• 17 March 2004
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Global Media Buzz

US-based firm to set up facility in Bangalore
US-based enStage Inc., a software firm started in Silicon Valley by Indian entrepreneurs, said it would set up an outsourcing facility in the technology hub of Bangalore. "The company is in the process of setting up a payment processing facility in India to enable banks to benefit from its payment solutions without extensive capital and operational expenses," said Govind Setlur, founder and CEO of the firm.

"The facility is being hosted by Reliance Infocomm’s center in Bangalore and is expected to be operational by this month end," Setlur told reporters. He said about 20 people will be initially employed in the center.

The firm makes e-payment solutions for banks which include processing of online payments of credit and debit cards through the Internet.

Agence France-Presse

Bank of America creates Indian outsourcing subsidiary
Bank of America Corp is setting up a wholly-owned subsidiary in Hyderabad, India, that will process some of its back-office operations. The Contin uum Solutions subsidiary will have about 500 staffers by the end of the year, with up to 1,000 employees by mid-2005, the Charlotte, NC-based bank announced. The subsidiary will help the bank to remain competitive in the global market and to grow in the US and abroad, said Rahul Samant, MD of Bank of America’s Global Delivery Center and director of Continuum Solutions.

BOA is the latest multinational bank to outsource back-office operations to India. The bank already outsources software development work to Indian software companies such as Infosys and TCS.

Computerworld, US

In defense of Bush’s economist
Last week when Gregory Mankiw, the head of President Bush’s Council of Economic Advisers, told reporters that the outsourcing of jobs to foreign countries is a natural part of globalization and not necessarily a bad thing, critics pounced on Mankiw’s remark as evidence that the Bush administration has bungled economic policy and neglected the plight of jobless Americans, accusations that have some merit.

But Mankiw has taken an unfair beating, for what he said last week is what most experts, including the nation’s best economists, would say about the integration of global markets in the last 30 years.

Consider the outsourcing of software jobs to India. This is certainly a threat to the wages and job security of some Americans. But it also demonstrates—as economists long predicted—that free trade could help poor nations climb the economic ladder, producing college graduates who would enter the world’s middle class.

Since 1990, for example, India has increased its per capita income by almost 50% and has cut its illiteracy rate by almost one-third. That’s good for the people of India and for Americans who sell exports.

Then there are American companies that have set up accounting shops in Korea and computer help lines in Ireland. This, too, could depress the wages of some Americans. But it also means that American consumers are getting more products for less money. The money they save is money they will spend on something else. That’s the textbook definition of rising productivity and, as economist Paul Krugman has pointed out, rising productivity is what makes the world richer.

Toronto Star, Canada

Outsourcing? No Fear   
Consider two countries. One is a developing nation with lots of dirt-cheap labor that has become an exporting giant. The other has been importing more and more products from abroad and losing manufacturing jobs by the millions. You might guess that the first country is China. The second? That’s China, too.

From 1995 to 2002, it lost 15 million manufacturing jobs. Its imports have grown rapidly in recent years. Yet you can hardly say those trends are symptoms of decline, since China’s economy is among the world’s fastest growing. All this is worth keeping in mind when you hear politicians talk about jobs and trade. Sen. John Edwards seems to think it’s a crime for any factory, anywhere in America, to ever shut its doors.

But all sorts of companies go out of business every day, even as new ones start up. That’s part of life in a dynamic, ever-innovating economy. It’s no more a tragedy for a factory to close than for an old house to be torn down so a better one can be built in its place.

On the campaign trail, candidates have blamed President Bush for the loss of millions of jobs, even as they criticize free trade agreements and US corporations that, as Sen. John Kerry puts it, "ship jobs abroad".

But the jobs shed during the Bush administration didn’t disappear because foreigners were stealing them. They disappeared because of the recession and subsequent sluggish growth. It’s a stark fact of life that no economy expands forever. Every boom ends in bust. Once economic growth resumes, though, employment growth inevitably follows, sooner or later.

Many people assume any job that migrates from America to another country permanently diminishes our employment base. Hence the furor over White House economic adviser Greg Mankiw’s remark that "outsourcing" of jobs to other countries "is probably a plus for the economy.."

If it’s sensible for American consumers to save money buying clothes from Malaysia or cars from Japan, why isn’t it smart for American firms to save money hiring people in India to answer phones?

Most American jobs are no more likely to be relocated than the Hoover Dam. I can’t outsource my haircuts to India or my car repairs to China.

The Baltimore Sun, USA

Greenspan warns against ‘protectionist cures’
US Fed chief Alan Greenspan warned today that "protectionist cures" to deal with the country’s job insecurities would make the situation worse. Entering the politically charged debate over US service jobs being shipped overseas, he said it was a lack of adequate educational training rather `outsourcing’ which posed the greatest threat America's future prosperity.

He predicted that the strengthening economy should lead to stronger employment growth in the months ahead. "...but America’s job-turnover process is never without pain for those in the job-losing portion," he said.

Greenspan said the current anxiety about losing jobs to other countries is not new. There were fears about losing jobs to low-wage Japan in the 50s and 60s and to low-wage Mexico in the 1990s, he said.

However, he also said the recent migration of service sector jobs to India is a new phenomenon. But he cautioned that erecting trade barriers in this country would be wrong. "The protectionist cures being advanced to address these hardships will make matters worse rather than better," he said.

Star Tribune, USA

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