Outsourcing BC

Drawing a straight line in the world of global economics is not easy. Still, there are dots that can be connected. Here are a few. The Telus labour dispute, Filipino call centres, and Bell Canada. Ross Perot and John Kerry. High-tech industries in Brampton, Ontario, and Bangalore, India. And B.C. government outsourcing contracts with Accenture, Maximus, Electronic Data Systems, ISM Canada, and Telus itself.

Here are two more points to connect. The offices of New York Times columnist Tom Friedman and SFU Associate Professor Andy Hira. Friedman's bestseller The World Is Flat is a cautiously optimistic look at the effects of offshoring U.S. jobs. Andy Hira's Outsourcing America, written with his brother Ron, is a pessimistic look at the same subject.

There is one straight line that Andy Hira wants Canadians to draw. It travels due south, where he sees images from our future. In his modest office overlooking the SFU mall, the associate professor of political science says Canadians should look carefully at the U.S. controversy over outsourcing U.S. jobs to countries as diverse as India, China, Ireland, the Caribbean and Eastern Europe. "The issue has been huge in Europe as well as the U.S.," says Hira. "It hasn't really hit Canada yet. So far, Canada has been a net beneficiary of outsourcing."

But that will change, he insists. He points to China's burgeoning auto-parts manufacturing capacity and India's information technology sector as threats to key Canadian industries. "There are a lot of Canadian jobs at stake here."

Jobs will be lost. Then there's the question of what kinds of jobs will remain. What will they pay? Will they be secure? Will they have benefits? Finally, there's the matter of how business's sense of community will erode as it moves more easily around the globe.

These debates tend to be dominated by ideological presumptions. Either global competition will help create jobs and wealth for all of us, or big business will screw people at every possible turn. Few have made an effort to connect the dots in a thorough, rigorous way.

Still, there are points that can help us draw a rudimentary picture of our possible future.

Telus, Bell, and the outsourcing hammer

The key issue in the five-year-long Telus contract dispute, which degenerated this summer into a three-month work stoppage by most union employees, is who will do what work where. For Telus, whose mergers and acquisitions created a welter of different contracts, it's cheaper to move some work from B.C. to Alberta, and other work to places such as India. In July, Telus imposed a contract that offered little protection for existing jobs. After members of the Telecommunications Workers' Union hit the picket lines, the company moved some of its call-centre work to the Philippines. At the height of the dispute, the company said the move was temporary. B.C. Federation of Labour President Jim Sinclair doubts the company's declared intentions. He predicts Telus will ultimately move 40 to 50 percent of its jobs offshore.

The Telecommunications Workers Union tried to draw a clear line between Telus and the offshoring of Canadian jobs. Both sides agreed outsourcing was the main issue.

Telus sought to impose a contract with the clause: "No regular employee will be laid off as a direct result of the company contracting out work that is normally and currently performed by bargaining unit employees." That clause would have gutted the strong protections in the B.C. Telecommunications Workers Union's expired contract. Who would define "direct result"? How many employees would be asked to move to new locations or jobs for which they are not suited? How many good B.C. jobs would disappear through attrition?

A tentative deal was reached Oct. 10. The terms aren't being released until the TWU members vote on the proposal. However, The Tyee has been told the union won a partial victory that protects operator and clerical jobs. Whether the union will be able to protect those jobs during the next round of contract negotiations is an open question.

Telus wants to compete more effectively with Rogers and Bell Canada. In January 1999, in the midst of contract negotiations with 2,400 operators represented by the Communications, Energy and Paperworkers' Union, Bell partnered with the Arizona-based telecommunications outsourcing specialist Excell Global Systems to create a new company to provide those services. Bell employees were offered work, but wages and benefits suffered.

Today, according to Communications, Energy and Paperworkers' Ottawa-based spokesman Joe Hanafin, the union represents less than 200 Bell call-centre employees, down from 5,000 15 years ago. Most of that decline is due to new technology - welcome to the sympathetic female voice of a telephone robot - but much is due to outsourcing. The practice has complicated a bitter Bell pay equity dispute, which remains unresolved after more than a decade of legal wrangling. The threat of outsourcing can be a brutal company hammer when workers negotiate with their employers.

"We wrestle with this issue every single day at the bargaining table," says Hanafin. Is the union winning any battles? "Ah," he says, "define winning." Hanafin adds that his heart is breaking for Telus employees. He describes their protracted battle as "a tough fight with one of the toughest employers in a tough industry".

From Brampton to Bangalore

In April, the Brampton-based Nortel Networks paid $10 million U.S. for a stake in Indian telecom outsourcing firm Sasken Communication Technologies. While Nortel's workforce, gutted by both outsourcing and its own corporate incompetence, still includes about 10,000 Canadian employees, Ottawa Citizen reporter James Bagnall pegged the number of Indian staff and contractors working exclusively on Nortel projects at about 1,250. And Nortel is seen as a late starter in India's high-tech gold rush, centered in the southern Indian city of Bangalore.

One projection for Indian software exports shows them growing from $2.7 billion in 1998-'99 to $50 billion in 2008. The names of Indian outsourcing firms -Wipro, Infosys, Satyam, Tata - are becoming some of the biggest in the IT business. Accenture, EDS, Hewlitt Packard, and Microsoft all have large and growing offices in India.

But it's not just software design that's moving to India, and it's not just to India that work is moving. Call centres, medical transcription and radiology services, basic data entry - in short, anything work involving data that can move over the internet is vulnerable. Work is going to Eastern Europe, the Middle East, the Caribbean, and Southeast Asia. Last month, a former Microsoft employee said the company plans to hire a thousand workers a year in China over the next decade.

Perot and Kerry's "sucking sound"

When he ran for the U.S. presidency in 1992, Ross Perot warned of "the giant sucking sound" of U.S. jobs moving to Mexico under the North American Free Trade Agreement. The Hira brothers' book notes that Perot founded Electronic Data Systems, which has moved 20,000 jobs overseas and is a big U.S. player in the Indian high-tech industry. Perot Systems has an Indian subsidiary with more than 3,500 employees. Clearly, opportunity sometimes trumps loyalty.

John Kerry made outsourcing a key issue in his run for the presidency, and dropped a company that was routing some of his automated campaign phone calls through Canada. In a technology sector still reeling from the dot-com collapse, and in a country where manufacturing outsourcing has created some real economic desolation, outsourcing is a galvanizing issue. Canada is one of the targets of increasingly protectionist U.S. sentiment.

Government jobs: east, west and south

In B.C., the economy is thriving and birds still sing from construction cranes, even as fall days get shorter. They seem longer, though, if you're a former provincial government employee with BC Systems waiting for a cheque from ISM, an IBM subsidiary that now provides help desk and workstation repair services to government employees. ISM payroll is done in Costa Rica. Mistakes are chronic, according to BC Government Employees Union communications officer Chris Bradshaw, and some take months to correct.

There are other indications of what may come. In August, Accenture Business Services announced that it is closing two B. C. Hydro call centres, in Prince George and Nanaimo, as well as one for Terasen Gas in Kelowna, and will lay off 112 employees. Sinclair expects the Terasen jobs will move to move to Fredericton, New Brunswick. The former B.C. Crown corporation's head office, of course, will effectively move to Houston when (subject to inevitable shareholder approval) Terasen becomes part of U.S. pipeline giant Kinder Morgan.

So far, most of the government privatization and outsourcing controversy involves privacy issues. Is the privacy of B.C. citizens jeopardized by the U.S. Patriot Act when U.S. companies store and manage information about them? Are private companies that spend public money entitled to conceal their spending from public scrutiny because the information is proprietary?

However, many of the companies to which the provincial government has outsourced its work are lightning rods for criticism in the United States because they have exported U.S. jobs to countries such as India. And while the contracts the provincial government has signed contain a variety of provisions to ensure work stays in B.C., some critics fear they are inadequate.

David Black, a vice-president with the B.C. branch of the Canadian Office and Professional Employees Union, says the province shares the blame for the B.C. Hydro call centre job loss because of its decision to privatize part of B.C. Hydro two years ago in a $1.5 billion deal with Accenture. "Those are well-paying jobs that support a number of other businesses in the community," says Black.

At the time of the deal, Hydro said the $1.5-billion contract guaranteed it $250 million in savings over 10 years -- with the savings coming from new business and economies of scale, not job cuts. Section 11.4 of the contract offers reassuring language: Accenture must employ British Columbians for jobs "directly serving BCH and its customers."

But there are a broad range of exceptions, for those who also do other work for Accenture, for information technology services, and for work done by affiliates of Accenture. Accenture certainly understands the game. Its main headquarters is in Bermuda. It has offshored many U.S. call-centre jobs. And it plans to add 5,000 employees in India in the coming year.

Taken alone, 112 call centre jobs and some government payroll work are trifles, of course. But they are indicative of a trend with potentially huge implications for the Canadian economy. And they are issues that politicians, the media and the public have only begun to discuss.

So far, most of the attention on the outsourcing issue in B.C. has focused on government contracts and privacy concerns. But there are other issues to consider. What jobs - particularly lucrative IT jobs - will migrate out of the province and the country?

The U.S. debate suggests the impact could be devastating.

Tomorrow in Part 2 we'll look at opposing views of global outsourcing in the U.S., and the potential implications for B.C.

Charles Campbell is a contributing editor to The Tyee.