant Technology Solutions, an outsourcing rival based in Teaneck, N.J., said of Wipro. "When we compete against them, we have to put the best foot forward."

Given the political environment, Wipro strives to make outsourcing risk-free for its customers - at least as a business proposition. "Failure is no longer an option; on the other hand, every project needs to be a resounding success," said Mr. Paranjpe, who oversees Wipro's banking, insurance and other financial outsourcing businesses.

But the controversy has created additional management challenges. Mr. Paranjpe's prospective customers are peppering him with questions about how other companies are dealing with the transition to outsourcing. "They ask: 'What do we communicate to employees? When and how do we do it?' " he said.

In recent months, another manager said, clients were so nervous about the sentiment against outsourcing that they had Wipro take their company names off the Wipro Web site.

Mr. Paranjpe and other top managers advise companies to be forthright in their communications with employees. "We tell them, instead of sending a vague, generic e-mail or leaving a voice mail and sending all the employees into a tizzy, define the exact scope of your offshoring activity," he said.

The technology services industry also remains very competitive, and executives at Wipro see its primary mission as holding its own against competitors like I.B.M., Accenture and Electronic Data Services.

Recently, after staving off bids from three rivals for a $50 million, three-year project with an American company, Vishal Talwar, a business analyst at Wipro who sealed the deal, was jubilant. Mr. Talwar, an intense-looking 25-year old, was hired 11 months ago from the campus of a top Indian business school. During the week, he prospects for new business. On weekends, he and the two software engineers with whom he shares an apartment play soccer, watch Bollywood movies or hang out at a Bangalore pub.

Mr. Talwar says he and his co-workers have never had it so good. "With outsourcing, at least there is a job at the end of a graduate degree in India," he said. Entry-level positions for M.B.A.'s like him pay more than 600,000 rupees a year (about $13,300). Mr. Talwar says he is expecting a 25 percent raise soon.

But he is hardly oblivious to the outsourcing furor. After he closed his recent deal with an American company, he said its executives understandably did not want to crow about the 30 percent cost savings from shipping the work to India. "They said they could handle a leak but did not want to go straight on the Lou Dobbs show," Mr. Talwar said.





This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.