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Krishnan Thiagarajan

There's no wishing away the backlash against outsourcing. Two experts from the US share their views on taking on the wave.

GOING by the US Bureau of Labour Statistics, the spectre of `jobless recovery' paints a bleak picture on the claims of a sustainable economic recovery in the US. For the past five months till December 2003, the US economy has generated only 2.75 lakh jobs, a number which was typically added every month during the e-commerce and dotcom boom. However, in January, there has been fleeting improvement in the job numbers.

As this is compounded by an election year in the US, the prospects of an outsourcing backlash are expected to haunt the Indian software industry right through this year. At the recently concluded Nasscom Conference in Mumbai, outsourcing backlash was one of the prominent topics for discussion through the three-day conference. eWorld caught up with two key delegates from the US to get their perspective on this trend and what India can do to mitigate the adverse effects of this trend.

Jeff Lande, Vice-President, Information Technology Association of America.

Do you think that the outsourcing backlash will no longer remain a controversial issue once the US elections are over?

I think it (backlash) is going to persist throughout this election cycle and simply because you have a new President in, things (backlash worries) are not going to diminish. You will continue to have new election cycles for Congress as well as for State Houses. Until the job situation improves, people have greater comfort and leading Congressmen who are looking at this issue from the point of job losses, national security and other concerns, this trend will continue.

Will politics alone remain at play in this issue or will economics eventually take precedence over politics in the long run?

In the long run, there is no question. Globalisation is a fact of life. And the nations, such as the US, India or others benefit from this. One of the issues raised is that there has to be a level playing field. India has not opened up its markets fully. There has been some progress made, but more has to be done there. The US markets are about as open now than anywhere in the world. So, we need that level to be established.

The engineers and other white-collar workers have never really been worried about job losses in the way that the manufacturing sector has seen. This is a new phenomenon in which highly-paid knowledge workers have lost their jobs in the economic downturn.

According to Bureau of Labour Statistics (BLS), nearly 22 million jobs are going to be created between 2000-10 as against a loss of 2 million jobs due to offshore outsourcing. Do you think that job loss concerns are overstated and it is only an emotional issue?

Most people discount the BLS statistics. Part of the reason is that their data trails the most recent data that was taken at the height of the e-commerce and dotcom boom. The country is in a different place right now. When the economy was at a much higher level, the IT industry was at a different level. But if they (BLS) had made those projections, there is a good chance that these numbers will be different.

Steve C. Clemons, Executive Vice-President, New America Foundation, a think-tank in the US.

How do you think the Indian software industry can react to the outsourcing backlash during this year and beyond?

The future, I think, is a little more complicated. In the sense, it (the backlash) will not be disruptive, people can still get along with offshoring. But this has to be looked at from a couple of angles. From an Indian perspective, looking at it as an American, it will be in India's interest at many different levels to broaden the success that it has earned in the IT and software sectors into other sectors in the economy. It will then present a more coherent message and it will also lend a lot of credibility to the US.

On the US side, it is a little more complicated. I do not know what the Indian IT sector can do, except not overreact. The miracle of the later part of the Bill Clinton (US President) term was that Clinton, Robert Rubin (US Treasury Secretary then) and others convinced the Americans to accept a turbulent economy. We had a kind of robust confidence in a period of turmoil. We had as much dislocations going on then as we have now. They were then willing to swallow the bitter pill of more globalisation, more intensity and faster speed dynamics within an industry. That seems to be gone now, after the IT bubble, war on Iraq and fiscal policies. There is no just-in-time confidence left in the economy anymore.

So, what we need are other avenues. What can the Indian IT industry do?

The IT industry could, to some degree, begin recognising that it may be useful not to just advocate on behalf of India, but to advocate on something which looks broader than India's interest. I think the concept of building a `Global Middle Class' and looking at benefits that come to the US and the developed world from this area. This will ensure that it is no longer a zero sum game, where somebody automatically wins and somebody loses.

Do you subscribe to the view that services is the last bastion for the US economy and once this falls, it spells trouble for the developed world?

I think it is hard to predict where the US economy will go from here. But we are not going to lose all our services sector. Our problem is not in the high end, it is in the mid level of the services market, where people are 40 years old who are very hard to retrain. And I think these positions are something which Americans will be upset about. Without retraining and without people moving up, the only answer is that they will have to move into positions which will be lower-paying and they will have to work harder. That is the sad message of what competition is creating. People will resent that, but on the whole there will be new opportunities created by innovation and enormous growth.

There has been a perversion of incentives and erosion of trust that I think America has to deal with. It is one of the problems. Offshoring is a relatively small issue, but unfortunately it has fallen into the grey area of distrust about the character and actions of the American management. And a lot of people have not thought that through very well and till that happens, this will remain one of the key issues.

maverick@thehindu.co.in

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