Also read Laid-off Tech Workers Seek Government Benefits (They send the jobs overseas, but we all pay the cost)
Battered by the tech slowdown, EDS is shipping white-collar jobs offshore to catch up with low-cost competitors.
The new Electronic Data System office in Mumbai (formerly Bombay) is half a world away from company headquarters in Plano, Tex. Getting to this Indian office requires a bumpy two-hour drive from downtown Mumbai. At every stoplight women dressed in rags and holding emaciated, dull-eyed infants tap car windows to beg. In the slums lining the roads, thousands of people live crammed into dirt-floored rooms, sheltered from monsoon rains by plastic sheets. At the end of the drive is a heavily guarded, new office tower that rises above the slums. This is where Amit, 24, works. "This is Andy. How may I help you?" he says politely, hour after hour, to the Midwesterners who have forgotten their e-mail passwords or need the phone number of a colleague. EDS hired Amit and 500 of his colleagues--young men and women dressed in khakis or saris--to answer phone calls and e-mails on behalf of American companies that have outsourced tech work or customer service calls to EDS.
Amit and colleagues are paid $1.25 an hour. His counterpart in the U.S. would get $10. On that difference rests whether or not EDS can wiggle itself out of deep trouble. Victimized by cheap outsourcing by competitors, EDS is playing the low-cost-labor game itself now. It is rushing to hire thousands of mostly Asian college graduates like Amit, who are desperate for the kinds of jobs found in the U.S. Frantic to cut costs, EDS plans to hire 13,800 workers by the end of next year--a tenth of its current global work force of 137,000--in low-wage countries like India, Malaysia, Hungary and Mexico, places where starting pay is as low as $2,400 a year. Meanwhile, EDS plans to lay off at least 2,750 higher-paid workers, mostly in the U.S. and Europe.
Companies as varied as General Electric and Morgan Stanley are making the same calculation. White-collar jobs--in engineering, programming and accounting--are leaving America's shores for low-cost locales at a pace of nearly 4,000 a week, according to Forrester Research. The U.S., Europe and Japan combined are losing 600,000 a year, says McKinsey & Co.
Cheap labor is the motivation for these companies; for EDS it's the heart of new Chief Executive Michael Jordan's strategy to catch up with the competition. Low-cost outsourcing companies like India's Wipro (NYSE:WIT - News) and Infosys (NasdaqNM:INFY - News) are snatching away business, while such rivals as IBM (NYSE:IBM - News) and Hewlett-Packard (NYSE:HPQ - News) are aiming squarely at EDS' core business--running the computers of big corporations. Hurt also by the slowdown in tech spending and unprofitable contracts, EDS' second-quarter earnings dropped 56% to $138 million and its credit rating was cut to just above junk.
"The concepts of low cost and high value must be present in every action we take, in every service we provide, in every piece of new business we pursue," Jordan told employees in July. Jordan took over when Richard H. Brown was fired in March after unexpectedly disastrous third-quarter results led last year to a Securities & Exchange Commission investigation, which continues.
Jordan plans to triple the number of Indian workers to 3,500 by the end of next year. Indian programmers are maintaining old software written in the U.S.--some of it in Cobol--and making it work alongside newer programs. Indian keypunchers are typing in address changes for American workers who notify their companies they have moved. Others are updating computerized records to keep paychecks and 401(k) benefits going to the right place. EDS' U.S.-certified CPAs in Chennai (formerly Madras) are preparing corporate tax returns for an American manufacturing giant and doing bookkeeping tasks outsourced by other big companies. (EDS won't name its clients.)
The picture is the same companywide. In the same month that Jordan said hewould lay off thousands in the U.S. and Europe, EDS announced the opening of the Mumbai office and another in Auckland, New Zealand. It is scouting for bigger offices in Malaysia, where 100 jobs will be added in the next 18 months to the 400 already there. Workers do such jobs as processing bills for phone companies, handling expense report payments and writing code to keep computer systems from overloading. "I can offer someone the same capability at half the price," says Michael Stockwell, managing director of EDS Malaysia.
Why half the price when wages are just one-tenth? Higher expenses for new computers and long-distance phone bills account for some of the spread. Wider profit margins are part of the picture, too; suppliers don't pass along all their labor savings.
Jordan's strategy is even playing out at EDS unit A.T. Kearney, its troubled management-consulting firm. Jordan isn't hiring cheap consultants in India--not yet, anyway--but he is hiring the back-office support they need. So far Kearney has hired 50 workers for a new office in New Delhi. They sit next to 75 empty cubicles that are scheduled to be filled by the end of the year as layoffs claim the jobs of Kearney's staff elsewhere. The consultancy, based in Chicago, employs 5,000 people.
Half the Indian workers prepare PowerPoint presentations for the firm's six-figure consultants in the U.S. or Europe. Others help maintain Kearney's computer network and Web sites. The techworkers earn about $4,500 a year compared with about $45,000 a year for workers doing similar jobs in the U.S.
To overcome resistance from U.S. managers, Kearney's Indian executives had researchers do work overnight that couldn't be finished the same day in the U.S. When the quality of the overflow work proved first-rate, more responsibilities were assigned to Delhi. "It is very addictive, once companies learn what is possible," claims Chandramowli Srinivasan, head of EDS and A.T. Kearney operations in India.
There are obstacles big and small, the least of them American pseudonyms like "Andy." Indian workers who take phone calls for EDS clients attend weeks of classes to learn to speak with American accents and idioms. And it's too early to say whether certain white-collar work can be done so many miles and time zones away without foul-ups.
There's also a price to be paid in angry and anxious workers. "I'm sure I lost my job to offshoring," says Richard Randall Mohler, 51, an EDS programmer from Midland, Mich. who earned $68,640 a year until he was let go last year. That job in India pays about $6,500 a year. Mohler remains unemployed and says his former colleagues at EDS are worried, too. "They are all scared to death," Mohler says. "When you can get the same job done for a fraction of the cost, it puts everybody on edge."
Is Jordan the bad guy? If he doesn't export jobs, someone else will.
Mindfully.org note: But if, one by one, corporations decided to act in an ethical manner, then the practice would slow to a halt.
Qualified workers available, per year Mumbai Manila Kuala Lumpur Shanghai India Philippines Malaysia China Customer call center 35,000-45,000 9,000-11,000 6,000-7,000 6,000-7,000 $1.50/hr $1.47/hr $2.19/hr $2.50/hr Back-office finance and accounting 14,000-17,000 9,000-11,000 7,000-9,000 12,000-15,000 $1.35/hr $1.73/hr $1.86/hr $2.03/hr Electronic document conversion 110,000-140,000 11,000-14,000 20,000-25,000 18,000-23,000 70 cents-$1/hr $1.07/hr $1.47/hr $1.50/hr
Electronic Data Systems Corporation, EDS
Who We Are
Founded in 1962 as Electronic Data Systems Corporation, EDS is the provider of choice for clients looking to extract maximum returns on their IT investments. As the world’s largest outsourcing services company, EDS is built on a heritage of delivery excellence, industry knowledge, a world-class technical infrastructure and the expertise of its people.
We support the world’s leading companies and governments in 60 countries.
Here are the numbers:
Employees: approximately 138,000
Clients: more than 35,000 business and government clients around the world
2002 revenues: $21.5 billion
2002 total contract signings: $24.4 billion
Our Strategic Intent: EDS will be the
premier global outsourcing services company. This position will be
built on providing the industry’s most cost-effective, high-value IT
outsourcing services.
What We Do
With a singular-minded outsourcing focus, EDS is uniquely positioned to support today’s business-minded CIO seeking agile solutions. Through our unified global IT outsourcing business, we deliver best-in-class mainframe, data-center, help-desk and desk-top services, application maintenance and development, and increasingly business process outsourcing and transformation services. Client solutions are aligned with our clients’ business needs. Through our consortium approach, clients receive best-of-thought EDS solutions combined with best-of-breed technologies from like-minded hardware and software providers.
Our IT professionals manage more than 1 million applications and more than 2.5 billion lines of code. The global leader in desktop services, we support more than 3.3 million desktops worldwide. We also manage about 50,000 servers and provide Web hosting for about 900 clients.
EDS brings together proven experience, vast industry knowledge, the best technology and forward-looking innovation to enable business and government clients to achieve maximum returns from their IT investments.
source: http://www.eds.com/about_eds/en_about_eds.shtml 12sep03
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