New York — Ray Capuana paces the rows of cubicles in a haggard high-rise a stone’s throw from Wall Street as his people hustle the phones and hope for a bonus check.
His employees are not bond traders, though. They are call center workers. Many are African Americans without college degrees. Some lack high school diplomas. They work for a Mumbai-based company called Aegis Communications.
India’s outsourcing giants — faced with rising wages at home — have looked for growth opportunities in the United States. But with Washington crimping visas for visiting Indian workers, some companies such as Aegis are slowly hiring workers in North America, where their largest corporate customers are based. In this evolution, outsourcing has come home.
Capuana, a manager for Aegis in New York, motivates this U.S. office with dress-down days and the prospect that workers could, one day, earn a stint training call center workers in Goa, India. One of his tasks is to staff 176 cubicles, where workers make or take calls for customers of prescription drug plans or Medicare contracts and enter and verify information. The pay runs $12 to $14 an hour, with bonus checks of up to $730 a month.
“Our recruitment model is simple,” says Capuana, who played Division III college football, wears rosary beads on his wrist and has a picture of Jesus above his desk. “I don’t care if you come from Park Avenue or the park bench. If you can do the job, we want you.”
Aegis, a subsidiary of India’s Essar Group, an energy, telecom and metals conglomerate, says it’s pioneering the next generation of outsourcing: putting the work close to its global customers. Its executives call the practice “near-sourcing,” “diverse shoring” and, sometimes, “cross-shoring.”
Madhu Vuppuluri, chief executive and dealmaker for the Americas division of Essar Group, remembers watching outsourcing grow in India in the late 1990s and early 2000s and thinking that the decline of U.S. call centers was overdone. He persuaded the billionaire Ruia brothers, Essar’s Indian owners, to let him make a counterintuitive bet: In 2000, he bid on the bankrupt assets of Telequestion, a 500-person call center in Arlington, Tex., for $2.5 million.
That led to other acquisitions in the United States and abroad. Today, Aegis employs 50,000 of Essar’s 70,000 employees on several continents. About 5,000 people work at nine U.S. call centers. Aegis, which is on the hunt for more acquisitions, has said it aims to triple its U.S. head count, to more than 15,000.
The strategy is based on the old-fashioned idea of being close to your customers. It’s one embraced by companies such as credit card giant American Express, insurer Humana and government agencies, which sometimes prefer on-shore call centers to handle customer service for sensitive life insurance, financial or health-care products.
“The customer is the king,” Vuppuluri said. “Wherever the customer wants the services to be, we can provide.”
At its U.S. sites, Aegis says, 90 percent or more of its workers are American. In that way, Aegis is an exception to the rule. Until now, India-based outsourcing companies have largely brought Indian workers into the United States using H-1B visas and L-1 visas and have been the heaviest users of those programs.
In India’s $60 billion software-exporting industry (which employs roughly 4 million people worldwide), Aegis is competing with companies such as Wipro, Tata Consultancy Services, Genpact, WNS and Infosys. Most are expanding their outsourcing work — from call centers to high-tech consulting and financial services — to the United States. In many cases, it’s a key part of the companies’ growth strategy. But political and economic forces in this country and India complicate things.
Some say the visa practice has hurt U.S. jobs and wages. These new visa categories were created by the Immigration Act of 1990, allowing foreigners to work in the country for up to six years. The aim was to lure high-tech talent. Tech America, an industry trade group, says that the visas are crucial to American innovation, future competitiveness and job creation.
But they have been abused, too. In a study released in 2008, the government found fraud and technical violations on 20.7 percent of H-1B applications. Violations ranged “from document fraud to deliberate misstatements regarding job locations, wages paid and duties performed,” said Donald Neufeld, of the Department of Homeland Security, at a March hearing.
Immigration officials and the State Department have worked to crack down on the fraud.
“There will be, in any situation, an effort to go around the law,” said David T. Donahue, deputy assistant Secretary of State for Visa Services. “Our job is to catch the companies doing that.”
Some lawmakers are looking to curb the practice and to encourage the India-based outsourcing firms to follow Aegis’s model of hiring Americans at U.S. sites. Issuance of regular H-1B visas — 10,200 so far this year — is down 43 percent percent from 2010, according to federal data. Last year, the Obama administration added a roughly $2,000 fee per H-1B visa for large companies, which could be curbing applications.
In the past, if, say, BNY Mellon inked an IT contract with Infosys, Infosys would handle 70 percent of the work in India and send 30 percent of its project staff to the United States on temporary work visas. These Indian workers often live in ethnic enclaves on the outskirts of a city, work long hours and earn less than an American would for the same work.
Companies such as Tata Consultancy Services, Genpact and Infosys are the largest users of the H-1B visa program and have collectively brought as many as 30,000 workers into the country in a year on H-1B or other visas.
Critics of the visa programs, such as Ronil Hira, a public policy professor at the Rochester Institute of Technology, say the work arrangements can amount to indentured servitude. The workers are often paid “home-country wages” in America. “That’s as low as $8,000 a year” with housing allowances, he says. The employers own the visas — so the workers can’t bargain for wages, and if they lose their job they have to leave the country.
Hira said Indian workers still make up more than 90 percent of most outsourcing companies’ U.S. head counts. He and other critics argue that many of these workers are not more highly skilled than their American counterparts but are simply willing to work for less. “It’s harming American workers,” he said. “It’s taking away their job opportunities, bringing down their wages and harming their working conditions.”
The companies that use the visa programs have faced opposition from U.S. labor unions as well as age-discrimination lawsuits from American tech workers alleging that they were passed over by the hiring practices.
At the same time, as high unemployment lingers and the economic recovery lags, India-based companies have seized on an opportunity to improve their image and expand their U.S. businesses by taking over companies and hiring more U.S. talent.
Infosys and others find themselves in a quandary. U.S.-based rivals such as Cognizant, Accenture and IBM are ramping up hiring and offshoring in India, pushing up wages. So Infosys, Tata Consultancy Services and Genpact have had to move into the culturally uncomfortable area of managing Americans.
“What you have going on in India are salary hikes,” said Joseph Vafi, an analyst at Jefferies & Co. in San Francisco. “As these companies get larger and larger, it just makes sense for them to do some hiring in the States.”
Tata Consultancy Services, for example, is ramping up its North American presence in major deals with Citibank, Dow Chemical and Hilton Worldwide. It plans to hire more than 1,000 Americans in 2011 and to base 10,000 of its 185,000 global employees in the country.
“The focus is on building stronger relations with our customers in North America, by far our largest market,” said spokesman Mike McCabe, who added that more than half of the company’s revenue comes from North America. “It’s kind of a natural effort to invest more here.”
Robert Webb, chief information officer at Hilton Worldwide, said Tata Consultancy Services and Infosys increasingly rival the established consulting companies, such as IBM, Accenture and Bain Consulting, in areas such as integrating massive computer systems, developing applications for companies and even strategy consulting. He predicts that the India-based companies “will evolve to be more like one of the traditional consulting firms in the U.S.” by taking on higher-end capabilities such as business planning, industry knowledge and change management. Already, they are “starting to encroach on IBM’s territory, where data centers can be run from other parts of the world.”
He said IBM and Accenture are rapidly hiring talent in India and other emerging markets as a counterstrategy. “They’re all keeping their eyes on wage inflation in low-cost countries” like India, where wages are increasing 10 percent a year.
Hilton hired Tata Consultancy Services in 2009 to take over some back-office operations, such as human resources, financial systems and its intranet portal for the company’s 10 brands and 3,700 hotels. Hilton used to handle this work in-house or with hundreds of small consultants.
Tata Consultancy Services is doing most of the work in Memphis and McClean, where Hilton has offices. Hilton is sharing these best practices with its parent company, private-equity firm Blackstone Group. Using companies with talent around the globe allows Hilton to continue working on projects around the clock and to innovate more quickly.
“While some people are sleeping in the U.S.,” Webb said, “people can be coding in India and vice versa.”
Genpact, the outsourcing company created and spun off by General Electric, doubled its U.S. employment last year, to 2,000 of its 40,000 global employees. Most of that expansion came with Genpact’s contract with drugstore giant Walgreens to take over its accounting services. It bought Walgreens’ accounting center in Danville, Ill., promising to hire there.
Taking over existing employees of another company is called “re-badging.” Indian firms have been uncomfortable managing U.S. workers in the past, Hira said, particularly when Indian workers are working alongside Americans who are paid more. But companies increasingly see rebadging as a necessary way to expand.
Genpact is also hiring at centers in California and Pennsylvania as it aims to expand in the mortgage and regulatory compliance industries and in consumer product, hospital and health-care companies.
“The U.S. became the fastest-growing location for us,” last year, said chief executive V.N. “Tiger” Tyagarajan. “We expect that to continue on this year.”
Bob Kane, treasurer of New York-based textilemaker Westpoint Home, which makes Ralph Lauren linens, uses Genpact for general accounting in India and accounts payable in Mexico. He’s used Genpact’s Pennsylvania office for its accounts receivables work since 2007.
The Pennsylvania office “is the most competent and is the most business-savvy,” he said, noting that it does the work 40 percent more efficiently for less money and with fewer people than his company could do in-house.
“They understand it is important to get the job done and stay the extra hour,” he said. “They get it. They get what we need. We don’t always get the same feeling from” outsourcing contracts abroad.
He pays slightly higher wage rates — $15 an hour — to keep the receivables work in the United States. He said he’s heard from executives at other companies that the quality of work in India is slipping as turnover increases and Indian companies invest less in training, especially if a client isn’t willing to pay higher wages over time. Some U.S. companies don’t want sensitive customer data transmitted abroad. Others are tired of poor service, accents and crackling phone lines.
The lower Manhattan branch of Aegis, on Broad Street, is one of the company’s top performers. And Capuana, 41, is hiring. The 11th-floor lobby is crowded with applicants looking for training and jobs, some of them unemployed and on public assistance.
At $12 to $14 an hour with possible monthly bonuses, workers can make four times what call center workers in India do. But Essar executives say it’s worth paying more in wages to leverage a large U.S. presence to gain contracts with banks, health-care companies and governments that require the work to be done here.
Some workers at the call center, such as Mary Auguste-George, eventually move up the ranks. Originally from St. Lucia, she started as a phone rep, moved to supervisor, then trainer and and is now payroll manager of the lower Manhattan division. Capuana calls her “a diamond in the rough who just hits the ground running.”
Capuana, a stocky man who prefers jeans and wears his hair long, uses a motivational-speaker’s approach to get workers to show up on time and do their best. “You really need to leave everything you have on that phone call,” he says, walking amid the 3-foot-by-4-foot cubicles with signs that read “Perfect Service” and “One Member at a Time.”
He pins pictures of the top 12 performers on a “Circle of Leaders” bulletin board each quarter. They receive free movie tickets, have greater dress-down privileges and eat free lunch. The practice has been adopted by Aegis on a corporate-wide level, he says.
Many Aegis employees at the site are not very aware that they work for an Indian company. The Dallas headquarters, though, celebrates India’s independence on Aug. 15. And the call center workers have made music videos for each other: The Indian office performed a Bollywood song, and workers at the U.S. office danced to the Black Eyed Peas.
But with all its globalism, Aegis also has its culture clashes. Some managers from India have a hard time understanding what motivates U.S. workers and why they are less-educated than their Indian peers. One Indian-born manager said he thinks that the U.S. standard of living has spoiled Americans and that they take less pride in their work. In other words, he says, they are lazy.
The India executives are also puzzled by the appeal of dress-down practices. “We don’t do that” in India, says Ramya Devi Ramachandran, 27, a former administrative assistant at the lower Manhattan office who worked for Aegis in India before moving to New York.
Essar and Aegis, however, want to step up the cross-sharing this year, shuffling dozens of U.S. Aegis employees to Goa and Bangalore in India to help handle large U.S. government contracts. Aegis executives say the cross-continent exchange will help India’s call centers keep up during peak Medicare enrollment season and aid the company’s cross-cultural efforts.
A few employees from the lower Manhattan call center are applying for the temporary transfer. “I’ve never been to India,” said Keith Swindell, 39, a trainer. “I’d enjoy traveling and getting international experience.”
Glader is a journalist based in New York.