03:24 PM PDT on Saturday, July 24, 2004

By ANURADHA RAGHUNATHAN / The Dallas Morning News

CHENNAI , India – These are the faces of outsourcing.

AP Employees of Infosys walk through the company's 60-acre campus in Bangalore, India.

Twentysomethings unafraid to plunk down money on a Nike shoe, a Dell computer or a Nokia cellphone.

A new generation that thinks it's OK to marry outside your caste.

And an increasing number of workers moving here to take the jobs offered by American companies hoping to cut labor costs.

Even as outsourcing roils the U.S. labor market and stirs the presidential campaign, the migration of back-office jobs is revolutionizing India's urban landscape. This new class of Indian workers numbers nearly 800,000, is connected to the U.S. economy by the Internet and increasingly looks like the American consumer market.

Those are powerful forces that help make the outsourcing movement as attractive to India as it is to American corporate executives.

Young workers in India "drink Coke, they use Microsoft software, they use a Cisco router, they use a Dell computer and they watch History Channel," says Mohandas Pai, chief financial officer at Infosys Technologies Ltd., a consulting company that does a lot of work for the United States.

The accelerated spending is also evident at the coffee pubs, restaurants, bars, discotheques and malls in such outsourcing capitals as Mumbai, Chennai, Bangalore and New Delhi. And India's imports were up 43 percent, reflecting increasing demand from a growing middle class.

This globalizing of the world's workforce has allowed American employers to drastically reduce labor costs, experts say. That creates a powerful incentive to keep moving jobs to lower-cost labor providers, such as India.

But critics counter that it has come at a high price for the United States – a much more brutally competitive job market, stagnant or declining pay in many cases and widening income inequality.

Where Americans see trouble in the outsourcing movement, many Indians see unprecedented opportunity.

For the first time in decades, people with bachelor's degrees here are earning $150 to $250 monthly starter salaries – triple what they would have settled for before the advent of this services industry.

Consider M. Bhagyavathy. From her office in Sholinganallur, a suburb in this southern Indian city, she processes home equity loans and lines of credit for U.S. mortgage companies.

This 24-year-old is an associate for Wipro Spectramind Services Limited, a large India-based provider of services for the outsourcing industry. She's saving to buy her dream home.

Or Nitesh Kripalani, a 24-year-old implementation manager at Office Tiger, a firm that offers a whole range of services, from stock market research to accounting to claims processing. He rose from managing a team of three to heading a team of 75.

Granted, the number of jobs created is minuscule compared with the 26 million unemployed in India. But young workers such as Ms. Bhagyavathy or Mr. Kripalani are part of a burgeoning $16 billion industry.

The software and services industry is poised to generate thousands of jobs over the next decade.

Since most of these twentysomethings are single and live at home – as is the Indian norm – their salaries go toward food and fun.

"You have a huge consumer class in India," says Kiran Karnik, president of the National Association of Software and Service Companies, an IT trade group.

"Outsourcing has triggered consumerism and taken it to a higher plane. It has created employment for the educated, intelligent, urban, middle-class [graduates]."

Despite the debate, the outsourcing industry here is expected to continue.

Large corporations – including Perot Systems Corp. and Electronic Data Systems Inc., both of Plano – are hiring in India while their U.S. employment remains stagnant. They derive cost savings from the salary differentials and the 24-hour work cycle created by the time difference. (India is 10.5 hours ahead of Dallas time).

Perot Systems, for instance, does billing, claims and collections work for U.S. health care providers in Chennai.

Employees follow up on bills on behalf of American doctors and hospitals, working from Monday evening to Saturday morning.

The associates receive training to neutralize their accents. They're coached extensively on the business processes involved in bill collection.

As part of the informal cultural orientation, "they watch lots of reruns of Friends and Will and Grace," says Anurag Jain, chief executive of vision Healthsource, a Chennai company that Perot Systems bought last August.

He adds that the "acquisition was more about adding complementary capabilities and ... an offshore component rather than just a source of less expensive labor."

Mr. Jain says the biggest challenge is in keeping "two people from two different parts of the world on the same page."

The cultural differences are many. For example, the Indian workplace has a rigid organizational structure. Employees refer to their supervisors as "sir" and "madam."

Mr. Jain recalls how he tried to get his Indian employees to refer to him as "Anurag" or "A.J." Many employees kept going back to "sir." So he instituted a one-rupee rule. Every time an employee called him "sir," that person had to put one rupee into a jar.

All the training and hard work are paying off for the companies, too. Perot Systems now has a bill collection system with a turnaround time of 24 to 48 hours and an accuracy rate that is over 95 percent.

In another instance of offshore work, California-based E-Loan Inc. has farmed out a portion of its home equity loan processing to a 20-member team at Wipro Spectramind, Chennai.

E-Loan asks consumers whether they want their loans processed in India. If they do, the procedure is 24 to 48 hours faster than in the United States. Thanks to the work continuity, an associate in Chennai can pick up right where a California employee leaves off.

Chris Larsen, E-Loan's chief executive, says 85 percent of the 11,000 home equity loans granted by the company in the last three months or so were for consumers who wanted their loans processed in India.

"When we explain it and you give them a choice, customers are very comfortable with it," Mr. Larsen says. "Outsourcing is no different from buying a car that's made in Japan."

He recently visited Wipro's Chennai office to see whether it met all of E-Loan's security requirements.

"The infrastructure they've set up and the quality is very good," Mr. Larsen says.

Wipro's 100-acre campus is on a par with any Fortune 500 company's in the United States. Fifteen acres of the campus contain modern offices, a game room, a fitness center, a dorm and a 24-hour cafeteria. The buildings have 24-hour security. Associates working for one U.S. client cannot enter parts of the building where work is being done for another client.

E-Loan ensures security of consumer loan documents by providing a view-only option for associates in India. They can't download or print any of the mortgage applications they process.

Many chief executives shy away from any discussion on outsourcing, but Mr. Larsen openly defends it.

"You can't ignore offshoring if you really want to be competitive," he says. "It's the reality of the market today."

Even so, it's a touchy subject. Indian workers are often accused of exacerbating unemployment in the United States. The word outsourcing has become a symbol for the loss of American jobs.

Displaced U.S. workers have launched protests, and presidential candidate John Kerry has called for a plan where only Americans would execute U.S. federal contracts.

But local economists say outsourcing is a two-way street. It's providing valuable benefits to the U.S. economy as well.

For one, U.S. corporations achieve tremendous cost and time savings. Second, the United States gains $1.14 for every dollar outsourced, while the Indian economy gains 33 cents, according to a recent study from McKinsey & Co.

In addition, IT companies spend huge money setting up the infrastructure that makes it possible for Indians to work remotely. In 2003, India spent $3 billion to import high-tech equipment – the bulk of it from the United States, according to statistics from the Indian government. The equipment was used for meeting the demand for IT services.

Moreover, the consuming middle class in India – fueled in part by outsourcing – is going after U.S. consumer products.

Non-oil imports in India rose 25.6 percent for the second quarter, according to Economy.com. The import data generally reflect an improving economy and higher disposable incomes in some parts of society.

But the most important contribution, economists say, is that the new wave of jobs has taught youngsters to hope for a better future.

Mr. Kripalani, who holds an undergraduate degree in commerce, started his career at a Chennai call center four years ago. Two years later, he moved to Office Tiger, which has 1,500 employees in Chennai and about 150 in Manhattan.

He was bringing in $75,000 to $100,000 per month in revenue for his company. Now he's one of three implementation managers in Chennai. His salary has grown to five times what he first earned. Mr. Kripalani declined to divulge exact salary figures. Companies are wary of releasing the information, fearing it will tip off competitors.

Because he lives with his parents, Mr. Kripalani say his money mostly goes right in his pocket. He can afford expensive lunches at four-star hotels in Chennai.

He can buy shirts for $20 as opposed to $4 or $5. And he proudly displays a $300 watch. He's even paying part of his tuition for an MBA program at INSEAD, a reputable French business school. A few years ago, a commerce graduate without any work experience couldn't have dreamed of such a life.

"I probably would have been at a bank working as a clerk earning 5,000 rupees, or about $110, a month," says Mr. Kripalani. "BPO [business process outsourcing] has given me the opportunity to grow and to learn."

While Mr. Kripalani has chosen to spend his savings on higher education, some of his peers talk about buying cars and homes.

"It's a different generation altogether," says Rasheeda Bhagat, deputy editor at Business Line, a daily based in Chennai. "When they get a job, the first thing they're saying is, 'Can I buy a Maruti 800? [a starter car] ... Can I take a loan?' "

The economic independence and the accompanying confidence are also pushing youngsters to break social shackles.

In a country where arranged marriages are still the norm, Mr. Kripalani, for example, is dating a co-worker. She's from a different caste – and she's five years older. All of these are taboos in a culture where intercaste marriages are rare and where the husband is typically older than the wife.

"My parents are OK about it – provided the horoscopes match," says Mr. Kripalani. "I had to convince them about it. It wasn't as bad as I thought."

The young professional says there's a definite correlation between the changing economy, the increased earning power and social attitudes.

"If I was [economically] dependent on my parents, I wouldn't be as mature as I am today," he says. "You do change. You go out more. You get more confident."

Other outsourcing industry workers affirm that the money has given them the courage to challenge social norms.

Ms. Bhagyavathy of Wipro Spectramind is planning to marry her former boss after dating him for three and a half years. He is from a different caste. What's more, she speaks Telugu, one of the 14 national languages in India, and he speaks another Indian language, Tulu. English is their bridge language.

Experts say that the other big impact on India is the multiplier effect on the economy. Jobs in information technology are leading creating opportunities elsewhere.

For instance, Wipro Spectramind uses 1,000 vehicles to pick up and drop off employees at their doorsteps every day. (Because the employees work night shifts to match U.S. schedules, they rely on company transportation.)

"I run a small transportation company in addition to doing BPO work," jokes Raman Roy, chairman and managing director of Wipro Spectramind.

Some industry figures show that for every job created in the BPO sector, two or more jobs are generated in services. Experts say this is just the beginning. As the industry grows, the prosperity will spread.

"All these guys that you see buying designer shirts, motorcycles and scooters – a very large portion of them would come from BPO," Mr. Roy says.

Economists rush to put this in perspective.

India is a country of 1 billion people, and 25 percent of its gross domestic product is derived from agriculture. Outsourcing is a strictly urban trend. Vast segments of the Indian population are untouched by the outsourcing boom.

The information technology segment contributed only about 3 percent to India's GDP in fiscal 2003, which ended in March 2003.

Ms. Bhagat of Business Line says that the job market is still volatile.

She points out in a recent article that an advertisement for 2,000 entry-level jobs for Indian Railways (a government-run company operating more than 14,000 trains a day) brought in 1.1 million applications from graduates, even people with MBAs. And this was in the state of Andhra Pradesh, known for its technology parks and cyberjobs.

Other experts say the impact of outsourcing and globalization is limited and localized.

"There's been no significant new job addition," says E. Balaji, general manager at Ma Foi Management Consultants, a staffing firm for the outsourcing industry. "Certain jobs have been lost in the country due to structural adjustments. Net-net, it's a very marginal addition of jobs."

Still, for associates such as Ms. Bhagyavathy, outsourcing has meant a whole new way of life.

She's out on Friday and Saturday nights. She recently spent nearly $70 – an entire month's pay for thousands of families in India – on a new hairdo.

As she puts it: "You buy more; you spend more; your lifestyle changes."