WASHINGTON - Take Jamey Bennett. When he first began selling his LightWedge personal reading lamp a few years ago, everything was made in China. Then the headaches began: Numerous conference calls in the middle of the night. Shipment delays because of a dockworker strike in California. And many problems related to language differences. The problems became so acute that Bennett transferred the manufacturing to Virginia two months ago.

"Managing a significant manufacturing effort in China remotely with a business of our size is very difficult," Bennett says.

"Firms that just believe that this is going to be simple ... very often get burned," says Martin Kenney, a University of California-Davis professor who recently completed a study of firms doing work in India. "This is a very, very complicated business activity, and there are a thousand ways it can go wrong."

Examples of the perils of moving work abroad keep cropping up. Last month, Indiana said it was halting a contract with an Indian company to upgrade its computer system for its unemployment benefits office after politicians and others started an uproar about the work leaving the state, not to mention the country.

Dell recently shifted some of its computer call center work from India. After moving some of its appliance call center work to India a few years ago, GE in May moved the work back to the Phoenix area. It found that workers in India, who don't own many appliances, couldn't relate to the customers' problems. U.S. workers can take more calls because they resolve issues faster, boosting productivity.

Highlighting how sensitive the topic of moving work outside the USA is, spokesmen for Dell and GE declined to comment. But Dell CEO Michael Dell recently told USA TODAY his company sticks with U.S. employees for many jobs for their skills.

"Most of our (employees) are in the U.S., and it's probably going to remain that way for a long time," Dell said. "The fear of jobs moving from one country to another, at least in our case, is probably greater than the reality."

That doesn't mean the trend will go away. Repetitive and low-skilled manufacturing and services work will likely continue to be sent abroad. But some firms' experiences suggest the hysteria about work going outside the USA may be overblown.

'Lost in the translation'

Several major issues confront businesses when they shift manufacturing outside the USA:

?Culture, language. U.S. firms are finding the do-it-now culture of the USA and some American tastes don't easily translate overseas.

Wells Fargo chief economist Sung Won Sohn says companies he has come in contact with have complained of productivity problems. A U.S. furniture importer has had a tough time persuading his overseas manufacturers to "distress" furniture, a popular style in some U.S. markets that evokes an antique feel. His workers don't see the point in taking a new product and making it look older.

And there are language issues. Although many people overseas speak English, phrasing and other issues can crop up when English is not the first language.

"Quite a bit was sort of lost in the translation," LightWedge's Bennett says.

A Dell spokesman told the Associated Press the company was shifting some corporate clients from Bangalore, India, to Texas, Idaho and Tennessee after receiving service complaints.

Gary Beach, publisher of CIO Magazine, recently was on the phone with a Dell agent in Bangalore for 11/2 hours after having problems with a notebook computer. "The guy was very polite, but he had to go to his supervisor after 65 minutes," Beach says. "It was a change in power options in your control panel. You had to switch to 'always on.' ... Duh!"

-Expertise. Many countries are churning out well-educated engineers, scientists and others while some foreigners are coming to the USA to be educated and then return home. But such education often does not replace experience.

Bethlehem, Pa.-based Air Products and Chemicals makes liquefied natural gas machinery in Wilkes-Barre, Pa. The firm has no plans to move the factory, even though none of the products is sold in the USA.

"We have spent a number of years building up this plant, making major investments and also building up a skilled workforce," spokeswoman Kassie Hilgert says. "Both the workforce and the technology are not transferable to anywhere else in the world."

Kenney notes that some of the businesses overseas are so new that there are few trained managers who know how to properly oversee both service and manufacturing operations.

-Shipping. Some manufacturers are finding the time, money and extra regulatory burdens associated with shipping products to the USA prohibitive. Those issues were compounded after the Sept. 11 attacks, because import regulations were strengthened.

Sanjay Chandra, co-founder of American Leather, a furniture producer in Dallas, does all manufacturing in-house. With hundreds of combinations of styles and fabrics and other attributes to choose from, the firm waits to produce the furniture until orders are received and prides itself on getting the products shipped out in a matter of weeks. Shipments from China are estimated to take about six weeks, after production, according to manufacturers.

"Special order, quick ship doesn't really lend itself to foreign manufacturing because of the time issues," Chandra says.

The shipping headaches may grow. Under rules starting this month, importers are required to electronically send lists to the government in advance of shipments, to help Customs and border protection agents identify high-risk cargo that deserves special attention because of terrorism fears. That is upsetting some importers who say the lists will cost them time and money if there are delays at the borders.

The challenges of importing were also highlighted a little more than a year ago when dockworkers in California were locked out during a labor dispute, stranding Asian imports at sea. The 10-day action that led to the closure of 29 docks was estimated to cost the U.S. economy up to $2 billion a day and forced some manufacturers who rely on foreign parts to shut down.

Keeping supplies flowing

The dockworker strike persuaded Alan Schulman, owner of Glentronics, to stick to his supply method. Schulman, who sells battery-operated, backup sump pumps, has suppliers both overseas and near his headquarters in Wheeling, Ill. When the dock strike started, he was able to switch to his local supplier and continued without any interruptions.

"I always want Plan B."

There are numerous other issues that U.S. firms are bumping into when it comes to working abroad. Many companies find themselves holding more inventory in case there is a supply disruption. That means added costs, because more inventory requires extra space, financing and, sometimes, employees.

"Supply Chain 101 says the most important thing is continuity of supply," says Norbert Ore, who organizes a regular survey of manufacturers for the Institute for Supply Management. "And when you establish a supply line that is 12,000 miles long ... you have to weigh the costs of additional inventory and logistics costs vs. what you can save in terms of lower costs per unit or labor costs."

Shipping business abroad also means relinquishing some control, which for some business owners is easier said than done. And, unless you own the facility and have an employee on-site, fixing any problems that require in-person work involves a lot of time and money. The contracts to set up facilities abroad can also be lengthy, involving months of negotiations and lawyer and consultant costs.

Regional conflicts, such as the periodic clashes between India and Pakistan, also must be considered.

Some move despite challenges

Despite all those issues, for some, moving work abroad is the way to go.

Wall Street giant Goldman Sachs estimates that of the 2.7 million U.S. factory jobs cut in the last three years, 1 million have been relocated abroad.

A wide range of service jobs, such as customer call centers, medical billing and architectural drafting, are also moving outside the USA. In the next 15 years, U.S. employers will move about 3.3 million white-collar jobs abroad, Forrester Research predicts.

The main motivation: money. UC-Davis' Kenney and co-author Rafiq Dossani of Stanford University estimate a call center worker who costs clients $12.47 an hour - including equipment and other costs - in Kansas City costs $4.12 an hour in Mumbai, the Indian city formerly known as Bombay. Indiana originally went with the Indian company after its bid for the computer work came in at $15 million, $8 million below the closest competitor.

After working in Asia and Europe for 15 years, Philip Ison, president of Ison International, bought an upholstery factory in Tennessee in 1999 and shut it down after two years.

"There was just no profit margin to be made," he says. "With all of the headaches between health insurance, workman's comp, OSHA, you can just keep on going down the list. It's not economically feasible to produce something here that takes a lot of labor."

Ison now produces furniture in Romania and ships the products to Norfolk, Va., before selling in the USA.

"With the Internet and the communication systems that are available at this point in time, it's no big deal to sit here and run the factory," he says.

But while some jobs may continue to be sent overseas, it's clear that others - especially those requiring special skills, quick turnaround times or customer contact - will stay in the USA.

"Most companies believe it's going to be easier (to shift work)," says Rudy Puryear of Bain and Co., who has consulted with clients on setting up operations abroad. He says he's seen some firms pull back two or three years after shifting to foreign workers or suppliers. "It is a buyer beware situation."

For months now, it's been popular in the United States to whack China for its trade and currency policies. But India could soon become the next political whipping boy because it has been snaring U.S. hi-tech jobs. Recently unemployed computer professionals, labour unions and politicians have become alarmed that U.S. companies are moving growing numbers of information-technology jobs to India.

The Politics of Unemployment

Joblessness among tech workers in the U.S. is stubbornly high. Meanwhile, U.S. firms are exporting tech jobs to low-cost India. As an election nears, American politicians see votes in complaining about offshore outsourcing. In mid-September, technology workers staged a protest at a San Francisco conference promoting offshore outsourcing of service jobs to countries like India. The protesters were backed by a unit of one of America's most powerful unions, the Communications Workers of America. The unit, called the Washington Alliance of Technology Workers, or WashTech, was set up to fight the exodus of jobs overseas. The protesters carried such signs as "Chip in, don't chip out." A new group of unemployed computer specialists calling itself the Organization for the Rights of American Workers, or Toraw, protested at a similar job outsourcing conference in New York in July.

These sentiments were bolstered in mid-October when Intel Chairman Andy Grove warned at a software conference that a huge number of IT jobs could move from America to countries like India and China in the next decade. The hi-tech pioneer added that his California-based semiconductor manufacturing firm had "no choice" but to continue sending work offshore because of rising costs and the pressure to increase productivity.

It would be one thing if the protests and dire warnings stayed confined to angst-ridden words, but now American legislators are getting involved. Faced with an election next year, many smell a populist, potentially vote-attracting issue. On October 20, the House of Representatives' small-business committee held a hearing on the exodus of white-collar jobs. "At what point will we send so many jobs overseas that we won't have any jobs here to buy the products, regardless of where they're made?" asked the committee's chairman, Donald Manzullo of Illinois.

One of those who testified was California engineer Natasha Humphries, who was laid off in August by hand-held computing-device provider Palm Inc. several months after she was sent to India to train Indian engineers to perform her job. Humphries, who joined TechsUnited.org, a group created to protest against the departure of U.S. hi-tech jobs, believes that "offshoring has created a devastating economic climate."

There is an irony in Humphries' words that goes beyond her travelling to India to train the people who may have taken her job. Only a few years ago, American technology companies were accused of stealing some of the best and brightest engineering and scientific minds from India to meet a severe talent shortage. But now that the global economy has struggled for many months, technology unemployment in the U.S. is high and the jobs are moving to India.

Some industry insiders blame at least part of the unemployment problem on the U.S. programme of granting temporary work visas to hi-tech workers from India. Ron Hira of the Institute of Electrical and Electronics Engineers told the October 20 hearing that many of those who come to the U.S. under this visa scheme go home to set up or work for companies that compete with American companies. He called the visas for these workers "a subsidy promoting the movement of American jobs overseas."

This concern has prompted legislators in at least nine states to join the fight to slow job migration. New Jersey took the lead in drafting legislation after lawmakers learned that a company hired to help welfare recipients had moved its help-centre jobs to Mumbai. Legislation requiring state government contractors to use U.S.-based employees is still stuck in various committees. But the threat of the new law was enough to persuade the welfare-help contractor, eFunds Corp., to move the jobs back to New Jersey.

A flurry of comparable bills in several states has prompted India's National Association of Software and Service Companies, an umbrella grouping of some 850 companies, to hire high-powered lobbying firm Hill & Knowlton. "India is being made to look like the enemy in some parts of the media," says Nasscom's president, Kiran Karnik. "The popular mood is reinforced by politicians, and those statements make customers wary. They're concerned, as are we."

So far, none of the state-level bills have become law. If they did, however, "purely on a business plane, it wouldn't matter at all," says Karnik, since the bulk of India's outsourcing comes from private-sector customers, not from government contracts.

Cheap, Tech-Savvy Workers

Seeking to cut costs, U.S. multinationals such as General Electric, Honeywell and Citigroup have for years moved jobs to India, seeking to capitalize on the country's inexpensive but technology-savvy, English-speaking workforce. Nasscom estimates that job outsourcing to India saved U.S. companies $10 billion-11 billion in 2001 and was accompanied by a $3 billion increase in American exports to India that year.

The migration of these jobs wasn't a big issue when the U.S. economy was roaring and companies had a hard time filling job openings. But that attitude changed abruptly with the dotcom bust in 2000 and subsequent recession in the industry. Today, despite a tentative recovery, U.S. technology jobs remain scarce.

The exact number of jobs that have moved to India isn't known. The Communications Workers of America estimates that 400,000 white-collar jobs have already been lost, particularly to India, and projects that a good proportion of 3 million more expected to migrate offshore by 2012 will go to India as well. "This is not about protectionism," says Marcus Courtney of WashTech, the union affiliate that organized the San Francisco protest. "We have to find a way to engage in globalization so that it doesn't come at the expense of our best workers."

More of Courtney's anger is directed at U.S. companies than at India. "This is an issue about how companies want to increase profits at the expense of highly-skilled American employees," he says.

Others believe the figures cited by labour unions are exaggerated. Economist Rafiq Dossani of Stanford University cites Nasscom statistics estimating that India had 171,500 "business processes" jobs by March 2003, up from 106,000 a year earlier. And that number is expected to grow annually by about 45% over the next five years to be nearly 1 million by 2008. But even that heady growth is substantially less alarmist than what labour unions warn will be India's job-grab from America.

"Am I concerned that the U.S. information-technology industry will end up in India over the next year?" asks Harris Miller, who heads the Information Technology Association of America that includes America's leading multinationals. "That's rubbish. Only about 6%-8% of the all information-technology outsourcing will move offshore. Now it's only 2%."

Miller argues that the best way to protect U.S. jobs is to promote free trade. He believes that there are steps the U.S. government could take to bolster job growth, including such measures as establishing a tax credit for companies that engage in research and development. Miller also says that the current surplus of hi-tech workers in the U.S. will dissipate as the baby-boomer generation retires.

Others add that sending work offshore leads to important benefits to the U.S. John Chen, who heads Sybase, the software giant, argues that "when we spend $1 in India and China, 65 cents comes back" in the form of orders for hi-tech equipment.

Still, the new breed of hi-tech activists can boast of at least one recent success. They helped persuade a majority in the U.S. Congress to let lapse on September 30 a measure that had temporarily tripled the number of foreign professional workers, many from India, admitted to work in the U.S.--to 195,000 a year up from the usual 65,000.

But this victory may be short-lived. Utah Senator Orrin Hatch, the influential chairman of the Senate Judiciary Committee, is in the early stages of floating a proposal that would introduce a variety of exemptions that would effectively circumvent the 65,000-visa limit. If the proposal succeeds--and that's not assured--the number of hi-tech workers admitted into the U.S., many from India, could again top 100,000 a year.

Any moves to expand the number of visas for foreign hi-tech workers will likely be opposed by groups such as Toraw, the one founded last December by recently unemployed information-technology workers. These are people like John Bauman, a computer expert who lost his job in Connecticut a year ago. Toraw is lobbying Connecticut and other state governments to pass legislation making it illegal for a company in the U.S. to bring in a foreign worker and lay off an American employee within six months. "We'd like to see tax incentives for companies that don't offshore work and tax penalties for every job offshored," says Bauman. "I'm going to tell my kids to go into [car] repair so they can't be offshored," he adds.

If tech jobs in the U.S. remain scarce, the biggest uncertainty as to whether the U.S. ultimately takes action on the issue of outsourced jobs is the U.S. election coming up in November 2004. "It's anyone's guess as to which way the political roulette wheel will spin," says Vivek Paul, vice-chairman of Wipro, one of India's largest software firms. "We will definitely see more posturing, but the question is: Will we see regulatory action?"

Still, even if outsourcing opponents are big election winners, analysts doubt that India will face the strident critiques that China is likely to experience in the months ahead.

"There's no constituency for bashing India," says James Steinberg, a foreign-policy analyst in the Brookings Institution think-tank. Steinberg, who served as No. 2 in the Clinton administration's National Security Council, points out that it's politically easier in the U.S. to attack Beijing's communist government than the world's largest democracy. On top of that, American politicians raise a lot of money from Indian Americans. Says Steinberg: "There are only two countries that get an applause line when they're bashed [in the U.S.]: China and France."

President Bush's week-long swing through six Asian nations is long overdue. Despite being home to half the world's population and the globe's most dynamic economies, Asia has received scant attention from this administration. Unfortunately the president has only one subject on his agenda -- the war on terrorism. The president is touching lightly, if at all, on the other issues that matter most to this region -- economic globalization, China's growing presence, and political instability fed by economic disparities. This is not surprising. The Bush administration doesn't seem to think much about global economic issues. And when it does speak, as it has recently on the issue of currency manipulation by China and Japan, the administration's policy is confusing and contradictory. In Asia, the single-minded focus on terrorism leaves an opening for others -- China first of all -- who are more in tune with the region's concerns. "I've never seen a time when the U.S. has been so distracted and China has been so focused,'' Ernest Bower, the head of the U.S. business council for Southeast Asia, told a business magazine.

Regional economic bloc

Faced with multiple challenges, the countries of Southeast Asia have accelerated plans to create a regional economic bloc like the European Union. The Chinese, followed closely by India and Japan, are embracing the idea, proposing the creation of a vast East Asian free trade area that would encompass nearly 2 billion people, but notably not include the United States. When national security adviser Condoleezza Rice briefed reporters on the president's trip, the focus was almost entirely on security issues. Bush's itinerary is designed to highlight the nations working closely with the United States to combat Al-Qaida-linked Islamist terror groups in Southeast Asia -- Singapore, the Philippines, Indonesia and Thailand. Or to reward those who are backing the war in Iraq -- Japan and Australia. Even at the annual Asia Pacific Economic Cooperation summit in Bangkok, Bush plans to `"stress the need to put security at the heart of APEC's mission because prosperity and security are inseparable,'' Rice said. No one can argue with that basic proposition. The example she cited was the terrorist bombing a year ago in Bali, Indonesia, which shut down tourism, a vital source of income for Indonesians. But let's not look at that link through the wrong end of the telescope. We need to grapple with the poverty and income inequality in Indonesia, the world's largest Muslim-populated nation, which feeds growing Islamic radicalism.

China drives growth

East Asia has largely emerged from the financial crisis that swept through this region in 1997-98 and sent countries such as Indonesia into economic collapse. Economic growth should pick up to almost 6 percent next year, the World Bank has predicted. But much of this is driven by China's rapid growth, which is in turn sparking a sharp rise in trade within the region, much of it between countries in the region and China. These countries look warily on this rising giant. China is sucking away foreign investment from places like Silicon Valley that used to flow to them, and with it, jobs. At the same time, progress toward a global free market that ensures fair competition has stalled. The world trade talks in Cancun last month collapsed in rancor, and the United States seems content now to pursue its own bilateral trade deals with favored countries such as Singapore and Australia.

10-nation association

This has encouraged the 10-nation Association of Southeast Asian Nations to accelerate plans to create a European Union-style economic community. The Chinese sent a huge, high-powered delegation led by their premier to their recent meeting, signed a friendship treaty with the group and pledged to negotiate a free-trade zone with the group. "The Chinese are moving in in a big way,'' says Stanford University expert Donald K. Emmerson. Where is the United States in all this? "We're outside, and our businesses are going to be outside,'' says Brookings Institution global economic expert Lael Brainard. "The Bush administration needs to get a handle on this.'' If it doesn't, the United States will wake up one day from its infatuation with unilateralism and return to Asia to find that the furniture has been rearranged and the locks have been changed.

U.S. companies sent jobs to India to save money, but stayed because of the quality of the work. Rafiq Dossani is a senior research scholar at the Asia-Pacific Research Center at Stanford University. Dossani, along with Martin Kenney, a professor in the human and community development department at the University of California, Davis, published a 52-page research report entitled "Went for Cost, Stayed for Quality: Moving the Back Office to India." The paper is available for download below. The research is a comprehensive look at the driving forces behind the migration of "business process" work to India. These BP jobs include much of the so-called back-office tasks -- human resources, accounting and customer service -- that are being outsourced to India. General Electric Co., for example, employs 9,000 BP workers in India, saving the company $340 million per year. It's little wonder why GE anticipates employing 20,000 workers in India by next year. Biz Ink editor Dennis Taylor spoke with Dossani from his Stanford University office about the dynamics of the offshoring trend. Q: What are the key business needs being outsourced to India today? A: There are really two practices: [information technology] and business process outsourcing. BP is expected to overtake IT by next year. IT outsourcing has been growing in India by about 15 percent per year. BP is growing at 100 percent a year. There are different dynamics involved. Q: On the IT side, what work is being done in India? A: There are four distinct processes to IT development -- project determination, architecture, system design and [programming]. About 25 percent of that is programming, quality assurance and Web services. India has about 15 percent of that. It's a small percentage, but it's growing fast. Q: Why does that type of technology flourish in India? Is it the education focus? A: The education policy as such hasn't made much of a difference. India doesn't have a lot of technically educated people, relative to its population. There are 0.3 scientists and technicians per 1,000 people, which ranks India 42 out of 62 nations surveyed by the World Bank in 1998 in the per-capita number of scientists and technicians. What it does have is a billion people. What has helped India is everyone speaks English. Q: What was the most surprising finding coming out of your research? A: By far, India's biggest skill is business management. It is very hard to manage these projects remotely. Yet American companies are lifting a key component of a process and shipping it off to India and it is being managed well. You need to understand that 96 percent of these programming projects are complex coding for banks, insurance companies and a host of manufacturing companies. This is complex software being created on demand and most of it -- because it's banks and manufacturing [not tech companies] -- is coming from mainstream America, not Silicon Valley. Q: How much of the work being outsourced to India comes from the United States? A: About 70 percent. How is the phenomenon of "offshoring" affected life in tech hubs such as Bangalore? Q: In a sense IT has not had an impact on these places. It's like an ivory tower. In March 2003, there were 230,000 employed in the [IT] industry. In Bangalore that may represent one-third of the population, but 30,000 out of a population of 5 million creates a buzz, but that's about it. A: But BP outsourcing is having a completely different impact. There are many recent graduates who have never been able to get a job so easily. Now they have well-paid jobs with multinational firms because they speak English and have good interactive skills. With more people employed, it's beginning to hit mainstream India and move out of Bangalore and to smaller cities. That in turn affects other sectors, such as construction management skills. Shoddy buildings in India are becoming a thing of the past. Q: Is offshoring causing any Indian engineers here in the valley to consider returning to India? A: What happened is India liberalized in 1991 -- allowing foreign firms to do business. But it took them five or six years to adjust, so in 1996 the first foreign company was established and now it's quite common. But IT outsourcing still only comprises 4 percent of the business, but it is growing so there will be an impact to the valley. Q: There are roughly 30,000 Indian engineers in the valley, and I'd estimate no more than 300 have gone back. A: Will the rapid growth in offshoring continue as long as there is a substantial wage disparity between the two countries? Q: Oh, yes. The wage disparity is too much. Someone working in a BP tech support call center will make $1.50 [U.S.] an hour, including benefits. Over here, even if you paid $15 an hour, you wouldn't get happy workers. There it is viewed as a good career. The supply of labor is so huge for call-center work, it will take many years before the difference is cut to even half as much, probably 10 to 15 years. With IT outsourcing, in India you would be paying $3.50 an hour for a Java programmer versus $25 an hour here, so the eight-times differential still exists. Q: Is the practice paying off for valley companies? Any early report cards? A: Oh yeah, big time, especially on the BP side. You save 80 percent in costs. On the IT side it is beginning to pay off, now that it's a matter of in-house offshoring to your own subsidiary. Product software doesn't source out well because of the [feared loss of] intellectual property associated with it. Q: Is there a downside to offshoring work to India? A: A big concern for companies is the loss of knowledge. The last time that happened was in consumer electronics and the U.S. lost the lead. And business continuity is a big concern. You need to have payroll done at a certain time of the month, but if there is a power outage, which is more likely to happen in India than here, what are you going to do? And of course there is a very real concern over the loss of intellectual property.