Pittsburgh
Post-Gazette
By
Jim McKay
December 30, 2004
As the law firm Reed Smith LLP expanded to New York,
San Francisco and London in recent years, it consolidated
support services from those far-flung places and brought
the work home to Pittsburgh, where the firm was founded
in 1877.
Enabled by advanced communications technology, about
70 back office workers in the Gulf Tower on Grant
Street provide accounting, human resources and technical
support to nearly 1,000 attorneys in 16 Reed Smith
offices in the United States and abroad, just as if
they were down the hall in another cubicle. The operation
is expected to expand in 2005.
"The increase in capable technology allows us to
grow Reed Smith in other parts of the United States
and throughout Europe and at the same time take advantage
of some of the great things about Pittsburgh, which
is a stable, talented work force and a favorable cost
structure," said Greg Jordan, Reed Smith's firmwide
managing partner.
The Internet has created a two-way street by breaking
down geographic boundaries between labor markets for
a growing category of service jobs. The same technology
that allows Reed Smith to bring work to Pittsburgh
permits other companies to utilize talent in India,
China and other lower-cost locales around the globe.
Such is the trend in the 21st-century economy, where
the rise of online communications and the decline
of trade barriers have truly resulted in a global
marketplace, with all its pluses and minuses for companies
and workers. The drive to maximize talent and skills
and minimize costs -- whether through outsourcing
to another country or by consolidating work in Pittsburgh
or other U.S. locales that have comparative cost and
skill advantages -- is expected to continue in 2005.
Mellon Financial Corp., for example, continuously
looks at the different tasks it performs in Pittsburgh
and elsewhere with the goal of rationalizing and re-engineering
operations to take advantage of where things can be
done most efficiently.
That can mean relocating to Pittsburgh the computer
hardware and software resources that supported Mellon's
business in London, a decision that was based on the
bank's intentionally redundant information technology
infrastructure here. Or it can mean moving IT work
from Pittsburgh to a vendor in India, if the conditions
allow.
"The expression that you hear if you talk with Mellon
people is Centers of Excellence," said Ron Sommer,
a spokesman for Mellon, which has trimmed its companywide
work force by nearly 3,000, to 20,000, the past two
years. "You look at a function and find out where
it gets done most efficiently. You have to do that
in this business. It just goes on all of the time.
" In a sense, globalization and technology have put
the world into a trading ring, argues Nandan Nilekani,
chief executive officer of Infosys Technologies, a
leading Indian exporter of software services to the
United States that has counted Mellon among its many
customers.
"People across the world can plug into the Internet,
the broadband and become part of this global work
force," Nilekani said in an interview this year on
the Infosys campus in Bangalore, India.
Infosys and other large Indian software companies
are ending 2004 with new hiring and in an upbeat mood
after the re-election of President Bush and defeat
of Sen. John F. Kerry, who made foreign outsourcing
a campaign issue.
"American firms will be bolder in terms of not hiding
that they are benefiting from outsourcing to Indian
IT offshore providers," said Sudip Banerjee, president
of Wipro Technologies, an Indian company listed on
the New York Stock Exchange. "The industry is pleased
as punch that [the] IT outsourcing wave will continue
without any policy road blocks."
More than 80 percent of the world's top 2,000 corporations
will have established significant outsourcing operations
overseas by the end of 2005 as political opposition
to the trend diminishes and the pressure to cut costs
grows, according to a new study released last week.
The study, conducted by neoIT, a Silicon Valley and
Bangalore consulting group, also said small and medium-size
businesses were increasingly looking to outsource
services to India and other developing countries.
It expects manufacturing, health care and retail to
be among the sectors that will embrace the practice.
Wipro added 5,546 employees during the quarter ended
in September. Infosys added 5,010 new recruits, half
of them recent college graduates, to its Indian work
force and anticipated hiring about 10,000 for the
full year.
Exports from India in information technology and
business process services amounted to $12.5 billion
in the last fiscal year and are expected to exceed
$16 billion in the current fiscal year that ends in
2005.
NeoIT agrees that growth in India will accelerate
in 2005, but said China, Russia and a number of Eastern
European and Southeast Asian countries also are becoming
larger players in the outsourcing industry.
Despite the neoIT report, the outsourcing of jobs
to lower-cost countries remains a comparatively small
portion of the U.S. economy, where about 7 million
jobs were gained and lost in each of the last four
quarters.
The U.S. operations of foreign-based companies represent
a more positive face of globalization. A trade group
of foreign investors, the Organization for International
Investment, estimates that 6.4 million Americans owe
their jobs to foreign corporations.
Infosys, for example, is investing $20 million in
a new California-based U.S. subsidiary, Infosys Consulting,
that is expected to hire 500 workers over the next
few years to compete with more established consultants
such as Deloitte & Touche and IBM.
Closer to home, the trade group estimates that more
than a quarter of Pennsylvania residents owe their
paychecks to foreign-based corporations. Local examples
include Sony's television complex in Westmoreland
County, Bayer AG's and GlaxoSmithKline's operations
along the Parkway West, and Marconi's computer networking
division in Marshall.
Lower wage costs are not the only factors employers
consider in deciding where to place an operation.
Workers can compete on other factors such as innovation,
advanced skills and customer service.
Precision Response Corp., a Florida-based provider
of telephone services and e-mail management, cited
"quality work force" for its decision this fall to
expand its customer service center in West Mifflin
by more than 400 full-time employees. The company
also operates centers in the Dominican Republic, India
and the Philippines.
Its chief executive, John Hall, said the 4-year-old
operation had "continuously been a top performer,
exceeding client expectations, and our expansion is
a direct result" of that success and the "quality
of the local work force."
West Mifflin manager Glenn Burns cited the region's
work ethic and said PRC looked at a number of sites,
including Texas, before making the decision.
"We know there is a committed work force here. It's
a culture that is very conducive to what we are looking
for at PRC," Burns said. "We find definite value domestically
and more specifically here in Western Pennsylvania."
|
