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Little by little, Sab Maglione could feel his job slipping away. He worked for a large insurance firm in northern New Jersey, developing the software it uses to keep track of its agents. But in mid-2001, his employer introduced him to Tata Consultancy Services, India's largest software company. About 120 Tata employees were brought in to help on a platform-conversion project. Maglione, 44, trained and managed a five-person Tata team. When one of them was named manager, he started to worry. By the end of last year, 70% of the project had been shifted to India and nearly all 20 U.S. workers, including Maglione, were laid off.

Since then, Maglione has been able to find only temporary work in his field, taking a pay cut of nearly 30% from his former salary of $77,000. For a family and mortgage, he says, "that doesn't pay the bills." Worried about utility costs, he runs after his two children, 11 and 7, to turn off the lights. And he has considered a new career as a house painter. "It doesn't require that much skill, and I don't have to go to school for it," Maglione says. And houses, at least, can't be painted from overseas.

U.S. financial-services firms expect to move more than 500,000 jobs overseas within five years

Jobs that stay put are becoming a lot harder to find these days. U.S. companies are expected to send 3.3 million jobs overseas in the next 12 years, primarily to India, according to a study by Forrester Research. If you've ever called Dell about a sick PC or American Express about an error on your bill, the friendly voice that answered your questions was probably a customer-service rep in Bangalore or New Delhi. Those relatively low-skilled jobs were the first to go, starting in 1997.

But more and more of the jobs that are moving abroad today are highly skilled and highly paid — the type that workers assumed would always remain at home. Instead Maglione is one of thousands of workers adjusting to the unsettling new reality. "If I can get another three years in this industry, I'll be fortunate," he says. Businesses are embracing offshore outsourcing in their drive to stay competitive, and almost any company, whether in manufacturing or services, can find some part of its work that can be done off site. By taking advantage of lower wages overseas, managers believe they can cut their overall costs 25% to 40% while building a more secure, more focused work force at home. Labor leaders — and nonunion workers, who make up most of those being displaced — aren't buying that rationale. "How can America be competitive in the long run sending over the very best jobs?" asks Marcus Courtney, president of the Seattle-based Washington Alliance of Technology Workers. "I don't see how that helps the middle class."

The same process is under way in Europe. According to Gartner Research, three-quarters of the Continent's large and medium-sized firms will explore offshore services by the end of next year. In the U.K. — Europe's largest outsourcing market — the floodgates are already open. Late last month, news and information provider Reuters announced it was shifting some of its back-office operations to India. Just days earlier, U.S. investment bank Goldman Sachs said a significant part of its British administration and IT departments would be headed in the same direction. U.K. call-center staff are feeling the heat, too. On the back of large-scale moves by British Airways, HSBC and the insurance giant Prudential, telecoms operator BT recently announced plans to switch more than 2,000 call-center jobs to India. But labor unions are answering BT back. "The bulk of your customers are in the U.K., the bulk of your profitability is in the U.K., and here you are moving work out of the country and damaging communities," says Bill McClory, acting deputy general secretary of Britain's Communication Workers' Union. Overall, labor leaders say around 200,000 jobs will be outsourced abroad over the next five years.

And as India develops its advanced technology services, European firms could shift yet more posts out East. In May, the mobile-phone division of German-based technology giant Siemens designated Bangalore, India, as its global software R and D center. That means adding 100 more software engineers to the 400 already working at Indian subsidiary Siemens Communications Software. While investment pours into India, some European countries stand to benefit from the outsourcing trend. According to Gartner, Western European firms could shift jobs to Ireland or countries in Eastern Europe because of the closer cultural and linguistic links and the more convenient time zones.

On the other side of the world, though, educated Indian workers are quickly adjusting to their new status as the world's most sought-after employees. They have never been more confident and optimistic. Uma Satheesh, 32, an employee of Wipro, one of India's leading outsourcing companies, is among her country's new élite. She manages 38 people who work for Hewlett-Packard's enterprise-servers group doing maintenance, fixing defects and enhancing the networking software developed by HP for its clients. Her unit includes more than 300 people who work for HP, about 90 of whom were added last November when HP went through a round of cost cutting.

"We've been associated with HP for a long time, so it was an emotional thing," Satheesh says. "It was kind of a mixed feeling. But that is happening at all the companies, and it's going to continue." Satheesh says that five years ago, computer-science graduates had one career option in India: routine, mind-numbing computer programming. Anything more rewarding required emigrating. "Until three years ago, the first preference was to go overseas," she says. Nowadays her colleagues are interested only in business trips to the U.S. "People are pretty comfortable with the jobs here and the pay here" — not to mention the cars and houses that once seemed out of reach. Employees in her group earn from $5,200 a year to $36,000 for the most experienced managers.

And companies have steadily increased the complexity of the work they are willing to hand over. Rajeshwari Rangarajan, 28, leads a team of seven Wipro workers enhancing the intranet site on which Lehman Brothers employees manage personal benefits like their pension accounts. "I see myself growing with every project that I do here," Rangarajan says. "I really don't have any doubts about the growth of my career."

Her experience with a leading brokerage will probably help. Financial-services companies in the U.S. are expected to move more than 500,000 jobs overseas in the next five years, according to a survey by management consultant A.T. Kearney, and India is by far the top destination. U.S. banks, insurance firms and mortgage companies have been using outsourcing to handle tech support for years. Now these firms are using Indian workers to handle the business operations — say, assessing loan applications and credit checks — that the technology supports. Kumar Mahadeva, ceo of the thriving outsourcing firm Cognizant, explains the appeal: "It becomes logical for them to say, 'Hey, you know everything about the way we do claims processing. Why not take a piece of it?'"

The next logical step, says Andrea Bierce, a co-author of the A.T. Kearney study, is jobs that require more complex financial skills such as equity research and analysis or market research for developing new business. Evalueserve, a niche outsourcing company in Delhi, already performs research for patent attorneys and consulting firms in the U.S. In April, J.P. Morgan Chase said it would hire about 40 stock-research analysts in Bombay — about 5% of its total research staff. Swiss pharmaceutical giant Novartis employs 40 statisticians in Bombay, who process data from clinical research.

But as educated workers in India are finding new opportunities, those in the U.S. feel the doors closing. Late last month, Bernie Lantz drove 2,300 km from his home in Plano, Texas, to begin a new life in Utah. He is 58 years old, a bachelor, and had lived in the Dallas area for 24 years. "I'm leaving all my friends," he says with a sigh. "It's quite an upheaval." Lantz used to earn $80,000 a year as a troubleshooter for Sabre, a company based in Southlake, Texas, whose software powers airline-reservations systems. But over the past two years, Sabre has gradually standardized and has centralized its software service. As Sabre began to outsource its internal IT services, Lantz says, he became convinced that jobs like his were becoming endangered. He was laid off in December. (A company spokesman denies that Lantz's firing was related to outsourcing.) Discouraged by a depressed job market in Dallas, Lantz realized he would have to do something else. In the fall he will begin teaching computer science at Utah State University in Logan, and in the meantime he has learned a lesson of his own: "Find a job that requires direct hands-on work on site," Lantz advises. "Anything that can be sent overseas is going to be sent overseas." Pat Fluno, 53, of Orlando, Florida, says she, like Maglione, had to train her replacement when her data-processing unit at Siemens was outsourced to India's Tata last year. "It's extremely insulting," she says. After 10 months of looking, she is working again, but she had to take a $10,000 pay cut.

To protect domestic jobs, U.S. labor activists are pushing to limit the number of H-1B and L-1 visas granted to foreign workers. That would make it harder for offshore companies to have their employees working on site in the U.S. Several congressional committees have held hearings on the impact of offshore outsourcing on the U.S. economy, and lawmakers in five states have introduced bills that would limit or forbid filling government contracts through offshore outsourcing.

Stephanie Moore, a vice president of Forrester Research, says companies are concerned about the backlash but mainly because of the negative publicity. "The retail industry is very hush-hush about its offshoring," she says. But within the boardroom, such outsourcing enjoys wide support. In a June survey of 1,000 firms by Gartner Research, 80% said the backlash would have no effect on their plans.

The advantages, businesses say, are just too great to ignore. Creative use of offshore outsourcing, says Debashish Sinha of Gartner, offers benefits that outweigh the direct loss of jobs. In an economy that has shed 2 million jobs over two years, he contends, the 200,000 that have moved overseas are less significant than the potential for cost savings and strategic growth. But he concedes that "when you're a laid-off employee who can't find a job, that's hard to understand."

• JYOTI THOTTAM
• U.S. and European firms are shifting high-wage work overseas, especially to India