The Telegraph
Since 1st March, 1999
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Job outsourcing cuts to the bone of US tech industry

San Jose (California), July 15 (AP): Peter Kerrigan encouraged friends to move to Silicon Valley throughout the 1980s and 1990s, wooing them with tales of lucrative jobs in a burgeoning industry.

But he lost his network engineering job at a major telecom company in August 2001 and remains unemployed. Now 43, the veteran programmer is urging his 18-year-old nephew to stay in suburban Chicago and is discouraging him from pursuing degrees in computer science or engineering.

“I told him: ‘Unless you’re planning to do this as a path to technical sales, don’t do it’,” said Kerrigan, who lives in Oakland. “He won’t be able to have a career designing and building stuff because all those jobs have moved to India.” Like many unemployed programmers, Kerrigan blames the sour labour market on offshore outsourcing — the migration of tech jobs to relatively low-paid contractors or locally hired employees in India, China, Russia and other developing countries.

The haemorrhaging of tens of thousands of technology jobs in recent years to cheaper workers abroad is already a fact of life — as inevitable, US executives say, as the 1980s migration of rust belt manufacturing jobs to southeast Asia and Latin America.

But a new wave of technology outsourcing — involving tasks that require greater skills — could be cutting to the industry’s bone, threatening to prolong the three-year US economic downturn. Some who oppose the trend — which such industry stalwarts as Hewlett-Packard, IBM, Dell and Microsoft are embracing — believe it could even usher in the end of American domination in technology.

“We’re giving countries like China and India the support they need to build up their technology industries, and the result could disadvantage us in the long run,” said Phil Friedman, an electrical engineer and chief executive of New York-based Computer Generated Solutions, a 1,200-employee software company.

“We outsourced electronics manufacturing. We’re closing steel mills. Every week, 400,000 people file for new unemployment claims,” said Friedman, a 54-year-old Ukrainian native who immigrated in 1976. “At the same time, we’re shipping tech jobs offshore — it’s a shortsighted approach and cheats the American workforce.”

Cost-conscious executives have been shifting lower-level tech jobs in data entry and systems support abroad to cheaper labour markets for more than a decade. But now they are exporting highly paid, highly skilled positions in software development — jobs that have been considered intrinsic to Silicon Valley and tech hubs such as Seattle, Boston, and Austin, Texas.

Critics say it’s the equivalent of exporting not just the automobile industry’s assembly line jobs — but the core engineering and car design jobs too.

Roughly 27,000 technology jobs moved overseas in 2000, according to a November study by Forrester Research. It predicts that number will mushroom to 472,000 by 2015 if companies continue to farm out computer work at today’s frenzied pace.

Boeing, Dell and Motorola have opened software development centres in Russia. Intel employs 400 full-time Russian software research engineers and nearly 200 others in marketing and sales, wireless Internet access and modem projects.

Santa Clara-based Intel entered the Russian market with a small contract project three years ago. But within months, the world’s largest chip maker hired all the programmers who write compiler software to optimise the microprocessors’ performance, and opened the Russia Software Development Centre in Nizhny Novgorod.

Microsoft is adding software development jobs at its India development centre in Hyderabad, opened in 1999 to create versions of Windows for giant corporate computers. Bill Gates said late last year that the expansion was part of an estimated $400 million in corporate investments in the subcontinent.

On its corporate website, Microsoft lists dozens of Hyderabad openings, many requiring five years of experience, fluency in multiple computer languages, and college degrees in computer science — far from the hourly telemarketer jobs that financial services and insurance companies exported to the Philippines and elsewhere in the early 1990s.

Some say sending those jobs abroad may cause American tech workers’ wages to stagnate.

The average computer programmer in India costs $20 per hour in wages and benefits, compared with $65 per hour for an American with a comparable degree and experience, according to consulting firm Cap Gemini Ernst & Young.

But executives say outsourcing offers advantages beyond wage differences. Jean-Marc Hauducoeur, a senior vice-president at Cincinnati-based human resources consulting firm Convergys, said his 47,000-employee company will employ 6,000 customer service representatives and network engineers in India by year’s end. Convergys’ average technical employee in India stays on the job for nearly three years — more than double the US average.

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