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Offshore IT and Call Centers Are Now Mainstream

As recently as the mid-1990s, the notion of a company shifting its entire programming department to Bangalore or Moscow was considered avant-garde, if not downright radical. The basic concept of saving money by using knowledgeable, but lower-paid employees was still the same, but telecommunications and computer technology had not advanced enough to make it sufficiently practicable. And besides, there simply weren't enough companies brave enough to be the first in their industry to take the plunge. The same was true of call centers and most of the examples discussed in Chapter 4.

But now, a mere decade later, it's a mainstream concept. A 2002 survey by Forrester Research estimated that "demand for offshore outsourcing will account for 28% of IT budgets in Europe and the U.S. within two years,"4 and a more recent study by the Gartner Group indicated that by 2004, eight out of ten CIOs in American companies had "direct marching orders to move offshore at least part of the technology services they provide to their businesses." Even more significantly, the study found that "four out of ten companies will already have done so."5

Computer companies ranging from IBM to Microsoft, Oracle, Unisys6, and Dell have set up programming centers in India, China, Russia, and other countries in Eastern Europe. Meanwhile, banks, Wall Street firms,7 and insurance companies and other information-intensive companies with large IT departments (such as General Electric) have done the same. Also, call centers and help desks are being set up by credit-card companies, consumer appliance companies, and dozens of other types of companies.

Of course, the average consumer doesn't know or care where Microsoft or Citibank carry out their software development work. But they do know whether they're talking to a customer-service representative who has a slightly different accent and whose conversation appears to be punctuated by ever-so-slight phone delays. Reactions from consumers range from indifference to slight bemusement to mild hostility to occasional outrage—but what will it be like five years from now, or ten years from now?

If you think this is an abstract question, think back to the reaction of American consumers to imported Japanese automobiles in the early 1970s. Someone brave enough to have driven a Honda Civic into downtown Flint, Michigan might well have been stoned by angry auto workers. Elsewhere in the country, those same Hondas and Toyotas evoked mild hostility, slight bemusement, or utter indifference. By the early to mid-1990s, a mere 20 years later, that attitude had changed—not just to one of passive acceptance but enthusiastic support for cars that were demonstrably cheaper to buy, more economical to operate, and less likely to break down.

Some of this was caused by a shift in perceptions and attitudes, but some of it was also caused by continuous improvement of the early models of Japanese automobiles (followed by a desperate effort on the part of American auto companies to catch up and show that they, too, cared about quality and economical performance). I mention this because I think we'll see the same trend with the consumer-visible call-center industry: Not only will American attitudes shift measurably over the next five to ten years, but the training of Indian call-center workers will have improved, and the telecommunications infrastructure will have advanced that much more. Chances are you won't hear any static, hiss, or perceptible delay; and chances are that the call-center person with whom you discuss your broken toaster-oven won't have any recognizable accent.

The offshore IT industry—including software development, maintenance, project management, and several other segments—has also become a mainstream phenomenon, and it will continue to become more and more widely accepted. There is no reason to imagine that it will level off in the next few years. As suggested already, the only question is whether it will eventually level off at the 10 to 15% level (in terms of percentage of overall employment within the industry) or at some higher level such as 50%. Although it should be obvious, I must point out that none of the IT executives that I've spoken with in India or in any other part of the world feel any reason why they should stop competing and growing when and if they manage to shift 10 to 15% of existing American IT jobs overseas. Quite simply, they'll continue growing and competing as long as they can.

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