The World is Flat

Since CAT (and MRI) images are already in digital format and available on a network with a standardized protocol, it is no problem to view the images anywhere in the world... I assume that the radiologists on the other end... must have trained in [the] US and acquired the appropriate licenses and credentials... The groups abroad that provide these after-hours readings are called “Nighthawks” by the American radiologists that employ them. Best, Bill

Thank goodness I'm a journalist and not an accountant or a radiologist. There will be no outsourcing for me-even if some of my readers wish my column could be shipped off to North Korea. At least that's what I thought. Then I heard about the Reuters operation in India. I didn't have time to visit the Reuters office in Bangalore, but I was able to get hold of Tom Glocer, the CEO of Reuters, to hear what he was doing. Glocer is a pioneer in the outsourcing of elements of the news supply chain.

With 2,300 journalists around the world, in 197 bureaus, serving a market including investment bankers, derivatives traders, stockbrokers, newspapers, radio, television, and Internet outlets, Reuters has always had a very complex audience to satisfy. After the dot-com bust, though, when many of its customers became very cost-conscious, Reuters started asking itself, for reasons of both cost and efficiency: Where do we actually need our people to be located to feed our global news supply chain? And can we actually disaggregate the work of a journalist and keep part in London and New York and shift part to India?

Glocer started by looking at the most basic bread-and-butter function Reuters provides, which is breaking news about company earnings and related business developments, every second of every day. “Exxon comes out with its earnings and we need to get that as fast possible up on screens around the world: 'Exxon earned thirty-nine cents this quarter as opposed to thirty-six cents last quarter.' The core competency there is speed and accuracy,” explained Glocer. “You don't need a lot of analysis. We just need to get the basic news up as fast as possible. The flash should be out in seconds after the company releases, and the table [showing the recent history of quarterly earnings] a few seconds later.”

Those sorts of earnings flashes are to the news business what vanilla is to the ice cream business-a basic commodity that actually can be made anywhere in the flat world. The real value-added knowledge work happens in the next five minutes. That is when you need a real journalist who knows how to get a comment from the company, a comment from the top two analysts in the field, and even some word from competitors to put the earnings report in perspective. “That needs a higher journalistic skill set-someone in the market with contacts, who knows who the best industry analysts are and has taken the right people to lunch,” said Glocer.

The dot-com bust and the flattening of the world forced Glocer to rethink how Reuters delivered news-whether it could disaggregate the functions of a journalist and ship the low-value-added functions to India. His primary goal was to reduce the overlap Reuters payroll, while preserving as many good journalism jobs as possible. “So the first thing we did,” said Glocer, “was hire six reporters in Bangalore as an experiment.

We said, 'Let's let them just do the flash headlines and the tables and whatever else we can get them to do in Bangalore.'“

These new Indian hires had accounting backgrounds and were trained by Reuters, but they were paid standard local wages and vacation and health benefits. “India is an unbelievably rich place for recruiting people, not only with technical skills but also financial skills,” said Glocer. When a company puts out its earnings, one of the first things it does is hand it to the wires-Reuters, Dow Jones, and Bloomberg-for distribution. “We will get that raw data,” he said, “and then it's a race to see how fast we can turn it around. Bangalore is one of the most wired places in the world, and although there's a slight delay-one second or less-in getting the information over there, it turns out you can just as easily sit in Bangalore and get the electronic version of a press release and turn it into a story as you can in London or New York.”

The difference, however, is that wages and rents in Bangalore are less than one-fifth what they are in those Western capitals.

While economics and the flattening of the world have pushed Reuters down this path, Glocer has tried to make a virtue of necessity. “We think we can off-load commoditized reporting and get that done efficiently somewhere else in the world,” he said, and then give the conventional Reuters journalists, whom the company is able to retain, a chance to focus on doing much higher-value-added and personally fulfilling journalism and analysis. “Let's say you were a Reuters journalist in New York. Do you reach your life's fulfillment by turning press releases into boxes on the screen, or by doing the analysis?” asked Glocer. Obviously, it is the latter. Outsourcing news bulletins to India also allows Reuters to extend the breadth of its reporting to more small-cap companies, companies it was not cost-efficient for Reuters to follow before with higher-paid journalists in New York. But with lower-wage Indian reporters, who can be hired in large numbers for the cost of one reporter in New York, it can now do that from Bangalore. By the summer of 2004, Reuters had grown its Bangalore content operation to three hundred staff, aiming eventually for a total of fifteen hundred. Some of those are Reuters veterans sent out to train the Indian teams, some are reporters filing earnings flashes, but most are journalists doing slightly more specialized data analysis-number crunching-for securities offerings.

“A lot of our clients are doing the same thing,” said Glocer. “Investment research has had to have huge amounts of cost ripped out of it, so a lot of firms are using shift work in Bangalore to do bread-and-butter company analysis.” Until recently the big Wall Street firms had conducted investment research by spending millions of dollars on star analysts and then charging part of their salaries to their stockbrokerage departments, which shared the analysis with their best customers, and part to their investment banking business, which sometimes used glowing analyses of a company to lure its banking business. In the wake of New York State Attorney General Eliot Spitzer's investigations into Wall Street practices, following several scandals, investment banking and stockbrokerage have had to be distinctly separated-so that analysts will stop hyping companies in order to get their investment banking. But as a result, the big Wall Street investment firms have had to sharply reduce the cost of their market research, all of which has to be paid for now by their brokerage departments alone. And this created a great incentive for them to outsource some of this analytical work to places like Bangalore. In addition to being able to pay an analyst in Bangalore about $15,000 in total compensation, as opposed to $80,000 in New York or London, Reuters has found that its India employees tend to be financially literate and highly motivated as well. Reuters also recently opened a software development center in Bangkok because it turned out to be a good place to recruit developers who had been overlooked by all the Western companies vying for talent in Bangalore.

I find myself torn by this trend. Having started my career as a wire service reporter with United Press International, I have enormous sympathy with wire service reporters and the pressures, both professional and financial, under which they toil. But UPI might still be thriving today as a wire service, which it is not, if it had been able to outsource some of its lower-end business when I started as a reporter in London twenty-five years ago.

“It is delicate with the staff,” said Glocer, who has cut the entire Reuters staff by roughly a quarter, without deep cuts among the reporters. The Reuters staff, he said, understand that this is being done so that the company can survive and then thrive again. At the same time, said Glocer, “these are sophisticated people out reporting. They see that our clients are doing the exact same things. They get the plot of the story... What is vital is to be honest with people about what we are doing and why and not sugarcoat the message. I firmly believe in the lesson of classical economists about moving work to where it can be done best. However, we must not ignore that in some cases, individual workers will not easily find new work. For them, retraining and an adequate social safety net are needed.”

In an effort to deal straight with the Reuters staff, David Schlesinger, who heads Reuters America, sent all editorial employees a memo, which included the following excerpt:

Off-shoring with Obligation I grew up in New London, Connecticut, which in the 19th century was a major whaling center. In the 1960's and 70's the whales were long gone and the major employers in the region were connected with the military-not a surprise during the Vietnam era. My classmates' parents worked at Electric Boat, the Navy and the Coast Guard. The peace dividend changed the region once again, and now it is best known for the great gambling casinos of Mohegan Sun and Foxwoods and for the pharmaceutical researchers of Pfizer. Jobs went; jobs were created. Skills went out of use; new skills were required. The region changed; people changed. New London, of course, was not unique. How many mill towns saw their mills close; how many shoe towns saw the shoe industry move elsewhere; how many towns that were once textile powerhouses now buy all their linens from China? Change is hard. Change is hardest on those caught by surprise. Change is hardest on those who have difficulty changing too. But change is natural; change is not new; change is important. The current debate about off-shoring is dangerously hot. But the debate about work going to India, China and Mexico is actually no different from the debate once held about submarine work leaving New London or shoe work leaving Massachusetts or textile work leaving North Carolina. Work gets done where it can be done most effectively and efficiently. That ultimately helps the New Londons, New Bedfords and New Yorks of this world even more than it helps the Bangalores and Shenzhens. It helps because it frees up people and capital to do different, more sophisticated work, and it helps because it gives an opportunity to produce the end product more cheaply, benefiting customers even as it helps the corporation. It's certainly difficult for individuals to think about “their” work going away, being done thousands of miles away by someone earning thousands of dollars less per year. But it's time to think about the opportunity as well as the pain, just as it's time to think about the obligations of off-shoring as well as the opportunities... Every person, just as every corporation, must tend to his or her own economic destiny, just as our parents and grandparents in the mills, shoe shops and factories did.

“The Monitor Is Burning?”

Do you know what an Indian call center sounds like? While filming the documentary about outsourcing, the TV crew and I spent an evening at the Indian-owned “24/7 Customer” call center in Bangalore. The call center is a cross between a co-ed college frat house and a phone bank raising money for the local public TV station. There are several floors with rooms full of twenty-somethings— some twenty-five hundred in all-working the phones. Some are known as “outbound” operators, selling everything from credit cards to phone minutes. Others deal with “inbound” calls-everything from tracing lost luggage for U.S. and European airline passengers to solving computer problems for confused American consumers. The calls are transferred here by satellite and undersea fiber-optic cable. Each vast floor of a call center consists of clusters of cubicles. The young people work in little teams under the banner of the company whose phone support they are providing. So one corner might be the Dell group, another might be flying the flag of Microsoft. Their working conditions look like those at your average insurance company. Although I am sure that there are call centers that are operated like sweatshops, 24/7 is not one of them.

Most of the young people I interviewed give all or part of their salary to their parents. In fact, many of them have starting salaries that are higher than their parents' retiring salaries. For entry-level jobs into the global economy, these are about as good as it gets.

I was wandering around the Microsoft section around six p.m. Bangalore time, when most of these young people start their workday to coincide with the dawn in America, when I asked a young Indian computer expert there a simple question: What was the record on the floor for the longest phone call to help some American who got lost in the maze of his or her own software?

Without missing a beat he answered, “Eleven hours.”

“Eleven hours?” I exclaimed.

“Eleven hours,” he said.

I have no way of checking whether this is true, but you do hear snippets of some oddly familiar conversations as you walk the floor at 24/7 and just listen over the shoulders of different call center operators doing their things. Here is a small sample of what we heard that night while filming for Discovery Times. It should be read, if you can imagine this, in the voice of someone with an Indian accent trying to imitate an American or a Brit. Also imagine that no matter how rude, unhappy, irritated, or ornery the voices are on the other end of the line, these young Indians are incessantly and unfailingly polite.

Woman call center operator: “Good afternoon, may I speak with...?” (Someone on the other end just slammed down the phone.)

Male call center operator: “Merchant services, this is Jerry, may I help you?” (The Indian call center operators adopt Western names of their own choosing. The idea, of course, is to make their American or European customers feel more comfortable. Most of the young Indians I talked to about this were not offended but took it as an opportunity to have some fun. While a few just opt for Susan or Bob, some really get creative.)

Woman operator in Bangalore speaking to an American: “My name is Ivy Timberwoods and I am calling you...”

Woman operator in Bangalore getting an American's identity number: “May I have the last four digits of your Social Security?”

Woman operator in Bangalore giving directions as though she were in Manhattan and looking out her window: “Yes, we have a branch on Seventy-fourth and Second Avenue, a branch at Fifty-fourth and Lexington...”

Male operator in Bangalore selling a credit card he could never afford himself: “This card comes to you with one of the lowest APR...”

Woman operator in Bangalore explaining to an American how she screwed up her checking account: “Check number six-six-five for eighty-one dollars and fifty-five cents. You will still be hit by the thirty-dollar charge. Am I clear?”

Woman operator in Bangalore after walking an American through a computer glitch: “Not a problem, Mr. Jassup. Thank you for your time. Take care. Bye-bye.”

Woman operator in Bangalore after someone has just slammed down the phone on her: “Hello? Hello?”

Woman operator in Bangalore apologizing for calling someone in America too early: “This is just a courtesy call, I'll call back later in the evening...”

Male operator in Bangalore trying desperately to sell an airline credit card to someone in America who doesn't seem to want one: “Is that because you have too many credit cards, or you don't like flying, Mrs. Bell?”

Woman operator in Bangalore trying to talk an American out of her computer crash: “Start switching between memory okay and memory test...”

Male operator in Bangalore doing the same thing: “All right, then, let's just punch in three and press Enter...”

Woman operator in Bangalore trying to help an American who cannot stand being on the help line another second: “Yes, ma'am, I do understand that you are in a hurry right now. I am just trying to help you out...”

Woman operator in Bangalore getting another phone slammed down on her: “Yes, well, so what time would be goo...”

Same woman operator in Bangalore getting another phone slammed down on her: “Why, Mrs. Kent, it's not a...”

Same woman operator in Bangalore getting another phone slammed down on her: “As a safety back... Hello?”

Same woman operator in Bangalore looking up from her phone: “I definitely have a bad day!”

Woman operator in Bangalore trying to help an American woman with a computer problem that she has never heard before: “What is the problem with this machine, ma'am? The monitor is burning?”

There are currently about 245,000 Indians answering phones from all over the world or dialing out to solicit people for credit cards or cell phone bargains or overdue bills. These call center jobs are low-wage, low-prestige jobs in America, but when shifted to India they become high-wage, high-prestige jobs. The esprit de corps at 24/7 and other call centers I visited seemed quite high, and the young people were all eager to share some of the bizarre phone conversations they've had with Americans who dialed 1-800-HELP, thinking they would wind up talking to someone around the block, not around the world.

C. M. Meghna, a 24/7 call center female operator, told me, “I've had lots of customers who call in [with questions] not even connected to the product that we're dealing with. They would call in because they had lost their wallet or just to talk to somebody. I'm like, 'Okay, all right, maybe you should look under the bed [for your wallet] or where do you normally keep it,' and she's like, 'Okay, thank you so much for helping.'” Nitu Somaiah: “One of the customers asked me to marry him.” Sophie Sunder worked for Delta's lost-baggage department: “I remember this lady called from Texas,” she said, “and she was, like, weeping on the phone. She had traveled two connecting flights and she lost her bag and in the bag was her daughter's wedding gown and wedding ring and I felt so sad for her and there was nothing I could do. I had no information.

“Most of the customers were irate,” said Sunder. “The first thing they say is, 'Where's my bag? I want my bag now!' We were like supposed to say, 'Excuse me, can I have your first name and last name?' 'But where's my bag!' Some would ask which country am I from? We are supposed to tell the truth, [so] we tell them India. Some thought it was Indiana, not India! Some did not know where India is. I said it is the country next to Pakistan.”

Although the great majority of the calls are rather routine and dull, competition for these jobs is fierce-not only because they pay well, but because you can work at night and go to school during part of the day, so they are stepping-stones toward a higher standard of living. P. V. Kannan, CEO and cofounder of 24/7, explained to me how it all worked: “Today we have over four thousand associates spread out in Bangalore, Hyderabad, and Chennai. Our associates start out with a take-home pay of roughly $200 a month, which grows to $300 to $400 per month in six months. We also provide transportation, lunch, and dinner at no extra cost. We provide life insurance, medical insurance for the entire family— and other benefits.”

Therefore, the total cost of each call center operator is actually around $500 per month when they start out and closer to $600 to $700 per month after six months. Everyone is also entitled to performance bonuses that allow them to earn, in certain cases, the equivalent of 100 percent of their base salary. “Around 10 to 20 percent of our associates pursue a degree in business or computer science during the day hours,” said Kannan, adding that more than one-third are taking some kind of extra computer or business training, even if it is not toward a degree. “It is quite common in India for people to pursue education through their twenties-self-improvement is a big theme and actively encouraged by parents and companies. We sponsor an MBA program for consistent performers [with] full-day classes over the weekend. Everyone works eight hours a day, five days a week, with two fifteen-minute breaks and an hour off for lunch or dinner.”

Not surprisingly, the 24/7 customer call center gets about seven hundred applications a day, but only 6 percent of applicants are hired. Here is a snippet from a recruiting session for call center operators at a women's college in Bangalore:

Recruiter 1: “Good morning, girls.”

Class in unison: “Good morning, ma'am.”

Recruiter 1: “We have been retained by some of the multinationals here to do the recruitment for them. The primary clients that we are recruiting [for] today are Honeywell. And also for America Online.”

The young women-dozens of them-then all lined up with their application forms and waited to be interviewed by a recruiter at a wooden table. Here is what some of the interviews sounded like:

Recruiter 1: “What kind of job are you looking at?”

Applicant 1: “It should be based on accounts, then, where I can grow, I can grow in my career.”

Recruiter 1: “You have to be more confident about yourself when you're speaking. You're very nervous. I want you to work a little on that and then get in touch with us.”

Recruiter 2 to another applicant: “Tell me something about yourself.”

Applicant 2: “I have passed my SSC with distinction. Second P also with distinction. And I also hold a 70 percent aggregate in previous two years.” (This is Indian lingo for their equivalents of GPA and SAT scores.)

Recruiter 2: “Go a little slow. Don't be nervous. Be cool.”

The next step for those applicants who are hired at a call center is the training program, which they are paid to attend. It combines learning how to handle the specific processes for the company whose calls they will be taking or making, and attending something called “accent neutralization class.” These are daylong sessions with a language teacher who prepares the new Indian hires to disguise their pronounced Indian accents when speaking English and replace them with American, Canadian, or British ones-depending on which part of the world they will be speaking with. It's pretty bizarre to watch. The class I sat in on was being trained to speak in a neutral middle-American accent. The students were asked to read over and over a single phonetic paragraph designed to teach them how to soften their r's and to roll their r's.

Their teacher, a charming eight-months-pregnant young woman dressed in a traditional Indian sari, moved seamlessly among British, American, and Canadian accents as she demonstrated reading a paragraph designed to highlight phonetics. She said to the class, “Remember the first day I told you that the Americans flap the 'tuh' sound? You know, it sounds like an almost 'duh' sound-not crisp and clear like the British. So I would not say”—here she was crisp and sharp—'“Betty bought a bit of better butter' or 'Insert a quarter in the meter.' But I would say”—her voice very flat—“'Insert a quarter in the meter' or 'Betty bought a bit of better butter.' So I'm just going to read it out for you once, and then we'll read it together. All right? 'Thirty little turtles in a bottle of bottled water. A bottle of bottled water held thirty little turtles. It didn't matter that each turtle had to rattle a metal ladle in order to get a little bit of noodles.'

“All right, who's going to read first?” the instructor asked. Each member of the class then took a turn trying to say this tongue twister in an American accent. Some of them got it on the first try, and others, well, let's just say that you wouldn't think they were in Kansas City if they answered your call to Delta's lost-luggage number.

After listening to them stumble through this phonetics lesson for half an hour, I asked the teacher if she would like me to give them an authentic version-since I'm originally from Minnesota, smack in the Midwest, and still speak like someone out of the movie Fargo. Absolutely, she said. So I read the following paragraph: “A bottle of bottled water held thirty little turtles. It didn't matter that each turtle had to rattle a metal ladle in order to get a little bit of noodles, a total turtle delicacy... The problem was that there were many turtle battles for less than oodles of noodles. Every time they thought about grappling with the haggler turtles their little turtle minds boggled and they only caught a little bit of noodles.”

The class responded enthusiastically. It was the first time I ever got an ovation for speaking Minnesotan. On the surface, there is something unappealing about the idea of inducing other people to flatten their accents in order to compete in a flatter world. But before you disparage it, you have to taste just how hungry these kids are to escape the lower end of the middle class and move up. If a little accent modification is the price they have to pay to jump a rung of the ladder, then so be it-they say.

“This is a high-stress environment,” said Nilekani, the CEO of Infosys, which also runs a big call center. “It is twenty-four by seven. You work in the day, and then the night, and then the next morning.” But the working environment, he insisted, “is not the tension of alienation. It is the tension of success. They are dealing with the challenges of success, of high-pressure living. It is not the challenge of worrying about whether they would have a challenge.”

That was certainly the sense I got from talking to a lot of the call center operators on the floor. Like any explosion of modernity, outsourcing is challenging traditional norms and ways of life. But educated Indians have been held back so many years by both poverty and a socialist bureaucracy that many of them seem more than ready to put up with the hours. And needless to say, it is much easier and more satisfying for them to work hard in Bangalore than to pack up and try to make a new start in America. In the flat world they can stay in India, make a decent salary, and not have to be away from families, friends, food, and culture. At the end of the day, these new jobs actually allow them to be more Indian. Said Anney Unnikrishnan, a personnel manager

at 24/7, “I finished my MBA and I remember writing the GMAT and getting into Purdue University. But I couldn't go because I couldn't afford it. I didn't have the money for it. Now I can, [but] I see a whole lot of American industry has come into Bangalore and I don't really need to go there. I can work for a multinational sitting right here. So I still get my rice and sam-bar [a traditional Indian dish], which I eat. I don't need to, you know, learn to eat coleslaw and cold beef. I still continue with my Indian food and I still work for a multinational. Why should I go to America?”

The relatively high standard of living that she can now enjoy-enough for a small apartment and car in Bangalore-is good for America as well. When you look around at 24/7's call center, you see that all the computers are running Microsoft Windows. The chips are designed by Intel. The phones are from Lucent. The air-conditioning is by Carrier, and even the bottled water is by Coke. In addition, 90 percent of the shares in 24/7 are owned by U.S. investors. This explains why, although the United States has lost some service jobs to India in recent years, total exports from American-based companies-merchandise and services-to India have grown from $2.5 billion in 1990 to $5 billion in 2003. So even with the outsourcing of some service jobs from the United States to India, India's growing economy is creating a demand for many more American goods and services. What goes around, comes around.

Nine years ago, when Japan was beating America's brains out in the auto industry, I wrote a column about playing the computer geography game Where in the World is Carmen Sandiego? with my nine-year-old daughter, Orly. I was trying to help her by giving her a clue suggesting that Carmen had gone to Detroit, so I asked her, “Where are cars made?” And without missing a beat she answered, “Japan.”

Ouch!

Well, I was reminded of that story while visiting Global Edge, an Indian software design firm in Bangalore. The company's marketing manager, Rajesh Rao, told me that he had just made a cold call to the VP for engineering of a U.S. company, trying to drum up business. As soon as Mr. Rao introduced himself as calling from an Indian software firm, the U.S. executive said to him, “Namaste,” a common Hindi greeting. Said Mr. Rao, “A few years ago nobody in America wanted to talk to us. Now they are eager.” And a few even know how to say hello in proper Hindu fashion. So now I wonder: If I have a granddaughter one day, and I tell her I'm going to India, will she say, “Grandpa, is that where software comes from?”

No, not yet, honey. Every new product-from software to widgets-goes through a cycle that begins with basic research, then applied research, then incubation, then development, then testing, then manufacturing, then deployment, then support, then continuation engineering in order to add improvements. Each of these phases is specialized and unique, and neither India nor China nor Russia has a critical mass of talent that can handle the whole product cycle for a big American multinational. But these countries are steadily developing their reseach and development capabilities to handle more and more of these phases. As that continues, we really will see the beginning of what Satyam Cherukuri, of Sarnoff, an American research and development firm, has called “the globalization of innovation” and an end to the old model of a single American or European multinational handling all the elements of the development product cycle from its own resources. More and more American and European companies are outsourcing significant research and development tasks to India, Russia, and China.