4 American states may ban outsourcing

LONDON: Four US states are considering legislation to ban outsourcing of state data processing contracts to developing nations even as dozens of household names, spanning insurance, banking, technology and telecoms, are transferring part of their white collar administrative and customer-service work to Asia, particularly to India to cut costs. The US states considering the measure to curb flight of jobs are New Jersey, Maryland, Connecticut and Washington, the Sunday Telegraph reported on Sunday.The report also expressed concern about the future of UK call centres, a major industry employing about 500,000 people across 6,000 sites. According to it, Mitial Research, a specialist consultancy, has predicted that one third of Britain's larger call centres could shut down by 2005 with the loss of 90,000 jobs. General Electric, the giant US conglomerate, which initiated the bold decision to shift thousands of back office jobs to India a decade ago, is still in the van, with 11,000 Indian processing staff, the report said. ''If China is becoming the workshop of the world, India is the world's back office,'' says Chris Gentle of Deloitte Consulting, part of Deloitte and Touche, the big five accountancy firm. Deloitte estimates that 2 million jobs in financial services alone are likely to move from developed economies to emerging nations in the next five years. Across all industries, the exodus of services jobs could be 4 million. By 2008, financial services firms, are expected to have transferred $356 billion, or an average of $1.4 billion for each of the world's top 100 financial services companies. For leaders such as Citigroup and HSBC, there could be savings of two or three times that level. India's rise has been remarkable. Some 100,000 people are thought to be employed in call centres, while India's computer services and software industry is now worth $10 billion. It is expected to grow by 25 to 30 per cent this year, according to Nasscom, the computer industry body. Call centres in India handle the processing of student loans, queries about utility bills for Powergen and flight bookings for British Airways. A series of other British companies, including BT, HSBC, Prudential and Aviva, are shifting their call centres to the world's biggest democracy. Cost is just one issue. ''Companies go for the costs and stay for the quality,'' says Mike Harding, the managing director of Mercer O Liver Wyman. India may be a poor country but it has a well-educated, English-speaking workforce. JP Morgan has said it would set up a team of 40 junior research analysts in India. The plan is to provide greater analytical coverage at a fraction of the cost in the West. The trend has even caught the eye of the entertainment industry. Sanjeev Bhaskar, the star of the spoof BBC chat show ''The Kumars At No 42'', is to script the call centre, a film billed as a comic love story set in India and the UK. Citigroup now employs 3,000 people in India in call centres and processing operations in Mumbai and Chennai have helped it to become the world's most profitable financial services firm — its revenues have grown by $ 35 billion in the past five years, while costs have increased by just $12 billion. HSBC, which is due to open a global processing centre in Kuala Lumpur this year and already has a major back office centre in Shenzhen, China, expects to employ 9,500 call centre and processing staff in developing countries by the end of 2003, including 5,500 in India and 3,500 in China.