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Nov/Dec 2000 issue (#48)
In a new push to increase company profits, the Seattle-based e-commerce giant Amazon.com is beginning to outsource some of its customer service work overseas to Gurgaon, India, where labor costs are far less than those in the United States.
"I am pleased to announce that Amazon.com CS has entered a partnership with Daksh.com, a customer support company based out of [New] Delhi, India," said Bryce Hanson, a customer service supervisor, in a newsletter distributed to Amazon customer service representatives on July 24. "Daksh.com very much mirrors the kind of quality, passion and efficiency that we deliver every day to our customers which will allow this venture to be successful and flourish."
Amazon hopes its new outsourcing partner will employ 150 workers by November 2000. "We have instructed Daksh to prepare for a 50 percent increase over the amount of workflow agreed upon for October launch (equivalent of 100 FTE's) beginning November 15th," said the Amazon memo. "Daksh has committed to handling this additional workload before the given date."
Amazon is reportedly telling its Seattle employees that the decision to outsource some customer service work to India will not result in layoffs of Seattle-based customer service workers. However, one source familiar with the details of the new partnership said that, "Amazon in the future hopes to have up to 80 percent of its customer service work done in India."
WashTech received the internal Amazon documents through the mail, and verified their accuracy through other company sources.
Daksh.com, a small company based both in Gurgaon, India and Sunnyvale, California, is one of many new companies that employs highly skilled, low-wage Indian workers to fill the demand of United States companies seeking cheaper options for their customer support needs. The company fills a growing niche by providing online customer service and real-time chat to U.S.-based e-commerce companies out of its India-based service center.
While Amazon customer service employees already earn lower wages than unionized customer service employees across the United States, a full-time customer service rep based in Seattle may still earn $11 an hour. At 40 hours a week, the monthly cost of this employee, in wages alone, might be more than $1,900.
While wage information is not available on the Daksh.com website, by researching prevailing wages for service jobs in India's IT industry, WashTech found that highly skilled, full-time customer service positions in India offer between 5,000-8,000 rupees a month. At the current exchange rate of about 45.6 rupees to the U.S. dollar, this salary is equivalent to only $109-175 US dollars a month.
As investors increasingly lose their patience with Amazon's failure to post profits across the company, the company is scrambling to cut costs while keeping consumer prices competitive. As Amazon can't purchase goods for any less, the easiest way to drastically reduce costs is to cut employee compensation. And no place in the world can currently provide adequate customer support services cheaper than India.
The Daksh.com website courts U.S. businesses with promises of lower labor costs: "We provide significant cost savings for you given the different wage structures between India and the United States. Moreover, our large scale of operations yields significant economies of scale and enables us to pass on these benefits to you as well."
Amazon has not formally announced to the public all the details regarding its Indian outsourcing efforts. Investors will likely be pleased with such a decision because the company's ability to drastically reduce its basic operating expenses means a greater chance at corporate profitability and sustainability.
"I have no idea what kind of conditions the customer service workers in India will be working under," says Keri Tyler, a WashTech member and Level 2 customer service rep at Amazon's Auctions department, "but I hope that they will make a livable wage by Indian standards."
As Amazon begins to outsource to India, it forces low-wage, Seattle-based customer service employees to compete with workers in India who are making even less. It also means that outsourced Indian employees, while contributing to Amazon's success, will never find the opportunities for growth in the company that Amazon's U.S. workers occasionally enjoy. While the expansion to India conjures up images of an increasingly diverse and multi-cultural corporation, those who benefit from this partnership are ultimately the investors and corporate executives of the company. A job posting for Customer Care Specialists (CCS) on the Daksh.com website states that applicants must be college graduates with one to two years work experience in the customer service industry, have strong computer skills, have good written communication skills in English, and be prepared to work in shifts.
The job posting also states that the company offers "free transportation, meals and accident and health insurance" to its employees. In addition, it states that every employee is eligible for Daksh.com stock options.
With the Daksh.com partnership, Amazon begins what might become a new trend in global outsourcing. As it has grown to become a world leader in internet-based retail, Amazon has established a presence in other countries, bringing faster distribution and localized service to other regions of the United States and Europe. Although employees of non-Seattle branches have almost always been full employees at Amazon, none of the customer service representatives in India will be direct Amazon employees.
India's relatively weak labor standards also mean that Indian workers have fewer avenues for addressing grievances with employers than workers in the United States. While India has issued statutory minimum wages for unorganized sectors, according to a report by the International Labour Organization these minimum wages are poorly determined and rarely influence real wages.
Tyler, of Amazon customer service, views the move in relation to the company's business interests: "They are not doing this for the people of India, they are doing this for Amazon," she notes. "They know that the reality is that most people in India can't afford to buy goods through Amazon. So they have Indian workers doing a job for them, but does that mean that these employees will be able to buy products from Amazon? Probably not."
India's IT industry is growing at an enormous rate; according to a 1999 report by Nasscom--an Indian business association--and international consulting firm McKinsey & Company, expected revenues in India's IT and e-commerce service industry will reach $87 billion US dollars in the year 2008.
As with U.S. manufacturing jobs that have been transferred to Mexico and Southeast Asia, information technology work currently performed in the United States is increasingly being relocated to countries where employees will work for a fraction of the cost of U.S. employees and are often not protected by comprehensive labor laws. India's strong and growing technology sector--which already produces 35 percent of the world's software engineers--is already a favorite for other large corporations like Microsoft, which has many employees working in Bangalore, India.
Tax incentives, in addition to cheap labor, may also be a fundamental reason companies like Amazon are considering moving operations to India. Daksh.com's Web site boasts that Indian Prime Minister Atal Behari Vajpayee intends to develop the country's IT outsourcing industry and has worked with the Indian government to make a number of amendments to tax law, including a "100 percent tax exemption on export of IT-enabled services." Some local companies are also capitalizing on the niche of outsourced customer service work: Talisma Corp., a Kirkland-based company that specializes in working with U.S. companies to outsource customer service to India, already boasts clients such as Microsoft, RealNetworks, Xoom, and ZD University. Their website states: "When you take advantage of our India-based e-mail and chat center, you get the best talent working for you at the most cost-conscious prices."
WashTech is made up of employees at over 85 different companies in the Puget Sound area, including at Amazon.com. We are working to report on workplace changes that affect Amazon employees and temps. For more information about WashTech, contact washtech.org or call (206) 726-8580.
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