Posted on 10/30/2006 3:22:25 AM PST by CarrotAndStick
New Delhi, Oct 30 (IANS) US engineering jobs are being 'offshored' to countries like India and China, a trend that is 'gaining momentum', says a study just out.
But it says that it is still 'not clear' whether this would erode US competitiveness or provide long-term benefits to the West.
'What is clear is that there is insufficient independent research on this study,' says the study by the Durham, NC-based Duke University's Pratt School of Engineering Research. The study is titled 'Industry Trends in Engineering Offshoring'.
Significantly, this study challenges the often-accepted view that China and India 'graduate 12 times the number of engineers as the US'.
'Until recently, the most commonly cited statistics were that the US graduates 70,000 engineers a year versus 600,000 in China and 350,000 in India,' said the study.
It said that a more realistic comparison of total bachelors and sub-baccalaureate engineering, computer science and information technologies for 2004 was 222,335 (in the US), 644,106 (in China) and 215,000 (in India).
Duke University's executive in residence Vivek Wadhwa, who conducted the study with two others, said a recent offshoring conference in the US found civil engineering 'under threat' and some pessimistic views of the telecom industry - where most research and development has started going overseas.
'Some of the findings fly straight in the face of recent reports about India being in trouble,' said Wadhwa.
This study interviewed 78 senior executives of major US firms. It surprisingly found that 75 percent of US firms surveyed say that India has an adequate to large supply of entry level engineers - even more than in the US and China.
What was also surprising, he said, was that 57 percent of companies hire graduates with two-three year diplomas either directly or after they have received additional training.
This, said Wadhwa, may explain why despite the low four-year engineering degree and poor quality of engineering education in India, outsourcing is gaining momentum -- companies are recruiting raw talent and providing training.
'This also shows another big flaw in the current debate which is focused on four-year degrees,' he added.
Vivek Wadhwa told IANS: 'This means that despite what you read on the front page of the New York Times, the outsourcing trend is continuing and perhaps gaining momentum.'
'Indians have a resilience that is astounding. India has major issues with the quantity and quality of its engineering graduates. Yet companies doing business in India say that they find an adequate to large supply of engineering graduates in India -- more than in US and China,' he added.
Wadhwa found this 'particularly surprising' as the Chinese government reported that it graduated over 350,000 engineers with bachelor's degrees in 2004 -- over twice what India did.
After visiting Delhi and Bangalore and meeting business executives and academics, Wadhwa said he believed the private sector is making up for the deficiencies of the education system.
'Companies like NIIT are taking engineers with poor education and polishing their skills to the point that they become employable. Companies (in the US) are hiring based on skill and competence - not just four year degree,' he said.
Wadhwa said: 'Companies also confirmed that the reason they are outsourcing isn't a shortage of engineers in the US -- there are many other factors with cost being the no.1 reason.... the results are very positive for India.'
He mentioned in another comment that visitors from the US who visited a number of new private schools across India had been 'blown away' with the quality of education and infrastructure.
This study was presented at the US National Academy of Engineering in the past week.
Giving a hint about the economic reason for outsourcing in engineering, Wadhwa commented: 'There is no general shortage of engineers in the US. We asked questions about job acceptance rates, hiring bonuses and time to hire, to validate this.'
He said, this and an earlier study contradicted 'the media hype about a US (engineering) shortage'. There have been calls by political and business leaders to double the number of US engineering graduates to compete with India and China.
It also noted that jobs traditionally done in the US 'are going to India, China and Mexico'. Wide variety of jobs are being offshored including analysis, design, development, testing, maintenance and support.
But work done in the US is either more technical or equal to what's done abroad. Some 37 percent surveyed said US engineers are more productive and 24 percent said as productive as offshore engineers. None percent said overseas employees were more productive.
Companies expect the offshoring trend to continue and expect a wide variety of jobs to go overseas. Only 5 percent indicated a stabilization or contraction of offshore operations.
But some types of jobs are unlikely to be offshored: research, conceptual design, IP work, deep technical, communication or business support, customer interactions, project management, marketing, finance, architect level design, network design, management staff, business analysis, and jobs requiring US security clearances.
Ping.
Ping.
ping
It'a called cheap. Just wait till the "overseas" Indian and Chinese Engineers demand more money and perks...Then I guess everything will be outsourced to Africa.
From another article, a FReeper posted this, albeit somewhat unrelated, but nonetheless interesting nugget:
"Think of it this way - employee goes to employer and says "I'm more productive, give me a raise!" Employer says "All my employees are more productive, therefore I need fewer of them to get the same output the market is demanding. You're fired!"
Tends to hold down wages..."
Calling Yankee Ingenuity.
I wonder how the degree requirements differ.
at a recent conference on Help desks - all the big companies, HP Dell, AOL etc. told stories of how the qualified - can speak proper English - people have been hired in India and now companies are searching other areas to get help. Cheap is only part of the business model, but like the net makes this forum possible, phones and the net give users a desire for solutions - and they want it to cost less.
too bad the, in IT, the outsourcers write lousy code which will comw back to bite the us companies in a few years
http://www.webwereld.nl/articles/43373/wipro-profits-surge-on-continued-outsourcing-boom.html
Wipro profits surge on continued outsourcing boom
Woensdag 18 oktober 2006, 11:01 - Riding a boom in offshore outsourcing, India's Wipro Ltd. on Wednesday reported strong growth in both revenue and profit for the quarter ended Sept. 30.
Wipro posted revenue of 35.1 billion Indian rupees (US$767 million as of the closing day of the quarter), up 41 percent from the same quarter last year. The company's profit was 6.96 billion rupees, up 48 percent from last year.
The results are based on U.S. generally accepted accounting principles (GAAP), and refer to the second quarter of Wipro's fiscal year.
Wipro has both a domestic and export business. Exports for the quarter, consisting of IT services and business process outsourcing (BPO) services, were 27.2 billion rupees, up by 44 percent over exports in the same quarter last year.
India's largest outsourcer, Tata Consultancy Services Ltd. (TCS) of Mumbai, and the second largest outsourcer, Infosys Technologies Ltd. of Bangalore, also reported strong revenue and profit growth for the quarter, citing business from new customers and an overall buoyancy in offshore outsourcing.
Wipro, which is India's third largest outsourcer, added 54 new clients during the quarter in its export business. It also added 5,328 new employees, taking the total in its export business to 61,179 as of Sept. 30.
Higher operational efficiency and increased profits from its BPO business helped Wipro offset the impact of a wage increase in the quarter, the company said.
Eventually, the Cambodians will outsource everything *back* to the U.S. It's all part of the plan... /s
If we are not going to keep research and development, exactly what do we plan to keep here?
If you allow research and development to go overseas, I don't think you can plan to keep any part of the business.
My opinion is that you won't be able to have the world's best technological military if your researchers are in China or India.
http://www.theherald.co.uk/business/73247.html
UK is target as India Inc pens £9.5bn chapter
DOUGLAS HAMILTON
CASH-RICH Indian corporations, boosted by a booming economy at home, are in a highly acquisitive mood, snapping up a wide range of companies in the UK and elsewhere.
During the long period of the Raj, Indian companies were mainly small, family-owned concerns but with the emergence of India as a potential economic colossus in recent years, the country's corporate culture has changed radically.
Many industrial groups are still family owned but are now so powerful that they have been dubbed "India Inc", by the sub continent's financial press.
So far this year, Indian companies have made more than 130 acquisitions exceeding $18bn (£9.5bn) in value.
The UK is the top destination for acquisitions by subcontinental companies. The nation also became the third-largest investor in the UK as Indian firms invested about $2bn in the year to March 2006, more than twice the previous period.
A senior investment banker told the Financial Express, a leading Indian newspaper: "The rise in takeover activity indicates both foreign as well as domestic investment is flowing into Indian companies.
"This is also a sign of greater consolidation and value creation for the shareholders of the companies whose shares are being acquired in the process."
Behind the push for expansion overseas lies a combination of factors: easier credit, a strong desire to achieve global scale, a new self-confidence about Indian business's ability to add managerial value to companies that have been taken over and the ability of many Indians to work in English.
India's booming economy has also been crucial – the huge nation, which ironically has an ancient spinning wheel on its national flag – is in its fourth straight year of growth of around 8%. In the first two quarters of this year, GDP growth increased at rates of 9.3% and 8.9% respectively over the same periods in 2005.
India's companies have capitalised on the government's economic reforms of the early 1990s to build some of the healthiest balance sheets in the world.
The shopping spree includes a variety of industries spanning information technology, to steel, and from motor vehicle parts to pharmaceuticals and chemicals.
Ranbaxy Laboratories, the pharmaceutical group, recently acquired RPG Aventis to become a top player in the European generic drug market.
Mahindra & Mahindra, the flagship company of the Mahindra Group, which makes tractors and other other vehicles, has bought Stokes, a British automotive forging company, the tractor manufacturing assets of China's Jiangling Motor, and Jeco Holding, a German forging company.
Suzlon paid more than $500m (about £265m) to acquire Hansen Transmissions, of Belgium. Vijay Mallya's United Breweries Group is considering a £400m bid for Scotland's Whyte & Mackay whisky distiller.
The Wood Group, an Aberdeen-based energy services firm, is said by the Indian press to be a takeover target of Reliance Industries, India's largest publicly quoted company although City experts have played down the speculation.
Meanwhile, Videocon Industries is leading a consortium bidding $700m for Daewoo Electronics, one of South Korea's leading companies.
Confirmation that Indian companies are major players on the global scene came on October 20 when the board of Corus, the UK-Dutch firm, accepted a 455p-a-share takeover deal with India's Tata industrial group to create the fifth biggest steel maker in the world.
The proposed acquisition of Corus by Tata group for about £4.3bn is unique in several ways.
It is the biggest overseas acquisition by an Indian company and clearly demonstrates its corporate power.
Corus, whose Scottish operations centre on the Dalzell steel works in Motherwell, was the result of a union between British Steel and Koninklijke Hoogovens of the Netherlands in 1999.
However, the company has not been able to move beyond the middle sector of the high-high-cost European steel sector and has left itself open to become a takeover target.
While the Corus board has accepted Tata's bid, the situation is not yet settled. Rumours are swirling around the City that the Brazilian steelmaker CSN (Companhia Siderurgica Nacional), which has shown interest in Corus in the past, may step in with a higher bid.
Novolipetsk of Russia has also been linked with Corus, whose shares have risen sharply in recent days. Corus stock closed4.25p stronger at 470p in Friday's dealing.
The terms have not impressed Edinburgh-based Standard Life Investments, Corus's biggest institutional shareholder with a 7.9% stake.
In a statement, SLI said: "The 455p-per-share offer by Tata for Corus is lower than we would have expected the board of Corus to agree to and recommend."
It added that the Corus management team had done "an excellent job" in restructuring the group.
The statement continued: "The global steel business is undergoing a period of rapid consolidation, which leaves Corus in an interesting strategic position within the industry.
"We feel that the offer price does not fully reflect the value of that position.
"The acquisition of Corus brings many advantages to Tata, including elevating it into the top five of global steel producers and an as yet unquantified amount of synergy benefits.
"The 455p-per-share offer from Tata does not attribute significant value to Corus shareholders from achieving what we understand to be the substantial savings available from the joining of the two businesses."
The proposed Tata takeover reinforces the trend towards consolidation in the industry.
Earlier this year Mittal Steel, controlled by Anglo-Indian businessman Laksmi Mittal, acquired Arcelor, the Luxembourg-based steel maker for e26.9bn after a protracted and controversial bid battle.
For Tata, the Corus takeover is a big deal: Tata is a diversified conglomerate with interests ranging from steel, hotels, tea, telecoms, automobiles, textiles, chemicals, information technology, and power, and Tata Steel is the biggest private sector steel maker in India.
If the deal goes ahead, it will catapult Tata from the world's 56th biggest steel maker a major market player.
Tata is a well-known brand in India and is a company many investment bankers respect, because its corporate governance and ethical standards are high. It has a reputation of treating its workers well, which should help ease fears of job losses by the Corus workforce.
Tata has a revenue of $22bn (about £12bn) and equivalent to about 2.8% of India's GDP.
The group controls Britain's Tetley Tea and is the largest seller of whole coffee beans in the US.
It recently acquired a 30% stake in Glaceau, a US company that makes "enhanced" water, flavoured with fruit and containing added vitamins.
Its computer software arm, Tata Consultancy Services, may lack the glamour of Bangalore-based Infosys and Wipro, but it raked in more export revenues than the other two in 2005.
Tata's car, the Indica, was marketed in Britain by MG Rover as the City Rover.
Tata officials have hinted that the proposed takeover of Corus will not be the group's last acquisition. The company appears to have more steel-making assets in its sights.
Says it all right here.
The main point for comanies is that they want the lowest costs and the highest margins. THat means you do all your work outside the U.S., where it is cheap, and you sell your products and services in the U.S., where all the money is located. I remember reading a month ago that the only area of growing opportunity is the U.S. is healthcare. That is the only sector that can't be directly outsourced, even though some of it's adminstrative functions can be. The future U.S. economy will be based on healthcare providers, not manufacturing, argriculture or technology.
Yes, the economics of outsourcing are compelling and few industries are immune to them.
But is it in our national interest not to be world's military superpower? I don't think we can be if we don't lead in research and development, and I doubt we can be if we aren't also leaders in manufacturing infrastructure.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.