The Problem of Corruption in IT Matches That in US Politics

Executive Summary

  • This video explains the problems with the US political system.
  • With some slight adjustments, it can be used to explain a similar problem in the IT industry.

Introduction

The Problem With the US Political System

In shorthand, the US political system has been hacked by monied interests who have succeeded in converting a government that was supposed to have a degree to participation to where the participation is facia. The fascia of participation is maintained because, without a facia, the system would lose its legitimacy, which is, of course, a major part of its power.

The video does a superb job of showing that the percentage of the electorate that favors a law being passed has no correlation with whether it is passed. This is because legislation is passed based upon financial power.

The Corrolary with IT

The state of IT is very similar, all that is necessary is to move around the primary interest groups, and the video could just as easily be applied to IT.

Voters = Business Users

We need to convert voters to business users. Business users ultimately have to use the software that is purchased but has close to no control over what software is purchased. This is because the decision making has been delegated to a specializes group called IT.

Representatives = IT

The US was never a democracy and the term democracy is not used in either the US Constitution or the Bill of Rights. It is a representative system of government or a republic.

The founders of the US opposed democracy on the grounds that it would lead to the masses being able to be lead by a demagogue to execute policies that were popular, but ultimately bad for the system. The only democratic aspect of the US political system are referendums that have direct voting. But these are rare compared to the decisions that are made through the representative process.

  • A representative is someone who is elected to execute the will of the electorate. That is in theory.
  • Similarly, the business has IT make decisions for technology under the idea that IT has specialized knowledge. In the US political system, the problem is that the representatives are responsive to money rather than to the electorate. A representative system only works if that system cannot be gamed by non-electorate based forces — which is unfortunately exactly what has happened.

Lobbyists = Sales People

Lobbyists are instruments of corruption. In a system that was about the representation of the electorate, lobbyists would not exist. There is already a system for influencing representatives, it is called voting. However, lobbyists and lobbyist money is designed to minimize the influence of voters on their representatives.

They bring the interests of the elite to bear on the representatives, pivoting the representatives away from representing the electorate to representing whoever is paying the lobbyists. Lobbyists don’t care what is true, they push any message in return for money.

In the IT space, lobbyists are salespeople. Salespeople are hired to get customers to buy things that are bad for the company, but good for the people that work in the IT department. Their role is to corrupt the IT decision makers by any means necessary. Salespeople frequently talk about how they are the voice of the customers. However, having worked with them, this is clearly false. Salespeople are expert at highlighting areas that are strong and hiding areas that are weak in applications from customers. Like lobbyists salespeople will laud their relationship with their customers, but these relationships have a specific purpose — to sell software, and the stronger the relationship, the less appropriate the software needs to be to get purchased.

As a lobbyist, it is virtually impossible to keep one’s job without lying, and then lying about lying, and the same is true of sales people. Their job is to get the sale, by any means necessary. Both lobbyists and salespeople see their roles as essential and normally have a blind spot about lying, preferring to adopt the idea that either “everyone is doing it,” or “there is no objective truth.”

However, the end result of their activities is that the entire system is pivoted away from the representatives (IT or political) from representing the interests of either the voters or the business users. Like lobbyists, those salespeople that are most successful in turning IT decision makers against the interests of their companies are paid the most.

Conclusion

A final end state of corruption is attained through decades of small incremental degradation of the system. After enough decades pass, eventually, the system becomes so obviously corrupt that it requires reform. This is where both the US political system and IT is currently. Those inside of the system is so used to corruption that they barely question it. Those looking inward toward the system can’t believe how the people on the inside who benefit can’t see how dysfunctional the system has become.

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How Indian IT is Bringing Bonded Labor to the US

Executive Summary

  • Bonded labor is illegal in the US. However, Indian companies are engaging in bonded practices.
  • What this means for labor practices in IT in the primary IT markets.

Introduction

There have been shocking things happening in the area of human bondage which is entirely due to Indian labor practices being exported to the US by Indian companies. We will begin this article discussing IT recruiters, move onto H1-B Visas, and then discuss labor bondage.

Indian Conformity the US Law and the Laws of the Countries of the Primary IT Markets

We began to notice unconscionable contracts from Indian IT recruiters several years ago. These contracts were like nothing we had ever seen and when the questioned these contracts we were told by the recruiters that they had many subcontractors working underneath them.

These contracts were so horrid, we wrote up one experience in the article Contract Clauses to Watch Out for In Professional Service Agreements, and Recruiter Lies Explaining Clauses on Subcontractor Agreements. The IT recruiting area overall has become a hotbed of practices that are either illegal or highly inconsistent with US standards. What appears to be happening is that Indian recruiters are bringing Indian culture and labor standards from India to the US and other primary IT markets rather than adopting the legal and ethical standards of the countries to which they are migrating.

This is explained by The Guardian as follows:

“Softech is a case in point. Owned by Krishnan Kumar, Softech has filed 32 lawsuits against employees in Gwinnett County, Georgia. Many of those lawsuits name workers who complain that they quit because they weren’t being paid. Yet most of the workers ended up on the losing end, through settlements or mediations or in court.

Kumar declined to be interviewed. But in court testimony and legal filings, he says he sues former workers to recoup the financial damage their departures cause his company – damage he routinely values at $20,000.

Virginia attorney Rajiv Khanna, who represents employers and employees in immigration matters, considers the financial shackles “an immoral, unethical and very probably illegal control of the workforce.””

And in this quotation.

“Of nearly 200 H-1B labor violation investigations completed by the Labor Department in the 2013 fiscal year, seven companies were cited for imposing – or attempting to impose – illegal penalties on workers who quit

In at least three of these cases, CompSys made workers headed to the US sign bonding agreements requiring them to pay hefty fees if they quit. They had to sign another document once they arrived, agreeing to pay $15,000 more if they quit before the end of their contracts.

“It is an artificial handcuff on workers,” said Paul Weiss, a labor attorney in New York who represented workers in some of the CompSys cases. “To impose such a draconian requirement is unconscionable.””

We found very similar types of if not illegal, completely inappropriate clauses in the contracts of Indian recruiters. When we explained the deep problems with the contract, the Indian recruiting firm both attempted to get us to speak on the phone (we think to remove the paper trail) and then proceeded to lie to us about the contract.

And the largest firms are also implicated, like TATA consulting, as the following quotation attests.

“Binding workers to their jobs in various financial ways is not limited to small-time labor brokers such as Softech, which had 81 petitions for H-1B workers approved between the 2011 and 2013 fiscal years.

Global giants such as Tata Consultancy Services Ltd, part of India’s Tata group, also have made workers sign restrictive employment agreements before they leave India for the US, according to interviews with several workers and company documents submitted in court.

With more than 16,000 H-1B petitions approved between the 2011 and 2013 fiscal years, Tata has been one of the top users of the temporary visas, according to US Citizenship and Immigration Services records. Tata clients have ranged from tech giants such as Cisco Systems to retail firms such as Walmart.

In interviews, workers said Tata demanded that they pay penalties if they quit before their contracts ended.

A native of Haryana, a northern state outside New Delhi, Kaushik started working for Tata at age 24 in India. Five years later, in 2012, the company transferred him to South Florida. Just before his departure, Kaushik said Tata required him to sign a contract promising not to quit his US job.

Over the next two years, Kaushik says Tata contracted him out to work 14-hour days without overtime pay as a computer programmer for Carnival Cruise Lines in South Florida. He was paid $60,000 a year, even though programmers in the Miami area then earned a median annual salary of $98,000, according to the Bureau of Labor Statistics.

“I worked from 9am to 11pm almost every night and never got paid overtime,” Kaushik said. “I thought, ‘Why am I working with this company?’

After Kaushik gave the company a week’s notice in early January, a Tata human resources representative declined to provide him with proof he had worked for the company – essential for maintaining his visa status in the United States – according to Tata emails Kaushik shared with CIR. The company also stonewalled him when he asked for the $7,000 he and the company had contributed to his retirement fund, Kaushik said.”” – The Guardian

TATA’s Defense: Contracts That are Originally Signed in India but for the US Market are not Subject to US Law

And TATA is using the defense that since the contracts are signed in India, (where pretty much anything goes) the US courts do not have jurisdiction, even though most of the life of the contract is carried out in the US!

“Yet in 1997, a state appeals court panel in San Jose sided with Tata’s lawyers, who had argued that the contracts were beyond the court’s jurisdiction because they were signed in India.”

Understanding the History of Bonded Labor

Apple publishes the following rules for suppliers.

“For example, Apple’s supplier code of conduct says companies that provide services to Apple “shall not traffic persons or use any form of slave, forced, bonded, indentured or prison labor”. The company reports that last year, it conducted 27 audits into allegations of bonded labor at its suppliers, most of them offshore.” – The Guardian

Notice the terms “bonded” with “indentured” in the description.

It is important to understand that those that bond labor have historically attempted to keep the bonded laborer from paying off the bond. This is explained in the following quotation.

“For instance, a laborer may begin with an initial debt of $200. While working and unable to leave, this worker needs a shelter, food and water. The employer tacks on $25 per day to the debt to cover those expenses. Consequently, the employee only grows his debt while continuing to labor for his debtor, and repayment is impossible.

Oftentimes this debt is passed down from generation to generation, making it eerily similar to chattel slavery in the 18th and 19th centuries. Migrant laborers are particularly vulnerable to this form of enslavement. In their home countries, migrant laborers contract with labor agencies and employers for a destination country, looking for an economic opportunity. These situations are ripe for exploitation because agencies and employers hold a debt or a bond over these employees.

Still, this particular system of slavery is deeply entrenched around the world. It’s most common in India, Pakistan, Bangladesh and Nepal. In fact, the majority of the world’s slaves live and work in India in a form of bonded labor.” – End Slavery Now

Bonded labor was engaged in in the post Civil War period in the US when African Americans supposedly received their “freedom” and after the Emancipation Proclamation. This tends to not be taught in high school or college courses on history in the US, and the teaching of this history can sometimes get the presenter of the information as classified as “anti-American.”

“Following the Civil War, former slaveholders and white Americans needed labor for their workforce, so they found new ways to force African Americans to work. Whites arrested and charged African Americans and then fined them for their various crimes. Former slaves had little money to afford such fines, so white businessmen forced the emancipated slaves to take on debts in exchange for paying them. These former slaves then had a bond over them, and employers exploited the situation so that the debt could never be repaid.” – End Slavery Now

After the Northern influence left the US South, what is referred to as “slavery by another name” increased. And the system converted to bonded labor rather than slavery. Bonded labor sounds much cleaner than slavery.

This is a powerful animation. It describes a world which bonded labors live currently globally. This a very difficult video to watch. 

Apple’s Constant Opportunities for Coerced Labor

The term bondage or human bondage is the same as debt peonage and is often used in conjunction with the term slavery. It is interesting that Apple has this comment in their contracts because Apple is well known to profit from what amounts to sweatshop conditions in its contract manufacturers. Apple does not need to personally exploit any worker.

  • In China, there are contract manufacturers lined up to offer Apple coerced labor.
  • In India (and in Indian companies in the US) there are firms lined up to offer Apple bonded labor.
  • In the US there are a large number of US workers in PR willing to tell any lie to defend anything Apple does.

International Trade: Good for Increasing the Diffusion of Coerced Labor?

Previously it was extremely uncommon to hear about coerced labor in the modern era in the developed world. However international interactions have changed all of that. All of those practices that the developed world congratulated themselves for moving past are now creeping back in.

The dirty little secret is that not everyone is so opposed to labor coercion. It might not be something that one advertises on their dating profile, but it is irrefutable that many people in many countries are actually quite amenable to slavery and coercion, as long as either they or their family members are not the coerced individuals. 

There are those that say that exploiting labor is always a negative. But that can be a shortsighted view. One must consider how that money from exploiting labor is spent, and much is spent in boutiques of great status and that allow one to demonstrate one’s class and style. Therefore perhaps one should be careful to not judge labor exploitation too harshly. 

International interactions were supposed to lead to some type of more flexible and open capitalism, but the interactions with the less developed world are constantly bringing coerced labor and bonded labor into the companies that operated in the developed world.

Apple has hundreds of billions of dollars in offshore accounts untaxed, and it can take its choice of entities, primarily from the undeveloped world offering them bonded labor, which can allow Apple to squirrel away even more money. What a fantastic system! Apple can succeed in both barely paying taxes, and having an army of coerced laborers working for it.

This is one of the best books written on the history of slavery and notice the title Inhuman Bondage. 

It means that a person works under a bond and that they are not free until they have paid the bond. Human bondage is strongly related to human trafficking. Often people are moved to locations where they are unfamiliar and made to work off the bond.

Time to Reduce Onerous Regulations on Bonded Labor to Accommodate Indian Companies?

This is “bonded” labor, and while bonded labor was made illegal in the primary IT markets, but it still very common in India to this day. The Indian influence in the IT labor markets has brought the practice back to shores where it had been eradicated. This goes back to the repeating pattern we have observed of Indians bringing labor practices from Indian to their new countries. And the people they are putting into bondage are not the domestic population, but other Indians. The fact is that bondage labor is accepted as a practice in India. Therefore, it seems perfectly natural to extend the practice to the primary IT markets, even if it happens to be illegal in those countries.

Entities Trying to Stop International Bonded Labor (i.e..Not Apple, WiPro or Infosys)

The website Anti-Slavery.com covers this topic of human bondage in great detail.

“Debt bondage occurs when a person is forced to work to pay off a debt. They are tricked into working for little or no pay, with no control over their debt.

Most or all of the money they earn goes to pay off their loan. The value of their work invariably becomes greater than the original sum of money borrowed.

Puspal managed to leave thanks to the great support her family received from our project partners, but usually that it is extremely difficult. People bonded by debt face coercion, violence and intimidation if they try to leave.

Bonded labour has existed for hundreds of years. Debt bondage was used to trap indentured labourers into working on plantations in Africa, the Caribbean and South-East Asia, following the abolition of the Transatlantic Slave Trade.

Bonded labour is most widespread in South Asian countries such as India and Pakistan. Often entire families have to work to pay off the debt taken by one of its members. Sometimes, the debt can be passed down the generations and children can be held in debt bondage because of a loan their parents had taken decades ago.

Bonded labour flourishes because of poverty and widespread caste-based discrimination. Limited access to justice, education and jobs for discriminated groups makes it difficult to get out of poverty.”

The Importance of Silence on the Topic of Indian Bonded Labor

India is the 12th most income unequal country in the world, and bonded labor has been highly effective in keeping India at that level of inequality. It is normally felt by many in India that it is better to not discuss bonded labor as keeping it quiet is both better for national pride and can help motivate no change in this area.

Indian Respect for Freedom of Speech and of the Press

India has historically never had any freedom of speech or of the press. This is how India has remained as the twelfth most income unequal country in the world. This inequality is why India is such a hotbed for bonded labor. To maintain this level of income inequality, suppression of freedom of speech is necessary. And most Indians will oppose this article. Opposing even the right for it to be written. Again freedom of speech is part of US law, not Indian law, and the established preference is for Indian law…..but not in India, in the US. India cannot change internally because India has very low freedom of the press. According to Reporters without Borders, India ranks 138 out of 180 countries in press freedom. Articles written in the Indian press have a distinct stamp of being censored or self-censored, and there is no India media outlet that is prominent or read outside of Indian readers.

Conclusion

Indian IT companies are not only engaging in H1-B Visa fraud, but they are also bringing Indian nationals into the US and under conditions of human bondage. US companies certainly know this, and seem to continue to hire IT resources through Indian companies. But companies like Apple are nice enough to declare to IT suppliers that they don’t want bonded or coerced labor (in the US). Which is odd, because Apple is fine with coerced labor if it is in China. The primary issue is that Apple is fine with coerced labor (that is why they went to China in the first place), but Apple prefers that the word coerced is not used. Coercion and bonded labor….and perhaps full-on slavery is perfectly fine, but it is the usage of these terms that is offensive.

If the US does not enforce its labor laws, then they do not exist. Indian firms have demonstrated such a pattern of violating US labor laws that there should be many investigations opened against Indian firms. The reason? The evidence is clear that Indian firms in a very unique way are engaging in bonded labor. That bonded labor is through a contract which is originated in India, but it is carried out in the US.

Part of the idea of IT workers from India being allowed to work in the primary IT markets was that these companies were going to obtain the skills they needed. However, there is now a great deal of evidence that many of these skills are falsified. But furthermore, because of the influence of Indian IT companies, US labor laws are being degraded, and the impact is that not only Indian workers are being subject to highly inappropriate contracts, but Indian companies seek to place domestic workers under these same contracts, contracts that are set up under Indian labor standards and practices rather than US labor standards and practices.

References

This is an excellent video that shows the estimates of slavery that currently exists in the world. The topic becomes more complex when one includes bonded labor. Bonded labor can be a difficult distinction from slavery. Indian immigrants are paid well compared to people with the same skills that work in India, but they are in many cases still controlled by a bond or by the H1-B process, that makes them subordinate to their employers. Employers are constantly looking for labor that can be bonded or enslaved. 

https://www.reuters.com/article/us-infosys-settlement-idUSBRE9A70IC20131108

http://www.endslaverynow.org/learn/slavery-today/bonded-labor

Slavery Is Alive And Well In America, Fueled By The Need For Cheap Labor

https://www.thedailybeast.com/how-slavery-gave-capitalism-its-start

What is bonded labour?

 

How Indian IT Workers Discriminate Against Non-Indian Workers

Executive Summary

  • Internationally, Indians have demonstrated a pattern of discriminating against non-Indian workers.
  • With the growing concentration of Indians in IT this is a problem for domestic workers worldwide.

Introduction

The following are quotations from Quora. Before we get into our own analysis, we wanted to provide quotations on the topic that we had nothing to do with creating. These quotations are consistent with our experiences working in IT. And this will illustrate a convergence of observation on this point.

Indians as Discriminating Against Other Indians

The following is a description of how they normally see the discrimination begin. This observation was written by an Indian.

“Many Indians in IT firms don’t just discriminate at the national level, many of them discriminate on a religion, race or caste-level. It usually starts like this.

They first look at your name in the resume. Is it a “cool” sounding Brahmin name? (like Anand Gopalakrishnan). Or is it a Punjabi name? (Parminder Singh). Or perhaps, it’s a Telugu name (Sudheer Reddy). Or does your name sound totally unheard of, hard to pronounce and possibly from a lower caste? (Pazhanimuththu Kanakadas). Godforbid, hopefully it isn’t a Muslim name (Imtiaz Khan), an Indian Christian name (David Kamaraj) or a Chinese name (Pang Pang).”

This illustrates that even Indians that are not in the right caste or have the right religion from the dominant group receive discrimination. The employment in the US for instance of Indians is not from all parts of India. It is very concentrated in specific areas of India and from specific castes, with Bhraman being the dominant caste.

Typically the US anti-discrimination laws are centered on race. However, Indian discrimination is more complicated than that. Indians have a complicated discrimination modality that is actually sub-race and is a combination of Indians from specific areas and beyond that caste. Indians prefer a type of scenario which they had back in India. So the preference is from Brahmans to be at the top of the organizations. For most outsiders there divisions are invisible, as each of the groups are seen as “Indian” by Western eyes (or at least all by the most trained). But for Indians, these divisions are highly important. They determine who can be hired into what role, how they relate to others, who have status over others, and so on.

Dealing with Abusive Indian Management Approaches

“If you are Black, Asian or from the middle-east, the answer is obvious. Racism.

If you are white, it’s not so much the case that hiring you is expensive, as it is that you are a flight risk. American locals wouldn’t take kindly to the authoritarian and abusive management style of Indian managers and Indian managers are aware of it.”

Indians do not create environments that non-Indians want to work in. They are hostile environments. The major Indian consulting companies, for instance, Infosys, WiPro, HCL, Cognizant, and TATA or TCS employ mostly Indians in the US, but are only occasionally subject to well-known discrimination lawsuits. Various Indian firms play settlements to the US Department of Justice, as covered in the following quotation.

“The settlement, which the U.S. Justice Department said was the largest in a case of alleged civil fraud over visas, was filed in U.S. District Court for the Eastern District of Texas.

Infosys, India’s second-largest IT services exporter, agreed in the settlement that it committed civil violations of U.S. employment law, but it was not required to admit and did not admit widespread further wrongdoing.”

However, at the fines imposed of 1 million dollars or 34 million dollars paid out occasionally, Indian firms can afford to pay out fines indefinitely. That is they can see it as a cost of doing business.

None of the Indian firms in IT have employee compositions that look anything like the typical demographics in the countries they operate outside of India. However, each of these firms could argue that because they are terrible companies to work for that only nearly no Americans would want to work there.

When Infosys, WiPro or TATA sell a project in the US or Europe it means that the team will be primarily Indian. Domestic workers lose jobs when this happens. There are many companies like Cisco, IBM, Oracle, and HPE that are founded in the US and in their heritage and in their perception but are highly Indian. And domestic firms that become Indian seem to go in one direction. That is they become progressively more Indian. IBM stopped reporting employment by country because IBM has been laying off domestic workers in primary markets for IT services (US, Europe, Australia, Canada) and replacing them with Indian workers. Intel has been classifying Indian workers as domestic to also, hide the fact that Intel is becoming increasingly Indian. Companies that become strongly Indian hide that fact from both customers and from the general public and this leads to a great underestimation of the degree to which domestic companies are becoming strongly Indian. Indians see this as a very positive development and as a success. However, every job consumed by an Indian worker is taken from a domestic worker. The reason being that India primarily offers workers. Companies like Accenture or Deloitte do not sell consulting projects in India, they use Indian workers to displace domestic workers in the primary IT markets. This is the same modality of commerce as is found in the Middle East in construction projects. Indian (and Pakistan) construction workers come over to various Middle East countries and displace workers in those countries. However, in those cases, the workers do not become Saudi or Dubai citizens. They eventually go back to India.

There is little “trade” between the primary IT markets, the primary IT markets are either importing Indian workers, who eventually become citizens or outsourcing work to Indian firms in India. There is simply no getting around these are jobs that would ordinarily be performed by domestic workers. Indian workers in the primary IT markets do not “make the pie bigger” for non-Indian workers. They take a slice out of the pie, and an increasingly large slice. And once that slice is taken, it grows to a larger and large slice.

Indian Workers and Income Inequality

Furthermore, the jobs taken from the domestic worker not only transfer wealth from the domestic worker to the Indian worker, and make the work environment hostile for the other domestic workers, they also increase income inequality in the domestic location. Through the H1-B program US companies have booked far more profits than they would have if they had not had the H1-B program, and that is what is undiscussed in the Indian media. That this leads to higher income inequality in the US and in the other primary IT markets.

How The Indian Bias Against Non-Indians Extends to Indians in a Tribal Manner

“So is there a bias towards Indians while hiring for IT positions in Indian-run companies? Definitely. And that too, it’s a bias only towards a small sub-section of Indians.”

For the domestic workers, it is not particularly material if Indians discriminate against Indians that are not part of whatever the in group appears to be. This is because the majority of Indians that immigrate to developed countries discriminate against the domestic population within that country. It cannot be said that because Indians discriminate against other Indians as well, that discrimination is not an issue. When Indians discriminate against the domestic population they are in violation of US anti-discrimination laws. The problem is one of perception and unequal treatment of who can claim discrimination. That is discrimination is only discrimination if the discrimination is undertaken by some groups. Other groups demonstrate high levels of discrimination can’t be charged with doing so. At least that appears to be the logic.

Where Are Indians in the US Primarily From?

Most Americans have no idea where different Indians are from, are unaware of the regional or other differences in India. To most Americans any Indian is simply “from India” and that is the end of it. However, the Indians that come to the US for IT work are from one specific area according to not only this commenter but others we have interviewed.

“If you take a count of the total people hired in US in IT, you will find that 90 to 95% of them are from Andhra Pradesh in India. I have worked for several companies in the bay area and other states and in spite of my experience and skills was always threatened by an incapable Telugu manager, Lead or candidate who only wanted to hire people of his caste. As if this was not enough, most of the Indian recruiting companies in the Bay Area are run by Telugu people who prefer to hire people from their region/caste and also work hand in hand with hiring managers to give a commission off the rates they make. This is very well known and widely practiced in companies such as CISCO and many others in the bay area. There are instances when my recruiting company told me that my resume didn’t stand a chance because the other recruiting company that was working with this client was bribing managers to get their folks in. The result you see is incompetent inexperienced people who get hired for low rates, the cuts off salary goes to the recruiting company and hiring manager. No guessing how this has affected the IT job market. Really surprised this crap has been going on for the last 10 years or so and nothing has been done about it.”

No doubt this article will be unpopular, but this is extremely specific information. What is the motivation to make this type of information up? It seems there is very little incentive. It is literally unheard of for people to bribe people to get people into a company, but the topic of bribery repeatedly comes up when describing Indian hiring. And this apparently is a point of contention for other Indians.

“Absolutely, sometimes you can even find Indians who got frustrated by this because they are born in the wrong part of India.”

And this gets to not only the discrimination against Indians but the fact that there are enormous numbers of Indians who want to come to the US (or Europe, or Australia), but can’t because they are not in the right group. There are roughly 146 million jobs in the US, and if Indians could have their preference, all of those jobs would be filled by Indians, and given the situation in India, the only limitation is the inability of Indians to take those jobs. The number of US jobs (or Europe or Australia, etc..) that are made available to Indians is the number that will be taken. But no matter how many jobs are consumed by Indians, even if all of the employees in all of the developed countries were consumed, it would still not satisfy the demand for jobs in India. India has a larger population than the US, Western Europe, Australia, Canada, New Zealand, that is all the places that Indians would like to work, by a very large margin.

How to Domestic Firms With Previously Domestic Labor Become Indian so Quickly?

Indians like to propose that they are so skilled that companies become Indian after the first small number of Indians are hired because of the demand for skills. This is a rather curious position that Indians are not only more skilled than any one group but than all other groups. And that further Indians from one part of India are also more skilled than all of the other Indians from other parts of India.

However, this following quotation brings up a different reason.

“I have worked in Silicon Valley in both startups and big companies and my experience is the same as what the question says: Indians will ONLY hire other Indians and, like other people mentioned, they will only hire Indians like them. This is true most of the time with Indians who arrived in Silicon Valley to work or to go to University to study. The next generation, the Indians who were born here, is more Americanized and therefore more attuned to the principles of fairness and judging somebody on their merits, not on who they are related to or who are their friends with.”

This is an entirely different commenter than the commenter from the previous quotations. This commenter goes on to describe a pattern of infiltration that occurs after the first Indians begin to work at a firm.

“I can tell you it is something that is recognized and spoken by everyone here. I have friends from all ethnic groups (Latino, Chinese, Japanese, White) and they all say the same thing: once an Indian is hired in a position of relative power (say middle management) a constant stream of resumes from his family or friends will come and, after that, most of the group will be Indian. I, like other people who answered, also have very good Indian friends and they themselves say the same thing: Indians have a long-running tradition of nepotism and cronyism and they do the same here in Silicon Valley. It is not uncommon to go to a startup run by Indian management or a big company with Indian managers and see their relatives working there (the second cousin, the brother-in-law, the wife, the son and so on). This, of course, is not a problem, if people were qualified for the job they do. Sadly, in a lot of cases that is not the case, they get the job because a relative got it for them.”

Why would nepotism and cronyism be so consistently attributable to Indians who immigrate to other countries?

In the Indian media, they routinely use the term “highly skilled.” However, while that is the description of an H1-B Visa, and the original logic of the program, only a small fraction of the H1-B Visa holders fall into this category. At Brightwork we have received repeated requests from people in India who are recent college graduates with no special skills to sponsor them for an H1-B Visa. However, the H1-B program was never passed into law under the concept that just about any Indian who has an education would be able to qualify for one. At several SAP consulting companies we found large scale resume falsification on the part of H1-B Visa holders. At one consulting firm the H1-B Visa holders have a particular incentive to falsify their resume as if they did not get staffed, they would have a high likelihood of being let go, which could very likely mean having to move back to India. The H1-B Visa is viewed in India as the best opportunity to improve one’s condition in life. Therefore, the incentives to do what is necessary to stay are extremely high. This is not to say that domestic resources do not also have an incentive to be successful, but with a domestic resource, their jobs are not tied to their citizenship or their rights to stay in the country. To a worker from Denmark or Italy, it does not improve their condition all that much if they stay in the US or go back home. But to Indians, it is a major upgrade in their lives and in the lives of their families. Nearly every H1-B Visa holder’s goal is to move to become a citizen. As one moves through the various stages to citizenship, the ability of the employer to control them decreases. And their pay and other freedom increase.

Experiences from Singapore

Indian behavior of immigrants is similar the world over. This following quotation is from a commenter from Singapore.

“They created a lot of new manager roles so that they can send their friends in. 5 years ago, we had 1 manager and 15 guys. Now, 7 guys with 3 managers! (The rest left of moved). They force people out by abusing their power. Every year, they have to publish a organization chart. When they realized that all the managers are Indians,(In Singapore, they are not the absolute minority, but definitely low in numbers.) they gave an organization chart without picture! No one will notice that right? Except we are the only region in the world that does not have a picture on the organization chart! So in the end, Indian managers are definitely having some big problems. But due to the political correctly, they can do it. But we can’t point it out. “Racialism “ I guess.”

It is not possible to know the race of this commenter, but most of Singapore’s population is ethnic Chinese. Therefore, it is curious that it may also not be possible for an ethnic Chinese Singaporean to call out this behavior for fear of being called racist.

Setting Up a Indian Caste System Within Non Indian Companies

“Once Indians have taken over an organization, they would establish a caste system of Brahmin priest caste as senior managers. The Brahmin would act all civilize as vegetarians non-meat eaters while appointing lower caste Indians as middle management along with the Sikhs. The middle management Indians would be the ones who brutalize workers and do the bullying while the Brahmins just smiles and silently approve their discriminatory behavior. The organisation will turn into a caste system as follows:

Brahmin Indians

Middle caste Indians + Sikh Indians

Older whites

Young whites

Non-Indian minorities.

Harassment of non-Indians staff, in particular, sexual harassment, is not uncommon. Non Indians are deprived of career opportunities while bully to quit just so the Indians can import more Indians into the workplace using immigration loophole.”

The description above sounds horrible. It is the exact opposite of meritocracy and is essentially reinforced through Indians stacking the deck with as many possible Indians as possible. This reinforces a strategy used by Indians where they use their numbers to act as a “block.” In the US the domestic population tends to act as individuals. Certainly, there are various cliques and “networks.” For example, it is well known that when executives from Oracle begin working at a software vendor, that company can have a number of Oracle resources come over that form an Oracle clique at the new vendor. However, the descriptions of Indian behavior in their new adopted homes indicate that they form a semi-cohesive unit that discriminates in favor of more Indians at the expense of the domestic population. This is without considering how Indians generally make the companies they work for hostile to non-Indian workers in more subtle ways. This commenter brings up this point.

“In the end they aim to take over our IT industry and replace all workers with Indians.”

Yes, and what is stopping this? If Indians act as a block and there are what amounts to an unlimited number of Indians who seek to leave India as they cannot make a comparable living in India when does this stop? Currently, Indian companies like Wipro and TATA are known to be hostile to non-Indian workers, but companies like IBM and Oracle are so high in Indian concentration that they are considered less appealing to domestic workers. There is not a single domestic US company that increases its percentage of Indian workers in a significant way, that stays equally appealing as a work environment for domestic workers. And let us review, the domestic workers in any country are supposed to be the first labor poor to pull on for workers. But Indian employment is changing that. Indians in India claim superior job rights over US citizens. And apparently, a very high percentage of the Indian workers in the US agree with this sentiment as it helps them increase their concentration in the companies they currently work.

High Percentages of Indians

“I started noticing that 99% of the interviewing managers at a particular client, a large corporation, were Indian. I also started noticing that 99% of all my fellow vendors were Indian as well. I thought it was strange but I was new to servicing a client in the Bay Area. After ages of watching top-notch candidates get rejected with no reason or false reaons, especially my white and asian candidates, I knew something was up. The candidates all said the feedback (when we got it) made no sense, that the interviewer was rude to them, that the interview was impossibly short, heavy accent was challenging, questions were surface level etc. They were just staging these “interviews” to try and cover their rears, so they could hire their fellow Indians.”

Again, this is another very specific charge. Any interview can be rigged simply by the questions asked to one candidate versus another if the intent is to only hire the Indian candidate.

Can a Domestic Worker be Successful in a Predominantly Indian Company?

“So, because of this, Indian based consulting companies like TCS, HCL, Tech Mahindra, Wipro have taken over major corporations and just ignore (or just pay off) any discrimination lawsuits thrown at them in the USA and Canada but, continue to discriminate.

Unless you’re Indian, don’t even think about applying to Microsoft, Hewlett Packard, Adobe, many federal and state gov’ts, Google, Apple, T-Mobile, Dell, etc.

If you happen to land a job with a predominantly Indian company, they will sabotage you out of the picture.”

And then this comment, which seems to be nearly the same comment, but is from a different commenter.

“Check out Cisco, it’s no longer American company, but an Indian company. After years of quiet layoffs of American workers and replacing them with Indian workers. The CTO of Cisco, possibly a successor to John Chambers, is from India, has no computer science degree, and got famous for bungling a high flying project on bad data and poopooing iPhone while at Motorola.

Same thing with Qualcomm, Microsoft, Motorola, VMWare and many smaller IT department around the country, including Target and Ebay. The latter was recently hacked while their Indian IT workers slept on their jobs.”

This is another common comment, that Indians seek to undermine non-Indian workers already in companies. This is a very serious claim, but our experience on projects backs up this claim. We have observed the following phenomena working with many Indians.

  1. If the Indian is your boss: He makes life very difficult for you.
  2. If the Indian reports to you: He undermines you.
  3. If the Indian is lower in the hierarchy, but not a direct report: He begins pleasantly but looks for some way to undermine you.

For domestic workers, there seems no way to win against Indians. This another point of emphasis. The Indian worker does not need to be in a position of power over the employee. They can work to undermine them to look less capable then they are. It appears that the motivation is to have the domestic worker leave, and this allows an opening for the Indian workers to recommend another Indian, which then strengthens their hand within the company. The Indian worker does not see the job they have as a merely a job. Rather it is a strategic possession to be expanded to others in the “in group.” The strategy is the group who is able to get more of their people into the company end up winning.

This following quote from a different commenter describes the exact same thing.

“I can personally vouch that your average Indian IT engineer is very ethnocentric, clannish and completely un-american in every sense of the word.

They do whatever they can to make sure that life for you (as a non-Indian) in their team becomes so hellish that you leave on your “own accord”. I’ve seen many of my friends just move on to other companies confronted by similar minded Indians. Some of them entirely left IT altogether.

I think they have completely decimated non-Indian diversity at the workplace and they want every company to resemble Oracle and Cisco, both of them are almost 100% Indian now with a few token whites and other folks (nevermind that they are fighting lawsuits by well-meaning professionals regarding their hiring practices).”

This includes yet another statement that Indians make a concerted effort to force out non-Indians.

Indian Dominance in IT Recruiting

Indians have not only taken over IT jobs, but they have also taken over IT recruiting and forced out domestic IT recruiters. Our email inboxes oftentimes the recipients of IT recruiters that are primarily Indian. This takeover of IT recruiting has occurred over even a shorter period of time than the takeover of IT employment. It is now uncommon to find domestic IT recruiters. The only conclusion is that the domestic IT recruiters have been forced from the market.

Secondly, when we compare the rates offered by Indians recruiters, the rates are always lower than for domestic recruiters.

This is a shocking and unanticipated outcome of the H1-B Visa program. Originally intended for highly skilled candidates, now nearly anyone qualifies. And Indian immigration and workplace discrimination has not only reduced the domestic employment in IT, but domestic employees must now mostly go through Indian recruiters, many of whom are calling from India. It would be unsurprising if Indian recruiters prefer to place Indian candidates.

Rigging Job Descriptions for H1-B Entry

It is difficult to not notice how specific many IT job descriptions have become. Many job descriptions essentially describe a candidate that does not exist. There is a rule about H1-B Visas that the job description must be published for a certain amount of time, and then evidence shown to immigration that no individuals could be found that would fit the job description. This is very easily managed by creating such a ridiculous job description that no domestic candidates qualify. Now, the job can be opened to a candidate from India who will add those qualifications to their resume. There is no validation of the skills listed on the resume, they are essentially self-reported.

This is the problem with the continual comments by Indian resources that the entirety of Indian immigration to the US under H1-B is based on skills. Skills can be added to resumes if the people filling out H1-B Visa applications simply declare that the individual from India has those skills. This is explained in the following quotation.

“Most people who apply for H1B have a Indian 3 year degree education which I strongly believe is no better than a High School Degree in United States.

These 3 year degree holders take a 2 or 3 month computer training and land in United States stating fake experience.

There are thousands of companies in India which aid these people file a H1B petition and secure visa. These IT companies where potential H1B aspirant claims to have worked for, exists only on paper. They answer verification phone calls from USCIS or US embassy, have a web site and a physical address but there is NO actual Programming or Development done by this companies.

After landing in the United States, the same people, put 7 or more years of experience in the United States to get job.” – Petition2Congress

Which led a commenter to state.

“Therefore, the bottom line is that we don’t need Fake IT Professionals who make up their fake degrees and fake resumes and take away our real jobs which is not acceptable at all. And I request the US Senate, The US Congress, The Homeland Security, and the USCIS and Labor Law departments to take the needed steps and right measurements to stop all these fraudulent workers, “

This quotation on a similar matter was from The Guardian from back in 2014.

“Labor brokers providing Indian high-tech workers to American companies have hijacked a professional visa program, creating an underground system of financial bondage by stealing wages and benefits, even suing workers who quit.

About 840,000 people from around the world work in the United States on temporary visas, intended to help companies seek uniquely talented employees for specific jobs. In the tech realm, labor brokers often sponsor the visas, then contract out the workers to technology companies or government agencies to build databases, test software and complete other technical projects.”

Once one investigates it turns out H1-B Visa fraud is incredibly common. Again from The Guardian.

“It has been the source of the vast majority of India’s fraudulent documents tied to H-1B visa applications, according to a June 2009 cable from the US State Department unearthed by WikiLeaks. Inflated work experience was a typical problem, the cable said, adding that of 150 companies in Hyderabad investigated by the US Consulate, 77% were “fraudulent or highly suspect.””

Wikileaks released a document that was internally sent out from the consulate in Chennai on this topic with the following quotation on this topic.

“India wide consular operations are among the busiest in the world. Some states such as Gujarat and Punjab are traditional sources of migration out of India and faudulent applications from these areas are more common than from other regions of India. The state of Andhra Pradesh, in particular, its capital of Hyderabad, has been identified as a large center of documentary fraud which affects all Indian posts. An opinion poll published in the popular Times of India in January 2007 noted that 37% of the 1.1 billion Indians would emigrate if they had the chance.

Most of India’s fraudulent applicants come from specific and easily defined regional areas within each consular district. These states have some of the most mobile populations in India and the largest concentrations of expatriate communities overseas, including in the United States. In New Delhi, cases originating from the Punjab comprise the majority of its IV and fraud caseloads, while the same can be said in Mumbai with Gujarat. Chennai and Hyderabad’s fraud workload comes principally from Andhra Pradesh.

B1/B2 visa fraud is the most commonplace. Regionally-based fraud rings throughout the country, but especially in Hyderabad, continue to produce fraudulent documents for visa application and travel purposes. Some visa “consultants” and travel agents specialize in fraudulent experience letters and fake document packages, which include passport copies of false relatives, bogus financial documents, and affidavits of support.”

Indian Respect for Freedom of Speech and of the Press

India has historically never had any freedom of speech or of the press. This is how India has remained as the twelfth most income unequal country in the world. This inequality is why India is such a hotbed for bonded labor. To maintain this level of income inequality, suppression of freedom of speech is necessary. And most Indians will oppose this article. Opposing even the right for it to be written. Again freedom of speech is part of US law, not Indian law, and the established preference is for Indian law…..but not in India, in the US. India cannot change internally because India has very low freedom of the press. According to Reporters without Borders, India ranks 138 out of 180 countries in press freedom. Articles written in the Indian press have a distinct stamp of being censored or self-censored, and there is no India media outlet that is prominent or read outside of Indian readers.

Indian Immigration Beneficial for India?

Given the enormous transfer of wealth to people from India to the US, many of whom falsely qualified for H1-B status, one might think that India has greatly benefited. Well first, India’s population is around 1.34 billion, so as even though IT in the US and in the other primary IT markets have become swamped with Indian labor, it is still a tiny fraction of the population in India. But one must also include all of the outsourced IT work in India and the jobs that only exist because of the IT connection to the primary IT markets.

However, India’s income inequality is getting starkly worse as the following quotation attests.

“As of Nov 2016, India is the 12th most unequal country in the world. [1] The richest 1% of Indians own 58.4% of wealth. The richest 10 % of the Indians own 80.7 % of the wealth. This trend is going in the upward direction every year, which means the rich are getting richer at a much faster rate than the poor.” – Wikipedia

India a vast country either tied with or greater than China depending upon the statistics used, those with access to the international IT market is still a small percentage of India. IT in India is similarly concentrated in just a few cites like Hydrabad. India already had debilitating income inequality before the rise of Indian IT workers. And India’s income inequality is growing rapidly. Could it be that the income flowing into a small percentage of Indians some of who work overseas and some of who work in India is actually hurting India’s political stability? That is the IT industry creates a class of IT-based wealth that is distinct from the rest of India? When one looks at India, there is no way that the impulse to leave India will be moderated by Indians. The flow has to be restricted within the primary IT markets. In this way, the combination of overseas Indian IT workers and Indian based IT workers is increasing the income inequality in both India and the primary IT markets of the US, Western Europe, Australia, and Canada.

Finding Other Groups As Frequently Accused of Discrimination as Indians

Brightwork Research & Analysis is a research entity. We are known for tackling issues that almost no one else will. We approached this topic as a research question, and we found damning evidence against Indian employment or workplace discrimination that is only reinforced by what we have seen on many projects. This Indian employment discrimination is not merely limited to the US but is found in Asia and in Australia, in Europe and in Africa. The standard defense by Indians will naturally be that this is all a racist illusion by a white author. However, Indians are being accused of discrimination worldwide. And they are being accused of discrimination by non-whites. If this is all a giant racist conspiracy, it is not only extremely widely reported, but the same reports are coming in from many different areas. All of the quotations in this article were obviously not written by the author.

  • Companies globally are becoming Indian at astonishing rates. It seems impossible for this to happen without something shady occurring. It is very difficult to find a field that has in the space of a few decades switched to dramatically over to a new group of immigrants. And not only a group of immigrants (which has never happened in US history) but a group of immigrants primarily from one part of India.
  • We could find no other race or group that was as frequently accused of employment or workplace discrimination as Indians. For these observations to be false, there would have to be a vast conspiracy to promote the reporting of accusations against Indians and no other group.

Conclusion

This hostility of work environment against domestic workers in areas ranging from Singapore to Australia to the US to Europe and elsewhere is part of how Indian workers are continually pushing domestic workers out of IT employment. There are two sources that dispute the demonstrated discrimination against non-Indian workers. And that is Indians, who will often say that all of these independent observations are incorrect. The strategy only works if it is not declared. If Indians were to say that they intend to bring practices of nepotism and discrimination over to the countries they immigrate to then the game would be up. The second source is employing companies. Most of their statements revolve around disputing that they violated the employment laws or visa laws in the countries of the primary IT markets, or hiding the massive rise in Indian employment.

Indian workers and employing companies use terms like skills when describing H1-B quotas and hiring, but this is an oversimplification of the actual factors that are driving H1-B and the highly disproportionate hiring of Indian workers. It is clear that other terms like income inequality, lower pay, job loss for domestic workers, the creation of hostile work environments for domestic workers and workplace discrimination by Indians against non-Indians needs to become more publicly associated with importing Indian workers.

The evidence is piling up that this is a pattern that is applied by Indians globally. From this, it is not difficult to predict that it will be very difficult for domestic workers to become employed in IT. This is because these jobs are increasingly going to be reserved for not only Indians already in developed countries but for future Indian immigrants and for Indians children of current Indian immigrants. If the pattern holds then the children of Indian immigrants will also be highly prevalent in IT. Once most of the jobs are held by Indians, it will become very difficult to break into the field due to Indian workplace discrimination.

What this comes down to is cheating. And unless domestic workers begin to call out this cheating, the cheating will continue. Naturally, the entities performing the cheating do not want to admit to the cheating and want to continue as business as usual. Therefore they will adhere to the “skills” argument and most likely throw ad hominem or personal attacks at those that point out the cheating. Literally, the entirety of the Indian takeover of IT jobs in the major IT markets is based upon one central hypothesis….that Indians have superior IT skills to all other workers — (not only the domestic workers but workers in the Andhra Pradesh region of India). On the basis of this argument, these workers essentially are demanding that most of the IT jobs in the major IT markets be handed over to these workers and that they are granted citizenship rights in the major IT market countries. However, once the topic is investigated, it becomes increasingly difficult to accept the premise of these arguments.

References

https://www.reuters.com/article/us-infosys-settlement-idUSBRE9A70IC20131108

What is bonded labour?

https://rsf.org/en/ranking

https://www.theguardian.com/us-news/2014/oct/28/-sp-jobs-brokers-entrap-indian-tech-workers

https://www.petition2congress.com/ctas/most-h1b-holders-are-fake

https://www.quora.com/Are-there-too-many-Indians-living-in-the-US-who-forged-or-faked-their-work-experience-or-educational-certificates-to-get-a-hold-of-a-US-H1-B-visa-If-yes-how-different-are-they-from-illegal-immigrants

https://www.aljazeera.com/indepth/opinion/india-wealth-inequality-growing-rapidly-180125084201143.html

https://en.wikipedia.org/wiki/Income_inequality_in_India

*https://www.nytimes.com/2012/04/12/world/asia/12iht-letter12.html

https://asia.nikkei.com/Business/Business-Trends/India-s-IT-sector-feels-squeeze-of-higher-US-labor-costs

https://www.transparency.org/cpi2018

https://www.quora.com/Is-there-any-bias-among-Indians-of-hiring-other-Indian-workers-in-the-IT-industry

Shaun Snapp on The Criminal Nature of Consulting Firm Software Selection

Executive Summary

  • Consulting companies nearly always rig software selections so that the vendor they make money from wins.
  • As this is fraud on the part of the consulting firm, it is by its nature criminal.

Introduction

IT consulting is normally all about sales and billing hours. The best way to maximize billing hours is to get clients to implement the most complicated and expensive applications. To do this, consulting companies pretend to be independent software vendors, which ultimately leads them to be selected.

Rigging RFPs

An RFP is how requirements are documented to know what is needed when evaluating different vendors. However, as explained in the book How to Rig an RFP to Maximize Billing Hours consulting companies normally do not allow customers to select from vendors that are the best match for the requirements. This is because it would be detrimental to billing hours. Therefore, the RFP must be rigged so that the software selection results in the “right answer,” the right answer is implementing the software that the consulting company has resources it can bill for. This is known in the industry and considered entirely normal. The consulting company engages in fraud when they declare to their client that they will help them select the best vendor for their requirements. What they mean is they will select the best vendor for the consulting company.

Conclusion

IT consulting is filled with misrepresentations that should qualify as fraud. Many IT consulting companies engage in behavior that should be subject to not only civil but to criminal implications. Software selection fraud is just one of the many areas by which IT consulting firms routinely defraud their clients. The consulting companies do a double disservice to their clients because even after they leave, the customer is stuck with software which was normally selected only because of the needs of the consulting company. Consulting companies walk out of clients all the time, and perpetuate the same fraudulent tactics on their next clients. Having worked in IT consulting for decades and with many different firms (as an employee, as a sub-contractor, as just another consultant reporting directly to the end client) there is not one of the consulting companies that we would trust to do a software selection. IT consulting companies are dedicated to doing what they can to get the most out of the software selection for themselves while leaving the least benefit for their clients.

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Shaun Snapp on IT Consulting Exaggeration and Criminal Behavior

Executive Summary

  • Consulting companies nearly always greatly exaggerate their capabilities to customers.
  • Consulting companies routinely engage in behavior which is criminal as it violates fraud statutes.

Introduction

IT consulting is normally all about sales and billing hours. Having worked on IT projects for many years, it has been extremely rare to find projects where the capabilities of the consulting company have not been greatly exaggerated by the partner level resources.

Fraud Versus Puffery

Fraud is when one misrepresents a product or service. One this is sold, and something else entirely, of lower value, is delivered. For IT consulting companies it is common to lie about the following areas.

  1. A Unique Methodology: Nearly all consulting companies state that they offer a special or unique methodology for implementation. We reviewed many consulting methodologies in the article The Real Story on IT Implementation Methodologies. Our observation was that there was nothing special about any of them and that they were primarily designed to sell IT projects.
  2. Special Resources: Exaggerating the training and expertise of resources is extremely common in IT consulting. Resources often have skills listed for which they have only a passing exposure. At one consulting company resources that had performed demos, altered their resumes to state that they had participated in full implementations for customers they had only prepared a demo. Sometimes the exaggerated skills are added by the resource themselves, and sometimes they are added by the consulting company.
  3. Pretending Public Information is Specific to a Consulting Company: IT consulting companies will often overstate the degree to which they have contributed to their area versus how much they have taken material available from published books and articles.
  4. Timelines: It is highly common for consulting companies to exaggerate the speed at which they can implement software.

Conclusion

IT consulting is filled with misrepresentations that should qualify as fraud. Many IT consulting companies engage in behavior that should be subject to not only civil but to criminal implications. Furthermore, IT consulting companies use these same fraudulent tactics and patterns against US government agencies.

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Shaun Snapp on Criminal Inflation of Revenue Prior to IPO

Executive Summary

  • It is common for software vendors to inflate their revenues and profits just prior to an IPO.
  • Learn why in many cases this can qualify as criminal intent.

Introduction

When software vendors are about to make an initial public offering, they will in many cases cook the books to make the revenues look as good as possible. The crime to be committed is fraud.

How Do Companies Artificially Inflate Revenues and Profits?

There are many tricks to revenue inflation.

  1. Push Off Expenses: It is very common for companies to push expenses until after the IPO. This makes the company look more profitable than it is. They do this knowing that they will incur those expenses later. Furthermore, some of those expenses may be necessary to be incurred pre-IPO, and pushing them after the IPO can have negative implications for operations.
  2. Bring Forward Deals: Deals can be brought forward, depriving post-IPO timeline of those deals. This is quite common.
  3. Push Harder for Short Term Bad Deals: Software companies can lower their standards of sale, which will increase sales…in the short term, but which will reduce the long-term viability of the implementations.
  4. Push the Sale Force Harder: This also has the consequence of increasing short-term sales before the IPO, but can cause long-term damage to sales as more experience salespeople leave post IPO, making it more difficult for the company to meet its long-term sales increases.
  5. Not Pay Out Sales Compensation that Was Agreed To: The incentives to bait and switch on sales compensation pre-IPO can be tempting. The reason being that salespeople take a high percentage of their income in bonus. And bonus plan can be altered while the salesperson is working, which is different than what was agreed to in the sales compensation plan originally. In extreme cases salespeople with a large amount of money due can be fired, to keep from paying bonuses, keeping more cash in the company, and again inflating actual revenues.

Conclusion

Software vendors employ a variety of tactics to inflate revenues and profits prior to an IPO. Some of the tactics are unethical, but others are illegal and fall into the category of investment fraud, and are therefore criminal in nature.

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Shaun Snapp on Criminal Behavior of Software Vendors

Executive Summary

  • It is common for software to provide false information to customers.
  • Learn why in many cases this can qualify as criminal intent.

Introduction

Software vendors normally present themselves as providing information about their software. However, many software vendors lie so extensively about their applications that is provides an entirely false impression as to what the software can do. The crime to be committed is fraud.

It is curious how infrequently the term fraud is used in software, but it should be used quite frequently. If a company that manufacturers refrigerators lie about what the refrigerator can do, that is very easily called fraud. But because software tends to be more esoteric, it is infrequent for the term fraud to be used, even when it fraud and therefore criminal. In analyzing statements by vendors we repeatedly find false statements contained in marketing documentation. It is considered very normal in the software industry to mislead customers, and in the past when we have supported sales efforts when we have pushed back on false statements, we have often been accused of doing things that would “lose the account.” In the head of a sales pursuit entirely false statements are justified on the basis of attaining the sale. The truth or falsehood of a statement often falls to the wayside.

Conclusion

The false statements made by many software vendors qualify as fraud and therefore is in fact criminal. Yet it is virtually unheard of for criminal investigations to be opened against software vendors by the government. Even in cases where customers have been completely lied to, the most the software vendor will face is a civil suit and no criminal implications.

Software vendors operate in an unregulated market. Many vendors feel, and are accurate in feeling, that they are immune from the repercussions of providing false information to customers. This is because we do not define fraudulent information as criminal if it is part of the process of selling software.

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IT Consulting Companies and the Mythology of Job Creators

Executive Summary

  • How the consulting business undermines the concept and the mythology of “job creators”
  • IT consulting companies and the contribution to income inequality.
  • Underhanded strategies by consulting companies to get sales at any cost
  • How low can consulting companies go?

IT Consulting Companies as Proof Against the Mythology of “Job Creators “

They are amazingly similar, part of the Mitt Romney crowd that think that they are the ones that actually add value to society, when in fact they really primarily do two things; live off of the labor of others and exploit labor. In fact, the consulting business is an excellent repudiation of the concept of the “job creators.” This is a phrase, which is often used by corrupt conservatives, and is repeated ad nauseum by Fox News.

The Concept

The basic concept is that  the entities that “create jobs” are businesses. However, when a consulting company either hires a permanent employee or someone like me as a sub-contractor, they are not hiring to fill an internal need, but hiring to fill the need at another company. Therefore, the consulting company cannot be the job creator. They are the job or demand intermediary. And, very quickly, if another company, say IBM were to win the contract from Accenture, then the Accenture would be the hiring company. But again, all that has happened is demand has switched to flow through a new intermediary.

Lets chart about how the demand for consulting services originates  Here is another example, I once interviewed with a company for a demand planning project. I competed against Plan4Demand. I told the company that it was not possible to turn on statistical forecasting in SAP DP in 3 months, and I believe that Plan4Demand either said it was possible, or from my experience seeing their PP/DS webinar, essentially sugar coated what could be done in DP, and mentioned none or few of the downsides in the application. This may have been the decisive factor that helped them get the business. Therefore Plan4Demand staffed the project, instead of a recruiter I worked though. A few months later I was contacted by Plan4Demand about whether I would be interested in working for them….full time of course, so they could pull the majority of the billing rate into their coffers. It should be noted that even in situations where I would work as a contractor to Plan4Demand, they would still take roughly ½ the billing rate that the client paid, contribute nothing to my ability to implement the project (in fact probably detract from it as they had given inaccurate information to the client to get the business – placing the responsibility for meeting the false promises). This payment is what economists refer to as a rent. In fact one can easily simply replace several words in a quotation from the independent economist Michael Hudson. Here is the original quotation which refers to the charging of interest on the part of banks which work under a fractional reserve system (i.e. they can loan out roughly $100 for every $1 to $2 they have on reserve:

Interest payment much like a tax – a charge without a corresponding cost of production, paying for the privilege of creating bank credit electronically in today’s world. It is predatory rather than productive, adding a price without reflecting an intrinsic cost-value. It is a form of economic rent – although not one that Ricardo discussed when he limited the concept of landlords rather than to the banking sector.

The same paragraph works for consulting companies with just a few adjustments in orange text:

Payments to consulting companies above the monies paid to the consultants (which are quite significant) much like a tax – a charge without a corresponding cost of production, paying for the privilege of the matching buyers and seller in today’s world. It is predatory rather than productive, adding a price without reflecting an intrinsic cost-value. It is a form of economic rent – although not one that Ricardo discussed when he limited the concept of landlords rather than to the consulting sector.

Underhanded Strategies by Consulting Companies to Get Sales At Any Cost

Plan4Demand may take some intellectual property off of the internet and present it as their own, as they did on a PP/DS webinar with an unsourced graphic from SCM Focus, lie about how an application is generally implemented in order to motivate an implementation on the basis of a false assumptions, or they may write a comical and fallacious white paper on a topic they know nothing such as with white papers by Booz Allen Hamilton.

They may take material from a published book on an inventory approach but then tell the consultant not to tell the client that the method came from a published work, as Andersen Consulting instructed me when I found a method that could have been used at Pfizer. They may “adjust” the resume of their resource, as Andersen Consulting did with mine when I first came out of graduate school – to phony up some experience I did not have. They may accept a consulting selection project, but then insert themselves into the process by making the client feel that there was really only one choice, to go with the consulting company for the implementation that was supposed to only oversee the bidding selection – as Deloitte Consulting instructed me to do with a contact that I made in SAP training.

The management for Plan4Demand/Accenture/Deloitte/etc.. then goes out and buys themselves a new Audi A4, and then casts a vote for Mitt Romney and goes home and tells their family and friends about how they create all these jobs.

How Low Can Consulting Companies Go?

After 16 years working in, with and around consulting companies, my opinion of them could scarcely be lower. (And this includes SAP America, which lies along with the best of them). It’s possible that my opinion could decline more, for instance, I could come to find out that IBM is engaging in human trafficking – which at this point would not surprise me, and I think many IBM partners would probably be up for. They are deeply misrepresented in the popular press as legitimate businesses or thought leaders when they are neither. They are not about true thought leadership or innovation, but about copying the ideas of others and selling selling selling. The same things I have witnessed have been witnessed by countless others, yet the criticisms of them have been scant. There is truly very little reason for them to exist. They add very little value and primarily function as outsourced HR departments for the eventual client. They reduce the quality of IT dollars spent because they constantly lie about the potential of the SAP and other software they implement to clients, who make investment decisions based upon this fact. As a general principle, I would estimate that only roughly 30% of the dollars spent on IT projects actually end up as a value added system for the company. The rest is frittered away on bad projects and bad software. The efficiency would never be 100%, but the existence of consulting companies dramatically increases the failure rate of projects, and beyond that the bad decision-making of what projects, what software to implement, etc. before the project even begins.

Income Inequality and Consulting Companies

They also increase income inequality generally. Consultants receive roughly 1/3 of their billing rate. That is an enormous overhead for the minor contribution of selling consulting services, providing business cards, health insurance and a laptop. This means that the majority of the rate flows to Mitt Romney types (don’t forget, according to Mitt, he inherited nothing – because he gave all of his and his wife’s inheritance away to charity and made his $200 million fortune from exclusively hard work.) The management at consulting companies also does not train their consultants aside from providing style tips or recommendations related to increasing their corruption. This is because the management at consulting companies is about extracting from their consultants, not making them better, and certainly not making them honest.

Reference

How Common is it for SAP to Take Intellectual Property from Partners?

What This Article Covers

  • What was the xApps program, and how did it qualify as competitive intelligence or corporate espionage?
  • The Wellogix case where SAP conspired with Accenture to steal IP from a best of breed vendor.
  • The role of consulting companies as enablers for SAP’s behavior.
  • The need for regulations on SAP to prevent predation.

Pre-Reading

Some time ago I commented that the xApp program, which was where SAP “partnered” with some best of breed vendors should be terminated.

Introduction

The program did finally become mostly irrelevant (a few partnerships persist), with partners who were ill-served by the program refusing to continue their relationship with SAP. However, what is not frequently discussed is that SAP garnered a great deal of information about best of breed vendors from this program. Many best of breed vendors entered into the partnership with great expectations, but SAP never seriously meant to help them much in the way of sales.

Historical View

However, SAP starting partnerships and then ending them, often with IP that later leads to a lawsuit is quite common. It happened with i2 Technologies and with Commerce One.

History Repeats Itself

This article describes how they mostly did the same thing to another vendor, called Wellogix. The entire article on this case is available in this article. The quotations from this article are eerily similar what has come to be an obvious pattern with SAP. Some quotes include the following:

“While SAP already had an SRM (supplier relationship management module) that could handle some procurement tasks, it was inadequate for “complex services,” according to the complaint. “Wellogix had a working version of this software, and SAP was aware that it worked in a large client environment such as BP.”

After the deal was signed, a number of SAP employees visited Wellogix’s offices for a few days in order to “kick-off the NetWeaver Partner Agreement and perform [SAP’s] due diligence on Wellogix for the purpose of either investment in or the acquisition of Wellogix,” it adds. “During the workshop, employees of SAP went through Wellogix’s P2P software code in person with Wellogix personnel disclosing parts of the code structure.”

But instead of following through with the partnership, SAP used Wellogix’s trade secrets to “replicate the capabilities” of its software and incorporated them into its own SRM products, according to the lawsuit.”

This is all very standard. In fact, after seeing SAP work this way for years, I feel I could have written this script without having actually to read the article. However, the next part of the allegation becomes even more interesting. This is because SAP did not act alone to steal Wellogix’s IP:

“In 1999, BP America hired Accenture to help it “create a paperless (i.e. electronic) process in oil field services,” it adds. “After a thorough review of over twenty vendors, including SAP, Accenture recommended Wellogix.”

In January 2002, Wellogix and BP signed a software and services agreement, it adds. But Accenture then obtained confidential trade secrets from Wellogix and passed them along to SAP, according to the complaint.

Wellogix also sued Accenture in 2008, and won a $94 million jury award against the company earlier this year. Last month, a judge lowered the award $50 million and told Wellogix it could either accept the new amount or hold a new trial.”

And this is also not surprising. I have been writing for some time that SAP is far too powerful with the major consulting firms. In most cases, the major firms simply recommend SAP no matter how poor the fit. In fact, for most clients I work with, the most appropriate software from requirements and functionality perspective is not selected. There are several reasons for this, but one primary reason is that major firms like Oracle and SAP distort the market, making is far less efficient — as an economist would consider it, than the consumer software market. There is a great misunderstanding regarding the nature of market efficiency. Markets do not automatically become efficient through competition. Markets must be kept fair for an efficient market to exist as companies desire to build monopolies. This is poorly understood generally, as even some economists (many who take money from monopolies themselves), do not emphasize it. This is the entire reason for anti-trust regulations, regulations which are generally unknown to the pubic.

Regulation performs the same function performed by referees at any game. A fair game can only be ensured by an impartial intermediary which enforces the civil rules of the game. Those who use the term “free markets” or competition without understanding this feature of markets essentially do not understand the entirety of the history of economics. The efficiency of the enterprise software market is extremely important for the efficiency of the overall economy as is discussed in this article.

Major consulting companies maximize their revenues by recommending SAP, and this is why software selections performed by the major consulting companies are essentially rigged as I described in this article.

Advisement?

There is a concept that a consulting company provides an “advisement” function to their clients. However, with the money that drives the compensation schemes in the major consulting companies, the concept of putting the client ahead of the consulting firm’s revenues has essentially disappeared.

However, in this case, Accenture (which is not only accused but has been found guilty) conspired with SAP to help SAP steal intellectual property from a smaller vendor. This must have caught Wellogix entirely by surprise. However, it shouldn’t have because first of all, Accenture has a terrible reputation for unethical behavior, but also because the major consulting firms like Accenture receive so much of their consulting revenue from SAP that they are almost an arm of SAP. The best terminology I can use to describe the relationship is that they are remotely controlled.

Conclusion

This is a perfect example of how SAP has simply accumulated far too cozy a relationship and far too much influence over other actors in the enterprise market. I am not sure what more evidence the Federal Trade Commission (the body that polices anti-competitive behavior) has to see before they step in to limit SAP’s clear and obvious monopoly power in enterprise software. It has gone from major consulting firms overwhelmingly recommending SAP, even when the solution barely exists, to now a consulting company (and I would tend to doubt Accenture is the only one) assisting SAP in stealing IP from a vendor which the vendor freely shared with Accenture. If the FTC or other body does not eventually stop the behavior, it will get worse because SAP grows bigger every year, and very simply, power corrupts.

Continuing to try to address SAP’s abuses of power with smaller parties litigating against it is insufficient for the task. The litigation undertaken by Wellogix must have been extremely expensive, and a distraction for them, and is not something they should have had to bear. I wish I could have spoken with them before they partnered with SAP to explain how SAP operates. I have been fortunate enough to warn several vendors, and I think to keep them out of SAP’s lair.

All vendors, regardless of their size, deserve protections from predacious companies like SAP. Theoretically, companies are supposed to have similar intellectual property rights. However, that is now how it is in practice. SAP claims and has superior intellectual property rights over other vendors, and routinely violates the intellectual property rights of other vendors. This has been demonstrated in multiple lawsuits, as well as my observation of new SAP modules that have copied much of the functionality of best of breed vendors that they were once “partners” with. This is why it is time to regulate SAP, and not simply leave individual lawsuits as the only defense that best of breed vendors have against a company with $12.5 billion in annual revenues, and that doesn’t seem to think that rules of fair play apply to them.

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References

https://www.computerworld.com/s/article/9197887/Update_Oracle_awarded_1.3_billion_in_SAP_lawsuit