Third World cities have become America's back office, causing deeper resentment among the unemployed Kevin Flanagan was a casualty of the Internet's phenomenal equalising power, the power to transfer jobs from rich countries to poor ones because location has been rendered irrelevant. A computer programmer at the Bank of America in Silicon Valley, he was told he would be laid off; the bank was outsourcing his job to India. He walked into the car park and shot himself dead. This kind of tragedy is inflaming opinion in the United States. With unemployment high, Americans resent the way American companies - household names in telecommunications, banking, insurance, airlines and hospitals - are transferring white collar and customer-service work to countries such as India. Unions and workers say it is 'unpatriotic', forgetting that capital knows no nationalism. The reaction of politicians, inevitably, has been knee-jerk. New Jersey and Washington have introduced a bill to ban government agencies giving outsourcing contracts to India and other developing nations. Maryland, Connecticut, Missouri and Wisconsin plan to follow suit. The alarm bells are ringing in India. What effect will such legislation have on what was known as the information technology-enabled services industry but as entire processes began to be outsourced, came to be known as Business Process Outsourcing? BPO is the brightest star in the economic firmament. The National Association of Software and Services Companies (Nasscom) estimates that BPO will grow by 65 per cent to US$2.3 billion this year. US Congressman Jay Inslee from Washington, on a visit to India this week, tried to reassure a meeting of Indian businessmen in New Delhi. 'I don't expect America to forsake the principle of free trade,' he told them. 'We want to sell our products in India so I can't see us putting up trade barriers over outsourcing. I don't expect these bills to be passed.' Even if they were, they would not affect private companies in the US. These will continue to outsource work to India (or the Philippines or Ireland). The logic is inexorable. They make savings of 30 to 40 per cent, which can mean the difference between remaining competitive or going under in an increasingly cut-throat global marketplace. The tide is unstoppable, notwithstanding the Canute-like antics of New Jersey. Recently, investment bank JP Morgan said it was setting up an offshore research department in Bombay for data collection and basic financial modelling. Leading the way a few years ago were American Express and GE Capital. Other banks and financial services companies are planning to relocate 500,000 jobs offshore, or 8 per cent of their work force, over the next five years. When US companies send their work to India - data processing, answering customer queries, CAT-scan reading, credit card and insurance claims processing, or medical transcriptions - they get college graduates to do jobs for $1.50 to $2 per hour that would cost $12 to $18 in the US. The US is witnessing a replay of the transfer of blue collar jobs in the manufacturing sector to Mexico, East Asia and China that happened in the 1980s. Now it is the turn of the services industry. 'Over the next 15 years, 3.3 million US service industry jobs will move to countries like India, Russia, China and the Philippines. The IT industry will lead the initial exodus,' says a Forrester Research report. McKinsey & Company believes the BPO market will touch $142 billion by 2008. The same services cost $532 billion at present. So the difference of $390 billion is the net saving the US economy can expect. Experts believe Americans will benefit in the long term. 'Look at the huge economic surplus that resulted from outsourcing manufacturing. This surplus was partly responsible for the high growth, low inflation. The resources that were freed up were profitably deployed in new sectors such as biotechnology. So Americans will benefit,' said Matthew Halle, vice-president at QCSI, a healthcare solutions provider. Indians are hoping the BPO juggernaut cannot be stopped by Americans angry at losing their jobs. The industry is going from strength to strength. The Indian brand is now well-established, so much so that Indians working in call centres no longer change their names to Sue or Dick - though denture-dislocators like Yashodhara or Shakuntala still need shortening for the sake of an easy life. Westerners no longer bother about their query being answered by an Indian sitting in New Delhi as long as it is answered satisfactorily. India has become the world's back office and no amount of Luddite angst will bring the shutters down on it. The effect on the bottom line of western companies is just too compelling. That said, people in the BPO business believe India should be sensitive to American disappointment, of which Flanagan's suicide is an extreme example. 'Job losses are a delicate issue. We need to work co-operatively with America to turn this into a win-win situation for both sides and that can only be done with understanding,' says Pramod Bhasin, president, GE Capital India. To that end, Nasscom is meeting US legislators to make them understand the issues. It has also appointed a public relations firm to project the case for outsourcing both in the US and Europe. Mr Inslee believes American firms need to do their bit too. 'Many of my constituents work for Boeing. Let's say Boeing outsourced some of its work to remain competitive. 'They would have to explain to their workers that if they didn't remain competitive, there might ultimately be no Boeing. I think people will understand that.'