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India at outsourcing revolution’s core

A growing number of companies are setting up call centers in India — banks of people who help you when you have computer trouble or a question about your credit card.
CNBC's Sue Herera reports on the controversial practice of outsourcing jobs to India.
CNBC's Sue Herera reports on the controversial practice of outsourcing jobs to India.
/ Source: CNBC

“We’ve gotta make sure we don’t say tomah-do. Today, tomorrow, OK?,” an instructor tells his class. “We’ve gotta make sure the tongue touches exactly behind the teeth.” This isn’t Acting 101, nor is it your basic music class. It’s a class on how to sound like an American.

It's the midnight voice and accent training class at the Wipro Call Center in New Delhi, India.

Sounding like the customers is a critical skill at Wipro. The Indian IT services giant — traded on the NYSE — fields a small army of operators processing calls for customers like Dell, Lehman Brothers and Delta Air Lines.

So many, they expect to generate $1 billion in sales this year.

“Out of our client list, about 350 clients, about 70 percent are in the Fortune 1,000,” said Girish Paranjpe, Wipro’s president of financial services.

Across town, at the call center of General Electric, employees expertly weave in and out of classic British. (MSNBC is a joint venture of Microsoft and NBC, which is a GE company. Additionally, GE is CNBC’s parent company.)

Call centers are big business in India, but the outsourcing revolution goes far beyond this. Companies like Wipro are providing high value services for customers all over the globe.

“The ability to deliver services globally is really the story,” said Wipro CEO Vivek Paul. “And the story is that virtually anything that can be done ... can be done in a global fashion.

Forrester research expects more than 3.3 million U.S. jobs to move offshore by 2015 — the bulk of those to India.

American firms are outsourcing financial analysis work, IT management and even U.S. tax return preparation.

In Bangalore, India, radiologists read and interpret medical data for Wipro clients — and patients — in America.

The main draw is low cost, white-collar labor.

According to management consulting firm A.T. Kearney, an American engineer might earn $90,000 annually, but the same worker in India would make $23,000.

American software developers might earn $50,000-$75,000 a year, vs. $7,000-$10,000 in India.

Call center agents are also cheap, earning roughly $2,300-$3,200 annually — vs. ten times that in the U.S.

And the lure goes beyond money.

“You can get a higher level of employee, somebody who’s got four years of college or potentially even some advanced degree work,” said Forrester Research’s John McCarthy.

It’s among the reasons many are alarmed by the outsourcing trend.

Earlier this year, Rep. Donald Manzullo (R-Ill.) said, “If the bottom line in America today is profit to the exclusion of everything else, then, as the National Association of Manufacturers says, we’re gonna lose the cutting edge in technology and we better get used to being a third-rate country.”

But companies like technology leader Oracle say they have to take advantage of India’s deep and inexpensive talent pool to remain competitive.

“From an Oracle perspective, our own personal experience is companies strive to be competitive, profitable and in the long run those companies which take the right direction are going to survive,” said Murali Subramanian, Oracle’s vice president of e-business development.

Companies also say the job flow to India is not one-way.

Though Oracle has 3,000 employees in India, and will add 1,000 in the next year, they say that growth hasn’t cost any jobs in the U.S.

In fact, they point that out because Oracle now operates on a global, 24/7 schedule. Because the company has added Indian clients, there’s more work for employees in Bangalore and Silicon Valley.

“The more profitable and successful you are, you can generate more jobs, whether it is India or U.S.,” Subramanian said.

Outsourcing may be controversial, but the pressure on American executives to cut costs is relentless. As long as India can provide the savings, expect American companies to provide the jobs.