Xerox CEO, an Obama appointee, may send jobs to Indian firm

Xerox employees told last week of possible deal with Indian offshore firm HCL

WASHINGTON - Xerox Corp., whose CEO Ursula Burns is advising President Obama on exports, last week told its product engineering employees that it is in outsourcing talks with India-based IT services firm HCL Technologies.

Some of the affected Xerox employees may see their jobs transferred to HCL, said a Xerox spokesman, but how many will be affected is not known. Xerox has "hundreds of employees" working in product engineering groups in California, New York, Oregon, the Netherlands and the U.K., the spokesman said.

Burns was appointed last year as vice chairwoman of the President's Export Council, a panel of CEOs advising the Obama administration on how to increase exports, which would lead to an increase in domestic jobs. Boeing CEO and Chairman James McNerney is its chairman.

Burns is outspoken on the need to improve the pool of math and science graduates in U.S. schools. In a recent video interview on CNN, she warned that if graduation rates in these areas don't increase, "we become a server nation; our standard of living must decline."

Burns, in that interview, also argued that there is a dearth of workers who can fill skilled jobs, and when jobs aren't filled, the response from U.S. employers is: "We exported the work."

"The work has to be done, so we send the work to people in other places that can get it done. This is absolutely backwards," Burns said.

But a Xerox employee who would be affected by the action and who spoke to Computerworld on condition of anonymity, said the outsourcing agreement is being done to cut costs.

Engineering "is the core of America and to cut that is almost criminal," the employee said, and "if you don't have an engineering base in this country, you don't produce anything."

The employee continued, "If you are giving Americans jobs, isn't that a good thing for Xerox?"

The affected Xerox employee said workers were called to a meeting last Wednesday and told about the possible HCL agreement. There were 200 to 250 employees at the meeting and they were told that "we would all become HCL employees," this employee said.

An agreement is expected sometime next month.

Xerox spokesman Bill McKee said all that's been announced is that the company is "exploring a partnership with HCL." It hasn't announced layoffs , and it's too early to speculate on the impact on the work force, he said.

The Xerox employee said there are few details about what will happen to the local workforce, but among the concerns is that some of the job offers will be for positions at out-of-state facilities. "It's obvious there is a huge reduction of labor."

McKee said the HCL partnership is being explored "to help us improve the efficiency and effectiveness of our global product engineering operation. We have great skills and talent in our organization, yet we don't have the scale necessary to be a leader in all areas," he said.

"It becomes increasingly clear that to win, we have to partner with other industry leaders," McKee said.

Among the topics being discussed by Xerox employees is a remark made by Vineet Nayar, the CEO of HCL Technologies, in 2009 where he reportedly called most American college graduates " unemployable."

The only prior indicator that changes were ahead at Xerox was an internal webcast earlier this year describing a plan to cut some research and development engineering costs to one-third of current levels, the affected employee said. Asked about that, McKee said, "we have never said we would reduce R&D spend." The company has said "that we will be shifting our revenue mix to a higher percentage of services, a business that is targeted to grow between 6 and 8% by 2012. To support that, we have clearly indicated our R&D focus will also shift to a services-led, technology-driven business."

He added, "More than half of our revenue now comes from services, we will continue to shift R&D to support the direction the company is moving in."

Burns will have a "huge impact" on what happens to former Xerox employees," said Ron Hira, an associate professor of public policy at the Rochester Institute of Technology who has testified in Congress about the impact of outsourcing. Among the things Xerox will control is how many employees are retained and how many will be transferred to HCL.

"Xerox will also control whether HCL hires American workers or brings in guest workers on H-1B and L-1 visas," Hira said.

What typically happens in an outsourcing agreement is that some workers will be laid off, generally those who are older and have higher salaries, Hira said.

If Xerox follows the practices of other outsourcing agreements, Hira said "that some Xerox workers will be kept on in a transitional phase where they will be laid off some months in the future, but they will be asked to train their HCL replacement. Sometimes this is sweetened with severance, but given the current job market, that sweetener won't be very generous."

HCL, according to Hira's research, largely relies on L-1 visas to transfer its overseas employees to the U.S. Last year, the company used 85 H-1B visas and 2,935 L-1s.

Hira believes Burns will not favor investments that create jobs in America over countries with lower cost labor.

"By overstocking his export council with so many CEOs, President Obama has set it up to fail," said Hira. "There's no way that Ms. Burns or any other CEO" on the export council "will allow solutions that help American workers and the American economy but at the expense of profits and compensation for upper management," he said.

Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov or subscribe to Patrick's RSS feed. His e-mail address is pthibodeau@computerworld.com.

Read more about outsourcing in Computerworld's Outsourcing Topic Center.

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Tags servicesIT Governance and ComplianceIT industryXeroxoutsourcingCIO roleIT LeadershipIT managementHCL Technologies

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