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More complex jobs moving offshore

WASHINGTON—The practice of transferring American jobs to lower-cost countries, called offshoring, is moving up the food chain. It's no longer just software programming and help desks that are being sent to India and elsewhere in Asia.

Fidelity National Financial of Jacksonville, Fla., is looking for tax processors in India. Intelliways, an Indian company that's working on behalf of a U.S. Internet firm, wants someone there to write news releases. India's Cactus Communications Pvt. Ltd. seeks someone in Asia to edit complex English-language research papers on topics in nuclear physics, astrophysics and particle physics for U.S. and other foreign clients.

You get the picture. With more than 3 million jobs projected to be shipped overseas in the next decade, many analysts question what this means for future U.S. competitiveness.

"Any professional service that can be boiled down to predictable steps, even if they are complicated steps, is now exportable to South Asia," said Robert Reich, who was the secretary of labor in the Clinton administration. "We have to understand there is no longer any sharp distinction between manufacturing and services."

Jim Stachura came to the same conclusion when he was researching where to expand his technology-services company.

"Any profession that has a language of its own, where professionals from two entirely different cultures can share that work, is a candidate" for offshoring, said Stachura, the research director of Aelera Corp., a technology-development company in Alpharetta, Ga.

Aelera initially sought to expand into India, but opted instead for lower-cost U.S. cities such as Savannah, Ga., and Olympia, Wash., which helps keep the trend in perspective.

Broadly defined, the services sector today employs 8 in 10 American workers. When global trade eroded U.S. manufacturing jobs in the `80s and `90s, experts said the U.S. economy was making the transition to a service economy. Now that sector doesn't feel so safe anymore.

"Labor has always been a commodity, but it has never been so fungible, so easy to move," said Clyde Prestowitz, the director of the Economic Strategy Institute, which challenges free-trade assumptions, and the author of the recent book "Three Billion New Capitalists." It concludes that China and India threaten future U.S. job security.

Increasingly, skilled professional jobs are being sent abroad, including some in architecture, accounting, law, publishing, finance and insurance.

When the American Institute of Architects surveyed its members last year, it found that 11 percent had shipped some design work overseas and another 14 percent were considering it.

"I was a little bit surprised that it was that high; 25 percent had at least thought about it," said Kermit Baker, the institute's chief economist.

Of those who'd shipped some work overseas, a quarter cited lower costs, another quarter cited faster production and 50 percent of the architectural firms polled said offshoring helped them cover peak demand, allowing round-the-clock work on projects. Most of it is computer-aided design work, traditionally done by junior architects.

Lawyers look for help abroad too.

A poll published Dec. 1 by The American Lawyer magazine found that 77 percent of the top 200 U.S. law firms use contract lawyers on a temporary basis, with 6 percent contracting to lawyers offshore.

"When I saw that, my eyes popped out. Six percent is, to me, quite a bit when it was barely on the radar screen two years ago," said Ron Friedmann, the president of Prism Legal Consulting, an Arlington, Va., company that guides law firms on technology issues, including offshoring.

The trend is undermeasured and sure to grow, George Hefferan said. In 2001, he left a law firm to help pioneer offshoring of legal services. Now his Chicago-based company, Mindcrest Inc., operates a wholly owned subsidiary with 25 lawyers in the Indian city of Mumbai.

They handle everything from document drafting to legal research that surveys all 50 U.S. states. The work is considered administrative and thus fit for junior lawyers.

"We can do that work at much lower costs, and it never makes fiscal sense for a company to pay outside firms exorbitant rates for outside work," Hefferan said. He's doubling his staff in India next year.

Does offshoring high-value service-sector jobs threaten American competitiveness? After all, if junior accountants, lawyers or architects tend to be overseas, how do Americans rise to senior positions? Experts are divided.

"What we have is a vibrant economy that's redeploying people, and if you can move them away from activities that can be done cheaply elsewhere, you are creating opportunities for value creation here," said Diana Farrell, the director of the McKinsey Global Institute, a pro-business research center.

The liberal Center for Economic and Policy Research disagrees, fearing that offshoring is a threatening trend.

"It's at a low level now. It will grow rapidly from its small percentage," said Dean Baker, the center's co-director.

The risk for American workers, he said, is "Wal-Martization," in which some large company aggressively offers U.S. corporations a large menu of service-sector jobs abroad at rock-bottom prices.

"That would be what really starts to change the nature of the market in those sectors," Baker said.

American workers, ex-Labor Secretary Reich said, ought to ask themselves this question: "Can what I do be boiled down to predictable steps that can be done by somebody living 12,000 miles away or by a sophisticated software? If the answer is yes, then it's important to get some additional skills, including interpersonal skills."


(c) 2005, Knight Ridder/Tribune Information Services.

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