Earlier this year, a software developer working under contract at Microsoft was told his services were no longer needed. The supervisor in his unit, which created Web applications enabling online registration for Microsoft classes and seminars, said he was under orders to reduce his head count. But the supervisor also said he was allowed to hire more workers in India, where labor is a fraction of the cost. In a certain sense, I was shocked, says the developer, who continues to seek work on other projects at the company and requests anonymity. I guess I thought that outsourcing happened to other people. We were part of the technical elite. He is a senior developer who has worked on and off in Redmond for a long time, earning as much as $200,000 a year.
The reality of offshore outsourcing is quickly sinking in among white-collar professionals, including those in premium technological jobs once considered immune. A relatively modest phenomenon for much of the 1990s, white-collar outsourcing has spread to some of the regions and the nations highest-profile businesses. Last week brought reports of outsourcing at two local companies. Boeing confirmed a plan to build a third of its new 7E7 jetliner in Japan, including components of the wing, the most sophisticated part of its planes. The Japanese work will entail not just manufacturing but engineering and design. Outsourcing is the issue of the day, says Bill Dugovich, a spokesperson for the Society of Professional Engineering Employees in Aerospace (SPEEA), a Boeing union whose members are threatened anytime engineering work is sent overseas.
Meanwhile, sources inside AT&T Wireless, the nations second-biggest cell phone service in terms of revenue, told newspapers, including Seattle Weekly, that the Redmond-based company is planning to lay off as much as 70 percent of its 3,900-person technical staff, outsourcing those jobs to companies in India. The company wont confirm those reports. But one technical employee says workers from two India contracting agencies are on site, learning skills they could use to do that work for AT&T Wireless back home. Theres very deep and bitter resentment, says the technical employee, who feels he is being forced to train his replacement.
The issue of white-collar outsourcing has ignited a flurry of activism and research. Several national reports have called attention to the scale of the phenomenon. The most recent, released last month by researchers at the University of California-Berkeley, notes that up to 30,000 American white-collar jobs were outsourced to India, where there is a vibrant high-tech sector, in June alone. It asserts that as many as 14 million white collars jobs are vulnerable to offshore outsourcing. Far from being immune, the technology sector has led the initial overseas exodus, according to another, widely cited report, published last year by Forrester Research, a company that analyzes business trends.
Helping to lead a backlash is the Seattle-based Washington Alliance of Technology Workers. Five-year-old WashTech, an affiliate of the Communication Workers of America union, began by organizing temporary technology workers but has branched out to include permanent workers as well, making it one of only two or three unions in the country speaking for technology workers. Its membership is a tiny 350, but since taking on the issue of outsourcing last January, WashTechs electronic subscriber list has grown to 16,000. Now the union is frequently quoted by national and international news outlets, including CNN and The Wall Street Journal. Along with Boeings engineering union, WashTech also persuaded the federal General Accounting Office to study white-collar outsourcing.
In WashTechs Eastlake offices, founding president and former Microsoft temp Marcus Courtney says that what white-collar outsourcing there was in the mid- to late 1990s wasnt considered a big deal. In those boom years, he says, people thought, We can grow here in the U.S., they can grow there in India. Its a win-win. The economic bust changed all that. Its clearly not a win-win situation anymore, Courtney says. How is the region going to grow when we have its largest employers, like Microsoft and Boeing, increasingly moving its high-skilled jobs overseas?
Last week, the union held a well-timed forum on white-collar outsourcing and brought in author Alan Tonelson, who has similar concerns on a national level. The writer of Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade Are Sinking American Living Standards, Tonelson thinks there is momentum behind overseas outsourcing. As more and more U.S. companies go overseas to cut costs, other U.S. competitors follow. In part, Tonelson acknowledges, thats because companies are under intense pressure to lower prices to match those of competitors using overseas labor. People like me are worried about the process reaching the point of no return, he says.
Companies like Boeing also are under another kind of pressure, says spokesperson John Kvasnosky. The day is long gone when other economies are going to buy our products without having the opportunity to invest and share in the production of them, he says. He uses the companys Moscow Design Center as a case in point. The design center is a landmark for Boeing in terms of outsourcing white-collar work. It em-ploys some 750 engineers and technical workers, according to SPEEA. The 10-year outlook for Russia is $30 billion, Kvasnosky says, referring to the market for commercial plane sales. We have to compete for that.
Microsoft maintains that it is outsourcing overseas in part to take advantage of the untapped talent pool in places like India and China, both of which boast Microsoft development facilities. Workers there are not doing the kind of technical grunt work so often associated with offshore outsourcing in this sector. Among other things, they are working on the very core of Microsofts business, its Windows platform, according to Microsoft spokesperson Stacy Drake. (Microsoft outsources grunt work as well, last month opening, for example, a new phone and e-mail customer-support center in India.)
While there is an array of reasons for white-collar outsourcing, cost cutting is undeniably a major one. Quality work at 50 to 60 percent of the costthats two heads for the price of one, reads a famous PowerPoint presentation by Microsoft Windows executive Brian Valentine, under the heading Why Think About India Now.
Thats bound to stick in the craw of American workers, particularly in cases where highly profitable companies are laying them off. Take AT&T Wireless, for instance. Were absolutely doing well, says spokesperson Mark Siegel. Oh my God, look at the last quarter. Quarterly results released earlier this month show a 7.7 percent increase in revenue over the past year, to $4.4 billion. Although Siegel wont talk about whether the company is considering outsourcing overseas, he will say that AT&T Wireless is engaged in a cost-cutting effort to increase profit margins to industry-leading levels. The companys current profit margin of around 30 percent isnt good enough. Were trying to get up into the range of about 40 percent, Siegel says.