R&D Starts to Move Offshore - Outsourcing evolves beyond low-wage programming jobs

As corporate America becomes increasingly comfortable with offshore development, it's sending substantially more sophisticated IT work overseas. Companies such as Google Inc. are turning to foreign workers not for their willingness to work for lower wages but for their technological prowess.

Google is advertising for highly skilled IT help at its recently opened research and development facility in Bangalore, India. These employees will be involved in all aspects of Google's computer engineering work: conception, research, implementation and deployment.

"Bangalore is the so-called Silicon Valley of India, and there is a large pool of talented software engineers there," said Krishna Bharat, Google's principal scientist.

R&D is core to most companies. They guard it carefully, and their brightest people work on it. But as offshoring becomes increasingly commonplace, companies are moving up the value chain, using foreign workers in ways that make them a more integral part of the corporate identity.

Silicon Valley venture capital firms are encouraging start-ups to send their product development work overseas, said Marc Hebert, a vice president at Sierra Atlantic Inc., a Fremont, Calif.-based outsourcing firm that specializes in R&D. While Google was explicit about talent rather than cost being the driver of its offshore move, most companies are equally keen to tap the lower wages, which enable them to hire more people to bring products to market faster.

Hebert said that although idea generation and funding are still coming from the U.S., more and more of the R&D work needed to actually bring a product to market is being done offshore. "That's the really interesting trend," he said.

What that means for the future of Silicon Valley and IT development in the U.S. is unclear. But while overseas firms are hiring, the IEEE-USA said last week that the 2003 U.S. jobless rate for computer scientists and systems analysts has reached an all-time high of 5.2%.

Although the number of R&D jobs that have moved to Asia doesn't yet approach the number of low-end IT jobs that have moved, such as those in programming, the gap is bound to narrow, said Bob Hayward, an Australia-based senior vice president at Gartner Inc.

"There's a certain amount of inevitability about it," Hayward said, noting that the highly skilled Asian workforce and the leading role taken by those countries in developing cutting-edge services and technologies, such as broadband Internet access and flat-panel technology, have attracted the attention of U.S. IT vendors.

Just in the past three to four years, U.S.-backed investments in Asian R&D operations have increased dramatically, Hayward said. He noted that those investments have soared while IT vendors, faced with a global slowdown in demand for their products, have held back investments in other areas.

Several of the largest U.S. IT vendors started building R&D centers in China in 1998. Intel Corp. and Microsoft Corp. have opened facilities in Beijing. Intel has 40 researchers; Microsoft has 200 Ph.D. candidate interns and 170 researchers.

Some governments provide economic incentives to attract U.S. companies to invest in R&D operations in their countries. In Taiwan, for example, foreign firms can deduct 35% of their R&D investments from the income tax owed by their profit-making operations.

Still, some IT development work can be done only in the U.S., said Richard Brown, associate vice president of marketing at Via Technologies Inc. in Taipei, Taiwan. For example, the design and development of Via's PC chip-set products is done in Taiwan, but the company's CPU and graphics-chips products are designed by teams in the U.S., reflecting the dominance of the U.S. in those product areas, he said.

But the trend is clear. About half of the IT R&D done by Stratex Networks Inc. takes place overseas, some at its New Zealand subsidiary, and some in India. That has included development of a network configuration tool, said B. Lee Jones, vice president of IT and CIO at the San Jose-based company.

Jones has eight data centers to run on five continents and offices across 22 time zones. Like many U.S. IT executives, he wonders about the big picture: the long-term impact on the U.S. as more work is shifted offshore. But Jones said he believes the U.S. will remain dominant in IT.

Though he has some hesitancy about moving high-level work offshore, along with a desire to keep core development in the U.S., Jones said that "as the comfort level goes up and we are able to take advantage of having comparable quality for smaller prices, people will naturally migrate there."

Then by your own feelings, Congress' exercising their specifically inumerated power to declare war in an unwise way is not an abuse of power. You need to learn to control your emotions.

Your argument has no meaning. Congress is specifically empowered to levy tariffs. It is not some abstract power, the exercise of which constitutes abuse. If you have trade, you regulate it. If you are attacked, you declare war. By your your simple-minded reasoning, congress would be abusing power if they declared war for any reason. I've just nuked your ill-conceived argument. Sorry, but you're the emotional one here, and you've lost argument.

This reminds me of the end of the worlders crying here that Armageddon was coming at the turn of the millennium.

There it is! The ad hominem attack. No rebuttal, just a slander. The sure sign of a lost argument, in plain view for all lurkers and posters to see. Wheeeee!

No, because of China’s international aggression, all the rules change. A discussion of training dogs can’t be applied to razing a tiger. If you can’t transcend your knee jerk emotionalism to see that, start another tread on China.

Trying to dismiss facts as knee-jerk emotionalism is a poor debating technique. The original article was about outsourcing to "Asia" and "Overseas". Last time I checked, China was both of these. Anyway, From the article: "Several of the largest U.S. IT vendors started building R&D centers in China in 1998. Intel Corp. and Microsoft Corp. have opened facilities in Beijing. Intel has 40 researchers; Microsoft has 200 Ph.D. candidate interns and 170 researchers."

I guess you didn't read the article carefully enough.

Where's my proof? We're NOT a small, poor nation anymore

Nice try, but that's not what I asked you to prove. You seem to have forgotten your own statement, or you are just trying to steer the argument away from it, because you have no proof. You postulated that tariffs would no longer work for our nation. THAT is what I asked you to prove. Your statement (in case you forgot):

What worked when we were a small, poor nation in the 1700s will not work in the 2000s...

So, prove it.

"By your your simple-minded reasoning, congress would be abusing power if they declared war for any reason."

Let me make this simple.

1) I said that people (like you) were promoting the abuse of tariffs.
2) You say that since the founding fathers designed Congress with the power to impose tariff, criticism of that abuse power amounts to criticism of the founding fathers. Remember?
3) I pointed out that Congresses could abuse any power, specifically the power to declare war. And just because they were given that power, it does not make any abuse of it justified and any criticism of it a criticism of the founding fathers.

The rest of your post is dependent of that.

This is not an article regarding unique Chinese trade issues.

I don’t have time to continue a discussion based on out of control emotions.

Think a little past these statistics:

- Internet down 40%? Remember the phase Internet bubble? Or did we outsource 40% of the Internet?
- Communications and semiconductors up 38%”? Same thing, bubble. They were probably up 38% in the 3 years prior to the bubble bursting.
- Apparel 37 percent? You really think that we should protect apparel workers? Is the US a place for apparel workers? Is New York City a place for farming?

"Frankly I'm not surprised you stopped reading my profile in the first paragraph. It seems a pattern for you to only go as deep into any subject as it takes to find a single data point that supports your preconceived prejudices."

One word” “projection”. I need to move on.

(This reminds me of the end of the worlders crying here that Armageddon was coming at the turn of the millennium.) -elfman2

"There it is! The ad hominem attack. No rebuttal, just a slander. The sure sign of a ost argument, in plain view for all lurkers and posters to see. Wheeeee!"

On second thought, I can’t let this one pass… Sorry my last post failed to conform to your previous “high” analysis and discussion like this:
"Nice try, but you look like a blathering fool now."

I’m sure you're “deeply saddened”.

This article is proof positive that the CEOs of these corporations have been trumped. They kid no one: they are completely leveraged on H1-B workers and foreigners to make decisions on what to develop and where to develop it. How genuine is this: Krishna Bharat, a former H1-B visa holder from India I suspect and Google's principal scientist, recommends sending all the R&D and technology jobs for Google to where -INDIA, surprise, surprise, surprise? I'll bet if one were to analyze the make up of the major decision loops in these pro-outsourcing companies he/she would find a preponderance of H1-B and other like individuals in them. No CEO or analyst with more than a half wit would recommend sending such valuable work overseas. I doubt they are really saving any money, yet there are significant risks with such decisions that they never talk about.

Wasn't more than a couple months ago in another tirade about American students not studying the hard stuff in college such as engineering, science, and math that someone said such talk was tiresome. Well, this is the result. New patents used to be predominantly American. It's no longer that way. Science used to be predominantly American. It's no longer that way. If American culture was dominant in the world it was because of science and technology. That edge is no longer there. There is one way to recover the edge and that is to stop thinking about jobs and start thinking about business.

Let me make this simple.

So far, everything you have said is simple.

1) I said that people (like you) were promoting the abuse of tariffs.

Imposing tariffs is not an abuse, it is an inumerated, traditional power of our congress. "Abuse" is an opinion of yours that has no basis in fact. It is a fantasy. I will go back and forth with you forever, if necessary. The bottom line is you are flat out wrong. I have history and the exact wording of the constitution on my side, you have nothing but faith in failed economic theory.

2) You say that since the founding fathers designed Congress with the power to impose tariff, criticism of that abuse power amounts to criticism of the founding fathers. Remember?

No, you said that tariffs are an abuse. You have yet to prove that the imposition of a tariff is an abuse in this case. Clearly it is not, it is an inumerated power.

3) I pointed out that Congresses could abuse any power, specifically the power to declare war. And just because they were given that power, it does not make any abuse of it justified and any criticism of it a criticism of the founding fathers.

You are confusing use with abuse. You are railing against tariffs, claiming any tariff is an abuse. If I am wrong, then why don't you give me an example of a tariff that is not an abuse? I'll bet you can't, because in your "free" trade dogmatic mind, any tariff at all is an abuse. If that is the case, then why is the power plainly inumerated in Article I, section 8 of the US constitution. I guess you think the powers listed there are just for laughs, huh?

This is not an article regarding unique Chinese trade issues.

Ha! Ha! That's not what you said. I mentioned China, and you said it was not about China at all. You're just embarassed because the article is in fact about China.

I don’t have time to continue a discussion based on out of control emotions.

You are making baseless charges about emotion and running because you have lost the argument.

One more time: If the imposition of tariffs to equalize labor rates is an abuse, give me an example of a tariff that is not an abuse.

On second thought, I can’t let this one pass… Sorry my last post failed to conform to your previous “high” analysis and discussion like this: "Nice try, but you look like a blathering fool now."

I admit; you got me on that one! I should have let the post stand on facts without hurling names. I usually try to avoid doing that. I guess I was a little peeved because you were using insulting tones like sarcastic "brilliant", or "nonsense", instead of trying to argue facts. Whenever someone starts that, I tend to drop to their low level. I guess I'm too used to arguing with people who are intellectualy honest.

You need to prove that Tariffs WOULD work. They won't.

Tariffs to equalize labor content, and the elimination of taxpayer funded business failure insurance, will remove the incentive to move jobs overseas. As I have stated on other threads, I advocate the complete elimination of all forms of income, payroll, and capital formation taxes, to be replaced with sales taxes and tariffs. That is the system we had at the founding, and it worked. I claim that it will work now because it was based on wisdom then, and it worked then. In other words, I draw conclusions based on empirical evidence, and I am not affraid to try something that has been shown to work in the past. You claim that it won't work because now times are different. I could use that logic to all sorts of crazy ends, repeal 2nd ammendment, etc.

I prefer to refer to the founders for an economical model, rather than letting the WTO decide what it is going to be.

"If the imposition of tariffs to equalize labor rates is an abuse, give me an example of a tariff that is not an abuse."

You're starting from the ABCs here. I’ll summarize.

Abuse or use of tariffs is a matter of opinion, just like with virtually other every legal activity, from drug use to incarceration to taxation etc... Regarding tariffs, let’s start with the extremes (the obvious)

Uses:
- To protect the most critical industries to national security like food, fuel weapons, critical raw materials etc…
- To protect against state sponsored or otherwise illegal competition, like Japan subsidizing auto manufacturing in the early 80s, and their automakers colluding to share technology and marketing information.
- To persuade other countries to open up their markets.

An obvious abuses would be to tax imports in order to protect an uncompetitive business in exchange for whatever, campaign help, votes, friendship, nostalgia, etc…

Very early in this thread I made a case that tariffs to stop outsourcing generally have a negative impact on our economy and our jobs (excluding a country that we’re in a cold war with like China which you have a hard time accepting as a different discussion.)

You replied that because Congress had the power to tax imports, it couldn’t be abused. You did so by implying that the founding fathers must have been protectionists if excessive tariff use (protectionism) was wrong.

In a series of posts I’ve tried to show you that other legal powers can be abused, that just because authority is legal does not mean that any use of it is good. I honestly don’t know how anyone can believe any differently. I don’t know if I just didn’t communicate that well, or if you’re just being stubborn. The shrillness and emotionalism in your posts implies the latter.

Regarding the use of tariffs to “equalize wages” as being good or bad, that’s a discussion that I’m not willing to invest any more time in with you here. Just getting you to understand that this is not a discussion of trading with a military rival or that any tariffs could possibly be an abuse is too time consuming To make it worse, you’re too quick to attack personally (now my intellectual honesty) just because of my sarcastic tone. Perhaps I employ sarcasm too quickly. Whatever the case, we don’t have a relationship that would allow us to move into any greater depth with this. Perhaps another time.

Well, you've got a point there, FRiend. But what about the rest of us who have educated ourselves? Are we all destined to live in the squalor as America devolves?

It depends, how much are we going to take before they spark a rebelion. CFR might be the spark. If not, AMENSTY for illegal immigrants. If not that the reinstatement of the death tax. If not that, the collapse of social programs. If not that, the collapse of the U.S. dollar.

There are so many ways (what I listed and MORE) that this country could collapse into revolution that it is horrorifing.

"It depends, how much are we going to take before they spark a rebelion. CFR might be the spark. If not, AMENSTY for illegal immigrants. If not that the reinstatement of the death tax. If not that, the collapse of social programs. If not that, the collapse of the U.S. dollar. There are so many ways (what I listed and MORE) that this country could collapse into revolution that it is horrorifing."

Please, start with something less than 4% GDP growth, less than rising wages, less than historically below average unemployment, less than an improving environment, less than improved race relations, less than historically low crime rates and being by far the wealthiest country with the most opportunity in the history of the world. Yea, a real revolution breeding ground.

You put in tariffs. THe rest of the world puts in it's own tariffs and we have world wide isolationism. Prices get hked up, people get complacent and we lag behind in technology, industry etc. That's whats happened to every isolationist country and you can see the same in Zimbabwe now. Tariffs are not the way. You're lookign at it from a narrow perspective. You would also have supported the steel protectionism. That helped the steel workers, but hit the steel consuming industries hard. Now, your method may have some direct, visible benefits, but the indirect, invisibile benefits would hurt a lot more and the overal effect would be negative.

ALL jobs will not be outsourced -- for the simple reason that people would prefer to have someone on hand, in person. That isn't going to change. Outsourcing can work for the indirect ones. Furthermore, in India, which IS a democracy, wages are rising. Yes, in the short term it may hurt, but in the long term they will be at the same level as us. We've had it great for decades because 2.5 billion were trapped by communism and socialism. Now they're reforming so there will be inevitable growing pains. IF you put some of our ancestors who migrated here in the same position, they wouldn'tbe asking for handouts, they'd knuckle down and get the job done. As every society gets richer, it gets complacent -- we haven't gone too far and the indians nad CHinese have given us a wake up call, so we won't go the way of the Romans or even the Brits. the US will be a major power in this century, but it is inevitable that India and China would be powers at slightly lower, but still high levels. The British and French will decay -- the EU will survive and for all of those anti-EU nuts here who say no, such a diverse group won't survive, forget that the current nation states themselves were formed of diverse states in the middle ages -- take England (forget about the UK, just England), until 800 it was still a bunch of kingdoms with varying dialects. Inn fact, until Georgian times, Yorkshiremen would consider themselves quite different from, say, Cockneys. bUt htey all considered themselves part of a larger entity -- Englishmen. In the Early Middle ages, Wessex men, Essex men, cornishmen etc. all considered themselve part ot the vast entity called Christendom. Larger nation-states IS the future, it is inevitable, but they should maintain a degree of federalism as we do here in the states and as Spain does.

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