When outsourcing loses human element

By Anand Giridharadas
International Herald Tribune
FRIDAY, MAY 27, 2005

PUNE, India To some, the notion of outsourcing work to India conjures up stories of American and European software programmers being reduced to stocking supermarket shelves to make a living. To others, it evokes legions of fresh-faced Indians willing to do intense, high-skill work for low pay.

What may not immediately spring to mind are automated software factories: places where the labors once performed by Western programmers are not only transplanted to India but, once there, are performed by computers, not people.

Yet that is precisely the aim of a team of researchers at Tata Consultancy Services, the largest software and information technology services company in India. The company, which helped pioneer outsourcing to India, is pursuing an experiment in automating the activities of many of its employees, from call-center operators to software programmers.

The experiment, and others like it across India, aims to upgrade the image of outsourcing companies - from cheap replicators of other firms' techniques to innovators who change the way people work.

But the effort raises vexing questions for richer countries, where it has become an article of faith that manufacturing and low-end service jobs may be vulnerable to outsourcing to low-cost markets, but that the nebulous craft of innovation will remain the preserve of more developed economies.

At a Tata Consultancy research center in the western city of Pune, researchers are developing artificial intelligence software that, once perfected, would be able to sift through a company's millions of e-mail messages, memos and other documents to detect and formalize knowledge that the company may not know it possesses. Tata Consultancy Services says such software could drastically reduce technical-support calls by automatically gleaning from call transcripts which problem keywords correlate with which solutions.

"We can transform the whole call center - the way it looks today," said Subramanian Ramadorai, chief executive of Tata Consultancy. With "automated software engineering tools," he said, "if you're deploying 1,000-people voice-activated call centers, tomorrow you may say you can do the same thing with 10 people."

Researchers recently released a fresh version of a software program, MasterCraft, that automatically spawns computer code from a simple computer language, and then automatically rewrites the code when the user's needs change.

"You can generate code in minutes that would take decades to write," said Tony Hoare, a Microsoft researcher based in Cambridge, England, who has visited Tata's center in Pune and is familiar with its work.

"The design and construction of tools that will do that is a really advanced exercise," said Hoare "In the fact that they are doing it at all, they are among the leaders - globally."

Call centers and software programming lie at different ends of the spectrum of business activities being outsourced to India, where high-technology outsourcing exports have risen to more than $17 billion annually, up from $4 billion five years ago. The sector now employs more than one million people, according to the National Association of Software and Services Companies.

From low-end call centers to high-end software development, Indian companies are seeking innovations to help them combat the threat of new entrants to the market in countries like the Philippines. One approach has been to offer higher-value services, like business consulting or providing for a company's full range of software needs.

Less well-publicized is a determined attempt to retain low-end operations, even while expanding beyond them. The strategy is to transform operations like call centers from labor-intensive, cost-cutting shops into technology-intensive operations offering speed and quality.

"A program is taking away what a person would do," said Ravindra Datar, the principal Indian analyst for the outsourcing industry at Gartner Group, the research firm. "If the program is written well, the quality of work that you'll get out of the program is going to be better. The speed will be higher. The cost will be lower."

As India has validated the basic business model of outsourcing, destinations like the Philippines and China have begun vying for a portion of the market, while the fast-growing Indian industry sees local wages rising as a result of demand for workers outstripping supply.

"I don't think we will continue to have a competitive advantage," said Mathai Joseph, head of Tata's center in Pune.

Such fears have prompted the search for new advantages that will outlast India's labor-cost advantage. The buzz phrase is "climbing up the value chain" - moving into service offerings with hourly billing rates of around $100 per person, compared to the $20 commanded by call-center employees.