Skip to comments.Drifting away: Many fear such 'offshoring' will hurt the economy and nationa l security.
Posted on 08/03/2003 1:11:56 AM PDT by sarcasm
Sunday, August 03, 2003 - Denver-based Quark Inc., one of the nation's best-known software companies, has just built a brand-new facility that will employ 1,000 software and technology workers.
The growth might appear encouraging to the state's ailing tech economy, but there's a key caveat: the center, and the jobs, are in Chandigarh, India.
Quark is among a long line of tech companies now moving jobs or creating new ones in India, China, Vietnam and Singapore in search of cheaper and faster software development, manufacturing or tech support.
The trend appears to be an unstoppable force that infuriates many of Colorado's jobless and worries some economists who say it ultimately may hinder the state's economic recovery.
"This is part of why the economy is still sluggish," said Mac Clouse, director of the Reiman School of Finance at the University of Denver.
"It's not the traditional economic model anymore," he said. "Businesses may be spending, but they're not spending their dollars here - it's not going to result in new jobs and increased economic activity."
Momentum by U.S.-based companies to create new jobs in foreign countries is building throughout the tech industry. Late last month, news leaked that IBM Corp. would move 1,000 jobs overseas.
A couple of weeks earlier, Microsoft Corp. said it would hire 5,000 more people, up to 2,000 of them outside the United States. At about the same time, Oracle Corp. said it will almost double workers in its Indian unit to 6,000.
Tech-heavy Colorado is being hit especially hard.
Two-thirds of the layoffs in Colorado over the past few years came from telecommunications and technology firms. In June, 142,000 people were looking for work in the state, according to the Colorado Department of Labor and Employment.
Dozens of Colorado companies have already moved or created technology manufacturing jobs outside the country. More recently, they're taking technical support, software jobs and even network operations overseas.
One Denver firm called Technology Crafters is helping 18 Colorado businesses do software development in India.
"There's a lot of interest," said Robert Welch, the company's president. "American software teams are awesome for innovation, but in terms of being able to crank things out in a productive manner, they're not the best on the planet."
Three years ago, Louisville-based Storage Technology Corp. moved its manufacturing operations to Puerto Rico. Agilent Technologies shipped hundreds of its Colorado Springs jobs to India and China. Also in the Springs, broadband device maker Actiontec sent several hundred jobs to India, and computer storage firm Quantum sent 865 jobs to Malaysia.
Now PeopleSoft, the company that last month acquired Denver software maker J.D. Edwards, plans to double its Indian operation to as many as 700 jobs. And Denver tech consulting firm Ciber Inc. revealed a few weeks ago it will create new software and information technology-related jobs in India.
"All this is a huge challenge that the new mayor and Gov. Owens have to bring back a job base to Colorado and to Denver," Clouse said.
On Tuesday, Denver Mayor John Hickenlooper and Gov. Bill Owens will fly to California to meet with tech firms that have Colorado operations. The duo will encourage those businesses to expand in the state and in Denver.
"There are still jobs to be created domestically," said Hickenlooper's press secretary Lindy Eichenbaum Lent. "We just need to make our case."
But it won't be easy.
The pressure on corporate executives to look overseas is huge, primarily fueled by the weak economy.
Within the next 18 months, one in 10 U.S. technology jobs will be moved offshore, according to Gartner Inc., a research firm that follows technology trends.
|Special /Todd Spangler|
|Indian workers, above, staff a U.S. companys call center in Bangalore, India. Technical jobs are increasingly being offshored to companies such as Wipro Technologies in Bangalore, top.|
Business executives say they can't compete, let alone keep their companies alive, if they hire U.S. IT workers for $40,000 to $80,000 a year while their competitors hire the same talent in India for $8,500 to $9,800.
Mac Slingerlend, chief executive of Ciber, argues that by using Indian workers, his firm ultimately saves U.S. jobs. The company employs 6,000 worldwide.
For instance, Ciber lost work from a major client, American Express, when the financial firm sent half of its software development work to India.
Because Ciber didn't do work in India at the time, the company lost the business and was forced to cut 100 jobs in its Phoenix office, Slingerlend said.
"I've cost American jobs by not doing work on India," he said.
Slingerlend acknowledges that if the U.S. economy remains lackluster, India will chip away at American jobs and economic growth here. But he said the United States is simply too expensive.
"If things can be done well and more inexpensively, the work will find its way to these places," he said. "The question is, do we want to participate or put our heads in the sand? I'm not trying to sound cruel or crude, but we as a country need to adapt."
That doesn't provide much consolation to the thousands of Coloradans looking for work, some of whom say they were replaced by foreign workers.
"Corporate America is loyal to their stockholders, not loyal to America," said Richard Armstrong, an unemployed Denver computer programmer who was laid off three times and each time replaced by foreign workers.
"We really can't compete because they're earning $6,000 a year overseas," he said.
Armstrong started a website, HireAmericanCitizens.org, to organize rallies and urge people to write Congress to stop offshore job development. He also is pushing for reform of the temporary worker visa program that he says is abused by companies and ultimately used to send more jobs overseas.
"They bring in these people to work and train on their software," Armstrong said. "Once they've trained them, they can do everything offshore."
|Protesters picket last month outside Microsoft Corp. offices in Irving, Texas. Workers are upset because the software giant announced it would close the facility and move 800 jobs to India. The trend among tech companies to offshore jobs worries both workers and economists.|
Yet jobs have been leaving the United States for years in a number of other industries. The automotive industry began hiring offshore in the 1960s as did clothing, shoe and widget manufacturers a decade later. In 1970, manufacturing jobs made up 15 percent of the Colorado workforce. By 2000, they made up just 9.3 percent.
And more recently, customer call centers started moving overseas.
"It's the worry du jour. But it's been going on for hundreds of years," said Tucker Hart Adams, a regional economist for U.S. Bank.
"These people have to retrain," she said. "It's particularly hard for the older worker, but these jobs won't be here to put people back to work when we move out of this recession."
Critics of "offshoring" argue that technology isn't the same as making tennis shoes or cars. They worry that eventually, all the high-tech brain power will be in the hands of another country - which potentially could be dangerous to U.S. national security and to future high-tech innovation.
"Right now we're the technology leader of the world," said Jim Hertzel, chairman of Alumni Consulting Group International, a Greenwood Village technology consulting firm. "If we take the technology and let someone else do it for us, what's left for us?"
Armstrong, the laid-off programmer, fears that future college graduates, who will soon include his own son, won't find jobs or that others will be discouraged from even learning software skills.
He says that ultimately will lead to a technology brain drain for future American generations.
"It's dumbing down of American software," Armstrong said. "We're going to be so dependent upon that labor and they'll have an opportunity to have their way with us. It puts our assets and capital at risk."
And while manufacturing jobs in the 1970s were replaced with new and higher-paying jobs in technology, the future for today's jobless tech workers is not clear, said Clouse, the DU economist.
"No one knows what will replace these jobs," Clouse said.
Meanwhile, the noise made by people such as Armstrong over offshoring has piqued the interest of Congress.
Two congressional representatives from Washington state, Democrats Jay Inslee and Adam Smith, asked the U.S. General Accounting Office to study why companies are going offshore, which policies could encourage them to stay here and what domestic jobs will look like in the future. Washington has had one of the top state unemployment rates in the past couple of years, reaching 7.7 percent in June.
"We want to steer people toward jobs that will be there," said Smith's press secretary, Katharine Lister. "We're concerned we may be giving tax breaks to companies and then encouraging them to send jobs overseas."
Armstrong and Hertzel want to see Congress impose tariffs penalizing companies that do offshore work and create rewards for those that do not.
But John Hansen, Colorado's secretary of technology, said the solution is not regulation. That, he said, will strangle businesses' global competitiveness.
Hansen said U.S. companies and citizens must innovate and come up with technologies that create new companies and ultimately new jobs. Most of that innovation, he said, will come from university laboratories.
"We need to create an environment for innovation, access to capital and favorable tax climate," Hansen said. "(Regulation) will not work in the long run."
Technology workers must make themselves more valuable to employers as well, said John Raeder, CEO of IQNavigator, a Denver software firm that develops its code in India.
Raeder said tech workers should develop expertise in finance, marketing or perhaps business strategy as well as software.
"Don't pigeonhole yourself into just learning computer science," he said. "A lot of creativity for software cannot be done offshore."
Young college graduates already are starting to adapt, said Terry Wanger, director of DU's Suitts Center for Career Placement. She said 73 percent of DU's new graduates are getting jobs because they bring with them additional expertise and they expect jobs with lower salaries and less responsibility.
She said it's critical that older workers see the shift in the industry as well.
Welch, who sees the global economy firsthand as president of Technology Crafters, agrees.
"Colorado will evolve. We have to," said Welch. "We're in direct competition with people from all over the world."
He seems to think he can dramatically unveil evidence of WMD in Iraq just before the election and everything will be okay.
Having worked in the IT business for seemingly forever, allow me a generalization here. There are basically two kinds of people in the programming profession. Those who can and those who cannot. Those who can are typically strong mathematically, highly conscious of minute details (analytical), and are less prone to be concerned about big picture areas like business strategy etc. Many people who cannot program well are gifted with better interpersonal skillsets and through increased dialogue create opportunities to devise new solutions (out of the box).
These differences are why I think it is easy to say but not easily done when you tell a person who is a world class programmer that they need to develop more business skills.
This is the lastest figures on the GDP for next year. If we hit over 6% (low end) the country will be at full employment. It always happens in a booming ecomony (Bill Clinton's 20 million jobs). I know it is hard to tell someone who is unemployed to have a little patience, but soon, real soon, it will be an employee market again.
Next, do you realize that half the people on this planet never touched a computer screen? Do you realize that there is an explosive technology boom (telecommunications & Information Technology) happening worldwide? Do you realize that it would be stupid for American companies not to have a presence overseas to take advantage? Soon, the world will not be able to meet the demand for I/T professionals and require American solutions.
That's because they don't have electricity. Do you really think that people in the outback of Australia or the jungles of Asia or in Rwanda are ever going to need IT?
And this is the "Good" news????
I certainly do not envy the youth of today. While they have always enjoyed all the "goodies" in life, now they face a rather grim period of economic readjustment! It was much easier to start with "squat" and improve one's standard of living than to ride the economic slope downward for a long period of time!
I see this study was created back when IT was booming from the Y2K hysteria and the .com boom. The fact is network diagnosis, page layouts, etc can ALL be done and are being done offshore. The study, if redone today, would be more accurate to say Fastest Growing Jobs in Far East.... Personally I think Handicap Ramp Construction and Meals on Wheels delivery jobs are going to be the fastest growing US jobs... (only being partly sarcastic on this last sentence)
You caught me. It's gloomy outside due to the weather and I guess I need some sun.
Okay, in terms of growth, that's wonderful. In terms of numbers, we'll see.
I am ambivalent about this supposed economic growth. According to reports we have been in growth since Nov. 2001. It certainly hasn't trickled down as far as I can tell.