By: Christopher Boyd, The Orlando Sentinel, Fla. Knight Ridder/Tribune Business News

April 12, 2004, Miami Herald

Apr. 12 - Computer programmer Pat Fluno's transformation into a political activist began two years ago, when Siemens AG replaced her with a contract worker from India.

Since losing her job at the company's Lake Mary telecommunications division, Fluno has testified before Congress twice and is now traveling on an 18-city AFL-CIO bus tour to bring attention to what the labor union calls a national jobs crisis.

"Fifteen people in my department lost their jobs," said Fluno, a computer programmer. "What worries me is that this could happen to me again. All the pink slips out there are colored with the blood of the middle class."

The issue irking Fluno and other technology workers is offshore outsourcing. As U.S. companies search for new ways to cut costs, many are shifting operations to other countries where labor costs are lower.

In the Siemens case, company officials said they contracted with a company that brought in workers from India, replacing more than a dozen U.S. employees.

Fluno's lament isn't new. For decades, workers have complained as manufacturing jobs moved overseas. What is new is that many jobs now leaving the United States are in high-skill technology and financial-services fields.

Outsourcing, which started with the loss of blue-collar factory jobs several decades ago, has begun stripping work from educated middle-class workers. It's setting off alarms, not to mention a certain sense of deja vu.

Many jobs being lost today are the same ones those previously displaced factory workers were urged to take when the steel and textile industries moved abroad in the 1970s and '80s.

Back in the 1990s, that seemed to be good advice, with personal computers flourishing and the Internet exploding. New companies rose to fill a seemingly endless demand for tech services.

But that tech bubble burst in 2001, and even as the economy gradually recovers from recession, job growth is lagging.

That's putting more attention on the movement of technology jobs overseas.

India, with its large pool of highly educated, English-speaking workers, is one of the biggest beneficiaries. Improvements in telecommunications and computing in the 1990s have enabled Indian companies to provide telephone and online customer service for U.S. companies.

Forrester Research of Cambridge, Mass. predicts that 3.3 million U.S. service industry jobs will move abroad by 2017. A company report on the trend said that companies have cut costs as much as 50 percent by sending software development, customer service, back-office accounting and product-development work overseas.

The trend isn't confined to the United States. Companies in Western Europe and Japan are exporting labor in response to an international economy where borders are now far less important than the corporate competitiveness.

"The reality is you can't stop a global trend," said Rich Matlus, an outsourcing analyst with the Gartner Group in Boston. "When people look at how to contain costs, they look at all the alternatives, and outsourcing is an alternative."

Matlus said outsourcing is very fluid. India is the biggest beneficiary today, but that could change as other countries -- China and Russia in particular -- with large numbers of technically skilled workers get into the act.

"I think India is there right now because of the lower wages, but this could easily shift to other countries," Matlus said.

Mark Murphy, president of Softura, a computer-programming company in Detroit with a division in Chennia, India, said India's popularity with multinational corporations is already having an impact on wages.

"In India, you have to be recruiting," Murphy said. "Two years ago, we would never lose anyone. But in the last year, demand for workers has become intense, and it's becoming tougher to retain people. In a few years, we could be hunting for talented people."

But Sunil Chopra, professor of operations management at the Kellogg School of Management at Northwestern University, said that in a global economy, companies map their strategies in relation to one another. Their decisions are based on competitive forces and not loyalty to workers in their own countries.

"The important thing to remember is that competition isn't between countries, it's between companies," Chopra said. "All good outsourcing decisions benefit capital, but they don't necessarily benefit labor."

Dean Baker, co-director of the Center for Economic and Policy Research in Washington, said offshore outsourcing's biggest impact on the U.S. economy may not be in job loss, but in a lack of wage gain.

"The discussion has been misplaced," Baker said. "When people know that their jobs could go to India, they are in a difficult position pressing for higher wages."

Baker said that reluctance slows the economy. Even as worker productivity rises, workers aren't earning more. Static wages means workers don't have the money to buy more.

"Workers can't buy back what they're producing," Baker said.

But there is sharp disagreement on the long-term impact of globalization. A newly released American Electronics Association study of global outsourcing concludes that the trend isn't as harmful as some suggest.

The report says the United States is the recipient of many outsourced jobs from other countries, and that as the economy recovers and the American jobs engine revs up, the global movement of technology and financial-services work will seem less significant.

"Our overarching theme is that offshore outsourcing has been put in a negative context," said Christopher Novak, assistant director of research with the association. "Nobody has any credible statistics on how many jobs have gone offshore. It's important to remember that a lot of the technology jobs that have gone overseas are really serving the needs of local markets overseas."

As jobs move to other countries, Novak said, the international economy grows.

"Once the world economy gets back in gear, there will be a demand for U.S. goods and services," Novak said. "Our challenge is retooling and retraining ourselves."