A SUICIDE in faraway California has sent shock waves in the burgeoning Indian IT industry, further underscoring concerns about growing protectionism in the West against the outsourcing of jobs and services to companies located in this country.
Still smarting under the share market shock of 2001, most IT-related companies fear that the recent death of Silicon Valley programmer Kevin Flanagan would cause more American companies to devise ways to prevent the relocation of call centres and data processing units in this country.
The young software engineer shot himself to death fearing the prospect of unemployment. Naturally, Flanagan's suicide was headline news in the Silicon Valley, where every other techie was either unemployed or lived in constant fear of the pink slip that would abruptly spell the end of his job.
With more US companies outsourcing IT-related jobs and services, it was estimated that over 800,000 Americans had been rendered jobless last year alone. Given the relatively low-waged Indian programmers and substantially lower costs of setting up call centres and data processing units, India had emerged as a big hub for business processing outsourcing for western companies.
So long as the US economy was doing well, there was little or no resistance to outsourcing. The creeping slowdown in the US economy, however, has led to the rise of protectionism.
The self-styled champions of economic globalisation were now crying for restrictions to be imposed so that Americans would not be deprived of jobs through outsourcing.
The US Congress was considering further restrictions on visas for tech workers while several states were thinking of imposing a ban on the export of IT-related jobs and services, or at least of putting an arbitrary limit on them.
Reports from New Jersey last week spoke of a move in the state legislature aimed at making it compulsory for every call centre responding to calls emanating from the state to identify the location of that call centre.
Clearly, the objective behind the proposed legislation was to create public opinion against any company that had its call centre located outside the US, and thus build consumer resistance against it.
More damaging was the provision in the proposed law that said that that the caller in the state of New Jersey would have the right to insist that his call be re-routed to a call centre located in the US. Nothing could be more indicative of the growing protectionism in the US, the self-proclaimed home of the globalised free market, than the proposed legislation.
Business Processing Outsourcing (BPO) started in India in the early 90s when a leading western airline and a premier American bank located their data processing units in this country.
Since then, major banks and corporations in the western world had set up their own captive BPO centres in India.
At a rough estimate, over 100,000 Indians employed in the centres worked in captive BPO centres run by the western worlds greatest multinationals. Some of the big names in the BPO business in India included General Electrical, Standard Chartered, JPMorgan, HSBC, American Express, Citigroup, British Airways, Spectramind, AOL and British Telecom.
Hit hard by the share market bust two years ago, the Indian IT companies had yet to recover their old market values when the growing protectionism in the US, in particular, and in the rest of the Western world further hurt their bottom-lines.
The share prices of the Indian IT companies were now ruling at a historic low. Take the case of world-renowned Infosys and Wipro.
Not long ago, the shares of Infosys, the company founded by techie Narayana Murthy in the late 80s, were hard to come by at Rs13,000 (RM1,047) each; now there were hardly any takers at Rs2,900 (RM233).
Wipro shares had touched Rs10,000 (RM805) at the peak of the IT boom; now it was hovering around Rs900 (RM72).
And if US pressure groups succeeded in clamping on the export of IT-related jobs, the values of Indian IT scrips could come under further pressure.
It wasnt just that there was resistance in the West to the outsourcing of IT-related jobs and services, but increasingly the threshold against the import of software engineers was being raised in several of these countries. For instance, despite their lack of IT personnel, Germans were dragging their feet on easing restrictions for Indian software experts to take up jobs in the IT sector.
Even though two years ago it had agreed in principle to open the door to Indian techies, Germany was unwilling to allow easy access. Kinder statt Inder was a popular German slogan suggesting that instead of letting Indians do their jobs, Germans should educate themselves so that they could do those jobs themselves.
Ministers accompanying Prime Minister Vajpayee on his state visit to Germany last week discussed the resistance against Indian IT professionals with their German counterparts.
Another reported case of protectionism in recent months against Indian techies came from Australia. Major labour unions complained that telecom firm Telstra had hired 100 software engineers at one-fifth the salary their Australian counterparts would command and had thus deprived local IT workers of jobs.
Of course, thus far the Australian authorities had not acted against Telstra or the Indian software technicians, but it was a moot point as to how long a flourishing local company could withstand the campaign against foreign workers before it started hurting its bottom-line.
The last word on the growing protectionism ought to go to a leading Indian daily.
Commenting editorially, it said, The fact is that most countries in the world, particularly protected and isolationist economies like India, have long learnt to endure the pain of living in a brave new world of American-led globalisation, where uncompetitive sector of the domestic industry have either closed down or severely curtailed their operations in the face of cheaper foreign imports.
The challenge posed by the Indian IT industry to American jobs was then the flip side of the coin: the chickens of globalised free market coming home to roost in the worlds biggest economy.
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