outsourcing to india
Aijaz Rahi/AP

In a Recession, New Industries May Outsource Work to India

December 26, 2008 03:16 PM
by Liz Colville
While the Indian workforce that is dependent on the U.S. financial sector suffers, workers dependent on other industries may thrive.

New Industry Heads to India

James Macpherson, the owner of the online news source Pasadena Now, gained notoriety in 2007 when he gradually replaced the majority of his U.S.-based employees with Indian workers. In a recent interview with Maureen Dowd, the New York Times columnist, Macpherson said, “Many newspapers are dead men walking. They’re going to be replaced by smaller, nimbler, multiple Internet-centric kinds of things such as what I’m pioneering.”

“The newspaper industry is coming to a General Motors moment—except there’s no one to bail them out,” Macpherson added. He now pays his reporters in India $7.50 per one thousand words; he paid his U.S.-based reporters between $600 and $800 per week.

Macpherson may be able to ride out the recession by keeping down his payroll costs. He hired his workers independently through Craigslist.

But the recession is also being felt in India, where firms thriving on U.S. work are starting to scale back their earning predictions. One reason is that IT services firms, like India’s Infosys, are “heavily dependent on the financial sector.” The “fate” of Infosys is also “closely tied” to the American economy, since “two-thirds of its business comes from the United States.”

And even before the economic trouble began, Indian tech and engineering firms were finding it difficult to make it into the higher echelons of the U.S. workforce, The New York Times notes. “Rather than drowning American technology firms or work forces with a vast supply of cheap engineering talent, as some had feared, India—and Bangalore, its Silicon Valley—have continued to largely serve as the information economy’s version of manual labor.”

The Department of Labor announced in December that Americans have lost about a million jobs since 2000 to workers overseas, WCVB Boston reported. The department compiled a list of jobs that would remain safest for American workers, concluding that “face-to-face” jobs would be among the strongest. The IT industry continues to outsource the most jobs overseas, it added.

Background: “Glocal” journalism sends U.S. journalists to India

In the spring of 2007, Macpherson placed an ad on India’s version of Craigslist that said, “We seek a newspaper journalist based in India to report on the city government and political scene of Pasadena, California, USA.” Macpherson expanded his Indian workforce to cover more than just the Pasadena City Council, which the initial ad called for. He now has six Indian reporters on staff.

According to an article in the Los Angeles Times, the editor of the Pasadena Star-News “scoffed” at the Pasadena Now idea, while a spokeswoman for the city of Pasadena said it was odd, but “as long as they get their facts correct, I’m a happy camper.”

Information Week’s Rob Preston suggested that the scaremongering about U.S. jobs was overblown, writing that outsourcing across sectors is inevitable in a global economy. “The best way to prove that your job or function isn't easily or economically outsourced or otherwise replaceable is to prove every day that you're hungry, flexible, creative, and thus indispensable to the organization. If you're not, then yes, you're vulnerable.”

Others were more cynical. “This is a truly sad picture of what American journalism could become,” Bryce Nelson, a University of Southern California journalism professor, told the Associated Press. But AP noted in the article that, “This is not the first time media jobs have been shipped to India. The British news agency Reuters runs an operation in the technology capital of Bangalore that churns out Wall Street stories based on news releases.”

Dowd noted that while many may have derided the Pasadena Now idea in 2007, in October, the chairman of the Associated Press, Dean Singleton, “told the Southern Newspaper Publishers Association that his company was looking into outsourcing almost every aspect of publishing, including possibly having one news desk for all of his papers, ‘maybe even offshore.’” Singleton heads the MediaNews Group, which owns 54 newspapers including the Pasadena Star-News, The Denver Post and The Detroit News.

Related Topic: E-discovery laws drive law firms to outsource workers

In 2006, new federal amendments applying to electronic discovery of legal information started to “place increasing demands on litigants, lawyers, and judges to manage discovery [of information] earlier, more often, and in more detail than conventional discovery required,” wrote Judge Lee H. Rosenthal in the Yale Law Journal. These new laws contributed to the legal sector’s growing need for more workers, many of whom are based in India; the country’s outsourced legal sector is now growing at a rate of 60 percent annually.

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