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United States hemorrhaging core tech jobs: Trend could imperil the American programmer
San Mateo County Times ^ | Sunday, July 20, 2003 | Rachel Konrad

Posted on 07/20/2003 2:08:36 PM PDT by nickcarraway

Sunday, July 20, 2003 - SAN JOSE -- Peter Kerrigan encouraged friends to move to Silicon Valley throughout the 1980s and'90s, wooing them with tales of lucrative jobs in a burgeoning industry.

But he lost his network engineering job at a major telecommunications 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 labor 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 hemorrhaging of tens of thousands of technology jobs in recent years to cheaper workers abroad is already a fact of life -- as inevitable, U.S. 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 involve greater skills -- could be cutting to the industry's bone, threatening to prolong the three-year U.S. 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 that targets the apparel industry.

"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 work force."

Cost-conscious executives have been shifting lower-level tech jobs in data entry and systems support abroad to cheaper labor 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.

According to Forrester, companies in the United States and Europe will spend 28 percent of their information technology budgets on overseas work in the next two years.

Boeing, Dell and Motorola have opened software development centers 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 optimize the microprocessors' performance, and opened the Russia Software Development Center in Nizhny Novgorod.

"We intend to invest in the fastest-growing markets, and those are India, Russia and China -- that's the long-term plan," Intel spokesman Chuck Mulloy said.

Microsoft is adding software development jobs at its India Development Center 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 Web site, 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'90s.

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

According to the nonpartisan Economic Policy Institute, non-inflation-adjusted wages for tech workers grew 1.7 percent between the fourth quarter of 2001 and the fourth quarter of 2002 -- not enough to keep up with the period's inflation rate of 2.2 percent.

The average computer programmer in India costs $20 per hour in wages and benefits, compared to $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 U.S. average, saving tens of thousands of dollars in recruitment and training per employee per year, he said.

People in India are very ambitious and very well-educated, but they're also ready to invest in a company, and they have less of a tendency to move out of the company, Hauducoeur said.

Many U.S. corporate executives say they simply can't afford to overlook foreign computer workers -- especially in India, which produces roughly 350,000 college engineering graduates annually.

Bob Pryor, who heads the outsourcing practice of Cap Gemini Ernst & Young, said it's naive to think outsourcing software jobs could ruin America's tech dominance.

"The reality is that we live in a global economy and we compete against global players. We need to look at where we have strategic advantage -- whether it's resources or skills," Pryor said. "It frees up people and dollars to do much more value-added strategic things for clients."

Marcus Courtney, a former contract worker for Microsoft and Adobe Systems and president of the Washington Alliance of Technology Workers, said many tech workers understand and even endorse free trade and globalization.

"They even enjoy living on the cutting edge -- taking courses in advanced computer languages, getting experience in a variety of business disciplines, and endorsing a philosophy of continuous improvement," he said.

But many find it tough to reconcile their macro-economic outlook with their own unemployment.

"We need to move beyond the idea that individuals can simply cope and retrain," said Courtney, whose 275-member union is asking Congress to study and possibly regulate offshore outsourcing. "Workers need a voice over their economic future and a voice against the executives making these unilateral economic decisions."


TOPICS: Business/Economy; Constitution/Conservatism; Culture/Society; Foreign Affairs; Front Page News; Government; News/Current Events; Russia; US: California
KEYWORDS: california; employment; hightechnology; idia; jobs; pakistan; russia; siliconvalley
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To: JoeSchem
No one "deserves" anything. People earn what the market will pay.
41 posted on 07/20/2003 3:46:29 PM PDT by ItisaReligionofPeace ((the original))
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To: JoeSchem
BTW, it has nothing to do with who is "dumber". It has to do with who has marketable skills that are in demand.
42 posted on 07/20/2003 3:47:09 PM PDT by ItisaReligionofPeace ((the original))
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To: EGPWS
Why is that familiar? He didn't actually say "Nuts".
43 posted on 07/20/2003 3:48:04 PM PDT by ItisaReligionofPeace ((the original))
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To: PresbyRev
That's funny, I can't think of another time in our history that I'd rather be living.
44 posted on 07/20/2003 3:48:34 PM PDT by ItisaReligionofPeace ((the original))
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To: Nick Danger
Your post #16: should be required reading for all!

The jobs issue could well cost us the White House...and the House. Maybe even the Senate.

45 posted on 07/20/2003 3:52:27 PM PDT by neutrino (Oderint dum metuant: Let them hate us, so long as they fear us.)
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To: Lion in Winter
Your recollection is correct. DASD, a very successful Milwaukee firm, was purchased by Cap Gemini in the early '80's.

Following that purchase, two of the principals of DASD (original or second-gen shareholders) started up CPU, another extremely successful IS consulting firm.

By 1998, CPU had been sold to a Detroit(?) based firm and now employs about 10% of its 1990 numbers. At that time, the Company had over 600 programmers in the field in Wisconsin.
46 posted on 07/20/2003 3:54:41 PM PDT by ninenot (Torquemada: Due for Revival Soon!!!)
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To: scottlang
A moderate Democrate who addresses the issue of outsoursing, h1b, and l1 visas could walk away with the 2004 election.

I think if ANY demorat, including Hillary, addresses these issues, GW is going to go the way of his father. But then again, the demorats are bought and sold to the same multi-national corps as the Repub's, so there isn't much to worry about. Just keep watching the USA export all of our jobs.

47 posted on 07/20/2003 3:54:48 PM PDT by Walkin Man
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To: Antoninus
All these negative Nellies are missing the major point -- America didn't become the world technology leader by being a source of cheap labor like India and China are doing.

It wasn't the same America, either. Now, if you are on the leading edge, your rewards are heavily blunted by the taxes you pay to carry the now unemployable.

The outsourcing problem is to some degree analagous to the illegal migrant worker problem in this sense: The savings to the companies are illusory--companies save, but by shifting costs to society at large. Its a lot like the tragedy of the commons.

You can't easily retrain and re-employ a moderately skilled 50ish worker whose employment has gone offshore for a long and new career; and the dislocations in his life -- sell the house, long term unemployment, etc -- are picked up by the rest of us.

There are examples which mask the basic argument, such as when industries truly become obsolete or require very little skill and initiative--like buggy whips. That is only partially the case with programming. It is also interesting the liberal policy of the US universities in welcoming foreigners in the name of diversity and the spirit of education hastens this sort of reckoning.

Over time, competition means everyone has to work smarter to do well. However, it isn't in the common interest to hasten international competition when you consider the overall costs.

48 posted on 07/20/2003 3:57:59 PM PDT by Pearls Before Swine (South-south-west, south, south-east, east....)
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To: Nick Danger
We need to look at where we have strategic advantage -- whether it's resources or skills," Pryor said. "It frees up people and dollars to do much more value-added strategic things for clients."

Such as converting client systems to PeopleSoft??

Gee: that's a value-added-strategic-planning road to INDICTMENT for E&Y--now suspected of being on the take from PeopleSoft for pushing those systems to clients who simply did not need them.

Yup, value-added theft, fraud, and collusion.

49 posted on 07/20/2003 3:58:55 PM PDT by ninenot (Torquemada: Due for Revival Soon!!!)
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To: ItisaReligionofPeace
Why is that familiar? He didn't actually say "Nuts".

General McAulffie would dispute that statement.

50 posted on 07/20/2003 4:02:18 PM PDT by EGPWS
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To: ninenot
Such as converting client systems to PeopleSoft??

I didn't hear about this. Are you telling me these guys were peddling somebody's wares while taking the client's money to act as an 'independent' consultant? Did they caught at that?

51 posted on 07/20/2003 4:03:00 PM PDT by Nick Danger (The liberals are slaughtering themselves at the gates of the newsroom)
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To: Walkin Man
The Dems don't want to stop it, and will not even propose that. They gain by promising more programs and services to the displaced workers: unemployment extensions, government health care, more government jobs, etc. That will work, since desperate people who were once middle class and find the rug pulled out from under them with no place to go except waiting tables or Home Depot, need these programs. They will vote Dem, and they won't care a hoot about moral or national security issues, or anything except what they need to survive economically.

All these freepers who trash talk this issue beware, the one way ticket to a permanent Democratic majority in the US is the destruction of the private sector middle class. Its a slow process, but it is happening.
52 posted on 07/20/2003 4:03:23 PM PDT by oceanview
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To: speekinout
That $65 is wages *and* benefits

FYI (and I spent several years in the IT consulting biz...)

In Milwaukee, Madison, Green Bay, the average salary is now around $60K, or about $30.00/hour. Another $15./hour is bennies; the balance is the arbitrage given to the contracting house.

It may be the case that in other parts of the country the salary is up to $35 or $40./hour, in which case your estimate of 'total' (fully-loaded) compensation is about accurate.

But I suspect that the $65./number includes the contracting firm's take...

53 posted on 07/20/2003 4:04:34 PM PDT by ninenot (Torquemada: Due for Revival Soon!!!)
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To: captnorb
I just performed a retained search for an Ops Dir--one of the preferred skills was an understanding of cut/sew business.

We mailed inquiry letters to over 250 individuals regarding the opportunity. Of the 8 letters mailed to Mo. cut/sew type firms, 6 were returned, "addressee unknown/no forwarding address.)

Talk about shrink!! Hot water couldn't do it better than "free trade."
54 posted on 07/20/2003 4:08:14 PM PDT by ninenot (Torquemada: Due for Revival Soon!!!)
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To: Pearls Before Swine
your rewards are heavily blunted by the taxes you pay to carry the now unemployable.

Yes this is true, when a majority promotes the re-election of people who endeavor to make government your means of well being. Of course the visionary thinkers know better than to think this can be maintained for more than a short period of time.

55 posted on 07/20/2003 4:10:38 PM PDT by EGPWS
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To: EGPWS
Got a mouse in your pocket? You really don't get it.

Your concern with the economy as it relates to you is understandable.

I'm retired, son. I'm concerned about my country and my children, grandchildren.

What are your concerns beyond electing the next globalist?

56 posted on 07/20/2003 4:11:53 PM PDT by iconoclast
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To: Nick Danger
I saw an article on the topic about 3-4 weeks ago. It stuck in my mind because a very large Gummint entity in this area uses PeopleSoft and the consultant is E&Y.

Google, maybe? I think it's in the "investigation" stage; if you have WSJournal online search, they reference it, I am sure...
57 posted on 07/20/2003 4:12:19 PM PDT by ninenot (Torquemada: Due for Revival Soon!!!)
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To: ninenot
Hot water couldn't do it better than "free trade."

So your against free trade? What are you for then?

58 posted on 07/20/2003 4:15:02 PM PDT by EGPWS
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To: iconoclast
What are your concerns beyond electing the next globalist?

Whom are you refering to as a globalist that I'm so inclined to elect?

59 posted on 07/20/2003 4:18:36 PM PDT by EGPWS
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To: EGPWS
So your against free trade?

Where does free trade exist?

I'd say nowhere, but venture to say the CLOSEST you can come will be Uncle Sucker and some third world countries.

60 posted on 07/20/2003 4:19:58 PM PDT by iconoclast
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