Companies going offshore to outsource IT need to learn how to talk about this increasingly sensitive subject

Mary Hayes Weier, Contributor

July 19, 2003

4 Min Read

On April 17, Kevin Flanagan was let go from his job at Bank of America's Concord, Calif., division. Later that day, he committed suicide, shooting himself in the parking lot. His father, Tom Flanagan, says his son, a software developer with seven years at the bank, was troubled because his job was being sent overseas. "He knew for a year that Bank of America was dumping programmers and tech people, and he knew it was coming," the elder Flanagan says. "And he knew people from India were brought into his building and trained to do his job and sent back to New Delhi."

For a smart, hard-working 41-year-old man to take his life, there must have been troubles beyond the loss of a job, Flanagan acknowledges. And as a former manager and engineer himself, he understands that companies need to cut costs and please shareholders. What's more, Kevin got a generous severance package from the bank. Still, several groups have latched onto the younger Flanagan's suicide as an example of what happens when a company sends jobs overseas. A Bank of America spokesman declined requests for interviews for this story.

Bank of America isn't alone in its reluctance to talk. About a dozen large companies known or believed to use offshore outsourcing, including Best Buy, General Electric, and Nationwide Financial, declined comment or didn't return phone calls. Customer conferences hosted by Indian IT-services companies are often closed to the media at the request of the business clients attending. Indian IT-services providers such as Infosys, Satyam Computer Services, Tata Consultancy, and Wipro have difficulty convincing customers to talk to the press; U.S. IT-services companies face far less resistance.

If it were just a reticence to talk to the press, the issue wouldn't matter much. But the growing debate will make offshore outsourcing increasingly important to two groups that companies care most about--shareholders and customers--and one they'd just as soon avoid--politicians.

Atul Vashistha, CEO of NeoIT, a company that helps U.S. businesses find overseas contract-services firms, sees clients becoming reluctant to make their offshore-outsourcing plans public and putting more thought into how they communicate their plans inside their companies. They can't afford to keep under wraps a key piece of their business strategy. "If senior managers aren't explaining [their offshore-outsourcing strategies] to everyone in the company--and their customers--they're making a mistake," Vashistha says.

Another reason companies should make outsourcing plans public is that their shareholders need to know how they're spending and saving money, Vashistha says. He predicts that within five years, outsourcing will consume a third to a half of many companies' IT budgets. That's too big a number not to make it part of the strategic discussion with shareholders.

Today's economy intensifies the tension, since workers replaced by offshore outsourcing often have trouble finding new jobs. It's those unemployed workers who keep the political pressure on. John Bauman, president of the Organization for the Rights of American Workers and an unemployed IT consultant, says the nonprofit group, which is funded by its members, has a database of 3,000 professional technologists, 1,200 of them unemployed. It's gradually taking on a more activist role, staging protests and lobbying politicians. "Will we be able to convince companies [not to send job overseas]? Maybe through laws," Bauman says (see sidebar story, Politics: Lawmakers Jump Into The IT-Jobs Debate).

Perhaps the greatest risk companies face in trying to keep their offshore-outsourcing plans a secret is sinking morale among remaining employees.

TRW's Drouin wasn't concerned about publicity, but he still wishes he'd done a better job communicating the company's offshore strategy with employees. Company executives didn't spell out clearly what Satyam would do and what work would stay with in-house staff, Drouin says. "Because we didn't do that, everyone was worried about whether their job was going away." Now that the relationship is clear, TRW employees are more trusting of it.

In today's political and economic climate, decisions to outsource abroad come with a whole new set of communication challenges along with the everyday operational risks. Ignoring the challenges won't make them any easier to overcome.

Next week: How to avoid offshore-outsourcing pitfalls

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