EDS Auckland IT sweatshop

Date: Saturday, April 05, 2003 12:22 AM

H-1B and JOB DESTRUCTION NEWSLETTER

www.ZaZona.com

Now even New Zealand has sweatshops that take U.S. jobs!

http://www.nzherald.co.nz/storydisplay.cfm?thesection=technology&thesubsection=&storyID=3250453

Open arms and purses for IT sweaters

18.03.2003 - By CHRIS BARTON
Auckland, IT sweatshop (with air-conditioning and gorgeous scenery) of
the South Pacific. Yes, it's true - the forces of IT globalisation have
reached our beautiful shores.

While Opposition politicians gave knee-jerk negative reactions to news
last week of a $1.5 million Government grant to multinational EDS, they
missed the bigger picture.

Act MP Rodney Hide labelled the scheme "corporate welfare".

National MP John Key said such incentives should not go to "just one or
two of the chosen few".

And Green MP Ron Donald said he was "extremely unhappy" that a wealthy
multinational should be getting the money when small New Zealand
businesses needed it more.

They all need to open their eyes.

The EDS move to add 360 jobs to its NZ operation is symptomatic of a
worldwide trend in "offshoring" - cutting costs by sending skilled,
high-paying jobs overseas.

The destination is usually India, the Philippines or China but now New
Zealand is on the map we should be crowing. The potential benefits of
being a new source of cheap skilled IT labour are huge - not just in
job creation and foreign exchange earnings, but also the rub-off effect
of expanding our IT services industry.

The projected numbers are large. A Forrester Research report indicates
about 3.3 million American jobs and US$136 billion ($245 billion) in
wages will move overseas by 2015.

IT-related work is expected to be the vanguard of this trend, growing
from 27,171 jobs in 2000 to 472,632 overseas jobs by 2015.

Other businesses, including call centre services, back-office
accounting and legal services will follow.

Even if the numbers are exaggerated - and they probably are - getting
even a small slice of this action has got to be good for the country.

It's not great to realise how far our average salary is behind that of
the US. And that our low dollar makes us look even better. But every
cloud has a silver lining.

Suddenly, when it comes to cheap IT labour, we look very competitive.
We don't quite foot it with India, where top programmers earn about
US$20,000 ($36,050) a year compared with US$80,000 in the US. And while
our call-centre workers earn quite a lot more than the US$4000 to
US$7000 of their Indian counterparts, most would be a long way shy of
the US$35,000 to US$39,000 salaries of their American equivalents.

We also have a good climate, spacious offices and air-conditioning
which puts us at an advantage over India.

The tropical climate, lack of air-conditioning in many offices and
cramped spaces have led some to label India's IT industry a "data
sweatshop atmosphere".

New Zealand's stable political climate, helps too. As does our
location, which means our workers rise while much of the rest of the
world sleeps - great for "follow the sun" 24-hour help desk facilities.

Our largely English-speaking and reasonably IT-skilled workforce is
another plus - although some of the help desk and software development
and support jobs are going to require multilingual skills.

So the Government's immigration policy is just the sort of thing
multi-nationals like EDS want, not only to provide skills lacking in
New Zealand, but also to cover a continuing shortage of IT staff.

Is this a good thing? It depends on your point of view. IT workers in
the United Staes are not happy. The Washington Alliance of Technology
Workers has called for a congressional investigation of IT
"offshoring".

"We need to look much more closely at the ramifications of this
disturbing trend - on US workers, the communities in which they live,
and the future economic and technological security of this country."

But from EDS's point of view, its 16 Best Shores facilities are a great
strategy to make 30 per cent to 40 per cent cost savings.

Ditto for IBM and Hewlett Packard, which have similar schemes but have
not yet discovered that Kiwi workers are cheap.

Is it good for New Zealand? Undoubtedly yes.

Look at Indian technology services companies such as Infosys and Wipro,
which have been largely responsible for creating this overseas
competition.

In the past two quarters both increased their revenue by 26 per cent at
a time when American companies face flat or falling sales.

More than 300 of the Fortune 500 firms do business with Indian IT
services companies, says research company Gartner, which predicts that
by next year, more than 80 per cent of American companies will have
considered using overseas IT services.

And India's National Association of Software and Services Companies
says the country's call centre and business process outsourcing
industry grew 70 per cent during 2001-2002 to US$1.46 billion in
revenue - a figure it believes will jump to US$16.94 billion by 2008.

If New Zealand could pick up just a fraction of this sort of market,
our IT industry would be sitting pretty.

Which brings us back to the $1.5 million our Government has dropped in
EDS's lap to help win this deal.

In the scale of this market, it's a paltry amount - especially when you
consider the tax breaks, rates holidays and cheap loans other
Governments are offering to win the favour of multinationals.

With such sums - refundable if the jobs don't eventuate - we're getting
multinational investments on the cheap.

But one deal will not be enough to boost our tiny IT industry. If the
Government wants to catch the "offshoring" wave, it needs to make more
of these deals - and quickly.

And to really expand, the focus should be wider than just
multinationals. I'm sure a number of local IT services firms such as
Datacom and gen-i would welcome $1.5 million assistance to expand their
operations too.

Help to Keep ZaZona.com Online

Donate to the Cause at
http://www.zazona.com/Donations.htm
To Subscribe or Unsubcribe send an email to

Back to archives