Sunday, November 20, 2005

Wachovia Moving 4000 Jobs to India

In June, Wachovia said it would begin outsourcing software development and maintenance work to U.S.-based IBM Corp. and India-based Infosys Technologies Ltd. and Cognizant Technology Solutions Corp. The work will be performed in India. The move will displace some U.S. jobs, but the company won't disclose numbers.

According to the Charlotte Observer, Wachovia plans on shifting 4000 American jobs to India. Companies to benefit from this deal include Infosys, Cognizant, and IBM. This is part of a goal to shave $1B in expenses by 2007. He may want to read the recent PWC study that suggests that nearly a third of their "survey participants actually experienced no change in costs in the first year after offshoring functions and 15% of respondents reported no change in cost base even after five years of offshoring."

Others have shown how companies often pay more for offshoring deals because of hidden costs, not to mention the costs of "changing your mind" because once you move your business knowledge outside the organization it is a steep climb to get it back. In a CIO.com article the CIO of GE Real Estate found that "because of cultural differences you cannot simply replace on American worker with one offshore worker."

But let's be honest, I could care less about the business practices of Wachovia and if they are successful or not. I do however care about the future of our nation and my profession. The answer to this problem isn't business logic, but rather chaos in the marketplace. Consumers need to show genuine anger and become aware of the practices of Wachovia. If Wachovia believes this is a good thing and for some grand cause, why won't they disclose the number of U.S. jobs to be lost?

This trend to shift white-collar jobs to low cost nations will only be stopped once the American people and their elected representatives show a will to tackle this problem. Wachovia CEO Ken Thompson is trying to ride the wave of "nation building" and spinning this as an attempt to raise India out of poverty. What of the millions of Americans who have moved out of the middle class and into poverty? What of the American children not covered by healthcare? When will a CEO start riding that wave?

According to Thompson "We need to encourage trade and we need to work on education in this country so we can create a workforce that can do higher-level jobs...We have to raise the standard of living all over the world." I agree that we need to raise the standard of living around the world, but not at the loss of American jobs. When will he start lobbying for fair labor laws, sustainable environmental laws, and an open-market currency regime in countries like India? Currency manipulation is one of the reasons costs are so low there, after all.

In a fair market, Americans can compete toe-to-toe with anyone. Because we play by the rules we find ourselves with trade deficits and job loss. I believe it is important to call Ken Thompson on his hypocrisy; his attempts to spin this as a good thing has left a bitter taste in my mouth and it should do the same to you.

2 Comments:

At 5:19 AM, Blogger Prasanth said...

Hi,

I just commented earlier on the H1 visa abuse. I do not agree with the statement "we play by the rules and we end up with trade deficit and job loss". Are you implying then that we here in India for example do not play by the rules? I still remember back in the 1980's and early 90's when American diplomats use to lecture to India about "free trade" and "breaking down barriers" and "capitalism". May be it was a wrong move after all.

BTW, i strongly beleive that India plays by the rules - try protecting your IP in China and see what happens.

 
At 9:35 AM, Blogger R. Lawson said...

Going back in time...

The Chinese government doesn't play by the rules - egregious difference in our governments and economies.

India is much closer to the US in terms of government (long-time democracy) and society. India is plagued by corruption and manipulates their currency, but not as bad as China.

Traditionally countries go from a source of agriculture or raw materials --> manufacturing/industrial --> services. India is trying to skip some steps and with a billion people, many of which are not educated and cannot read, that spells disaster. The will become huge gaps between the poor, middle class, and rich - and probably already is.

It also spells problems for our own more developed economy. Our cost of living is much higher than the cost of living in India. With high-end jobs leaving the United States as well as manufacturing going to Mexico and China this is problematic.

In short, America should fight over these jobs otherwise we will face a collapse of our markets. Our cost of living is going up, we cannot afford to reduce our salaries as well.

 

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