U.S. need not be worried over job losses from outsourcing: survey

Monday, 10 November 2003, 20:30 IST
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NEW DELHI: Job losses in the U.S. due to outsourcing of financial services and technology work to low cost destinations like India will be offset by new employment opportunities in emerging sectors of the American economy, says a survey. Conducted by leading London-based research firm Datamonitor, it says while customer relationship services will continue to be outsourced by U.S. firms to cut costs, its impact on the U.S. labour market will be limited. "U.S.-based agent positions in traditional outsourcing verticals will safeguard against shrinkage of the domestic (labour) market," said a Datamonitor study report made available to IANS. The survey seeks to allay fears of increased job losses due to a rush among companies to outsource back-office jobs to low-cost overseas destinations like India, China and the Philippines. Currently, communications, financial services and technology account for over 65 percent of the total number of outsourced agent positions in the U.S. The survey says while continued deregulation in emerging sectors like U.S. utilities will spur growth in call centre jobs there, government agencies' cost reduction efforts will pave the way for outsourcing of functions to American firms. India's vast pool of English-speaking and cheap manpower, educational system and training programmes have helped transform the country into a global outsourcing hub. The rapidly growing business process outsourcing industry has virtually turned the country into an electronic housekeeper to the world, taking care of a host of routine activities for multinational giants. More than a quarter of Fortune 500 companies like General Electric, American Express, British Airways, HSBC and Citibank are shifting their back office operations to India. According to Datamonitor, currently one out of every 24 callcentre agents serving U.S. customers is outsourced to a "near outsourcing centre" in Canada and Mexico or an "offshore centre" in India or the Philippines. It predicts that by 2008, one in 15 agent positions will be outsourced to a foreign market. "The incessant pressures to cut costs and reduce capital outlay have triggered the offshore and near-shore exodus in the U.S. customer relationship outsourcing industry," said the study. The study says large contracts with Indian outsourcers have saved companies like American Express, Citibank, and Merrill Lynch tens of millions of dollars. "Generating similar interest in Britain, the Indian outsourcing market has recently welcomed firms like HSBC, British Telecom, and Prudential Plc, as well," said the Datamonitor report. According to the study, labour costs in outsourcing destinations like India are 15 to 25 percent lower than those in the U.S. while agent turnover rates are 10 times less. Datamonitor estimates that the total value of the U.S. customer relationship outsourcing market would be worth almost $24 billion by 2008 compared to $19 billion now. "Although there are geopolitical uncertainties and quality concerns over labour and management, U.S. outsourcers are determining that the benefits outweigh the risks," he added.
Source: IANS
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