India - An Emerging Global Competitor: U.S. High-Tech Service Jobs at Stake Article from January-March 2004 issue of Business Strategies Newsletter By Bill Birnbaum, CMC In the January – March 2003 issue of Business Strategies Newsletter, we wrote about US manufacturers sending production work to China. This in an obvious attempt to reduce manufacturing costs. But US companies are also sending much work to India. Not so much manufacturing, but rather service work. In fact, US service companies, and state governments also, have been “offshoring” more and more white-color, professional work to India. This includes financial services, technical design, US patent law work and tax preparation. As one example, tax preparer, SurePrep, offshored 7,000 US tax returns to India in 2003. The company plans to send 35,000 returns in 2004 and 85,000 in 2005. US companies find it extremely easy to deal with Indians. This is because among the two million Indians who graduate from college annually, 80% speak English fluently. During the 1990s, many Indian technical graduates came to the US and Canada to work in North America’s then-booming technology companies. But following the terrorist attacks of September 2001, the US government made it far more difficult for foreigners to emigrate to the US. This tightening of our borders has caused many skilled individuals to remain in India. Thus, much technical innovation which might have been US owned, is now being developed in India. This to the benefit of Indian companies and the Indian economy. Much of the price for India’s growth in services is being paid for by the State of California. As reported in a recent Los Angeles Times article (see “Offshoring Trend Casting a Wider Net,” January 4, 2004), California has lost tens of thousands of high-paying, technical jobs to India. Lost too are the bonuses and stock options previously included with such positions in California’s Silicon Valley and elsewhere in the Golden State. A recent Wall Street Journal article (see, “India Looks Beyond it’s Borders,” December 31, 2003) points out that with Indian companies sitting on new found profits, some are beginning to search for overseas acquisitions. While acquisitions have been both small and few to date – total about $1/2 Billion – the search is gathering momentum. Having developed both financial and operational expertise, Indian companies are looking for opportunities to buy overseas firms offering established brands and distribution networks in attractive markets. While their acquisition search includes a variety of industries, pharmaceuticals is an especially attractive target. This because India has some of the lowest-cost manufacturers of generic drugs in the world. Keep your eye on India. As the next decade unfolds, we’ll see that nation grow to become a stronger and stronger force in the global marketplace. And consider this question… How might this situation affect your business?    Originally published in thes Business Strategies Newsletter