Where Your Job Is Going A visit to Bangalore, India, a city where tech is hot, the drinks are cold, work is plentiful, and the salaries are a lot lower than yours.
By Justin Fox

(FORTUNE Magazine) – Every weekday, as the tropical sun begins its swift descent over the Deccan plain, fleets of what the Indians call "multi-utility vehicles" fan out across Bangalore. The Tata Sumos and Toyota Qualises bump along the potholed, muddy residential streets of India's fifth-largest city, stopping to pick up young men and women and carry them to work. Then, as business hours begin in the Eastern U.S., thousands of these young Indians don telephone headsets and do their enthusiastic best to help the American people get their Internet service working, figure out their credit card bills, and order tacky limited-edition collectibles.

After years of wondering what all those fiber-optic cables laid around the earth at massive expense in the late 1990s would ever be good for, we finally have an answer: They're good for enabling call-center workers in Bangalore or Delhi to sound as if they're next door to everyone. Broadband's killer app, it turns out, is India.

It's not just about call centers. In Bangalore some 110,000 people are employed writing software, designing chips, running computer systems, reading MRIs, processing mortgages, preparing tax forms, and doing other essential work for U.S., European, Japanese, and even Chinese companies. Intel, Cisco, Oracle, Philips, and GE are among the multinationals with significant R&D facilities there. AOL, Accenture, and Ernst & Young have big operations in town too. Scores more Western corporations outsource work to Indian companies like Bangalore-based IT services firms Infosys and Wipro.

Meanwhile, GE Capital employs more than 15,000 people in Delhi and other Indian cities who answer calls from credit card customers, do accounting work, manage computer networks, and the like. In Chennai (formerly Madras), a staff of 350 design the PowerPoint presentations that McKinsey consultants around the world show their clients. In Mumbai (Bombay), Morgan Stanley has been hiring equity analysts to help cover U.S. companies from 102 time zones away. There are more than 350,000 people working in IT services and outsourcing in India now; the number is expected to pass one million before 2008.

The attraction of the Indian knowledge workers who get those jobs is that they're paid 10% to 20% of what Americans would expect for similar work--and in many cases they do it better. That has stoked understandable alarm in the U.S. Together with China's rise in manufacturing, it is bringing protectionists out of the woodwork. It is also causing even those of a less reactionary bent to wonder just what it is that Americans will do for a living now that even knowledge work can easily be sent overseas.

And what do those young Indian knowledge workers (they are, overwhelmingly, young) think about this turn of events? Sitting on the terrace one pleasant October evening at a swank Bangalore bar called the 13th Floor (which is in fact on the 13th floor of an office building on M.G.--short for Mahatma Gandhi--Road, the city's main drag), I pose the question to a group of young managers and engineers from Wipro: "Do you feel bad about taking jobs from Americans?"

Several of them respond with a torrent of economic reasoning that would have made David Ricardo, the 19th-century English apostle of free trade, proud. Trade enriches all, they say. The American economy will take the money it's saving by outsourcing and invest it in the growth industries of the future. Besides, the U.S., Western Europe, and Japan will all face labor shortages in a few years as their populations age.

"Try explaining that to the customers I'm talking to," retorts Sapna Sudhir, a 28-year-old with a razor wit who manages IT projects for retailers, mostly in the U.S. "'Let's talk about the transition process,' I tell them. 'I'm going to transition your job to India.' ...There's a lot of hostility." Sudhir waxes conflicted about this for a few moments. Then she slips into the tougher language of her colleagues. "It's Who Moved My Cheese? The cheese has moved. You'd better move along too. This is a capitalist economy. He who bids the lowest gets the job."

That is what the world has come to. An ambitious young woman from a nation that spent the first four decades of its independence floundering in a semi-socialist economic miasma is lecturing Americans on capitalism in the language of a cheesy American business bestseller. And she's doing it at a slick night spot on a road named after the saintly ascetic who won India its freedom. Isn't it magnificent?

So let us step back a moment from the current plight of the U.S. The long-term fate of the earth rests largely with the 95% of humanity that doesn't happen to live within America's borders. About a sixth of the world's people live in India. That's why I've come to Bangalore, a South Indian metropolis of almost six million, where globalization and digitization are having the just the kind of transformative impact that hyperventilating Silicon Valley seers were predicting a half-decade ago.

That India may turn out to be one of the winners of the digital, global, interconnected economy has of course come as a surprise to many people--not least the Indians. The Mahatma had envisioned the nation he helped create as a land of self-sufficient villagers who grew their own food, spun their own cloth, and turned their backs on industrial modernity. India's first Prime Minister, Jawaharlal Nehru, was all for self-sufficiency too, albeit on the national level. And while Nehru felt India had to industrialize to achieve this self-sufficiency, he didn't trust industrialists.

Thus was India set upon the economic course it followed for decades: The government owned most major industries, discouraged foreign trade, and--in order to steer the country's scarce resources away from frivolities--forced anybody who wanted to manufacture a new product to get permission first. (As Nehru put it, "Why do we need 19 brands of toothpaste?") In response, India's economy stubbornly refused to move faster than what came to be known as the "Hindu rate of growth" of 3.5% a year--disastrously slow for a developing country with a burgeoning population.

A currency crisis in 1991 finally put an end to this madness. After being forced to fly the bulk of the nation's gold reserves to London as collateral for an IMF loan, a government led by the chastened Congress Party of Gandhi and Nehru finally started hacking away at India's economic regulations and import tariffs.

Even during the decades of economic stagnation, India did have some things going for it: Much to the surprise of many skeptics in the West, its democratic institutions--elections, a free press, an independent judiciary--survived and thrived. While huge swaths of the Indian populace received no education at all, instruction in the upper echelons of the educational system was of surpassing rigor. And while some political leaders tried to impose the North Indian language Hindi as the national tongue, the true national language of the educated classes remained English.

So while India as a nation remained closed to the global market economy until the 1990s, millions of Indians developed the skills to join it--which many did by emigrating to the U.S., Britain, and elsewhere. A few multinationals, like Unilever and Citicorp, began mining Indian talent aggressively. Bhaskar Menon, a former Citibank executive who now runs an Indian call-center operation called Msource, remembers sitting in on a meeting in 1985 at which Citi's India chief reported the unit's profits for the year to CEO John Reed. "John said, 'This would pay for our stationery in New York--don't worry about it. Your mandate is to export 15 middle-management people to New York every year.'"

The talent hunt has only escalated--since the mid-1990s global firms like McKinsey and Goldman Sachs have recruited students at India's top business schools for jobs in New York, London, Tokyo, and everywhere in between. But starting in the 1970s, another form of talent export that didn't require outright emigration began to evolve in the software business. Indian companies that wanted to import computers had to come up with the foreign currency to pay for them. So the likes of Mumbai-based industrial conglomerate Tata began sending teams of engineers to the U.S. to work on software projects for American clients and bring home dollars. Over time, with the rise of data networks and satellite communications, it became possible to do more and more of the work remotely from India.

That was the genesis of the Indian IT services industry--now led by Tata Consultancy Services, Infosys, and Wipro. Foreign multinationals also eventually saw the wisdom of tapping into Indian talent in India at Indian salary levels: Texas Instruments led the way when it opened an R&D center in Bangalore in 1985. The rise of big India-based tech companies, though, has had special significance in a country that has long associated foreign investment with imperialism (understandably so, as the British Raj began as a purely commercial venture). Software exports may directly account for only about 200,000 jobs in a country of one billion people, but the Indian leaders of the software industry have become hugely influential in the nation's political and economic life. Their message: Economic openness is good for India, because India is perfectly capable of competing internationally.

TCS, Infosys, and Wipro now each boast revenues of about $1 billion a year. That's still tiny in comparison with competitors like IBM's global services division ($40 billion) and Accenture ($12 billion), but it's clear that the Indian pipsqueaks have caught the attention of the big guys. Accenture now has 4,000 employees in Bangalore and Mumbai, up from just a couple of hundred a year ago.

"They have the advantage of stronger brands," says Wipro chairman Azim Premji of his foreign competitors. "We're working on that. They have no experience with the global delivery model. We're masters at it." Premji, whose 84% stake in Wipro makes him the richest man in India, has a habit of making such bold, almost smug pronouncements. "U.S. society is not being reskilled and retooled to stay on top of the emerging environment," he tells me during my visit to Wipro's headquarters southeast of Bangalore. "You need to retool your educational system."

A few miles away, on the sprawling Infosys campus, CEO Nandan Nilekani has no such harsh words for the foreign competition. But he, too, exudes confidence. "There's a sense that the worm has turned and our time has finally come," he says. "A lot of people tell me that the air here is like the Valley in 1999."

Ah, the Valley. The world is lousy with places claiming to be another Silicon Valley. But in Bangalore the claims have an eerie ring of truth. For one thing, as in Northern California, the climate is a big draw--Bangalore is 3,000 feet above sea level and thus has the most bearable summer weather of any Indian metropolis. What's more, like the San Francisco area it boasts fine educational institutions (foremost among them the Indian Institute of Science, founded in 1909) and an openness to outsiders--born of the city's status as a big army garrison since colonial days and as the home of India's defense and aerospace industries since independence. There's even a wine country (okay, one winery) north of town.

The real clincher is that despite constant complaints about the city's insane traffic, skyrocketing real estate prices, and fickle workforce--and constant efforts by other cities, especially Hyderabad and Chennai, to get in on the action--companies and people keep coming to Bangalore. Which, of course, sounds exactly like Silicon Valley in the late 1990s. And while Bangalore was a graveyard of failed startups in 2001, just like the Valley, the very corporate cost cutting that has meant continued lean times in California has brought tons of new business to South India.

India is a developing country, and for all its affluence Bangalore is still a city of power outages (all office buildings and many homes have backup generators), inadequate roads, a third-rate airport, over a million slum dwellers, and lots of wandering cows. But it's become attractive enough that Indian expats are moving back.

"In 2002 I thought, 'It looks like India is the place for global IT,'" says Sean Narayanan, an India-born U.S. citizen whose siblings live in the U.S. and whose parents spend six months a year there. "I had to get experience here." So he left a job with Booz Allen in northern Virginia to work in Bangalore for Cognizant, a Dun & Bradstreet software services spinoff. Narayanan and his wife are clearly ambivalent about the move--they live in a gated community east of town that appears to have been airlifted straight from Florida and are currently planning to stay only a couple of years. But still, they're here. "It's no longer considered hardship duty," Narayanan says.

For another bunch of Bangaloreans, the call-center workers, the very idea of hardship is so, well, dated. In the late 1990s, GE Capital pioneered the practice of putting Indians on the phone with Americans. This first call center was in Gurgaon, then an obscure Delhi suburb. Now Gurgaon is bursting with glass office towers and glitzy shopping malls, and call centers have spread to every major Indian city--including Bangalore. In the process, they've spawned a consumer generation unlike any the country has ever seen. Indian call-center workers may make a lot less money than Americans (salaries start at about $2,000 a year), but they make a lot more money than fresh-out-of-college Indians who aren't computer geniuses have ever made before.

My first encounter with this new India is at the Bangalore offices of Msource, which runs call centers for financial institutions in the U.S. and Britain. I tell the six young Msource employees gathered around me that I've heard call-center workers are materialistic, brand-crazy sorts who drink and smoke a lot. That's right, they tell me. I ask about their aspirations, if they hope to own a house and a car by the time they're 40. Most nod. "I want it by the time I'm 28," says Anshul Pathak, 23.

Actually, although Pathak still lives with his parents, he already has the car. He joined Msource a year and a half ago and proved so good at cajoling American deadbeats into paying off credit card debt that he now trains new hires to do the same. Along with his Maruti Suzuki 800 subcompact, he has a Bajaj Pulsar motorcycle. His mobile phone is a Sony Ericsson T610 with a built-in camera. He banks with Citibank. On nights off he hangs out with friends in bars where he favors the local beer, Kingfisher, but others go for foreign concoctions like Bacardi mixed with Sprite. Or they go to Starbucks-like coffee shops where a cappuccino costs $1--an absurdly large sum to older Indians. Pathak watches American movies, That '70s Show, MTV. He brushes his teeth with Colgate. He owns a pair of Nikes and a pair of Reeboks. While much has been made in the U.S. media of how Indian call-center workers are trained to sound more American, the best "training" of all is simply the lives they lead.

It's not all slavish imitation, either. India at its best is a lot like the U.S. at its best--a nation of staggering ethnic and religious diversity that somehow holds together by dint of tolerance and a sense of shared destiny. And now that India wants to join the material world, it seems churlish for Americans to begrudge it entry. "For the last 20 years, you've been telling countries like India and China to adopt free markets and join the global economy," says Nilekani of Infosys. "Now that we're doing it, you can't just say, 'Stop it!'"

In fact, we probably really can't. India and the U.S. are already entwined in an economic embrace far more intimate than that which has traditionally linked trading partners, one that could be exceedingly painful to get out of. These guys know what we owe on our credit cards, after all.

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