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Business 'offshoring' gains momentum -

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Business 'offshoring' gains momentum

Reporter: Ros Childs

KERRY O'BRIEN: Now to another contentious form of offshore practice that's gathering pace in
corporate Australia, particularly banking and IT. It's where a company moves part of its operation
overseas to take advantage of lower costs, employing workers in another country to do the work once
done here. A union-commissioned opinion poll released this week shows high levels of opposition to
the practice as well as concerns about sensitive, personal, financial information being sent beyond
national borders. But supporters of offshoring say it can actually lead to a net gain of jobs back
home and that security concerns regarding personal data are based more on myth than reality. Ros
Childs reports.

DAVID, IT WORKER: It is a real concern to actually see that, you know, there were people lined up
overseas who could do our jobs and we were told during the briefings that they could do it for a
third of the cost of what we cost and I guess that's when it really struck home that our jobs were
on the line.

ROS CHILDS: It's been nearly two weeks since this IT worker resigned from his job with a major bank
in Australia; demoralised by his employer's decision to offshore his department's work to Bangalore
in India.

DAVID: The way it was presented is it was just an inevitable thing that we just could not compete
with these major global corporations and - unless we followed suit.

ROS CHILDS: David does want to give his surname or former company's name for fear its will affect
his future employment prospects. He is afraid the offshoring trend means colleagues in other
financial institutions could soon face unemployment.

DAVID: If there are these cost efficiencies that we've been told there are, they will be more
successful, possibly, and other major banks will have to follow suit.

ROS CHILDS: Qantas is one of Australia's largest companies to offshore. Some of its international
cabin crew are now based in London, for example. And back in March, an announcement was expected
that maintenance jobs were heading overseas. Instead, they were shuffled domestically from Sydney
to Melbourne and Brisbane, but offshoring is still very much on the mind of Qantas chief executive
Geoff Dixon.

GEOFF DIXON, CHIEF EXECUTIVE, QANTAS (March): We said, "Look, we are going to look at offshore and
we're going to look at onshore options and work out which is the best one for the company and for
our people."

REPORTER: But you are not ruling out future moves?

GEOFF DIXON: No, we are not.

ROS CHILDS: Job losses are the most visible affect of offshoring, or global outsourcing. Unions
estimate that just over 2,000 financial services jobs have gone overseas in recent years, all of
them to India. And, they say, more than 500 have gone to that classic offshore target: call
centres.

DR NICHOLAS BEAUMONT, DEPARTMENT OF MANAGEMENT, MONASH UNIVERSITY: Obviously, the idea of exporting
jobs is unpopular and provocative, but I'm sure that the indirect affects of outsourcing mean that
jobs will be created in Australia.

PAUL SCHRODER, FINANCE SECTOR UNION: We think that global outsourcing could be worse for the
community and for jobs than the branch closure regime was from lass decade.

ROS CHILDS: Paul Schroder, of the Finance Sector Union fears that up to 15,000 finance jobs could
potentially be offshored. His union and three others have just released an opinion poll showing
that nearly all of the people surveyed were opposed to offshoring because of its impact on
Australian jobs.

PAUL SCHRODER: What this polling says is that the Australian community cares a great deal about the
investment in jobs and skills in Australia.

COLIN HOLGATE, CHIEF EXECUTIVE, LOGICACMG: These are actually stimulating more for jobs here in
Australia and growth.

ROS CHILDS: LogicaCMG was the only company contacted by the 7:30 Report prepared to talk about its
offshoring operation. It's an IT services company that employs 800 people in Australia and 2,000
had its development centre in Bangalore in India. The chief executive of LogicaCMG says no
Australian jobs have been lost and offshoring has meant the company can expand its domestic
workforce.

COLIN HOLGATE: The best way of putting it into perspective is that projects are getting up today
because the return on investment is there as a result of having the ability to use some offshore
costs, which are considerably lower.

ROS CHILDS: That's also a claim made by one of the country's most prolific offshorerers: ANZ Bank.
They employ 1,000 people at its Bangalore division to handle back-office operations. The bank
didn't want to talk on camera, but in a statement says an additional 3,000 jobs have been created
in Australia over the last two years as a result of offshoring. Dr Nicholas Beaumont of Monash
University's school of management says more Australian companies would venture offshore were it not
for public sensitivities.

DR NICHOLAS BEAUMONT: A few Australian companies are doing it - a lot of thinking about it - but
most companies are very shy about it. They're scared of the public reaction to it.

ROS CHILDS: Unions are not just attacking offshoring because of it impact on local jobs, they say
their polling also points to widespread public concern about data security.

PAUL SCHRODER: This polling makes it very clear that many customers would change their choice of
financial institution if they knew their financial data was being held offshore.

GORDON RENOUF, AUSTRALIAN CONSUMERS ASSOCIATION: There have, in fact, been cases where Australian
consumers data has been taken from, in that case, it was an Indian data centre, and used to defraud
the consumers.

ROS CHILDS: Gordon Renouf at the Consumers' Association is worried that sensitive financial
information, such as credit card details, could fall into the wrong hands if it is moved beyond
Australian privacy standards and laws. He backs a union proposal that consumers be told if their
data is being sent overseas.

GORDON RENOUF: I think that, in principle, consumers have a right to know what's going to happen
with their data. So, in principle, I think it's a good idea. Whether it actually provides the
protection that consumers need is another question.

ROS CHILDS: People here become very nervous about their sensitive data going overseas to India. Can
you understand their nerves or do you see it being misplaced or what is your view?

DEEPAK NANGIA, SATYAM COMPUTER SERVICES: I don't think it is misplaced from a layman's perspective;
however, the education and the awareness probably needs to increase in that area.

ROS CHILDS: Deepak Nangia is a country manager for Satyam Computer Services and IT company with
facilities in both India and Australia. He says the Indian stereotype of poor security bears little
relation to the reality.

DEEPAK NANGIA: Offices being audited and facilities being audited to ensure that they are secure -
in a lot of cases, more secure than what a lot of the Australian data centres and locations would
be.

DR NICHOLAS BEAUMONT: An Indian professional, an Indian programmer is no more or less dishonest, no
more or less incompetent than his or her Australian counterpart.

ROS CHILDS: With public opposition to offshoring still running high, according to the unions,
companies that do offshore are aware that have to tread carefully. But economic reality means that
offshoring inevitably carries a human cost.

DAVID: It's not your traditional retrenchment. It's no that the job no longer exists or the company
no longer requires that job. The work still needs to be done. The company just wants somebody else
to do it who's cheaper.