U.S. companies expanding operations in India
By Raju Chebium
Gannett News Service
WASHINGTON — Although the U.S. economy is sluggish and 8.6 million people are unemployed, American companies are hiring workers by the hundreds, building posh offices and signing new business contracts — in India.
More and more Fortune 500 companies are expanding their operations in India or farming out work — outsourcing, in business parlance — to the world's most populous democracy, which has more than 1 billion people and a large English-speaking, college-educated and tech-savvy work force.
"You are increasing the competitiveness of U.S. companies globally. You are lowering the cost to consumers substantially. You are improving in many cases the quality of service to consumers because you have (a) highly motivated ... work force that has become sort of the world standard," said Michael Clark, executive director of the U.S.-India Business Council.
The U.S. government doesn't keep up-to-date numbers on the number of companies expanding operations in foreign countries. Business groups don't keep totals of how many people U.S. companies as a whole are employing in India. However, analysts say the number of companies looking to India is rising quickly.
A total of 3.3 million U.S. jobs and more than $136 billion in wages will be sent overseas in the next 15 years, John McCarthy of Forrester Research wrote in November. In an interview, McCarthy said two-thirds of those jobs and money are bound for India, where the federal and state governments and private high-tech groups have joined hands to market themselves aggressively.
This trend worries unions and other critics, who say U.S. companies should be mindful of what this country of 285 million people needs — jobs — and not be fixated just on their bottom lines.
Saving money
Companies save hundreds of millions of dollars by paying Indian workers less money than U.S. workers, analysts say. They are quick to add that the Indians aren't working for slave wages. In fact, those working for or contracting with U.S. firms make much more money than the rest of the country's work force — one big reason Indian unions haven't objected to the growing American presence.
By saving millions of dollars in wages and taxes for U.S. government programs such as Social Security, U.S. companies are able to cut their overall production costs — and pass along the savings to domestic consumers in the form of low prices, business groups say.
At the same time, U.S. companies are getting some of the world's best products and services out of India, where the technical sophistication and customer care have evolved to world-class standards, the analysts say.
"This isn't five guys working out of the back of a scooter any more," said McCarthy of Forrester Research, a respected business-analysis firm in Cambridge, Mass.
After the U.S. economy softened in mid-2000, companies began to cut costs. Some firms fired thousands of workers, contributing to December's 6 percent unemployment rate, a level reached in April and November but otherwise the highest it has been in eight years. Some firms closed dozens of plants and offices. And many companies began sending work to India.
Big-name computer companies such as Microsoft and Dell; telecommunications companies including IBM Corp.; such credit-card companies as American Express; and conglomerates including General Electric, which makes everything from light bulbs to plastics, are doing robust business in India.
Indians increasingly are processing payments, answering customer calls, handling accounting tasks, developing software, and even managing payrolls for their U.S. clients. The intensifying U.S.-India business relationship is transforming the Indian economy and raising wages in what is one of the most impoverished countries in the world.
Many U.S. companies have set up sleek new offices in such cities as Bangalore in southern India, considered India's Silicon Valley.
A more recent trend: U.S. biotech companies doing cutting-edge research in areas such as genetics and conducting clinical trials there, said Sudhakar Shenoy, a native of India who owns a Northern Virginia high-tech consulting company called Information Management Consultants.
Flight of jobs
Countries such as Ireland, the Philippines, China and Russia also get work from the United States, but India is beating the competition hands down, McCarthy said.
Unions and other critics argue that what is good for a company's bottom line isn't necessarily good for the U.S. economy. They say that manufacturing jobs — in industries such as textiles — have been going overseas for the past 30 years or so as this country has entered into global trade deals.
Now, high-tech jobs are following the same trend during gloomy economic times.
Thea Lee of the AFL-CIO, an umbrella group for labor unions, said U.S. companies should try harder to expand operations domestically.
"Companies say they can't find workers. That's nonsense. These companies are not willing to pay their workers what they are worth," Lee said.
"You can't have a healthy consumer economy if people don't have decent jobs.
"That's sort of a long-term question for American companies," she said. "If they don't show the loyalty to their countries and communities, there may come a point where they may have no one to sell to."
If the U.S. government prevents companies from doing more business in India or any other foreign country, the U.S. economy would suffer, Shenoy warned.
"You and I buy things made in China. Are we losing jobs by doing that?" he asked. "How is that any different from doing software in India or doing your back-office operations in India? Free trade means you should be able to do anything you want anywhere you want."
