Tuesday, March 3, 2009

Foreign Companies Will Lie To Win American Contracts

R.I.P. American White Collar Workers

The Washington Alliance of Technology Workers has published an excellent article entitled Foreign Companies Will Lie to Win American Contracts (Part IV) by
Rawlein G. Soberano, Ph.D. who questions why our government is going out of its way to displace educated American professionals in favor of foreign nationals. As LWOH has written about India’s culture of corruption here and here, Indian outsourcer Satyam, has left a host of other Indian outsourcing providers vulnerable to defend their accounting practices. Or so it would seem.

In the midst of this economic depression, Citigroup recently announced that it is outsourcing ALL of its IT business staff and services to Tata Consultancy Services (TCS), a large outsourcing company based in India with US corporate offices located in Cincinnati. Citi employs over 12,000 contractors where over 90% are H-1B and L-1B visa workers. (Is it safe to say that Citi has been “outsourced” to India for some time now?)

The state of Ohio lured Citi ostensibly on the promise by Tata that it would create white collar jobs. Soberanto reports

“In late 2007, Tata received an $18 million, 8-year tax abatement from Clermont County and the State of OH to relocate their US headquarters to OH and "create" 1,000 jobs in Clermont County within a 3-year period. Tata has not yet fulfilled the terms of the tax agreement to fulfill the state tax abatement - "their corporate HQ is only 30% occupied, parking lots are empty and the future expansion plan is in limbo. However, Citigroup moved its R&D and development to OH 5 years ago. This group is among all IT departments being outsourced to Tata, closing down its IT operations in Cincinnati/Northern KY and moving them to Tata US HQ in Clermont County.

And where exactly are those jobs that Tata negotiated with the state of OH in exchange for $18 million of tax breaks?

“Tata has internally transferred 450 jobs that already exist from Northern OH to Clermont County and was supposed to create only 550 new jobs to meet state tax abatement requirements. Tata claims these 550 "newly created" jobs will be high-level software development jobs but has not advertised them in the local and state community media. This means that OH state government financed up to $27,000 per job for Tata to create 550 IT jobs that are already there. The outsourcing deal with Citigroup that is under Fed Govt. review further implies that more OH jobs will be transferred to Tata and not be newly created jobs as the original state tax abatement implies.

How is Ohio supposed to benefit when 1,000 jobs are retained in the state from Tata transfers to a total of $18 million for 8 years but no new jobs are actually created in the state? This month, Obama’s economic advisory team will meet with Tata, Satyam, Wipro, Resourcesoft, Megasoft, Infosys, Global Cynex, etc. “to make sure any job program he comes up with does not stop the white collar bleed to India and take away the one-sided benefits that have flown their way to date at American workers' expense.”

In the meantime, why are Ph.D.s like Gene Nelson working as security guards while Obama has pledged to import more foreign workers to take American jobs during this Depression? Does “BHO” care about what American citizen supposed to do for work?

All Slaves on board? Thanks to this wholesale sell off of American jobs to India and outsourcing/insourcing’s effects on labor arbitrage, how long will it be before the average IT worker in America is capped at earning a whopping $15 hr?

Sarah Johnson reports in this CFO Magazine article that outsourcing service providers are shaving as much as 15% off existing contracts in order to retain their customers. One research firm notes that vendors have become “more flexible” in their pricing and are accepting lower margins on agreements.

“They're waiving some of their clients' start-up costs or amortizing those costs over the length of the contract. In some cases, they're extending credit and payment terms. What's more, service providers are agreeing to renegotiate existing contracts so that they don't lose business — a growing concern for an industry whose rapid growth earlier this decade has slowed in recent months.

But Peter Allen, a partner and managing director for TPI, an outsourcing advisory firm, shines a cautionary glint of light:

"Clients are tending to ask themselves whether the lowest-price approach doesn't introduce unacceptable levels of operational risk and business resilience comes at a price, and these recent events accentuate the importance of paying that price.

Now, the million rupee question becomes: Will Obama follow the Bush administration’s policy of killing what’s left of white collar jobs for Americans? Will he stand up to protect US white collar workers from Citigroup for their blatant, discriminatory hiring actions by outsourcing companies, such as Tata, when the Federal Govt.'s financial bailout assistance is provided to benefit the likes of Citigroup Financial?


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