In February this year, when Senator Shirley Turner, the African-American Democrat of the New Jersey Senate, introduced a bill making it mandatory for only legal residents of the United States to be employed for any state contract job, not many realised it would trigger a sequence of events that would eventually threaten India's latest export: call centres. Least of all, the outsourcing companies based in India which have been raking in the moolah. The senator was moving to put the brakes on the business of call centres, which she believed was costing American citizens their jobs.

However, things took an abrupt turn in the second-last week of September when the Senate State Committee unanimously approved the bill and had it ready for a full vote before the Senate. The law clearly states that any company awarded a state contract will be bound to employ only US citizens or those authorised to work in America. As a result, call centres operating from India to service transfers of social security and pension funds are just a whisker away from termination. Initially, this will be restricted only to New Jersey, but could spread as other states take the cue once political pressure mounts on other governments too.

TUNED IN: IT workers in Mumbai

Senator Turner would be the first to politically articulate what has been a simmering issue ever since the concept of call centres gripped America. Her initiative, coming against the backdrop of a continued downturn in the US economy reporting the second largest job losses since 1982, and a crucial mid-term election to the US Senate, has assumed unexpected political overtones. From all accounts, the bill is not likely to face much resistance when it comes up for vote in the New Jersey Senate. In effect, it will only stop call centres operating out of state government contracts. The private sector is not bound by such law. But if the economy worsens, the politics of Senator Turner's bill could assume ominous overtones. All the more, since the Federal Health and Human Services is monitoring the pending bill to decide on the course of action in 40 other states employing private sub contractors to service the call centres.

At the centre of the controversy is Arizona-based e-Funds Corporation, which receives about $326,000 a month to process benefits for 1,94,000 New Jersey welfare and food stamp clients. The company moved its English-speaking customer service centre to India from Green Bay, Wisconscin, where workers were paid $10 to $12 an hour. e-Funds did what others have done before it: prune costs to improve the bottom line in a recessionary environment. Costs are estimated to drop by nearly 50 per cent by the second-year of operation, primarily due to lower personnel costs accounting for 80 per cent of total costs for companies with call centers in the US. The general rule is a savings of $20,000 per call center per employee.

These numbers have been realised by British Airways, American Express and General Electric. And, now almost half the Fortune-500 companies have moved their call center business to India. Ford Motors, which already uses India as a manufacturing base for automobile exports, has now established two centres for accounting services and software development in India, catering to the growing needs of Ford in the Asia-Pacific Region and Europe. According to a company official, their services will be extended gradually to Ford operations in North America as well.

However, many have warned that with joblessness on the rise, these companies will be hard pressed to explain their actions to the general populace and a vulnerable political leadership. A white paper by PWC Consulting, titled Riding the Offshore Wave, notes: "As companies explore offshore alternatives, they will be well aware of the public relations risk of exporting jobs on the one hand and exploiting third-world workers on the other. In our view, offshoring is an inevitable part of the trend towards globalisation, or as The Economist calls it, the economic integration of industrialised countries with the Third World."

If process support personnel are seen to be losing jobs to cheaper white-collar workers in India and the Philippines, it is likely to become a serious political and public relations issue for enterprises considering offshore sourcing. Enterprises must recognise this threat and plan their offshore migration accordingly. The plans may include using US-based outsourcers with global resources, along with redeployment plans for the affected workforce.

Some believe that the immediate loss of jobs are transitory in nature and part of a structural change in the US economy. However, increasingly more countries are willing to match India's rates. In more ways than one, it is crunch time.