Australia's Telecommunications and information services giant Telstra has come under attack from the government and trade unions over an agreement to move 450 jobs to India, in one of the largest moves by a local firm to transfer employment to low-wage countries.

Outsourcing and India: Complete Coverage

The partly state-owned corporation said the deal is an extension of existing outsourcing arrangements with its software consultant IBM under which the US-based computer giant will send much of the work done in Australia to its services operations in India, media reports here said.

The deal, reported to be a key part of Telstra's plan to slash $746 million in costs, is the latest in a process by which Telstra will send 1,500 jobs offshore in the next few years.

The deal has come under attack from the Federal Treasurer, the opposition Labour Party and workers unions.

"I'd say to Telstra they ought to look at that situation very carefully. Telstra has to have a pretty good reason why it couldn't fill its employment needs from this country. Australia has a very skilled workforce," Federal Treasurer Peter Costello told reporters in Melbourne.

The opposition Labour Party has also called up Telstra to have a rethink on shifting jobs to India.

"Telstra is a government-owned organisation that still is largely a monopoly and it makes all the profits in Australian telecommunications. It's a privileged position and Australians are entitled to expect some degree of social responsibility in return for that privilege," the Labour party said.

However, Telstra said it would not reverse the decision.

Telstra said in a release that its decision to extend arrangements with IBM Global Services represents the next phase of a competitive IT sourcing agenda to achieve reduced cycle times and improved quality and cost effectiveness.

Defending its move, Telstra chief information officer Jeff Smith said Telstra's IT sourcing agenda was driven by the need for world-class delivery of IT services and increased competitive pressures in Australia and abroad.

"In order for Telstra to be a strong and successful Australian company it must continue to partner with the world's best IT companies. We have called on our key IT providers to deliver improved cycle times, quality and cost effectiveness in the delivery of application development and maintenance services.

"IBM Global Services has responded with a solution that draws on its local and global strengths, while continuing to meet Telstra's strict privacy and security requirements. Today's decision reinforces the strong and ongoing relationship between Telstra and IBM Global Services," Smith added.

A spokesman for IBM, Australia, Caspian Smith declined to say how many local workers would be laid off. However, he said the company plans to re-deploy and retrain as many people as possible over an 18-month transition period.

Smith said, "We put together a solution that met Telstra's business requirements and took into account our competitors."

Meanwhile, the Community and Public Sector Union, which represents communications workers, said in a statement that "it is expected that at least 1,500 more Telstra IT jobs will be 'off-shored' to low-wage economies such as India and China this year".

The deal, a key part of Telstra's plan to slash $957 million in costs, is the latest stage in a controversial process in which the carrier is expected to send 1500 jobs offshore in the next few years, reports said.

Last year, Telstra had entered into an A$75 million contract with Nasdaq-listed Indian software and services giant, Infosys.

Infosys had taken over work, which was being carried out by IBM Global Services Australia, formerly a joint venture between Telstra, IBM and Land Lease.

Infosys Technologies Limited's Australia manager Ananda Rao had told PTI that it is not about exporting jobs. "I think the message from Telstra is very clear that it is about reducing cycle times, improving quality, bringing in repeatability, fostering knowledge re-use and lowering Total Cost of Ownership".

On being asked if the contract would yield cost savings of up to 40 per cent for Telstra, Rao said, "It is all about excellence in execution and predictable delivery. If systematic processes are followed to manage all IT layers, 40 per cent savings overall is definitely possible".

On why was Infosys chosen instead of IBM, Telstra's chief information officer said: "We are going to work with the best company and Infosys is one of the best in software engineering."