Invasion of the bodyshoppers
It is Saturday in Plano, a day when droves of well-heeled suburbanites gather at the mall or on the soccer field. As usual, Mali Subbiah is not among them. Instead, the Indian immigrant toils in a drab, crowded room in his suburban office suite.
A "cheesy little sign," as one employee calls it--a piece of paper on the front door--marks the headquarters of McDowell Tucker & Company, Inc., the current name of Subbiah's consulting firm. Inside, the office is so cramped that the reception room doubles as a supply closet. Visitors must wind their way through stacks of office supplies to get to a single worn, yellow couch.
Subbiah, a native of Madras in southern India, has labored here for the past seven years to build what is commonly referred to in the high-tech industry as a "body shop."
The 35-year-old former robotics engineer, relying on the temporary and controversial H-1B visa program, combs his homeland for qualified engineers and software programmers--the "bodies"--signs them to contracts with his company, then peddles their services to American companies ravenous for highly skilled workers. In return for acting as middleman, Subbiah takes a big chunk--sometimes as much as 40 percent--out of the workers' paychecks every week.
That fact has led to accusations that Subbiah and his bodyshopping ilk are exploiters who bind men and women from impoverished third-world countries to deals that resemble indentured servitude. Because of Subbiah's cut--and he, in turn, often subcontracts with yet another middleman--the foreigners typically end up making much less than their American counterparts.
None of this concerns Subbiah, who finds dozens of his countrymen more than willing to offer themselves up for "exploitation" in America. Indeed, he sees himself as offering a valuable service. "Imagine," Subbiah says, "if someone told you you could earn 10 times what you are now making." He is quick to add that his trade in human capital has made him a multimillionaire.
This afternoon, the wiry, energetic entrepreneur is making up for lost time. For almost five months, the Immigration and Naturalization Service has barred admission of any foreign workers on the H-1B visa program that allows Subbiah's engineers and programmers to live and work temporarily in the United States. The INS had implemented a moratorium on H-1B immigrants in May 1998 when body shoppers like Subbiah gobbled up so many foreign workers that the congressionally set annual quota of 65,000 H-1Bs had already been reached. Only on October 1 did the INS resume issuing the visas.
Within 10 days of the ban's being lifted, Subbiah had scored in the body trade. Wandering around his office was a female programmer, dressed in the traditional kurta and shalwar, whom Subbiah referred to only as Sita. She had flown in from India just the night before, and Subbiah's wife was showing her around the office. Subbiah says he will arrange and pay for Sita's stay in a Plano hotel while he finds her a "consulting assignment" with a corporation. To get that position, Subbiah may go directly to a company to offer the programmer's services, but more often he will work through another middleman, who will also take a cut of the worker's paycheck.
A handsome, fit man, Subbiah exudes an odd mixture of enthusiasm for his new country and boastful bravado. In seven years, his business has grown enormously. He has also developed a reputation for running a clean shop. Sure, he works just about every weekend, and yes, he has two children, but, he adds unapologetically, "My wife takes care of that."
He proudly relates how his 6-year-old daughter gets up every morning and says "God Bless America, not God Bless India." He, too, overflows with pride about his adopted country, and manages to wrap his own enterprise in patriotism. "I am getting the cream of the crop from India and dumping them on America," he says.
Any concern that he will drain the best and brightest from his desperately poor homeland? "No, there are plenty more there," Subbiah says.
Although he has about 40 people working for him in India--as well as 12 in the States--Subbiah says he couldn't live in his native country anymore because his body can't take the pollution. He won't send his money there, either. "To be honest with you, I have several million dollars, and not one cent of it is invested in India," he says.
America has been good to Subbiah. He has imported some 350 engineers and programmers from India since 1993--about 200 are under contract to him right now--and the home page for his company (www.sahana.com) claims that it generates more than $15 million in annual revenues. Subbiah started his business under the name Sahana International Inc. and changed to McDowell, Tucker & Co. when he merged with another consulting firm of that name. Yet another name change is in order, as Subbiah recently agreed to sell out--for somewhere in the range of $17 million--to Aztec Technology Partners, Inc., a publicly traded Boston-based concern.
Subbiah's good fortune would come as no surprise to high-tech industry insiders. Demand for engineers and programmers is enormous. A 1997 study by the Information Technology Association of America, an industry trade association, estimated that about 10 percent of U.S. technical jobs stand vacant because there's no one to fill them.
High-tech employers such as Texas Instruments, Microsoft, and Sun Microsystems insist it's hard to find U.S. workers with the appropriate skills to program and analyze computers. But in Asian countries like India, where children customarily learn their multiplication tables by the age of six, the supply is abundant and cheap. India has plenty of educational outlets for individuals with aptitudes in math and science; it has fewer jobs, despite the presence of some home-grown high-tech companies as well as international branches of American and European companies, including TI.
With a population set to hit one billion and a per capita annual income of only $300, India pays its programmers and electrical engineers a pittance compared to U.S. rates. The typical programmer or engineer working in Hyderabad, a southern city with enough of a stake in the silicon industry to go by the nickname "Cyberabad," earns between $20,000 and $24,000 a year, compared to $50,000 and up in the United States.
"It is general knowledge in this industry that it is a real gold mine in Asian countries," says Eddie Vela, a senior software engineer in a Dallas office of medical supplier Abbott Laboratories. "These guys have multiple degrees, they know English, and they are willing to work cheaply." Abbott Labs, Vela quickly adds, "has been ethical to a T in my experience in dealing with foreigners."
Those workers' winning traits figure into the large numbers arriving on H-1B visas. In 1996, as many as 56,000 Asians came to the United States on H-1Bs, according to the INS. About 30,000 were Indians.
Anyone who has stopped by the parking lot of Pasand, a Northern Indian restaurant at the corner of Coit and Campbell roads, the heart of what is now known as Telecom Prairie in Richardson, can deduce from the carloads of diners dressed in traditional saris, shalwars, and kurtas that Indian expatriates are a formidable presence in Dallas. Gurumurthy Kalyanaram, an associate professor at the University of Texas at Dallas' school of management, estimates that 60,000 Indians now live in the Dallas-Fort Worth area, compared to 15,000 in 1980.
TI, the Dallas-based semiconductor company, has led lobbying efforts to get Congress to raise the yearly cap on H-1B workers. During a six-month period ending in March 1998, according to INS data, TI asked the agency for permission to bring in 82 individuals on H-1Bs, putting it near the top of a national roster of companies using the program. In the same period, Subbiah's company got INS approval to import more than 40 workers.
Whether an acute shortage of engineers and programmers actually exists is the subject of some debate. Labor unions say the supposed shortage is simply a smokescreen to enable companies to get cheaper help. The high-tech industry, of course, argues that the shortage is real, and it has fought to get the H-1B program expanded.
TI lobbyists, when testifying before Congress in February, cited numbers from the American Association of Engineering Societies and the National Center for Education showing that 10,000 fewer students earn electrical engineering degrees each year in the 1990s than in the previous decade. "Know Any Engineers???" TI lobbyists wrote on one of their placards during a presentation to the U.S. Senate.
One surprising--and perhaps suspect--note in the debate was sounded by Stuart Anderson, an aide to Sen. Spencer Abraham, the Republican from Michigan who sponsored legislation to expand H-1B. (The quotas were eventually increased.) A former researcher at the conservative Cato Institute, Anderson argued that employers couldn't possibly be clamoring for foreigners just to get cheap help, because the outsiders actually made more than their American counterparts. Citing National Science Foundation figures from 1995, Anderson noted that foreign-born engineers in general--not just those on temporary visas--earn between $1,000 and $2,000 more each year on average than their native-born colleagues.
H-1B detractors waved around National Science Foundation figures to make the opposite point. Paul J. Kostek, president-elect of the Institute of Electrical and Electronics Engineers Inc., released a study in October as the Senate was preparing to vote on the H-1B expansion showing that 4.7 million engineers whose highest degrees were in engineering and science had occupations in other fields. Kostek claimed the exodus from engineering and science fields wasn't voluntary, and reflected that some older engineers couldn't find jobs because employers weren't willing to pay for their skills when they could get foreigners much cheaper.
Indeed, body-shoppers have earned a reputation as operators, middlemen who skim easy money off of others' hard work. "I know there are workers who will tell you Mali runs a slave shop," Subbiah says.
Yet he shrugs off claims that body-shoppers such as himself are taking advantage of their charges. He's giving his former countrymen opportunities when such are scarce, he says. Even so, he refused to make any of his contract workers available for an interview when told he wouldn't have control over what ends up in print.
Reddy Bandi, a 27-year-old electrical engineer from Hyderabad who initially came to the United States on a student visa, has never worked for a bodyshopper. Since he came here five years ago, Bandi, an eager, ambitious son of a rice farmer, who, as the youngest of three, was the first in his family to go to college, has assiduously avoided working for entrepreneurs like Mali Subbiah. "I don't like to apply to companies who get people from the outside," Bandi says. "I know what their tactics are."
Bandi says he's heard nightmarish tales from electrical engineering buddies who got their ticket to America through bodyshoppers. Oftentimes, Bandi says, the bodyshoppers had no legitimate job contacts, so the engineers, once on American soil, were on their own in finding temporary jobs. When Bandi's friends finally found a better arrangement with a less ruthless middleman, it still took them months to pry their visa papers away from the original bodyshopper.
Reedhar Gunda, an electrical engineer from Bombay, was one of Bandi's friends who ran into trouble. Gunda now works as a consultant for Prudential Bache in Scranton, Pennsylvania. But when he came to the States eight months ago, he found out his bodyshopper was taking $22 an hour out of his paycheck, leaving him with only $28. Gunda eventually managed to extricate himself from his contract. He had to find another opening, then get that company to petition for his H-1B visa all over again--a process that took several months.
Bandi's assimilation into the American high-tech industry went smoother. Within 18 months of arriving here, he'd acquired a master's degree in engineering from Arizona State University and switched from a student to H-1B visa so he could work. Even though his friends got a rough ride from the bodyshoppers, Bandi sees the people-importing business as a two-way street. "I don't blame only the companies," he says. "I also blame the people who come on H-1Bs. Their main intention is just to get in. When they get here, they start talking to people, they realize they are not being paid as well, they switch. Then sometimes they start switching two, three times a year."
The lack of American know-how when it comes to computers astounds Bandi. "I just have to laugh," he says. "Americans have computers lying around all over the place like they are tissues. But hardly any of them know what's inside."
For his own career in the United States, Bandi has stuck mostly with Romac International, Inc., a large publicly traded subcontractor that doesn't recruit directly from India. In his six years here, Bandi has worked as a contractor for Unisys, IBM, Abbott Labs, a small software testing company, and the Sabre Group. He's moved three times, but now tries to stay in the Dallas-Fort Worth area. His current assignment at Sabre--a travel and transportation technology subsidiary of American Airlines--has him reporting to offices in Westlake.
Most days, Bandi consumes lunch from a paper bag at his desk with a fellow Indian contract worker. The area's Indian high-tech workers constitute a small, comfortable, and somewhat insular community. Their lifestyle is circumscribed enough that Bandi, during an interview, is baffled by the southwestern offerings on the menu at Chili's. If he goes out with his wife for dinner, he says, it's to a place like Pasand, with its eight-buck, all-you-can-eat buffet of curried meat and vegetables, raita, and hot, puffed Indian breads. The same crowd of Indians and Pakistanis line up at the Everest Theatres in Irving for the weekend matinee, which is always an Indian movie.
Bandi, who hopes eventually to become a permanent U.S. resident and earn a doctoral degree from an Ivy League school, says he tries to live at least as lavishly as most Americans. "I try to live better than the locals," he says. He and his wife, also an Indian immigrant who is unable to work in her field of physical therapy on her spouse's visa, live in an apartment. "I'd like to get a house," Bandi says. Already, he drives a "very good car," he says, an Infiniti. Once every two years, Bandi and his wife journey home to visit their families.
Although he won't say how much he makes, Bandi believes he actually earns more cash than his American peers at Sabre with permanent positions. But since his employer is actually a subcontractor, Bandi thinks his colleagues enjoy better benefits and more authority in the workplace.
Despite Reddy Bandi's suspicions about his own pay, "Indian engineer," for many high-tech employers, has become shorthand for inexpensive, flexible, hard-working, and talented help.
"I need to get some Indians" was the statement of one founder of a North Dallas software company when he recently started a new project.
Subbiah, along with three of the other placement-company executives who were interviewed for this story but insisted that their names not be used, say they know companies expect anywhere between a $5 and $10 discount per hour when they are contracting with a worker who has just flown over from Asia.
Subbiah, who almost exclusively contracts with Indians, readily acknowledges the existence of this sort of discrimination within the high-tech industry. "It shows up on the rates," he says. "When we recruit Americans, we quote higher rates. The companies have no problem."
Says another job broker at a company that places Asians and Americans, who didn't want her name to be used, "People pay a premium for an American engineer. It's just that simple." She concedes that some cultural prejudices play into the wage calculations. "The companies are worried that these guys are going to be hard to understand, that they won't know how to dress," she says.
When displaying their wares on the Internet, bodyshoppers turn some stereotypes of Asian workers into an asset. "Remember, all our consultants are engineers, affordable, and are willing to relocate anywhere in the U.S. They speak good English and know to smile," wrote the recruiters at Applisoft, Inc., a Saratoga, California-based bodyshopping company, in a memo the company dispatched on the Internet to other job brokers, listing seven available Indian engineers--each with an accompanying paragraph about the computer languages he knows.
Any kind of crackdown on racial discrimination, or prevailing wage violations, seems unlikely from U.S. agencies. The high-tech industry moves way too fast for the INS and U.S. Department of Labor. Tom Simmons, chief of the business and trade services branch of the INS in Washington, says, "The immigration laws are not a good fit for the electronic age. Things are more dynamic than they have ever been."
Although in theory the sponsors of H-1B workers are required to pay a "prevailing wage"--which, to make matters more complicated, is defined differently by the various regulatory agencies--such a figure is a swiftly moving target in the high-tech field. The Labor Department, for instance, only compiles prevailing wage data once a year, not enough to keep pace with ever-changing salaries. A programmer's market price can double with just a few months' experience in one computer language. The INS, for its part, requires H-1B sponsors to use an "accurate source" to calculate prevailing wage. An "accurate source" is surely in the eyes of the beholder, Simmons admits.
Nationwide, government prosecutors have filed only eight cases in the last six years alleging willful violation of prevailing wage regulations with respect to temporary workers. Gary Edwards, special enforcement coordinator for the Dallas regional office of the U.S. Department of Labor's Wage and Hour Division, says he gets complaints about H-1B situations only once a month. And even in those cases, prosecution is highly unlikely. Edwards believes the engineers move on to other jobs rather than pursue a most likely futile case.
Similarly, claims of racial or ethnic discrimination are hard to establish at the courthouse. For starters, the workers would have trouble figuring out whom to name as a defendant. Legally, the corporations where the temporary workers actually ply their skills--the deep pockets--have the insulation of a subcontractor relationship. Hal Gillespie, a Dallas lawyer who represents workers in employment discrimination cases, says, "You would have to argue that it was a joint employer relationship. But it would be a hurdle."
"Something is not quite right" about the arrangement between the incoming Indian engineers and their U.S. employers, concedes Professor Kalyanaram. He nonetheless supported expansion of the visa quotas. "We just have to put up with this price of discrimination," he says. "The only silver lining is that it is short-lived."
While the foreign workers are willing to swallow some discrimination to get the benefits of work in the United States, organized labor and engineers' associations view them as job robbers. Last summer, the Federation for American Immigration Reform, a group that describes itself as "working to reduce foreign immigration," stated in a press release: "Microsoft, Sun Microsystems, and Intel...think that Americans aren't good enough to do jobs in their own country. Wonder why wages don't go up in America? FAIR thinks it knows the answer."
Concerns about foreign workers depressing U.S. wages threatened to derail the legislative effort to rewrite the nation's immigration laws so even more engineers and programmers could enter the country on H-1Bs. But after months of wrangling, the yearly cap on temporary visas was increased last month from 65,000 to 115,000.
The son of a federal employee and grandson of a jewelry trader, Mali Subbiah grew up in what he describes as a well-to-do family in suburban Madras. He spoke Tamil, the regional language, at home, but studied almost entirely in English at private schools. He earned an engineering degree in India, but went to Canada to obtain a master's. He was at Georgia Tech starting his doctoral studies in 1986 when a Michigan robotics company snatched him up on his student visa, which allows for a one-year, paid practicum.
Then he converted that to an H-1B visa, working first for NEC in Dallas. Within a few years--utilizing his savings--he'd launched his own consulting business and obtained a green card. With permanent residence, Subbiah, who recently became a U.S. citizen, won the right to import his countrymen. "I knew all my buddies in Madras wanted to come over here," Subbiah says when explaining how he got into bodyshopping.
The opportunity to help friends wasn't his only motive. "A sophisticated way of describing him is to say he is very self-possessed," says Kalyanaram, who knows Subbiah and has followed his fortunes here. "He thinks he knows the world. And how can you quarrel with his success? A lot of people want to do what he is doing. He is very aggressive about it."
Subbiah says he's come up with a special formula for recruiting and retaining his contract engineers. "There are ways to retain them," he says, as if guarding a trade secret. He refuses to offer up details, because there's stiff competition for the workers he's seeking. Indeed, Subbiah believes that every engineer who gets his offer of a contract probably gets 10 others.
His body shop is by no means the biggest in the United States. Mastech, an Oakdale, Pennsylvania-based company, probably sits at the top of the heap, according to the INS' list of the top 100 sponsors of H-1Bs. In a six-month period ending in March 1998, Mastech sponsored 672 temporary workers entering the United States.
Despite the competition for fresh bodies, Subbiah has managed to get his share. Right now, he lists on the Internet 38 names--all Indian--of workers available through his company, as well as their software skills. "We would love to place Americans," says Steve Stewart, a sales manager for Subbiah. "But they don't offer the flexibility. With the Indians, the majority are single. They come here with three or four suitcases. It's kind of a way for them to see America."
When the workers become more "Americanized," Stewart admits, "sometimes, then, they don't want to move."
Subbiah touts the fact that his workers will initially go anywhere. "The good news," he says, using a phrase he often employs to start a sentence, "is that for foreigners all American cities are the same."
Although he won't show any documentation of the deals he cuts with his workers, Subbiah does provide a rough outline. Typically, he puts them on an annual salary of $45,000 to $60,000, depending on their computer languages--and negotiating skills. When he offers their services to a company or to another job broker, he pushes for the highest price. In today's market, rival recruiters say, Subbiah could charge anywhere from $90,000 to $200,000 a year for the programmers.
Subbiah makes a verbal agreement with his new recruits that he'll give them a 10 percent raise every year. He also offers two weeks' vacation for the first five years. (H-1B visas expire after three years, but can be renewed once, so workers typically stay only six years unless they establish permanent residence.)
In the beginning, Subbiah leads his workers by the hand. He puts them up in hotels and corporate apartments in Plano and arranges transportation. He helps them get bank accounts and credit cards, and when they buy a car, he says, he loans them the money at no interest.
It typically takes him nine months, he says, to earn back the roughly $15,000 he invests in each of his workers. But Kalyanaram believes those figures represent a "complete exaggeration." The Bombay native believes that within three months, Subbiah is reaping pure profits. "It's all gravy from there, but it takes at least that long for these guys to discover their situation and...jump ship."
Subbiah writes some clauses into his contracts that would give the newcomers pause before they push off in search of better wages. If they leave too early, they are obligated to pay back Subbiah's initial investment. "They don't take it seriously, though," Subbiah says. He laughs, then, when asked why he'd bother to put such a clause in his contract.
Subbiah argues that he's a necessary component of the high-tech industry, because the IBMs of the world can't successfully recruit in India amidst the dramatically different business and cultural milieus of the Asian world. Besides, Subbiah says, the big companies are more than happy to leave the dirty work to him. "The only way they are going to solve the problem" of lower take-home wages for the newcomers, he says, "is to get rid of my company. The impact of that would hurt us all."
The bodyshopper doesn't have a particularly high view of the typical U.S. immigrant either. He refers to all those who qualify to move here for anything other than academic and professional credentials as "junkies." Asked to explain, he says he means they're of little use to this country. The laws that allow residents' siblings who don't possess such specialized skills to immigrate should be abolished, he says. "Eighty percent of them are junkies," he says, adding that he wouldn't even bring his own brother here. "He is a jeweler. What can he do here?"
Subbiah argues--like TI lobbyists did before a Senate subcommittee--that the H-1B high-tech workers are a Band-Aid solution to get this country through a rough spot, while our public schools struggle to get up to speed in turning out science-proficient students.
He is appalled by the paucity of math and science instruction at the elementary level in America. His own daughter is six and attends public school in Plano. Subbiah complains that she hasn't even started multiplication yet. (Plano gets there in the latter part of second grade.) If he took her home, he says, she'd be easily outdone by her Indian friends, who memorized their times tables in the age-equivalent of kindergarten.
To make up some of the educational slack, he sends his daughter on the weekends to private math schools, which are largely founded and attended by Japanese, Chinese, and other Asian immigrants.
Many Americans, of course, share Subbiah's concerns. Fewer and fewer U.S.-born students are entering computer-science and electrical engineering fields. Of the 699 graduate students in those fields at UTD, at least 200 are foreign-born, a trend found throughout the nation's universities.
"Recently I was shown a series of drawings by children asked to envision someone in the high-tech industry," a TI lobbyist told senators in February. "Their images of the folks who work in our companies are generally unflattering, but provide a wake-up call to our companies. Pictures of men with pocket protectors, crooked glasses, and rumpled clothing were the norm."
The legislation to expand the H-1B program is designed to address some of the inadequacies in U.S. training. It offers $10,000 scholarships, renewable yearly, for low-income students in math, engineering, and computer science. Who will foot the bill? Sponsors of foreign temporary workers. Bodyshoppers like Subbiah will have to pay a $500 fee for each worker they import.
Subbiah embraces the concept. "I want all the money to go for that," he says.
Some 5 percent of his fee payments, however, will go to fund enforcement of prevailing wage cases. Under the new law, the Labor Department has the authority to initiate "spot" investigations--without a complaint on file--to see if an H-1B sponsor is violating the law. Willful violators can be fined up to $5,000 per violation, five times more than under the previous law.
Eventually, the entire H-1B phenomenon could, like the 5 1/4-inch floppy disc, become obsolete.
Right about the time that Congress began its H-1B debate, Microsoft announced with much fanfare the opening of an office in Hyderabad. The message was clear: If we can't bring them over here, we'll take our work outside the United States. Dozens of other U.S. companies, including TI and Motorola, had already beat them there.
Even Subbiah predicts the bodyshopping business will become obsolete--and quickly, if the INS doesn't loosen up its visa restrictions even further.
Subbiah is preparing for change. He's already tested a new scheme: He simply gets his hands on the specifications for a programming project that some U.S. company needs done and ships them to his Madras office. His recruiters find software engineers who can complete the task at puny Indian wages. Then--with one cheap data transmission over the Internet--Subbiah's Madras office e-mails the project back to the States.
In a matter of a year or two, Subbiah predicts that much of the software programming and coding, now performed here, will follow the path of manufacturing and move to Asia. "Only the high-level tasks, the designing and marketing, will remain here," Subbiah says. "They are going to lose the whole business to India. As a citizen of this country, I regret that I am going to start a branch in India.
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