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."

"What is unfortunate is that yall are going to make everyone suffer while yall persue a marxist utopean"

That’s nonsense. You’re promoting big government intervention and micromanagement of my freedom to trade with who I want. That’s early Marxism. I’m resisting. That’s capitalism, freedom, liberty, America.

Whether any significant jobs actually moved from pre-civil war North to South or if they mostly grew up where the labor market was most appropriate for them is irrelevant. It’s still much like today’s America/Asia labor gap, with cheap labor in one area, expensive in another and no tariffs in-between. Yet the North thrived. How could that be?

If Asia’s now going to drive wage down to poverty levels, how come it didn’t happen in the North in the 19th century? How’d they prosper despite ultra cheap labor just an 4 hour train ride away?

I’d tell you, but you’d probably just call me a Marxist again for promoting capitalist values and freedom. Probably compare me to Stalin (a protectionist) again. Even my 86yo mother suffering from Alzheimer’s can still think past that one. You appear more senile than her.

The conclusion is that “outsourcing” jobs to the South that could be done cheaper there did not damage the North’s economy

So you support slave labor? Maybe we could do some deals with the Sudan. That way you could get your DVD player for $19.99 instead of $49.99. I think what we really need is to find some place where people are worked to death in concentration camps. That way we don't even have to pay for their food. When they die, we can burn them as fuel for the factory and replace them with fresh surplus population. If we can find a similar arrangement for raw material mining operations, we might be able to break the $10 price barrier for that DVD player

the North’s prosperity and Industry breed by freedom left it able to field an army large enough to invade and crush the South after it rebelled.

The North had a manufacturing economy, that is where its strength on the battlefield came from. The "outsourced" jobs were agricultural, mostly related to cotton production. If the North's economy was made strong by outsourcing to the South's slave economy, how is it that is was "bred by freedom". Slavery is Freedom. Now there's a logical procession you don't see everyday, 'cept maybe in books about evil times.

"So you support slave labor? "

I made the mistake of reading just this one sentence from you. I told you that I don’t read your out of control emotional driven nonsense. Now you’re just being a pest. Write to “all”. Don’t bother putting my name in the address field.

The day I lose the discipline to ignore people proven to post nothing but bitter nonsense, like I ignore CNN on my dial, is that day I stop reading FR.

Whether any significant jobs actually moved from pre-civil war North to South or if they mostly grew up where the labor market was most appropriate for them is irrelevant.

It was the central "relevant" point in your previous post, now it is irrelevant. So which is it?

It’s still much like today’s America/Asia labor gap, with cheap labor in one area, expensive in another and no tariffs in-between. Yet the North thrived. How could that be?

The North did not have expensive labor. Every educated person knows that. It had a huge population of immigrants from Ireland and Eastern Europe crammed into slums in the major cities of the North. The North had a manufacturing economy, the South an agricultural economy. Today, Asia has a manufacturing economy, the primary exports of the US are agricultural products.

I made the mistake of reading just this one sentence from you. I told you that I don’t read your out of control emotional driven nonsense. Now you’re just being a pest. Write to “all”. Don’t bother putting my name in the address field. The day I lose the discipline to ignore people proven to post nothing but bitter nonsense, like I ignore CNN on my dial, is that day I stop reading FR.

You compare jpsb to your 86 y/o mother with Alzheimer's, and you say I post bitter nonsense? I'm just taking your arguments to their logical conclusions. If you don't like it, don't let the door hit you on the way out. BTW I will stay on this thread forever, embarassing you over and over again ad infinitum if I have to. Why? Because it is both easy and fun.

["That’s nonsense. You’re promoting big government intervention and micromanagement of my freedom to trade with who I want. That’s early Marxism. I’m resisting. That’s capitalism, freedom, liberty, America."]

Oh really? let's ask Marx himself and see which system he considers conservative shall we?

But, in general, the protective system of our day is conservative, while the free trade system is destructive. It breaks up old nationalities and pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. In a word, the free trade system hastens the social revolution. It is in this revolutionary sense alone, gentlemen, that I vote in favor of free trade.Karl Marx, 1848

Wrong again huh? Yall free trader really need to study up a little.

[It’s still much like today’s America/Asia labor gap, with cheap labor in one area, expensive in another and no tariffs in-between. Yet the North thrived. How could that be?]

I have already explained that to you, but you refuse to listen, one more time, the northern workers DID NOT COMPETE with the slave labor of the south. The north had a moral objection to slaves and slave labor so the north refused to use it. And prospered BECAUSE they used high cost labor to produce high costs goods behind a wall of revenue tariffs that protected their economic system. Got it now?

Ask your 86 year old grandmother which is a better system, progressive income taxes or revenue tariffs? Don't you see that free trade is doing to this nation's ability to create wealth? And the standard of living of it working people? We are turning into a two tier society, the rich and the poor. Jobs are disappearing the government is going deeper and deeper into debt, and SURPRISE the poor are voting for more and more government help. Which, SURPRISE means more and more taxes on the few that still have descent jobs.

Yup you are a Marxist as Karl Marx himself points out. Not an intentional one, just an unwitting fool one one. I on the other hand am a conservative as once again, Karl Marx himself acknowledges.

Northern labor pre civil war was more costly then slave labor. And post civil war the southern economy changed and became prosperious because it was forced to use and compete with high cost labor. This is what the free traders do not understand, an economy is built bottom up by creating a marget that can afford to consume the products that the economy produces. Henery Ford understood this which is why he became rich by paying his workers a high wage. "I want my workers to be able to buy my cars" H. Ford.

It is quite likely, based on your previous posts, that you don't understand or will ignore the quote from Marx. So I will break it down for you.

This quote is what Marx used to summarize an important speech he gave in 1848 on the question of a free trade system vices a protectionist (tariff) system, with was being debated by the English.

But, in general, the protective system of our day is conservative, while the free trade system is destructive. It breaks up old nationalities and pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. In a word, the free trade system hastens the social revolution. It is in this revolutionary sense alone, gentlemen, that I vote in favor of free trade.

"the protective system [] is conservative" Well there we have it. Marx recognizes that a tariff system is conservative and therefore he is against it.

free trade system is destructive Well, that do you know Marx see the free trade system as destructive but what does free trade destroy? Marx tells us in the next sentence

It breaks up old nationalities ... Oh no Mr Bill, you mean a free trade system will destroy the good old USA? Yup, that's how Marx sees it, and he is correct as current developments (WTO, NAFTA, GATT) show. But it gets worse.

[it, free trade] pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. ... What this means free traders is that the free trade system chases the lowest cost labor and reduces to the lowest point, subsistence, all labor. That would be you, me and our children if we continue our insane trade policies. But it gets worse.

In a word, the free trade system hastens the social revolution ... Hmmm, this doesn't sound good. What this means is that once free trade has reduced labor costs to the subsistence level, well the workers will just say screw it kill the elites and demand a Marxists economy.

Ok, Mr Free trader, is this what you want? A socialist state? Cause that is what you are arguing for. While us "protectionist" are desperately pleading for a conservative national state with a prosperous working and middle class.

"But, in general, the protective system of our day is conservative, while the free trade system is destructive."

{snicker} Let me see, one misguided communist (Marx) says that “free trade is destructive”, and that’s your argument against me and free trade? ROTFLMAO (Rolling on the floor laughing my a~s off) Thank you for may best laugh of the week.

Regarding the North and the South, there were no tariffs between them. The North enveloped the South economically. Why is that? Come on guy. How’d it happen? Don’t change the subject. How’d the North manage to survive wage inequality and blow the South away economical and militarily?

Go ahead, side with Marx, and call me un-American.

As I have repeatedly pointed out which quotes and sources you are the Marxist, I am the conservative. Karl Marx, as I have repeatedly pointed out with quotes and sources, was a free trader. And Oh bye the way, the reason people are called Marxist is because of Karl Marx who is not just "one misguided communist", but the principle person responsible for the development of Marxistism/communist.

You really do need to study up if you intend to debate me without making a complete fool of yourself in front of the thousands of readers of this site.

I am not at all surprised you find all this funny. I have the feeling you are a teenage girl. But that's OK, someone has to educate you and it looks like that job has fallen upon me.

I tire of having to constantly repeat myself for your benefit, one more time and this is the last time so pay attention.

I have already explained that to you, but you refuse to listen, one more time, the northern workers DID NOT COMPETE with the slave labor of the south. The north had a moral objection to slaves and slave labor so the north refused to use it. And prospered BECAUSE they used high cost labor to produce high costs goods behind a wall of revenue tariffs that protected their economic system. Got it now?

"And Oh bye the way, the reason people are called Marxist is because of Karl Marx who is not just "one misguided communist", but the principle person responsible for the development of Marxistism/communist. "

Right, two diametrically opposed economic systems. Communism and Capitalism. One corrupt and evil and the other good. Communism maximizes government control of the economy, Capitalism minimizes government control of the economy.

Yet you, (the “conservative”) say that expanding government control of trade is “capitalist”. Explain that.

" I have the feeling you are a teenage girl."

I suspect that you’re an aging old man verging on senility. Evident By how you somehow your transposed “mother” to “grandmother. If you were together, you’d click on my name and read about me before contradicting that.

"the northern workers DID NOT COMPETE with the slave labor of the south. The north had a moral objection to slaves and slave labor so the north refused to use it. "

Snicker… And now the US refuses to use $1an hour labor in our territory (because no one will work for that), yet the North prospered and so will we. You’ve yet to explain how the free North enveloped the South. That’s because you can’t explain it without destroying your premise that wage inequality needs to be managed by tariffs. You are a coward.

Close but not entirely correct, capitalism without government supervision is really not a very good system either. It is an efficient system but does not do an acceptable job of distributing wealth. Capitalism worked well in the US because the US introduced labor laws, allowed labor to collective bargain and broke up corporations when they became to powerful. Without such government intervention capitalism would be a crueler master then Marxism.

Yet you, (the “conservative”) say that expanding government control of trade is “capitalist”. Explain that.

Gladly, first what we have to day is far from free trade, if it were in fact free trade then I might be willing to at least give it a try, but it ain't so I use the term "free trade" to describe what I consider the insane trade policies of our country. But even if it were I would still object as a conservative because adoption of free trade policies denies the government of it constitutionally prescribed method of raising revenue, tariffs. Without tariff revenue government adopted the progressive income taxes a source of funding.

Tariffs were a very effective way of funding government. Government could only grow as large as market forces would allow. If tariffs were to high, revenue would fall and government would have to lower them. Tariffs also limited the size of government. As a conservative letting market forces control both government size and government revenue appeal to me.

Tariffs also serve to protect and encourage domestic production which makes the nation less dependent on foreign sources. This is a highly desirable thing, particularly in time of war. And lastly if the capitalistic system that is funded and protected by tariffs does an equatable job of distributing wealth then the nation has a large, prosperous working and middle class that is far less likely to adopt a socailist/marxist form of government then a two tier third world soceity.

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