Off-Shoring......several recent articles.....very alarming

[RedEarth]

First manufacturing, now everything else, including R&D.....in the future, jobs in the US will consist of carrying each others luggage....the impact of out-sourcing on our country is not going to be pleasant.

Software
Programming jobs are heading overseas by the thousands. Is there a way for the U.S. to stay on top?


Stephen Haberman was one of a handful of folks in all of Chase County, Neb., who knew how to program a computer. In the spring of 1999, at the height of the Internet boom, the 17-year-old whiz wanted to strut his stuff outside of his windswept patch of prairie. He was too young for a nationwide programming competition sponsored by Microsoft Corp. (MSFT ), so an older friend registered for him. Haberman wowed the judges with a flashy Web page design and finished second in the country. Emboldened, Stephen came up with a radical idea: Maybe he would skip college altogether and mine a quick fortune in dot-com gold. His mother, Cindy, put the kibosh on his plan. She steered him to a full scholarship at the University of Nebraska at Omaha.

Half a world away, in the western Indian city of Nagpur, a 19-year-old named Deepa Paranjpe was having an argument with her father. Sure, computer science was heating up, he told her. Western companies were frantically hiring Indians to scour millions of software programs and eradicate the much-feared millennium bug. But this craze would pass. The former railroad employee urged his daughter to pursue traditional engineering, a much safer course. Deepa had always respected her father's opinions. When he demanded perfection at school, she delivered nothing less. But she turned a deaf ear to his career advice and plunged into software. After all, this was the industry poised to change the world.

As Stephen and Deepa emerge this summer from graduate school -- one in Pittsburgh, the other in Bombay -- they'll find that their decisions of a half-decade ago placed their dreams on a collision course. The Internet links that were being pieced together at the turn of the century now provide broadband connections between multinational companies and brainy programmers the world over. For Deepa and tens of thousands of other Indian students, the globalization of technology offers the promise of power and riches in a blossoming local tech industry. But for Stephen and his classmates in the U.S., the sudden need to compete with workers across the world ushers in an era of uncertainty. Will good jobs be waiting for them when they graduate? "I might have been better served getting an MBA," Stephen says.

U.S. software programmers' career prospects, once dazzling, are now in doubt. Just look at global giants, from IBM (IBM ) and Electronic Data Systems (EDS ) to Lehman Brothers (LEH ) and Merrill Lynch (MER ). They're rushing to hire tech workers offshore while liquidating thousands of jobs in America. In the past three years, offshore programming jobs have nearly tripled, from 27,000 to an estimated 80,000, according to Forrester Research Inc. (FORR ). And Gartner Inc. figures that by yearend, 1 of every 10 jobs in U.S. tech companies will move to emerging markets. In other words, recruiters who look at Stephen will also consider someone like Deepa -- who's willing to do the same job for one-fifth the pay. U.S. software developers "are competing with everyone else in the world who has a PC," says Robert R. Bishop, chief executive of computer maker Silicon Graphics Inc. (SGI ).

http://www.businessweek.com/magazine/content/04_09/b3872001_mz001.htm

Corporate America's Silent Partner: India
Businesses are off-shoring more and more white-collar jobs there, though you won't hear them talk about it much in an election year
The shift of skilled work to India is becoming one of Corporate America's worst-kept secrets. Almost daily, India's newspapers carry items on new plans by U.S. software, finance, or pharmaceutical companies to open or expand call centers and research labs. Officials from Bombay to Bangalore point to splashy new office parks that are soon to house major facilities by companies like Morgan Stanley (MWD ), General Motors (GM ), or Dell (DELL ). Tour a busy call center run by an Indian outsourcing specialist at midnight, and you'll likely see hundreds of staffers fielding calls for clients like American Express (AXP ), MetLife (MET ), J.P. Morgan Chase, or Citigroup (C ).

Yet it's still very hard to get these companies to talk in the U.S. about the increasingly important role India is playing in their business models. For BusinessWeek's Dec. 8 cover story, "The Rise of India," only a few BW 1,000 corporations were brave enough to grant on-the-record interviews about their R&D and back-office operations. They included General Electric (GE ), Intel (INTC ), and Cummins (CMI ).

A number of small software, chip-design, and e-commerce startups, for whom the ability to tap global brainpower is regarded as a competitive edge, also cooperated. But dozens of America's biggest investors in India -- don't worry, I won't name names -- simply refused to talk.

SPEAKING UP. Few topics are as radioactive as offshore outsourcing. In the current political climate, politicians, pundits, and angry laid-off workers are hunting for scapegoats for America's largely jobless recovery. You can't find better targets than China and India, both of whom undeniably are gaining from the sweeping restructuring of American technology, financial services, and telecom companies. Companies from AT&T Wireless (AWE ) to Bank of America (BAC ) are issuing pink slips at home while staffing up in Delhi, Bombay, and Hyderabad.

Corporate America won't be able to stay silent forever, though. Globalization of white-collar work is an irreversible mega-trend that's only starting to hit full force. The massive facilities being built in India under the radar screen will soon be blindingly obvious. More important, the economic payoff of off-shoring business processes and a portion of R&D can be so enormous that even reluctant corporations will have little choice but to follow suit to stay competitive. If a major info-tech, insurance, telecom, or banking company doesn't disclose any back-office center in India, Wall Street will soon start asking, "Why not?"

http://www.businessweek.com/bwdaily/dnflash/dec2003/nf20031215_8942_db046.htm

Outsourcing Innovation
First came manufacturing. Now companies are farming out R&D to cut costs and get new products to market faster. Are they going too far?


As the Mediterranean sun bathed the festive cafés and shops of the Côte d'Azur town of Cannes, banners with the logos of Motorola (MOT ), Royal Philips Electronics (PHG ), palmOne (PLMO ), and Samsung fluttered from the masts of plush yachts moored in the harbor. On board, top execs hosted nonstop sales meetings during the day and champagne dinners at night to push their latest wireless gadgets. Outside the city's convention hall, carnival barkers, clowns on stilts, and vivacious models with bright red wigs lured passersby into flashy exhibits. For anyone in the telecom industry wanting to shout their achievements to the world, there was no more glamorous spot than the sprawling 3GSM World Congress in Southern France in February.

Yet many of the most intriguing product launches in Cannes took place far from the limelight. HTC Corp., a red-hot developer of multimedia handsets, didn't even have its own booth. Instead, the Taiwanese company showed off its latest wireless devices alongside partners that sell HTC's models under their own brand names. Flextronics Corp. demonstrated several concept phones exclusively behind closed doors. And Cellon International rented a discrete three-room apartment across from the convention center to unveil its new devices to a steady stream of telecom executives. The new offerings included the C8000, featuring eye-popping software. Cradle the device to your ear and it goes into telephone mode. Peer through the viewfinder and it automatically shifts into camera mode. Hold the end of the device to your eye and it morphs into a videocam.

HTC? Flextronics? Cellon? There's a good reason these are hardly household names. The multimedia devices produced from their prototypes will end up on retail shelves under the brands of companies that don't want you to know who designs their products. Yet these and other little-known companies, with names such as Quanta Computer, Premier Imaging, Wipro Technologies (WIT ), and Compal Electronics, are fast emerging as hidden powers of the technology industry.

They are the vanguard of the next step in outsourcing -- of innovation itself. When Western corporations began selling their factories and farming out manufacturing in the '80s and '90s to boost efficiency and focus their energies, most insisted all the important research and development would remain in-house.

http://www.businessweek.com/magazine/content/05_12/b3925601.htm

[htuttle]

1. All you American programmers, listen up

There's only one way I know of to keep yourself in the IT business in the US without having to worry about your job getting outsourced. Become an IT employee for a company not in the IT business. What I'm talking about is working as an in-house programmer/network operator, etc... for a company that does not sell software (or software services).

Transportation companies, agricultural cooperatives, even veterinary offices need IT services (like billing and inventory systems, etc...), but they don't want to (and can't) pay a lot for them. While American IT companies can't underbid the ones from Pune or Bangalore, YOU as an individual can offer your services 'in-house' (as a direct employee of the company) cheaper or as cheap than any multinational is likely to want to bid -- even ones from India. Their programmers don't make squat, but the IT outsourcing companies themselves charge a healthy fee nonetheless (and make a health profit on them).

You might even get enterprising and approach a company that doesn't have much IT infrastructure at all, and offer to provide and operate one as an employee. You might get lucky. If you do, and it works out, you will have a good amount of job security, and a HELL of a lot less stress than the IT industry grind in Seattle or Northern California. It helps a lot if you are something of a 'jack of all trades' IT-wise (ie., everything from writing code to swapping network cards, etc...).

Don't expect to make more than half of what you made in Silicon Valley, and expect to have to write a lot of fairly boring business code, but it's a hell of a lot better than flipping burgers, waiting tables or selling pants at the Gap...

I know it's 'racing to the bottom' in an sense, but in another sense, it's cutting out the middleman. It's not so much a solution as it is a survival strategy.

[dcfirefighter]

2. Why do jobs leave the US?

1) We expect, and can generally find, high wages relative to the rest of the world.
2) Our employers must pay ~50% more than we're willing to work for. I may be completely willing to work for $10/hr, but it costs my employer $15/hr. Which means I must bring at least $15.01/hr of productivity to my employer, or I become 'uneconomic'.
3) Our cost of living is much greater than elsewhere, establishing a relative 'minimum' wage of acceptance.
Our cost of living is generally high due to lack of competition: the same competition for jobs that drives wages down (and out of the country) does not exist for the things we need and want to get by:
a)Super corporations can and do receive favorable tax treatment if not outright handouts, which inhibit 'upstart' competition.
b)Various other government granted rights inhibit competition: an old power plant may legally pollute more than a new plant. An old television network 'owns' frequency bands without paying for their value. There are no other bands for new competition. There are hundreds of others, including the right to drill for oil that can only be considered the property of the people of the US, if not the world (while its still in the ground).
c)the government grants patents that protect companies from competition. These patents encourage innovation, development, and progress. However, these patents last 20 years, I think. If we reduced these to 5-7 years, we'd see competition increase, more jobs, and cheaper goods (esp. medicines)
d)Real estate costs favor, by a long shot, those who bought land long ago. New, efficient employers can not find land in good markets. It's often quite profitable to keep a piece of land unbuilt, and hold out for a higher selling price later, keeping people out of jobs and homes, and keeping product prices high.
e)Housing costs account for roughly half of most people's income. It's impossible to create more land to live on in the areas people want to live, where the jobs are.

The current brand of capitalism has given the free exchange of goods and services a bad name. I blame this on two things: property laws that recognize god/nature-given gifts the same as human-built property, and the ability of banks & other financial opportunities to create money and manipulate credit.

If we redefine property laws, and recognize those irreproducable things as a gift of nature to be held as a common birthright, while recognizing labor, and the products of labor as absolute property, we'd make a major shift in economics. We'd start with the premise that those natural advantages are our commonwealth, and the user thereof must duly compensate the rest of us. Auctioning such rights to use could provide more revenue than the government, at all levels, currently collects. The surplus, being the product of our common birthright, would then provide a basic income grant or citizen's dividend to all of us.

Reducing other taxes in a progressive manner would increase the value of our commonwealth, and therefore the revenue and returns.

There'd still be competition for jobs, but jobs would be more plentiful than employees, and employees would have their basic needs met by the citizen's dividend. Monopolistic competition (read huge corporations) would be eliminated or severely reduced. In such an economic condition, democracy could truly flourish, and we could work on the other problems facing humanity.

[idlisambar]

3. Not in total agreement

1) We expect, and can generally find, high wages relative to the rest of the world.

Clearly true when it comes to many countries (China, India, etc.), but not so in the case of trading partners like Germany and Japan that have higher manufacturing wages/benefits than the U.S. Despite the higher wages these countries consistently run large trade surpluses with the U.S.

There'd still be competition for jobs, but jobs would be more plentiful than employees, and employees would have their basic needs met by the citizen's dividend. Monopolistic competition (read huge corporations) would be eliminated or severely reduced. In such an economic condition, democracy could truly flourish, and we could work on the other problems facing humanity.

In most manufacturing areas, small businesses are at a severe disadvantage to big businesses -- Economies of scale are critical for investment in infrastructure and R&D. Mom and Pop steel shops could never compete with large Japanese, Chinese, and European producers -- the U.S. steel industry would be wiped out costing more jobs. In some areas it might be beneficial to get rid of the Big corporation, but in many others a better policy would be to tame it through regulation.

[dcfirefighter]

5. Unprofitable jobs aren't jobs,

they're a particularly inefficient form of welfare.

As for steel in the US, one of the main problems with it was rather than upgrade and modernize production facilities, they received government protection. But even with the protection from imports, big steel lost market share to mom&pop microfoundries who mostly recycled scrap steel.

The artificially high steel prices caused by tarriffs, while keeping some steelworkers at work in the foundry, kept others out of jobs at the auto plant, the shipyard, and at potential construction sites across the nation, for a net loss in jobs.

There is an economy of scale, but there is also a span of control. Differing industries are going to have different intersections that will 'naturally' determine the most efficient size of a company. Economy of scale benefits has unlimited benefits when that size can be used to negotiate for special favors from the government.

Washington State has given Boeing Billions in subsidies an assistance over the years, yet Boeing keeps moving jobs out of state.

[idlisambar]

7. explain your logic

As for steel in the US, one of the main problems with it was rather than upgrade and modernize production facilities, they received government protection.

Most leading producing countries promote and protect their own steel industry, and yet the U.S. steel industry is the one in trouble. The U.S. probably offers the least assistance among major steel producing nations (Japan, China, Korea, Luxembourg, etc.). Running with your thesis that the government coddled the steel companies so that they became complacent and didn't upgrade their facilities, why didn't something similar happen in Japan or Luxembourg?

There is an economy of scale, but there is also a span of control. Differing industries are going to have different intersections that will 'naturally' determine the most efficient size of a company.

Well, I think most industries if left to "nature", which I take to mean market forces, would probably have a monopoly or cartel arrangement. Even absent significant "government favors" there would be a tendency toward further consolidation in a host of industries were it not checked by government regulation. The history of anti-trust as it applies to a host of industries including Steel, Oil, Telecommunications, software, etc. should be enough to convince. The idea that big business wouldn't exist were it not for government favors to protect them from mom and pop is just not realistic.

[dcfirefighter]

8. Japan and Germany

have more regulations in their steel industry, perhaps they were required to upgrade plant. Or perhaps somebody bombed the crap out of their steel infrastructure circa 1945 and it was rebuilt in the 50's. Either way, it was newer and more modern than the US Steel plants built in the early 1900's and rapidly ramped up in the early 40's.

Enclosure of the commonwealth, nature's providence, gifts of God, whatever you call it, and government granted monopoly priveleges are the only effective forms of monopoly, and the easiest to remedy.

Steel: get the government to protect your claim to ore. The ore's worth $Billions, but you only pay a few $Millions, in the right places, and you get Title to those Mineral Rights. If you had to pay for the full market value of the steel, you wouldn't have any money left to process it. At least someone else could outbid you on your ore claim, sell for less than you, and cut into your monopoly profit.

Oil: Same as steel, except you also have monopoly rights to land, in the form of pipelines. I guess steel had railroads, too.

Telecommunications: Monopoly rights to land for wired communications. Heck, most of these land rights were probably confiscated for eminent domain. Modern day telecom: you get FCC licenses for a nominal cost, and get to keep them first come-first serve. Kind of inhibits upstart competition, doesn't it? The FCC has recently started auctioning some of it's licenses.

Software: Monopoly privelege: 20 year patents on software. Upstarts: Open-source linux.

I don't mean to completely categorize these as protecting mom&pop, but they certainly would have a bit more competition. Perhaps it'd be easier to view this as fostering competition. I'm thinking there'd be more Apple sized companies and fewer MicroSoft size companies.

In each of these cases, government involvement is explicit, if generally accepted. In each of these cases, some bit of the natural universe was claimed as property, and the government (the people?) agreed to recognize that property right.

In your tagline link, if I'm not mistaken, there's a good bit on Monopolies.

[idlisambar]

9. On Software,

I can speak with the most authority. Software patents were not a factor contributing to Microsoft's current hold on the desktop, though recently has Microsoft started to use the patent system to help maintain its position. Here is an interesting article that tells how Microsoft got to be where it is today and why it looks it may now be vulnerable...

http://www.joelonsoftware.com/articles/APIWar.html

[dcfirefighter]

10. Link doesn't work for me

but I got the gist of it. So MS got where they are because? Good business at a time of rapid market growth? Maybe. If they don't have a monopoly, as the article seems to point out, they'll have to deal with competition just like anyone else.

[Warpy]

11. You are ignoring the rhinoceros at the tea party

The reason overseas labor looks so attractive is the strong dollar versus third world currencies.

It takes the same number of calories to sustain a worker anywhere in the world, along with shelter from the elements, clothing, and access to basic medical care for bumps, bruises, scapes, and the occasional infection needing antibiotics. The jobs in the third world provide a worker with all these things.

However, the subsistence wage in the local currency translates back into dollars at a wage that wouldn't sustain a US worker in free housing with free medical care. It simply wouldn't provide enough food calories to keep him alive.

There is no way a wage earner in the US can possibly compete with a worker who is being paid in rupees, bhat, or any sort of third world currency, NO WAY.

Either we will need Congress to wake up to this fact and institute protective tariffs or we will have to hope disaster truly strikes and the almighty dollar goes into free fall. Either course (and the former should have been done 40 years ago!) will now spell disaster for many of us. Doing nothing will not only ship all living wage jobs out of the country, it will further deplete our industrial and information infrastructures.

And if you want to know what that means, think about how in the next war we will be dependent on potentially hostile countries for all our shoes, our fabric, the electronics the military is utterly dependent on, our fuel, and even enough bullets to fight the war.

Just think about it.

[proud_dem]

12. yes, scary, when we go to war ....

with China (and we all know that day is coming) we will be in bigger trouble than we already are.
But hey, as long as bush his corporate base are making billions now why should they care.

[Robert Oak]

4. fundamental issue

people are just not a commodity meant to be traded like beans or
software. Trading people is why we named our groups noslaves.com
for this is a massive race to the bottom in terms of wages and skills.

What this article is not pointing out is due to this treatment
of people with a difficult white collar skill that takes years to learn...
is overall quality and innovation in engineering is dropping.

Who wants to sweat blood and tears for any organization that w/in
a moment's notice will drop you in favor of a 5 dollar an hour person in a 3rd world who may or may not have equivalent skills?

Why is it while the debate over "dollar value" of people happens here, in Europe
the EU and countries are plain calling outsourcing wrong, immoral
and that their corporations get quite enough already in tax breaks
and "owe it" to their home countries to employ their citizens?

Why is it the EU calls a spade a spade on China and sees it as a major
trade threat?

Only in the US do we see these sorts of financial analysis as if
we're all on the trading block to be purchased by the lowest bidder...
what does this remind you of and why is it Europe is not taking the same attitude?

[dcfirefighter]

6. I agree, no slaves

Which is why I think that taxes on labor are immoral. I should not have to pay a tribute of 25-35% in order to be allowed to work. Overnight, American labor could become 20-30% cheaper to employ. Employ more americans, and american labor becomes scarce, and wages rise. Once labor is scarce, in relation to capital, the laborer gets to claim the surplus production, as he'll be able to find capital elsewhere. Currently that surplus production is counted as Profit and kept by the owner.

I find no moral problem with outsourcing, I just think its bad business. But some taxes have that distorting effect.

For the record, I don't think that businesses should have to pay taxes on their productivity either. I think you should tax the land they sit on, and the natural resources they consume or pollute, and the rights government grants them, but not their productivity. All built capital (labor-capital) is the product of someone's labor, and taxing such capital is a disincentive to create more, keeping someone out of work.

The solution to the blood sweat and tears of a complex and specialized knowledge, is for the employees to own the shop. They, by my definition, and probably by yours, already own the 'knowledge capital'. The trick is to to tear down the barriers to employee ownership. Tear down the government-granted advantages to super corporations, and I think you'll find that employee-owned companies will become the norm rather than the exception.