Global "Body Shopping"

An Indian Labor System in the Information Technology Industry

Biao Xiang

• Verlag: Princeton University Press
• Jahr: 2011
• ISBN:
  9781400836338
• Thema: Sozialwissenschaften
• Thema: Kultur- & Sozialanthropologie

How can America's information technology (IT) industry predict serious labor shortages while at the same time laying off tens of thousands of employees annually? The answer is the industry's flexible labor management system--a flexibility widely regarded as the modus operandi of global capitalism today. Global "Body Shopping" explores how flexibility and uncertainty in the IT labor market are constructed and sustained through concrete human actions.
Drawing on in-depth field research in southern India and in Australia, and folding an ethnography into a political economy examination, Xiang Biao offers a richly detailed analysis of the India-based global labor management practice known as "body shopping." In this practice, a group of consultants--body shops--in different countries works together to recruit IT workers. Body shops then farm out workers to clients as project-based labor; and upon a project's completion they either place the workers with a different client or "bench" them to await the next placement. Thus, labor is managed globally to serve volatile capital movement.
Underpinning this practice are unequal socioeconomic relations on multiple levels. While wealth in the New Economy is created in an increasingly abstract manner, everyday realities--stock markets in New York, benched IT workers in Sydney, dowries in Hyderabad, and women and children in Indian villages--sustain this flexibility.

Chapter 1

The Global Niche for Body Shopping

The single most important catalyst defining the form of the body-shopping practice was the global demand for the “Y2K” programs. Primarily based on the largely obsolete IBM mainframe technology, the Y2K programs involved little innovative design, but their implantations were extremely labor and time intensive. Hence, it made more sense for companies to outsource their Y2K projects to software service firms (vendors) who were better placed to organize large numbers of contract workers dedicated to this task. When the Y2K frenzy became widespread by 1998 in Australia, larger vendors often targeted clients with a high revenue base and willing to consider broader involvements beyond Y2K projects, some even setting their sights exclusively on Fortune 500 clients. This led to a flurry among small-sized vendors rushing in to meet the needs of the mass of smaller clients. Small vendors could not of course afford to set up branches overseas to recruit workers and instead collaborated with recruitment agents in labor-sending countries—mostly India in this instance. Soon afterward, these small vendors also provided workers to the large software vendors apart from to clients. For example, in 1997 ICON Recruitment Pty. Ltd., one of the largest IT placement agents in Australia, set up a liaison office in Bangalore, Karnataka, a state in southern India, and worked with over ten firms all over India to recruit Y2K programmers. Then, in 1999 when the demand for Y2K programmers started scaling down and the numbers of Indian labor vendors in Sydney had increased, ICON closed down its Bangalore office and recruited workers through Indian-run body shops in Australia that were bringing in IT workers through their associates in India, which was more cost effective and efficient for ICON.¹ This multitiered and network-based market structure gave rise to agent chains, which became a defining characteristic of body-shopping operations in the United States by 1996 or 1997 and a commonplace in Australia after 1998. The body-shop practice of benching workers developed around 2000 in both Australia and the United States, after the Y2K heat was off and large numbers of IT programmers sat idle, awaiting new job opportunities.

This, however, does not mean that the body-shopping practice was an accidental by-product of the Y2K programs: the demand for a highly flexible international labor force in the IT industry had been built up well before; and the body shopping business was consolidated in the post-Y2K phase, specifically during the dot-com boom years. Thus we must examine the development of body shopping in a much larger context.

“Financial Democracy” and the Virtual Shortage of IT Labor

A high level of labor mobility—the key precondition for the emergence of the body-shopping business—was not always a necessary element of the IT industry, but one specific to the contemporary stage of development driven by Internet technologies, and in which the links with globalized capital played no small part. Internet technologies since the 1990s have greatly facilitated the management of resources on a global scale.² Internet-based “B2C” (business to customer) and “B2B” (business to business) transactions link together consumers, material suppliers, manufacturers, and dealers in real time, regardless of where they are, to reach an optimal arrangement of production and management. It is thus no surprise that the earliest major commercial investors in Internet-related IT services were from the finance sector—the most globalized fraction of capital—and they are still among the largest consumers. Indeed, many, including the Australian minister for communications and IT Richard Alston (1999a), exulted that IT had brought about “financial democracy”: “In 1999, everybody can be in Wall Street.”

Furthermore, Internet commerce, or “e-commerce” more broadly,³ was arguably leading to a “tariff-free” economy and thus fulfilling the true spirit of capital to maximize itself by circulating freely.⁴ Set against projections that global e-commerce would make up 1.3–3.3 percent of global GDP by 2001—equivalent to three times the size of Australia’s economy—e-commerce in Australia was predicted to increase to AUD 1.3 billion in 2001, from AUD 61 million in 1997 (Alston 1999b). Buoyed by projections, the IT industry became the top investment priority in the 1990s worldwide, particularly through the Nasdaq Stock Exchange, which was the first fully “electronicalized” and thus “deterritorialized” exchange and had surpassed the New York Stock Exchange as the largest in the United States. The amount of capital injected into the IT sector was breathtaking: a USD 100 investment in Dell Computer made in 1988 multiplied in value to USD 56,470 by January 1999 (Sklair 2001, 263). The Street.com Internet sector index measuring IT stock performance increased by 164 percent over the year 1999 (compared to 19 percent growth of the Dow Jones Industrial Average and the Standard and Poor’s 500). The years 1997–99 were thus called the “Net years” in the finance world.⁵

Besides stock-market investors, the IT sector attracted funds from venture capitalists⁶ and angel investors. Venture capitalists invested in a start-up’s business plan for a share in profits, but expected their real killings from the start-up’s initial public offer (IPO). In this sense, therefore, had there been no Nasdaq, there surely would not have been so many IT venture capitalists. By comparison, angel investors were usually IT industry veterans who made much smaller investments and who supervised the business closely, often contributing their technological expertise and business connections. In many cases, angel investors and dot-com start-ups would together solicit capital from venture capitalists when the prospects of their business plan became clearer. Considerable numbers of established Indian IT professionals in Silicon Valley often dubbed “gurus” mentored young Indian IT entrepreneurs in the United States as angel investors. Venture capitalists and angel investors pumped in about USD 185 billion into the high-tech sector worldwide in the year 2000 (Nasscom 2000).

The large injections of capital from various sources created tens of thousands of new IT jobs and brought about labor mobility. But this tells only part of the story. Beginning from the late 1990s, industrial bodies in all the major developed countries produced alarming estimates of IT labor shortages. For example, an Australian government taskforce reported a shortage of 31,500 in 1999, and projected shortfalls of 89,300 for the period 1999–2002 and of 180,200 by 2004 (IT&T Skills Taskforce 1999). In the United States, even with the ongoing freeze in recruitment and IT labor redundancies worldwide in mid-2001, the Information Technology Association of America (ITAA) still projected 425,000 unfilled IT job vacancies for 2001–2002 (ITAA 2001). Furthermore, major software companies in the United States had formed powerful lobbying groups to push for liberalizing migration schemes for foreign IT labor, making political-party campaign contributions for this purpose.⁷

The widely broadcast warnings of critical skills shortage from corporate sources were not taken at face value and jostled against vociferous accusations that the “shortage” was a myth created by the industry in order to import cheap labor.⁸ Industry definitions of skills shortages generally refer to the gap between the estimated demand for workers with a particular skill and the numbers available at that very moment, and never counted the unemployed IT workers who could learn the requisite skills quickly.⁹ Employers were in practice so particular about a worker’s skill area (or “platform”) that, according to Professor Norm Matloff’s (1998) congressional testimony, on average only 2 percent of all applications for software jobs succeeded in the United States. In Sydney, big IT placement agents admitted to me that rejection rates of over 90 percent were common in the applications they processed, and I personally came across a case where an agent required applicants to have two to three years’ experience in a technology that had been in use for less than one year! Furthermore, most of the reported forecasts of skills shortages were produced by large labor-placement agents, based on surveys of employers. In Australia, the largest IT labor-placement agents such as Candle Australia Ltd., ICON Recruitment Pty. Ltd., and Morgan and Banks Technology all carried out periodical surveys on market trends and publicized part of the results regularly through press conferences and releases by specially hired media consultants. Suffice it to say that IT placement agents themselves favored a tight labor market and were in a position to create a perception of an urgent and perpetual need for IT professionals.

The IT industry argued, however, that skills shortages should not be addressed in terms of simple demand-supply equations but had to be “over-addressed.” As a president of the Australian Computer Society (ACS) suggested, only when an excess labor pool was created would more multinationals be persuaded to locate their operations in Australia to tap the immediately available and affordable labor force.¹⁰ In other words, an increase in labor supply would create the necessary increase in demand. Official speeches and documents in Australia had credited great successes to this new official approach.¹¹ The policy of over-addressing also fits well with the overall development strategy of the IT industry. Ironically, though software solutions are meant to rationalize, standardize, and automate business operations, the process of software development itself has remained snagged by uncertainties (Eischen 2000, 31). To deal with this, the industry over the last thirty years has essentially adopted extensive—rather than intensive—growth strategies; that is, through increases in software manpower rather than increases in productivity or quality through “rationalization.” Thus, “even the most celebrated success stories . . . rely on large amounts of unpaid labor to overcome the fundamental inefficiencies and bottlenecks of the software process itself” (Eischen 2000, 33). This development strategy inevitably renders the IT industry highly sensitive to skilled-labor shortages. For example, in response to a proposed bill to reduce the number of H-1B visas in 1995, Microsoft’s CEO Bill Gates threatened: “If you want to prevent companies like ours from doing work in the United States, this [bill] is a masterpiece.”¹²

In sum, whether or not there was a real gap between IT labor demand and supply is less important; what matters more is employers’ desire for an ever enlarging labor supply to maintain the momentum in their expansion. Unlike a real shortage, a virtual shortage like this can never be balanced out, as more supply is likely to create more shortage. Thus, the coexistence of a skills shortage and a significant level of professional unemployment can be a long-term feature of the New Economy, a feature epitomized by the routine practice of benching workers in body shops even as more are being hunted.¹³

A virtual labor shortage could not be balanced out, but could disappear abruptly, due to its close links to the speculative movement of capital. This was clearly manifested in the dot-com saga of 2001. Dot-com companies created intangible products: Web sites and Internet-based services to attract large enough numbers of visitors to the site, which they could use as a leverage to sell the site. Tirelessly repeated success stories include Hotmail.com, set up by a U.S.-based Indian software engineer, Mr. Sabeer Bhatia, which was sold to Microsoft for USD 400 million in 1998, and Junglee.com, an Internet browser founded by four Indians, also based in the United States, acquired by Amazon.com for USD 180 million in the same year. Dot-com start-ups were usually sustained entirely by venture capital funds for between six months to two years, when they were either bought up or closed down. In the market meltdown of 2001, venture capitalists panicked and suspended most investment activity¹⁴ and as a result 330 dot-com companies closed down during the first half of the year.¹⁵ No less dramatic were the tens of thousands thrown out of jobs as, due to the hit-and-miss nature of dot-com endeavors, start-ups relied on a huge pool of temporary contract workers who could be laid off summarily in a slowdown. One estimate suggested that 35,000 dot-com workers lost jobs between January and March 2001 in the United States alone.¹⁶ More strikingly, according to Challenger, Gray, and Christmas, a placement firm in Chicago, dot-com companies announced 98,522 layoffs in November 2001, more than doubling the 41,515 firings in 2000.¹⁷

Gangadharam Atturu, a young Telugu IT professional whom I met on the plane from Kuala Lumpur to Hyderabad, was in San Francisco in early 2001 and recalled how he had started performing puja on Friday and Monday mornings, the two days on which IT firms usually announced layoffs. Nothing, however, could sufficiently fortify him for the nerve-racking moment of approaching his desk on those mornings to possibly find the customary “go home” note, or switching on the work computer and finding an e-mail to the same effect. More senior employees might be called in for a talk with the manager, to explain the need for “rationalizing,” “right-sizing,” and “re-engineering” the company—the words “layoff” or “fire” never coming up. Given the scale of the downsizing in the industry, some placement agents came up with a new business of “outplacement” packages to help firms redeploy their employees to jobs elsewhere, including in other countries; countless laid-off workers had to move on to a new country to search for jobs, or go home—indeed, when the dot-boom became a dot-tomb, “B2C” meant “back to Chennai” and “B2B” stood for “back to Bangalore.”

IT workers’ global mobility was also facilitated by the fact that standards in the IT profession are set by big global corporations and are thus free from national qualifications and accreditation procedures that have posed a major obstacle to the international mobility of other professionals.¹⁸ Certifications issued by industry players (e.g., Sun Certified Java Programmer, Microsoft Certified System Engineer, Cisco Certified Networking Associate) formed the common criteria for measuring IT skills and were more valued than even a postgraduate university degree.¹⁹ Among my Indian informants, these certificates often took pride of place, securely framed and prominently attached to the wall or carried about at the ready. Venkate, who used to work in a life insurance company in Hyderabad before moving to Sydney in late 1999, had his credit-card-sized Oracle Level 8 certificate in his wallet, facing a portrait of Shri Sai Baba of Shirdi²⁰ and a photo of his family. Being internationally standardized by global corporations, an informant in New Delhi quipped, meant that IT professionals “can go anywhere in the world—just like e-mails”!

Thus, as a result of the movement of globalized capital and the development strategies adopted by the IT industry, temporary and multiple labor mobility became the norm in the industry. For example, whereas the numbers of “computing professionals” entering Australia as permanent immigrants remained the same between 1997–98 (573) and 1998–99 (574), those arriving as temporary migrants in 1997–98 numbered 3,200 (DCITA et al., 1998) and nearly 4,000 in the year after (Birrell 2000, 80)—or six times the number sponsored for permanent entry (Ruddock 1999, 10). To meet IT companies’ concerns for an urgent labor demand, the Australian government created a “contingency reserve” with an extra 5,000 quotas in 1999 under the Employment Nomination program that encouraged employers to sponsor professionals to migrate to Australia as permanent residents, but despite the outcry about skills shortages, the reserve was hardly touched as employers invariably preferred temporary workers (Birrell 2000, 80–81). With the ever changing technologies and job-market situation, a high level of mobility also became crucial for...