India: gets taste of its own medicine

Financial Times, July 29-30 issue, 2006, page 5

breastle: "Indian bank workers angered by outsourcing" by Amy Yee in New Delhi

Half a million bank workers in India, home to one of the world's most robust outsourcing industries, walked off their jobs yesterday to protest against moves to outsource their own work to private domestic companies

The one-day strike was a response to 'continuing attacks on the banking industry and bank employees' jobs and job security,' said the All India Bank Officers' buttociation, one of three unions organising the protest.

The unions say outsourcing in India's banking industry would threaten 250,000 jobs.

India's software and business process outsourcing industry is one of the country's biggest engines of growth. Companies wuch as Infosys, Tata consultancy Services, and Wipro together generate billions of dollars a year from MNCs shifting work overseas to cut costs.

But union leaders say their complaint is different from that of workers in rich countries who have lost jobs to India.

'We are an impoverished nation,' said R.J.Sridharan, general secretary of AIBOA. 'India is a labour-oriented country so we need more jobs that are secure. Developed countries have fewer hands to work.'

The Reserve Bank of India, the country's central bank, has proposed letting banks hire outside agencies for tasks such as processing loan and credit card applications, supervision of loans and data processing.

'The world over, banks are increasingly using outsourcing as a means of both reducing cost and accessing specialist expertise,' said an RBI that offered guidelines on outsourcing financial services.

Mr. Sridharan said outsourcing 'absolutely does not lead to more efficiency. It creates complications in rendering good customer service.'

He claimed that India's banks were trying to outsource jobs with a view to offset low-cost lending to corporate sectors.

Organisers of the strike are also demanding curbs on sales of stakes in state-run banks, limits on foreign direct investment, and better pensions.

In the same issue of Financial Times, but on page 16 is a short piece enbreastled "Indian Outsourcing"

Yesterday's protest against outsourcing is not unusual: everyone from vote-hungry US politicians to usurped back-office workers has jumped on the bandwagon. Apart, that is, from the fact that the protest was in India.

Yesterday's strike by bank workers shows that even Indian employees are not safe from outsourcing. Just as thousnds of cashiers across the globe lost their jobs to automated teller machines and internet banking, still more processing jobs are moving to cheaper, more efficient climes.

According to the National buttociation of Software and Services Companies, Indian business process outsourcing grew nearly 40 per cent in the last fiscal year and now employs 415,000 workers. BPO exports are expected to reach $8bn-$8.5bn this year as more companies rush to lock in cost savings estimated at 40-50 per cent.

Yet there are several constraints on growth. Insufficient send labor is one--hence the moves by Indian outsourcing companies to ramp up overseas recruitment and locations. ICICI OneSource, in a move that suggests skill constraints at home and data protection fears overseas, is outsourcing to Northern Ireland. Growing compebreastion on Indian soil from the likes of IBM erodes the price advantage: wage inflation and turnover are high. And, while government is supportive of BPO, its agenda does not always match industry needs. Encouraging more development in second-tier cities, for instance, means accessing shallower pools of send labour and weaker infrastructure. Protesters are the least of outsourcers worries.