Global Marketplace: Whether Bringing Jobs Here or Shipping Work Overseas, Companies Truly Shop The World For Talent
Growth in India will accelerate in 2005, but said China, Russia and a number of Eastern European and Southeast Asian countries also are becoming larger players in the outsourcing industry.
Jan 05, 2005
As the law firm Reed Smith LLP expanded to New York, San Francisco and London in recent years, it consolidated support services from those far-flung places and brought the work home to Pittsburgh, where the firm was founded in 1877.
Enabled by advanced communications technology, about 70 back office workers in the Gulf Tower on Grant Street provide accounting, human resources and technical support to nearly 1,000 attorneys in 16 Reed Smith offices in the United States and abroad, just as if they were down the hall in another cubicle. The operation is expected to expand in 2005.
"The increase in capable technology allows us to grow Reed Smith in other parts of the United States and throughout Europe and at the same time take advantage of some of the great things about Pittsburgh, which is a stable, talented work force and a favorable cost structure," said Greg Jordan, Reed Smith's firmwide managing partner.
The Internet has created a two-way street by breaking down geographic boundaries between labor markets for a growing category of service jobs. The same technology that allows Reed Smith to bring work to Pittsburgh permits other companies to utilize talent in India, China and other lower-cost locales around the globe.
Such is the trend in the 21st-century economy, where the rise of online communications and the decline of trade barriers have truly resulted in a global marketplace, with all its pluses and minuses for companies and workers. The drive to maximize talent and skills and minimize costs -- whether through outsourcing to another country or by consolidating work in Pittsburgh or other U.S. locales that have comparative cost and skill advantages -- is expected to continue in 2005.
Mellon Financial Corp., for example, continuously looks at the different tasks it performs in Pittsburgh and elsewhere with the goal of rationalizing and re-engineering operations to take advantage of where things can be done most efficiently.
That can mean relocating to Pittsburgh the computer hardware and software resources that supported Mellon's business in London, a decision that was based on the bank's intentionally redundant information technology infrastructure here. Or it can mean moving IT work from Pittsburgh to a vendor in India, if the conditions allow.
"The expression that you hear if you talk with Mellon people is Centers of Excellence," said Ron Sommer, a spokesman for Mellon, which has trimmed its companywide work force by nearly 3,000, to 20,000, the past two years. "You look at a function and find out where it gets done most efficiently. You have to do that in this business. It just goes on all of the time."
In a sense, globalization and technology have put the world into a trading ring, argues Nandan Nilekani, chief executive officer of Infosys Technologies, a leading Indian exporter of software services to the United States that has counted Mellon among its many customers.
"People across the world can plug into the Internet, the broadband and become part of this global work force," Nilekani said in an interview this year on the Infosys campus in Bangalore, India.
Infosys and other large Indian software companies are ending 2004 with new hiring and in an upbeat mood after the re-election of President Bush and defeat of Sen. John F. Kerry, who made foreign outsourcing a campaign issue.
"American firms will be bolder in terms of not hiding that they are benefiting from outsourcing to Indian IT offshore providers," said Sudip Banerjee, president of Wipro Technologies, an Indian company listed on the New York Stock Exchange. "The industry is pleased as punch that [the] IT outsourcing wave will continue without any policy road blocks."
More than 80 percent of the world's top 2,000 corporations will have established significant outsourcing operations overseas by the end of 2005 as political opposition to the trend diminishes and the pressure to cut costs grows, according to a new study released last week.
The study, conducted by neoIT, a Silicon Valley and Bangalore consulting group, also said small and medium-size businesses were increasingly looking to outsource services to India and other developing countries. It expects manufacturing, health care and retail to be among the sectors that will embrace the practice.
Wipro added 5,546 employees during the quarter ended in September. Infosys added 5,010 new recruits, half of them recent college graduates, to its Indian work force and anticipated hiring about 10,000 for the full year.
Exports from India in information technology and business process services amounted to $12.5 billion in the last fiscal year and are expected to exceed $16 billion in the current fiscal year that ends in 2005.
NeoIT agrees that growth in India will accelerate in 2005, but said China, Russia and a number of Eastern European and Southeast Asian countries also are becoming larger players in the outsourcing industry.
Despite the neoIT report, the outsourcing of jobs to lower-cost countries remains a comparatively small portion of the U.S. economy, where about 7 million jobs were gained and lost in each of the last four quarters.
The U.S. operations of foreign-based companies represent a more positive face of globalization. A trade group of foreign investors, the Organization for International Investment, estimates that 6.4 million Americans owe their jobs to foreign corporations.
Infosys, for example, is investing $20 million in a new California-based U.S. subsidiary, Infosys Consulting, that is expected to hire 500 workers over the next few years to compete with more established consultants such as Deloitte & Touche and IBM.
Closer to home, the trade group estimates that more than a quarter of Pennsylvania residents owe their paychecks to foreign-based corporations. Local examples include Sony's television complex in Westmoreland County, Bayer AG's and GlaxoSmithKline's operations along the Parkway West, and Marconi's computer networking division in Marshall.
Lower wage costs are not the only factors employers consider in deciding where to place an operation. Workers can compete on other factors such as innovation, advanced skills and customer service.
Precision Response Corp., a Florida-based provider of telephone services and e-mail management, cited "quality work force" for its decision this fall to expand its customer service center in West Mifflin by more than 400 full-time employees. The company also operates centers in the Dominican Republic, India and the Philippines.
Its chief executive, John Hall, said the 4-year-old operation had "continuously been a top performer, exceeding client expectations, and our expansion is a direct result" of that success and the "quality of the local work force."
West Mifflin manager Glenn Burns cited the region's work ethic and said PRC looked at a number of sites, including Texas, before making the decision.
"We know there is a committed work force here. It's a culture that is very conducive to what we are looking for at PRC," Burns said. "We find definite value domestically and more specifically here in Western Pennsylvania."
Enabled by advanced communications technology, about 70 back office workers in the Gulf Tower on Grant Street provide accounting, human resources and technical support to nearly 1,000 attorneys in 16 Reed Smith offices in the United States and abroad, just as if they were down the hall in another cubicle. The operation is expected to expand in 2005.
"The increase in capable technology allows us to grow Reed Smith in other parts of the United States and throughout Europe and at the same time take advantage of some of the great things about Pittsburgh, which is a stable, talented work force and a favorable cost structure," said Greg Jordan, Reed Smith's firmwide managing partner.
The Internet has created a two-way street by breaking down geographic boundaries between labor markets for a growing category of service jobs. The same technology that allows Reed Smith to bring work to Pittsburgh permits other companies to utilize talent in India, China and other lower-cost locales around the globe.
Such is the trend in the 21st-century economy, where the rise of online communications and the decline of trade barriers have truly resulted in a global marketplace, with all its pluses and minuses for companies and workers. The drive to maximize talent and skills and minimize costs -- whether through outsourcing to another country or by consolidating work in Pittsburgh or other U.S. locales that have comparative cost and skill advantages -- is expected to continue in 2005.
Mellon Financial Corp., for example, continuously looks at the different tasks it performs in Pittsburgh and elsewhere with the goal of rationalizing and re-engineering operations to take advantage of where things can be done most efficiently.
That can mean relocating to Pittsburgh the computer hardware and software resources that supported Mellon's business in London, a decision that was based on the bank's intentionally redundant information technology infrastructure here. Or it can mean moving IT work from Pittsburgh to a vendor in India, if the conditions allow.
"The expression that you hear if you talk with Mellon people is Centers of Excellence," said Ron Sommer, a spokesman for Mellon, which has trimmed its companywide work force by nearly 3,000, to 20,000, the past two years. "You look at a function and find out where it gets done most efficiently. You have to do that in this business. It just goes on all of the time."
In a sense, globalization and technology have put the world into a trading ring, argues Nandan Nilekani, chief executive officer of Infosys Technologies, a leading Indian exporter of software services to the United States that has counted Mellon among its many customers.
"People across the world can plug into the Internet, the broadband and become part of this global work force," Nilekani said in an interview this year on the Infosys campus in Bangalore, India.
Infosys and other large Indian software companies are ending 2004 with new hiring and in an upbeat mood after the re-election of President Bush and defeat of Sen. John F. Kerry, who made foreign outsourcing a campaign issue.
"American firms will be bolder in terms of not hiding that they are benefiting from outsourcing to Indian IT offshore providers," said Sudip Banerjee, president of Wipro Technologies, an Indian company listed on the New York Stock Exchange. "The industry is pleased as punch that [the] IT outsourcing wave will continue without any policy road blocks."
More than 80 percent of the world's top 2,000 corporations will have established significant outsourcing operations overseas by the end of 2005 as political opposition to the trend diminishes and the pressure to cut costs grows, according to a new study released last week.
The study, conducted by neoIT, a Silicon Valley and Bangalore consulting group, also said small and medium-size businesses were increasingly looking to outsource services to India and other developing countries. It expects manufacturing, health care and retail to be among the sectors that will embrace the practice.
Wipro added 5,546 employees during the quarter ended in September. Infosys added 5,010 new recruits, half of them recent college graduates, to its Indian work force and anticipated hiring about 10,000 for the full year.
Exports from India in information technology and business process services amounted to $12.5 billion in the last fiscal year and are expected to exceed $16 billion in the current fiscal year that ends in 2005.
NeoIT agrees that growth in India will accelerate in 2005, but said China, Russia and a number of Eastern European and Southeast Asian countries also are becoming larger players in the outsourcing industry.
Despite the neoIT report, the outsourcing of jobs to lower-cost countries remains a comparatively small portion of the U.S. economy, where about 7 million jobs were gained and lost in each of the last four quarters.
The U.S. operations of foreign-based companies represent a more positive face of globalization. A trade group of foreign investors, the Organization for International Investment, estimates that 6.4 million Americans owe their jobs to foreign corporations.
Infosys, for example, is investing $20 million in a new California-based U.S. subsidiary, Infosys Consulting, that is expected to hire 500 workers over the next few years to compete with more established consultants such as Deloitte & Touche and IBM.
Closer to home, the trade group estimates that more than a quarter of Pennsylvania residents owe their paychecks to foreign-based corporations. Local examples include Sony's television complex in Westmoreland County, Bayer AG's and GlaxoSmithKline's operations along the Parkway West, and Marconi's computer networking division in Marshall.
Lower wage costs are not the only factors employers consider in deciding where to place an operation. Workers can compete on other factors such as innovation, advanced skills and customer service.
Precision Response Corp., a Florida-based provider of telephone services and e-mail management, cited "quality work force" for its decision this fall to expand its customer service center in West Mifflin by more than 400 full-time employees. The company also operates centers in the Dominican Republic, India and the Philippines.
Its chief executive, John Hall, said the 4-year-old operation had "continuously been a top performer, exceeding client expectations, and our expansion is a direct result" of that success and the "quality of the local work force."
West Mifflin manager Glenn Burns cited the region's work ethic and said PRC looked at a number of sites, including Texas, before making the decision.
"We know there is a committed work force here. It's a culture that is very conducive to what we are looking for at PRC," Burns said. "We find definite value domestically and more specifically here in Western Pennsylvania."