Date: Mon, 15 Dec 2003 22:53:39 -0800 From: Norm Matloff To: Norm Matloff Subject: major Charlotte Observer series on offshoring To: age discrimination/H-1B/L-1 e-newsletter Enclosed below is one of the most extensive series on offshoring to date, including a detailed look at several employers who do or don't do offshoring. This is a highly valuable contribution to this topic. A few comments: o Wages up to 90 percent lower for educated, English-speaking professionals. o Savings of at least 20 percent, often more, on total project costs. The contrast between these two bullets is striking. Most press accounts cite the first of these two statistics but not the second. Clearly the second is what counts. o Round-the-clock production due to time-zone differences. Let me say again that this is a recipe for software project disaster. It evokes the image from a scene in "The Odd Couple" (movie version), in which each of the two old men alternately move a chair back and forth from one room to another, unaware that each is undoing the work of the other. Sometimes outsourcing means layoffs, but it's also about jobs not created. VF, the world's largest clothing maker, laid off 17 people this year at its Greensboro headquarters when it hired an Indian firm to staff its computer help desk in Noida. When VF started a software project about two years ago, it also turned to India rather than hiring in Greensboro. The company didn't want to add employees for short-term stints, said Eric Anthony, VF's vice president of IT services. Offshore staffing on the project peaked at 70 people but has been far lower at times. This is a very important point (previously seen in a statement by Intel as well). Speaking of the U.S., one economist in the article says, "We specialize in innovation," Groshen said. "Outsourcing ... gives us the opportunity to move on to the next big thing, whatever that will be, and I don't know what it is." Talk of the next wave includes wireless, biotech and nanotechnology, all of interest to the Indian tech sector as well. The Observer's comment following the quote is quite apt. Recall the San Diego biotech firm I cited the other day, which had virtually all of its open technical jobs in India, with only jobs like accounting and sales in the U.S. While he knows the movement of software work to India is eroding U.S. jobs, he's proud that his new employer is creating jobs. So far, 10 people have completed training in New Jersey to install and operate eG software. Those jobs make him confident he didn't waste $15,000 for his son's computer training. "People still need someone to walk through the door, smile and say, `I'll fix it.' " This is VERY misleading. It's like saying that we lost a bunch of jobs for physicians, but--whoopee!--we gained a few jobs for installers of medical equipment. Norm http://www.charlotte.com/ Posted on Sun, Dec. 14, 2003 OUTSOURCING: THE RUSH OVERSEAS There go our computer jobs STELLA M. HOPKINS & SARAH JANE TRIBBLE Staff Writers Huddled in their 16th-floor office uptown two years ago, Frances Queen and her management team voiced the unthinkable: Was the Charlotte computer-services firm doomed? In one week after the 9-11 attacks, Queen Associates had lost five long-term contracts worth $600,000 in sales. But a bigger threat loomed, one an economic rebound couldn't fix. Customers increasingly sought lower-paid software programmers overseas instead of hiring the company. Queen lay awake nights. "Then I decided, we're not going to sit around and feel sorry for ourselves. We're going to start an offshore division." She lined up a team of programmers in Russia and plans a Philippines operation. "Offshore is becoming expected," said Queen, 53, the firm's CEO. "You have to offer it to be competitive." In the Carolinas and nationwide, more companies are reaching that conclusion. Nearly two-thirds of the Fortune 1000 companies headquartered in the Carolinas -- 17 of 27 -- say they have sent computer tasks abroad, mostly to India, according to an Observer survey. Among 100 of the Carolinas' largest public companies, the survey found that a total of 25 say they have used the strategy. Big-name Carolinas players include Bank of America, which eventually expects to employ about 1,000 people at the center it plans in India. Matthews discounter Family Dollar has programmers in India modifying sales software. S.C. utility SCANA has done software work in India since 1996. Wrangler-maker VF has an Indian help desk for workers with computer problems. The white-collar exodus could put more than 10 percent of the nation's work force at risk of losing jobs to foreign workers, according to a University of California, Berkeley study. That's more than 14 million Americans, although the study's authors say all those jobs won't be lost. The move abroad -- often called offshoring or foreign outsourcing -- echoes the loss of manufacturing jobs to low-wage countries. After decades of textile losses, that's a trauma the Carolinas know well. But it's a new reality for service workers, long immune to the global wage battle. With the Internet, many computer jobs can now be done anywhere, often for a lot less money. Workers abroad also process mortgage applications, read X-rays, prepare tax returns and staff customer call centers. The job shift will continue, and it is reshaping the nation's economy. But experts don't agree on the impact or how the economy will adapt. Amid uncertainty and fear, there have been protests, congressional hearings and states proposing anti-outsourcing legislation, including an N.C. bill. Supporters say the move abroad saves billions, gets work done faster, resolves labor shortages and frees U.S. employees for more creative work. Critics say it's eroding the middle class and wiping out America's future. "Everything is up for grabs, and the low-cost bidder wins," said Marcus Courtney, president of WashTech, a union for white-collar workers. "Where are you going to be able to get a job and build a secure economic future?" The Y2K effect In the 1980s, U.S. companies began tapping tech talent in India, but it was Y2K that taught Corporate America it could move more than factory jobs overseas.In the late '90s, companies here and around the world raced to fix software for the change of the century. Experts feared a meltdown when computers, often using two-digit date codes, couldn't tell 1900 from 2000. That also was the height of the U.S. tech boom. Information technology workers were in short supply, and wages were high. India offered a huge pool of low-cost programmers for the rote work of Y2K fixes. The Observer survey found Charlotte-based Duke Energy and Raleigh-based Progress Energy were among the companies sending the tasks abroad. Both say they have done no more foreign outsourcing. As the economy staggered, the low-wage lure of India and other nations became more apparent. Shipping data around the world grew cheaper and easier with falling long-distance costs and growing webs of undersea communication cables. Outsourcing -- a well-established practice within the United States -- was moving abroad. Among the benefits: o Wages up to 90 percent lower for educated, English-speaking professionals. o Savings of at least 20 percent, often more, on total project costs. o Round-the-clock production due to time-zone differences. American outsourcers, such as giant EDS, are also abroad competing for business. "Offshore picked up a lot of momentum because it was a recession," said Dean Davison, who leads outsourcing research at Meta Group, a Connecticut IT consulting firm. "If they could cut 20 percent, they would do it because they were desperate." Front-runner in outsourcing SCANA, owner of Gastonia's PSNC Energy and S.C. Electric & Gas, was a Carolinas front-runner in outsourcing abroad. The company, based in Columbia, typically turned to computer services contractors so it didn't have to hire and fire as workload fluctuated. In 1996, a contractor bidding on a complex project said the company could save money and turn the job in half the time by using workers in India. Randy Senn, SCANA's chief information officer, was skeptical that Michigan-based Covansys could deliver. But he couldn't ignore the potential benefits, so he took a chance. Covansys had added an Indian operation in 1991, making it one of the first U.S. outsourcers to set up there. Today, one-half of the firm's 4,800 workers are in India. Covansys did an outstanding job overseas for SCANA, Senn said, and the two firms have worked together since. Their current project is to improve the utility's customer-information system. Senn says the company saves about 40 percent over the cost of doing the work in-house. "I didn't think it would work. It's part of our strategy now." So far, big companies in the Carolinas and nationwide dominate offshoring. At the Fortune 500 level, 80 percent of Carolinas companies -- 12 of 15 -- have used offshoring. In the broader Fortune 1000 universe, 63 percent of Carolinas companies outsource abroad. Among its biggest companies, Carolinas outsourcing outpaces world estimates. By the end of next year, 40 percent of Global Fortune 1000 companies -- the world's largest -- will have tested offshore outsourcing or will be using the strategy, according to Connecticut researchers Gartner. In addition to publicly held Carolinas companies, The Observer surveyed 20 other large Carolinas employers. Those doing work abroad include Springs Industries in Fort Mill, S.C. The textile maker, with 16,000 workers, said it has 19 programmers at a firm in India working with its S.C. teams to modify software. US Airways, based in Arlington, Va., has programming done in Brazil through EDS. And Charlotte's Presbyterian Healthcare hired an Indian firm in Bangalore late last year to help redesign its intranet. Bank of America project The Carolinas' biggest company, Bank of America, began outsourcing to India early last year with a few test projects, including building prototypes for Web sites.The move grew from the bank's increased focus on how it operates after more than a decade of acquisitions. "We got interested first because we heard that there were significant cost savings," said Tim Arnoult, the bank's technology and operations executive. "This is basically true. However ... we also found that the quality of work was very good, we could gain speed-to-market advantages, and it was a very effective way to staff special projects." Typical offshore work now includes developing, testing and modernizing software. The Charlotte bank gets about 20 percent of its software work done offshore and expects to continue at that level, said Mary Waller, senior vice president of media relations. The bank, which would be the nation's second largest by assets after the pending FleetBoston merger, says offshore outsourcing has saved it $10 million. Now it is expanding in India. A subsidiary, set to open in Hyderabad in April, will handle a wider range of work than software projects, which will continue going to outsourcers. Called Continuum, the center could, for example, work with Charlotte staff to develop a product more quickly. The bank won't give specifics about work intended for the center. Bank executives said they expect the Indian unit will employ less than 1 percent of their 133,000-member work force. The bank has been cutting technology and operations staff for about two years as part of its focus on how work gets done. Outsourcing to India accounted for some cuts, including jobs at Charlotte's Gateway Village, a hub of the bank's IT work. But the bank can't quantify offshore-related job losses because it doesn't track the reason for job cuts, Waller said. Losses may continue. "It's possible that some jobs are eliminated as certain processes are performed through the subsidiary," Waller said. "It's also possible that other jobs will be created by other initiatives at Bank of America." The bank's Indian unit makes it one of the first Carolinas companies to take the next step in moving work abroad by setting up its own shop. SAS, the world's largest privately held software maker, shares that distinction. The Cary company opened its subsidiary, SAS India, three years ago in Pune and has 50 software developers at the site. SAS didn't outsource through an Indian firm because it wanted direct control. The firm also wanted workers abroad to be part of its culture and learn its quality expectations. This month, a crew of 14 SAS workers met with colleagues in India for three days. "We're trying to tightly integrate the two staffs, trying to get to the point that it doesn't matter if they're in India or they're here," Fritz Lehman, the SAS project manager in Cary for Indian work, said before leaving. SAS, with its data-analysis software running at 90 percent of Fortune 500 companies, said it turned to India because of the tight U.S. tech labor pool in the late 1990s. Lower costs enable SAS to put more people to work on new projects, so their software gets to customers sooner. The company, with 9,100 employees worldwide, doesn't plan layoffs among its 1,200 developers in Cary, near Raleigh, because of foreign expansions, said Chief Technology Officer Keith Collins. But he expects growth will be largely overseas for several years. SAS plans to double its Indian programming staff in the next year. It also is eyeing Eastern Europe, Ireland and China. The job churn Sometimes outsourcing means layoffs, but it's also about jobs not created. VF, the world's largest clothing maker, laid off 17 people this year at its Greensboro headquarters when it hired an Indian firm to staff its computer help desk in Noida. When VF started a software project about two years ago, it also turned to India rather than hiring in Greensboro. The company didn't want to add employees for short-term stints, said Eric Anthony, VF's vice president of IT services. Offshore staffing on the project peaked at 70 people but has been far lower at times. This year, another Indian firm, Quinnox, won VF programming work using as many as 12 people. "I was meeting with everybody from India, getting to understand the players, the capabilities," Anthony said. "One of the big things you ... learn is all these guys can do it. It's who you like working with." At Family Dollar, a test project in India this year meant a little less work for U.S. programmers. Come January, cash registers will record sales in the discounter's 5,100 stores using software modified by Indian outsourcer Satyam in Hyderabad. The offshore software project is small compared with the growing chain's other IT work, said Chief Financial Officer Jim Kelly. The Matthews chain, with nearly $5 billion in annual sales, is on target to open an average of about 50 stores a month through August. The company's IT staff of more than 250 has doubled in the past four years, and Kelly said it will keep growing. But when Family Dollar has extra IT demands, it also turns to contractors, and more of that work may go overseas. The savings from working abroad propels growth, which produces U.S. jobs, Kelly said. "Technology enables you to contract long-distance," he said. "But working eyeball-to-eyeball still has advantages." White-collar worries Just how worried should white-collar workers be?There is no tally that separates jobs eroded by offshore outsourcing from those that vanished because of the weak economy and the bursting of the dot-com bubble. There also is no way to measure jobs not created when companies send work abroad. But white-collar workers have been hard hit by this economic downturn, making up a greater portion of the unemployed than in the past. Professionals and managers, a group that includes IT workers, accounted for nearly one in five unemployed people in November, according to the Bureau of Labor Statistics. These workers accounted for slightly less than one in 10 unemployed people in November 1992, a comparable point in recovering from an economic downturn. The trend is jarring. Just a few years ago, white-collar jobs held the promise of a secure employment future. Service jobs, especially in the tech sector, were touted as offsetting factory losses. Now the jobs of as many as 14 million Americans could be at risk, according to the UC Berkeley study, released in October. "Even in the worst case, we don't think all those jobs will go, but that's all the jobs that could possibly be outsourced," said Cynthia Kroll, a senior economist and the report's co-author. "Anything that involves sitting at a desk, talking on the phone and working at a computer is vulnerable." Kroll and co-author Ashok Bardhan say last year's heavily cited estimate of 3.3 million jobs lost to offshore outsourcing by 2015 "already seems conservative." That projection, by Forrester Research, also called for a drain of $136 billion in wages. Forrester's estimate includes nearly 473,000 computer jobs lost by 2015. In the broader pool of all IT jobs, another firm, Gartner, estimates 500,000 jobs could be lost by the end of 2004. Charlotte's banking hub could be especially vulnerable. Based on its survey of 100 U.S. financial services firms, consultant AT Kearney estimates the industry will move the work of 500,000 people -- 8 percent of its current work force -- abroad by 2008. Bank of America and Wachovia are the only Carolinas banks of 18 in The Observer's survey that said they are sending work abroad. Wachovia does IT development and testing overseas but won't describe specific projects. "We consider outsourcing on a case-by-case basis," said Wachovia spokeswoman Christy Phillips. "It's not a key business activity for Wachovia at this time." Keenly felt losses The white-collar exodus is often not as obvious as the shuttering of a textile mill, but the economic ripples could be harsher. "It's worrisome because these people are generally more educated, tend to vote more and make more money, so the loss of their incomes is felt more keenly by the economy than the blue-collar types," said Irwin Kellner, an economist with Hofstra University in New York. And these losses are likely to be permanent, like the mill jobs before them. An economic uptick won't reverse the move abroad, just as the economic boom of the '90s didn't halt the loss of textile and apparel jobs. Economists and researchers compare the move to past job shifts such as the migration from farm to factory. Textile jobs relocated from the Northeast to the Southeast and then to low-wage nations. Half the Carolinas' textile jobs -- 136,000 -- disappeared in the past decade. "The cost to individuals and communities is clear," said Erica Groshen, an economist with the Federal Reserve Bank of New York. "Workers lose earnings while out of work and, on average, don't get jobs that pay as well as the jobs they're displaced from." Yet historically, the nation has weathered such changes and created jobs -- an average of nearly 2 million a year for the past 20 years. "We specialize in innovation," Groshen said. "Outsourcing ... gives us the opportunity to move on to the next big thing, whatever that will be, and I don't know what it is." Talk of the next wave includes wireless, biotech and nanotechnology, all of interest to the Indian tech sector as well. Outsourcing supporters say the money saved allows companies to invest in creating jobs. By one estimate, two-thirds of every dollar outsourced to India comes back to America, and, with new jobs and investment, grows to $1.12-$1.14, according to the McKinsey Global Institute, the research arm of international consultants McKinsey & Co. India's global exports of software and IT services hit $9.5 billion last year, and are expected to top $12 billion this year, according to the National Association of Software and Service Companies, the Indian IT industry's trade group. Outsourcing is a partnership that benefits the economies and workers of both nations, said NASSCOM President Kiran Karnik. NASSCOM Vice Chairman Jerry Rao, CEO of Indian outsourcer MphasiS, added: "Innovative companies win, and innovative employees land on their feet." Trying to stem the tide Fears of political or consumer backlash, especially in an election year, could slow the trend.Offshore outsourcing isn't going away, but "you've got a push-back, a buy-American attitude coming into play," said Alan Pelz-Sharpe, a vice president with Ovum, a London-based technology research and consulting firm. Members of Connecticut-based The Organization for the Rights of American Workers, or TORAW -- mostly laid-off IT workers -- joined similar groups this year protesting at outsourcing conferences in New York and Connecticut. "Our goal is to put our American people back to work and to stop this nonsensical offshoring," said TORAW President John Bauman, a laid-off programmer who took a holiday job driving for Federal Express. "We can't as a country afford this. There will be no middle class." N.C. Sen. Eric Reeves, D-Wake, introduced legislation in April to ban foreign call centers on state contracts, saying the work of states shouldn't be done overseas. The proposal from Reeves, co-chair of the Senate's information technology committee, passed the Senate and awaits House consideration. At least five other states have had anti-outsourcing proposals. In August, Gov. Mike Easley ordered a review of many state contracts to determine whether work is done abroad. The order followed an Observer report that food-stamp recipients in 40 states, including the Carolinas, rely on help desks in India. On Nov. 6, Easley's office said the review found two contracts, totaling $687,000, with a Canadian firm. At the federal level, the General Accounting Office is studying the impact of offshore outsourcing. "It's a very important, strategic, emerging issue," said Randy Hite, the GAO spokesman on IT. Despite the outcry, Gartner researcher Diane Morello doesn't expect much will change. "There will be a lot of noise around this, but it will not stem the movement of work to lower-cost labor markets," she said. Divided loyalties Frances Queen, founder of the Charlotte computer-services firm, had planned to work with an outsourcing firm in the Philippines, homeland of her partners in the offshore venture. Then they found a Russian company charging $10 an hour less for programmers. If there's enough demand for offshore, they plan a foreign shop of their own, which will further cut costs. They see the Philippines as the best location. Business is picking up with the economy, and potential clients are interested in the offshore option. As a business owner, Queen is pleased. But after more than 25 years in Charlotte's IT world, she has a lot of longtime tech friends -- some out of work. She worries about them as she and others turn to foreign help. "There's a little part of me that almost hopes none of this is successful because there are so many people out of work here in the Carolinas," Queen said. She will hire locally "if we have the option." But now she's also optimistic that money saved by working abroad will generate new jobs. She's sleeping easier. "IT is still a great place to be," she said. "It's just different." "Business will never be the same." http://www.charlotte.com/mld/charlotte/business/7487870.htm Posted on Sun, Dec. 14, 2003 Jobs in foreign lands create demand for U.S. coordinators STELLA M. HOPKINS Staff Writer Managing people is hard enough. Imagine doing it across thousands of miles with employees you've never met, who come from different cultures and are going home about the time America wakes up. That's the job of a project manager for companies sending programming work overseas. And the rush abroad is creating big demand for the position. "It's an emerging class of workers and skills," said Cynthia Carlson, a principal with executive recruiters Campbell/Carlson in Charlotte. Headhunters seeking project managers court Keith Dicken a couple of times a month. He got his start managing work abroad four years ago at Arrendale Associates, a small Cornelius medical software firm, where he is a vice president. The company turned to Indian programmers because of U.S. shortages and high wages. Dicken wondered how the setup could work. "Being a programmer is hands on," he said. "When you're working on an issue, there's nothing like being able to walk into a room and talk. You don't have that when you move across the world." English is widely spoken in India, but accents can make communication difficult. Some things just don't translate. Nobody got Dicken's jokes. Calls came in the middle of the night on phones that often disconnected. Slowly, Dicken developed an ear for the accent. The Indians got a few of his jokes. The late-night calls grew fewer as Dicken built rapport among the staffs -- nine abroad, five in Cornelius, three in Tennessee. The foreign workers delivered high-quality work, erasing Dicken's biggest concern. The time-zone difference pays off, too, as the U.S. staff hands off to India at the end of the day. "We'd go home, and any problem was solved by morning." Project managers are like translators, bridging the gap between what a business wants to do with technology and the programmers who make that happen. Randy Senn, chief information officer for SCANA, credits the utility's success with working abroad to longtime lead project manager, Krishnarao Vinnakota, an engineer with a master's degree in computer science. Vinnakota's office is at SCANA headquarters in Columbia. But he works for Covansys, a Michigan firm providing the company with software work overseas since 1996. Covansys has more than 100 project managers in the United States, some coordinating work in India and some handling all-domestic cases. Average salaries range from $80,000 to $120,000, said Ted Vahan, who lives in Huntersville and heads project management for Covansys. At SCANA, the first offshore project with Covansys called for modernizing an accounting system. Senn didn't think an outsider could grasp the intricacies, let alone communicate them to foreign programmers. In the mid-90s, there weren't even many people to talk with about making outsourcing work abroad. To learn SCANA's system, Vinnakota talked with employees, watched people at work, made copious notes. Then he meticulously detailed work for programmers in India and those on-site. Since successfully completing that project, he has been at SCANA full time, coordinating up to 30 Covansys employees abroad and 25 in Columbia. Today, for SCANA, Covansys has four workers in India -- three in Chennai and one in Mumbai, formerly Bombay -- coordinating with 15 in Columbia. Vinnakota monitors work daily, reviewing all software before it's used. In addition to e-mail and phone discussions, the two groups have regular video conferences. That's easy to do with a direct satellite link from Covansys' Michigan headquarters to India. The calls are typically at 8:30 in the morning, near quitting time in India. "Krishna is the reason we've been successful," Senn said. Cultural details One day in October, Fritz Lehman couldn't understand why his usually prompt staff at SAS Institute's Indian office wasn't responding to e-mails.Then the manager at the software giant's Cary headquarters remembered that Oct. 2 is a national Indian holiday. They were celebrating the birth of Mohandas Gandhi, who led the country to independence from the British in 1947. That's the kind of detail Lehman has to keep up with to make work flow smoothly between the two staffs. He's been at SAS 19 years, and in October began coordinating all Indian projects. To get the best work from the Indian staff of about 50, Lehman has made understanding motivational differences a top priority. The respect of peers seems more important to Indian workers. Lehman -- like others working with Indian programmers -- found they don't like to disagree with bosses or raise questions, so they might say they understand when they don't or go along rather than express concerns. They also prefer more detailed instructions than American workers. "I don't want to dig into their private lives, but I need to understand the culture," he said. "How else do I know what affects people positively or negatively?" Lehman also has been reading up on cricket, a national obsession in India. He planned to play during a trip this month to SAS India, but shoulder surgery kept him out of the game. Maybe next time -- he expects his new job will take him to India at least four times a year. How Much Do They Make? The Project Management Institute doesn't track by industry, but the professional association had issued its Project Management Professional certification to 70,759 people as of Sept. 30, up from 18,110 in 1999. Average U.S. salaries for project managers handling offshore outsourcing range from $41,000 to $118,000, starting with a mid-career manager and rising to the top, according to nextSource, a New York staffing, work-force management and wage-tracking firm. At the top end, the average reaches $150,000 in New York, according to the company's People Ticker, a real-time, national wage database. The Charlotte high-end average is $88,000. http://www.charlotte.com/mld/charlotte/business/7488016.htm Posted on Sun, Dec. 14, 2003 He didn't try to beat the trend, he joined it In the late 1990s, Sam Wazan saw Indian firms charging $35 an hour for computer work he billed at $175 or more. That told him he couldn't beat the foreign outsourcing move. So he joined it. Instead of India, Wazan turned to his native Lebanon. During a visit in late 2000, he talked with programmers and laid the groundwork for a business providing computer services. Contemplating the venture, Wazan lay awake nights in his Charlotte home, near panic. Was he nuts? His wife, Megan, was pregnant with their first child. He would lose a six-figure salary. But more friends were being laid off. He'd been laid off in 1999, and he knew his MBA and experience developing computer systems no longer guaranteed a job. "It was only a matter of time." Early in 2001, he quit to open his Charlotte computer services firm, Stripling & Beck. Wazan's lower-paid staff in Lebanon enables him to undercut U.S. rates for such computer work as writing code and developing custom software. He won't say what he pays the workers or how many he has because he doesn't want competitors to know. The Lebanese staff works 9 a.m. to 6 p.m., five days a week. At 2 every afternoon, a white light flashes on, signaling that it's 7 a.m. on the East Coast. Workers call it "air time" and know to expect calls and e-mail from clients. Rita Khawand, 22, joined Wazan's office in Lebanon a year ago as a programmer. "What amazes me ... is the continuous change," she said. "I cannot imagine the IT industry not moving and evolving constantly. There always is something new to discover." Wazan, 39, also hires locally, tapping the pool of unemployed friends for projects that need on-site work. He targets companies with sales under $500 million and projects of $500,000 or less. He guarantees costs for several years and quotes fixed prices for work. That helps win business because he bears the chance of cost overruns. Shortly after going on his own, Wazan's previous employer went under. One of his final checks bounced, two never came and his health insurance disappeared, just before his wife gave birth. The faltering economy crashed after the 9-11 terrorist attacks. By the end of 2001, Wazan had run up $55,000 in credit-card debt keeping his company alive. Still, he turned down a job offer, believing he would be vulnerable to another layoff. He'd survived Lebanon's civil war and emigrated to Chicago at 25 with $600, half of it borrowed. Last year, in June, he reached break even. In September, he hired four more developers in Lebanon. In October, he added another six. "I want job security. I want to be happy," he said. "But I see the (outsourcing) trend taking over. I'm doing something about it." http://www.charlotte.com/mld/charlotte/business/7487996.htm Posted on Sun, Dec. 14, 2003 He's helping Indian firm create U.S. jobs During the tech boom, Tim Clark never considered using lower-paid foreign programmers at the Raleigh tech company he helped start. Now he's selling for an Indian company, cracking the U.S. market for its software. "It's incredible, the difference in cost," Clark said. It's a job he never imagined. And it's an example of a global pairing that is creating at least a few U.S. jobs. The Greensboro man's tech career began in the military in the 1960s. He has sold software, been a computer consultant and started two tech companies, including the Raleigh software firm he co-founded in 1998. The dot-com bust, recession and terrorist attacks shriveled that company, and he was out of a job. He couldn't even get a call back for the few tech jobs available. "I was frightened to death," said Clark, who is 56, married and the father of two young adults. An unemployed techie friend called about a start-up seeking an executive salesperson. The software product was similar to what Clark's company had produced. He admired the company's founder, a former Hewlett-Packard research scientist, who holds a doctorate and a dozen or so patents. There was just one thing. The founder was from Chennai, on India's southeastern coast, and had started eG Innovations after returning home to be with family. Clark wondered about working for someone from such a different world. "I was apprehensive, but I needed a job, so I took it," he said. That was 15 months ago, and he has no regrets. There have been rough spots with communication. Cell phone connections come and go, and sometimes understanding co-workers' accents has been difficult. Time-zone differences make for weird work hours. But he's impressed with his Indian colleagues, many with graduate degrees. They work long hours producing quality software at about 20 percent of what similar professionals cost his last company, Clark said. He's also sold on the product, used mostly by firms that manage, monitor and repair computers for other companies in a range of industries. The eG software identifies and diagnoses problems and sounds an alert when a fix is needed. Clark's industry friends have been supportive of his decision to join eG. Those hunting work ask whether eG has openings. While he knows the movement of software work to India is eroding U.S. jobs, he's proud that his new employer is creating jobs. So far, 10 people have completed training in New Jersey to install and operate eG software. Those jobs make him confident he didn't waste $15,000 for his son's computer training. "People still need someone to walk through the door, smile and say, `I'll fix it.' " http://www.charlotte.com/mld/charlotte/business/7488015.htm Posted on Sun, Dec. 14, 2003 He'll keep costs low, keep jobs in this country Tom Cox says his Charlotte software company won't ship programming work abroad and doesn't have to. Five years ago, when he first looked at outsourcing overseas, he decided against it because the savings didn't appear to offset the effort and cost of managing that work. Today, Cox is adamantly opposed to the practice that he says saps American jobs. "The deal is, we train workers for the high-tech jobs of the future with the faith those jobs will be there," he said. "All of a sudden, you lift your head, and those jobs are gone." This summer, his Cox & Co. underbid a competitor that uses lower-paid programmers in India. Cox bid $165,880, the lowest of five offers to supply Alamance County's new property tax software. The system from a Durham firm, Intelligent Information Systems, would have cost $458,180 in the first year, according to the county. IIS has about 40 of its 100 workers in India. Cox credits lean staffing and minimal overhead for his ability to profit on low bids. He's president and salesman, and his staff of seven has long worked together writing and installing county software programs. They understand the complex business of recording property values, generating county tax bills, tracking collections and mapping tax parcels. The company got the first N.C. county running on its system in 1991 and now has 10 counties using the system. (Cox, Republican chairman of the Mecklenburg Board of County Commissioners, doesn't sell to the county.) "We have fully functional software," said Cox, who worked 15 years for IBM in Charlotte before going on his own. "That's why we can price aggressively." Still, the company has ongoing programming needs as it enhances its tax program. Cox, 57, also is improving his software for county social services. He could send those chores overseas. He says he won't, even if the use of workers abroad spreads in his small industry. Government IT users lag business in adopting the offshore strategy. On the Alamance project, IIS was the only one of five bidders with an offshore site. The company ranked third in cost. IIS co-founder Sucheta Jain said the company does not aim to be the lowest bidder but rather to provide greater flexibility by using the latest technology. That, she said, costs more. "The programs are not all the same," she said. Last month, the county chose the highest bidder, Cole Layer Trumble Co. of Dayton, Ohio, at $759,400. The Cox and CLT systems were equally functional, but the Cole program is the most compatible with the county's Microsoft Windows network, said Jeff Causey, the county's chief financial and information officer. Disappointed but undeterred, Cox is on the road selling three days a week. "There are plenty of people looking for tax systems." http://www.charlotte.com/mld/charlotte/business/7487970.htm Posted on Sun, Dec. 14, 2003 India leads way, but other nations join trend o S.C. capacitor maker Kemet is talking with Chinese outsourcers, said Ross Patterson, the firm's chief information officer. The company also is considering taking the next step in moving work abroad by hiring software development staff of its own in China, he said. Kemet already has a Chinese factory. Any developers hired in China would work for that factory as well as handling projects for the company. This summer, Kemet tried the offshore strategy, contracting with an Indian outsourcer to do a new product announcement on its Web site. The price tag of less than $5,000 was about half the cost of doing the work in-house, Patterson said. Kemet continues talking with Indian suppliers. o Charlotte architects HLM Design pays about $18 an hour for draftsmen in the Philippines versus U.S. costs of about $30, said IT Director Rodger Poole. Lower wages and a 12-hour time zone differential are key attractions. The company also outsources in South Africa, but the time difference isn't as great and wages are higher, Poole said. o Charlotte computer-services firm Queen Associates plans to use a Russian IT firm for customers wanting to take advantage of lower rates overseas. Queen chose DataArt, founded in 1997. The company doubled to 100 workers since last year and plans to hire about 80 next year, said CEO and co-founder Michael Zaitsev. He hired an American teacher to help his workers in St. Petersburg improve their English-speaking skills. India dominates the white-collar outsourcing scene. "When I look in the rearview mirror, I don't see anybody," said Kiran Karnik, president of the National Association of Software and Service Companies, the Indian IT industry's trade group. Most outsourcing contenders fall into the category of "sniping at our edges," he said. "The only country we see as competition, maybe four, five years from now, is China. They have the size, the determination. They have established themselves in manufacturing. ... Now, they want to do software." http://www.charlotte.com/mld/charlotte/business/7488020.htm Posted on Sun, Dec. 14, 2003 Biggest Names in Carolinas Part of Offshore Outsourcing Trend From July through December, The Observer surveyed 100 of the Carolinas' largest publicly held companies about whether they have used offshore outsourcing, either directly or through another firm. (One of those companies went private during the survey period.) Twenty-five of the surveyed companies said they have used the cost-cutting strategy. That includes 17 of the 27 Carolinas Fortune 1000 companies. The eight smaller companies range from S.C. capacitor maker Kemet to Unifi in textiles. The work most frequently sent overseas includes software development, modification and testing, according to the survey. India is by far the most common destination. Here's what the Carolinas Fortune 1000 are doing with offshore outsourcing: Name (Fortune 1000 ranking) Headquarters Business Company work force Outsourced overseas? BANK OF AMERICA (23) Charlotte Banking 133,000 Yes Hires Indian firms for software work. Plans to open Indian subsidiary in April. BB&T (287) Winston-Salem Banking 27,000 No BELK (623) Charlotte Department store chain 17,800 No BOWATER (557) Greenville, S.C. Paper maker 8,348 No CARLISLE (679) Charlotte Diversified manufacturer 10,000 Yes Declined to give specifics. COKE CONSOLIDATED (928) Charlotte Soft drink bottler 5,500 Yes Outsourced short-term software development project with Rapidigm, which used four employees based in India. DUKE ENERGY (118) Charlotte Energy 25,000 Yes Outsourced Y2K conversion work to India but nothing since. FAMILY DOLLAR (388) Matthews Retail 37,000 Yes Satyam of India is modifying sales software. GOODRICH (385) Charlotte Aerospace manufacturer 22,900 Yes Has "a handful" of programming projects overseas, including work in India with Satyam and Xansa. INGLES MARKETS (682) Asheville Grocery chain 15,000 Yes Four years ago, the company did a small project that used offshore programmers. No intent on outsourcing further. JEFFERSON-PILOT (451) Greensboro Life insurance, broadcaster 3,500 Yes A software project outsourced to a domestic company is being done in India. LABCORP (572) Burlington Medical testing labs 24,000 No LOWE'S (60) Mooresville Home improvement retailer 130,000 Yes U.S. outsourcer doing 20% of one IT project in India. Overflow calls from credit-card customers go to Indian call center. MARTIN MARIETTA MATERIALS (820) Raleigh Sand, gravel producer 6,400 No NUCOR (342) Charlotte Steel maker 9,800 Yes Small programming projects with Indian firms. PANTRY (575) Sanford Convenience stores 9,830 No PROGRESS ENERGY (228) Raleigh Energy 15,300 Yes Outsourced limited Y2K fixes offshore but nothing else. QUINTILES TRANSNATIONAL (672) Durham Pharmaceutical services 16,000 Yes Uses companies in India and a U.S. company with offices in India and Canada for software development. RJ REYNOLDS TOBACCO (281) Winston-Salem Cigarette maker 6,800 No RUDDICK (545) Charlotte Harris Teeter owner, thread maker 17,500 No SCANA (499) Columbia, S.C. Energy 5,400 Yes Since 1996, has done programming in India with U.S.-based Covansys. SEALY (964) Trinity Mattress maker 6,600 No SONIC AUTOMOTIVE (253) Charlotte Auto dealership chain 12,500 No* SONOCO PRODUCTS (520) Hartsville, S.C. Packaging maker 17,000 Yes Occasionally uses MindTree Consulting (co-based in New Jersey and India) for offshore application development work. SPX (328) Charlotte Diversified manufacturer 22,000 Yes In the past year, began foreign programming project work, mostly in India. VF (322) Greensboro Clothing maker 57,300 Yes Moved its IT help desk to India and uses Indian firms for programming projects. WACHOVIA (70) Charlotte Banking 87,000 Yes Averages "less than a handful" of IT development and testing projects overseas annually. *Sonic outsources IT help-desk support to a California firm and says that, about three months ago, the firm began routing its service calls to operators in Central America. Sonic said the firm did not tell it of that move. Sonic said it has told the firm to return calls to U.S. centers. SOURCE: Staff reporting, companies listed and regulatory filings http://www.charlotte.com/mld/charlotte/business/7488022.htm Posted on Sun, Dec. 14, 2003 What are some other big names doing? In addition to 100 public Carolinas companies surveyed about offshore outsourcing, The Observer polled 20 others, including privately held firms and large employers not based in the states. Some, such as Observer parent Knight Ridder, Food Lion and home textile leader Milliken & Co., say they are not using the cost-cutting strategy. The group's big name companies working abroad range from offshore newcomer BellSouth to General Electric, a trend leader. Atlanta-based BellSouth, which has 8,900 Carolinas workers, is testing outsourcing to India as a cost-cutting tool. This involves work already outsourced to Accenture, not the work of BellSouth employees, said company spokesman Clifton Metcalf. Accenture, a consulting firm that offers outsourcing, has about 4,000 of its 83,000 workers in India. General Electric, with about 10,000 Carolinas employees, opened GE International Services in India in 1997. The unit has more than 18,000 workers and is growing. Services include call centers, help desks, software programming and administrative functions, such as planning and analysis. While GE's foreign employment has grown, its U.S. employment has been steady at about 165,000 people since 1992, said Peter Stack, a spokesman for the company based in Fairfield, Conn. That's slightly more than half of GE's global work force. http://www.charlotte.com/mld/charlotte/business/7488024.htm Posted on Sun, Dec. 14, 2003 Duke Energy: At home for now Duke Energy is on a cost-cutting mission, including layoffs, but so far isn't sending computer work abroad. The Charlotte company, owner of Duke Power, used programmers in India to make Y2K software fixes. That went well, but the company has had no other IT need big enough to warrant the hassle and expense of managing work on two continents, said Cecil Smith, chief information officer. Foreign outsourcing usually isn't worth considering on a project unless it requires at least 15 people, he said. A lack of specific skills also could send him searching for foreign expertise. Customer call centers and internal help desks are prime candidates for sending abroad. But at Duke, Smith wants local control of both because they are critical during emergencies, such as storms that knock out power and demand constant interaction. Still, he attends outsourcing sessions at IT conferences and reads extensively on the topic, always looking for savings. "I might patriotically like to, but I would never rule it out," Smith said. "You have to face shareholders and employees and say, `We're cost-effective.' " http://www.charlotte.com/mld/charlotte/business/7487731.htm Posted on Sun, Dec. 14, 2003 Even medical records being sent to India STELLA M. HOPKINS Staff Writer Inside a single-story Cornelius office building, high-power computers encode medical information for patients nationwide and zap it to 3,000 transcriptionists in India. In as little as two hours, neatly typed records of surgery, illness, recovery and death zip back across the oceans to Arrendale Associates and on to 40 U.S. hospitals and clinics, none in the Carolinas. Arrendale is the link to one of India's largest medical transcription firms, CBay Systems, and illustrates the range of U.S. work moving abroad. The partnership also represents two commonly cited offshore drivers: cost-cutting and U.S. worker shortages. "We much prefer U.S. transcriptionists because they are more productive and more accurate," said Del Arrendale, who co-founded the medical-software company with his wife, Judy. But, "There's a shortage." The Arrendales launched the business in 1989 in Chicago, writing programs to manage medical records for hospitals and clinics. The business moved to Cornelius in 1996 and grew with demand for health care and the electronic records documenting treatment. Medical records originate when a patient arrives to see a physician, and they follow the person through treatment. The record includes information doctors dictate as they care for patients. As the Arrendales developed software, they kept hearing from clients who longed for a better system to handle dictation -- and more medical transcriptionists, or MTs. Initially, Arrendale software gave MTs nationwide access to giant answering machines loaded with dictation. In the late '90s, Del Arrendale envisioned a better system, an online system, but he couldn't find the programmers. The dot-com frenzy and Y2K conversions made IT workers hard to come by and pricey. Programmers for Java, the computer language Arrendale wanted to use, were especially scarce. He knew other medical software executives who used programmers in India. He'd also read about India's supply of the MTs his clients wanted. Late in 1999, he went to check both, spending three weeks to visit three firms and touring the country. Impressed, he took the first step, contracting with a firm to start his new software. Two years later, he switched to CBay, which has a development arm in addition to its MT business. Last year, CBay bought a one-third interest in Arrendale. Today, Arrendale's staff of 28 includes 17 software developers -- nine in Bangalore, five in Cornelius and three in Tennessee. Together, the developers created the Arrendale system, which captures doctors' dictation, transmits the voice file to MTs and posts the medical records online. The records are easily available to medical personnel, insurers and other authorized users. That speeds up payments. More than 100 clients use the Arrendale system, which has the capacity for at least seven times that many. Fewer than half the clients also use CBay MTs. All transcription -- foreign and domestic -- moves through the Cornelius computer room. Security is tight, with constant video surveillance. Only three people have access and only via a thumbprint scan. There are back-up phone lines and a generator to ensure power stays on. The computers encrypt patient information for privacy, Del Arrendale said. The software allows MTs to receive dictation and return it online but not to download or copy files. MTs here or abroad could circumvent the system, but Arrendale said he knows of no incidents. For now, the Arrendales market CBay's MT service, but they're entering the business of supplying MTs. Growing industry The U.S. medical transcription industry is estimated at $15 billion and growing, with as many as 300,000 transcriptionists, according to the American Association for Medical Transcription. Some MT firms in the Carolinas say they have no problem finding workers. More say the shortage is serious, and industry publications routinely cover the problem. "We could do a lot more work if we had the qualified people," said Dan Drinkard, who helps with his wife's M.D. Data Management, a Hickory MT firm. MT is high-pressure and tedious, demanding speed and accuracy. An MT with extensive training and experience averages $25,000 to $40,000 a year, Del Arrendale said. To ease the shortage, the couple plan an 18-month, on-the-job MT training program in Cornelius early next year. They would like a team of about 80 for quick turnarounds. For example, a patient awaiting airlift to a trauma center needs a medical record in a hurry. The Cornelius team also would do quality checks and manage MT work in India. Del Arrendale expects the foreign work to grow as rising demand further strains the U.S. MT supply. Experts estimate that 1 to 2 percent of U.S. MT work goes overseas today. CBay already has a franchise-like network of 34 Indian sites, employing about 3,000 MTs at an average of $3,000 to $5,000 a year, Del Arrendale said. Indian MTs are less proficient because they struggle with American speech patterns. They average about one-third the production of their U.S. counterparts, he said. The work also needs more accuracy checks, which adds to the cost. However, Judy Arrendale said of Indian MTs: "There's quite a pool to select from, all with college degrees, even nurses and doctors." And within the past 18 months, the company has seen growing acceptance for work done abroad. "The stigma is there," said Kozie Phibbs, a former hospital medical records director now selling for Arrendale, "but a lot of people are becoming more comfortable with it." http://www.charlotte.com/mld/charlotte/business/7488023.htm Posted on Sun, Dec. 14, 2003 The Rush Overseas: There Go Our Computer Jobs We've chronicled the demise of Carolinas textile jobs, lost to lower-wage foreign workers. Now we're at the threshold of a drain on higher-paying, white-collar jobs. In the Carolinas, and nationwide, banking giants, utilities, software firms, government agencies and others are using lower-paid workers abroad for jobs ranging from call-center operators to software programmers. Companies say the move is critical to remain competitive -- even survive -- in a global economy. Supporters also say that using foreign workers frees U.S. employees for more valuable work. Researchers say the growing shift abroad could cost the nation millions of middle-class jobs and billions in wages. Today, we'll show you how widespread the trend is in the Carolinas. In the coming year, we'll cover efforts to protect personal information when work is done abroad. We'll examine how the job exodus is reshaping our economic future and explore strategies for ensuring secure employment. REPORTERSStella Hopkins (704) 358-5173 shopkins@charlotteobserver.com Sarah Jane Tribble (704) 358-5159 stribble@charlotteobserver.com PROJECT EDITOR | Patrick Scott PHOTOGRAPHER | Layne Bailey DESIGNER | Craig Paddock COPY EDITOR | Forrest Brown GRAPHIC ARTIST | Michelle Hazelwood RESEARCH | Sara Klemmer, Marion Paynter