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Andy Grove Speaks out on Offshore Outsourcing
molarmass192 writes "Andy Grove, of Intel fame, "spoke out" at a recent technology summit in Washington about the current trend towards offshore outsourcing and how it's causing the US to slowly but surely lose its edge in the tech sector. He states plainly that the US government must step in to restore balance between the need for profits and the lure of offshore outsourcing. There are also pokes at the patent system and slow adoption of broadband internet access. An interesting insight into what's going on inside the heads of the US's tech leaders."
Isn't free in america.
Turn blue, holding your breath.
The U.S. has re-modeled itself on an econoic and political model borrowed from Argentina in the '70's, and the rest of the world is charging along behind. E.U.? wants to be as big a Banana Republic as U.S. and China...
"Flyin' in just a sweet place,
Never been known to fail..."
This is regulation. I thought regulation was bad for the Internet... and in any case, merely saying that the government should do "something" about it is inviting vague foolishness down on our heads to the detriment of business. Any "solution" implemented on a vague platform like that would probably be worse than the problem, and at best a marginal improvement.
The World Wide Web is dying. Soon, we shall have only the Internet.
"Andy Grove, of Intel fame, "spoke out" at a recent technology summit in Washington about the current trend towards offshore outsourcing"
And where are Intel processors manufactured again? Or is it only a problem when it effects white collar workers?
China #2
India #22
As the IT mgt books say, "Don't outsource your strategic intellectual capital!". Unfortunately, most corps don't seem to think of this and they're outsourcing everything they can just to save a few bucks.
I saw an article a few months ago, I think CIO.com, that mentioned how United Technologies saved a whole $7 million (US) on their IT budget by sending some work over to India. I thought, "Wow! Seven million dollars US!". Then I looked. Their IT budget is over a billion dollars. So they saved a whole 0.7% by going overseas. In the meantime, their employees are demoralized for having seen their buddies lose their jobs and some poor bastard(s) have to stay in the middle of night to deal with people on the other side of the world, because if they don't - it's their ass too!
There I go again, ranting!
There is no spoon or sig.
I'm currently unemployed and directly due to off-shoring. It sucks to be unemployed - trust me. However I think that it is really silly to put barriers in place.
No 1. You inevitably get what you pay for. After having lost my job, the company I worked for now has a team of people in asia and they cost far more than the team we had here in the valley and they have yet to deliver squat.
I think that these off-shore arrangements only work if you have a very strong cultural match between off-shore supplier and local organization or if it is managed very carefully. Very few US organizations are capable of pulling off such a feat and it is inevitable that most of these off-shoring relationships will result in huge craters.
The US tech recession is the result of the "perfect storm", a) Bubble pops, b) oversupply of skilled immigrants c) Oversupply of "cheap" skilled workers. So, a) the bubble popped and it's now starting to come out of recession, b) immigrant quotas have been curbed, and c) there is only so much you can outsource.
It will recover, just be prepared to hold out for a few more months (up to 12 months). Keep abreast of the skills you need with your spare time.
Governemnt interference with the market is bad. Huge subsidies that distort thetrade in agricultural products is bad, and it is killing Africa (literally).
/. terminology: Protectionism is proprietary; free trade is free.
Tariffs or other protectionism would not work-- what would we do? demand that XX% of code is written in North America?
The software sector is simply waking up to something that has happened to every other sector: as the segment matures, labor becomes portable, and therefore companies will seek the cheapest labor possible. Trying to stop this only costs consumers, and-- perversely-- the very segment they are trying to protect via regulation compliance costs, taxes, and loss of overseas marketshare.
You want a job? innovate. Become efficient. Figure out howto make money by "exploiting" all that cheap Chinese labor yourself. Find something that those rising Chinese and Indian middle-class consumers want.
If you want action from the government, demand that they stop supporting 19th century industries and that they demand open trade with other countries. Protectionism is going back.
Let me voice my opinion in
davejenkins.com |
" How dare countries outside America try to compete! It's so... un-American!"
It's more like "How dare US companies compete against US consumers!" The other countries are just pawns in the whole game.
the USA should reconsider the software patents that have crippled American innovation for decades, and also the DMCA which has effectively denied Americans their fair use rights.
just like the humble blood clot... turboporsche@telus.net
Humans have social structures which circumvent it. Things like inheritance, family ties, friendship, traditions, religion, etc., etc. Emotions and the ability to reason routinely prevent the best from suceeding while allowing the worst to prosper. That's one of the many failures of capitalism. A small group of people monopolizes wealth and power to the detriment of the rest; and they use social structures to hold onto that wealth and power inspite of anything Natural selection has to say on the subject.
Oh, and the people with power in the U.S. don't care about keeping America in power. They're global, meaning they operate on a global scale sans petty concerns like patriotism. Nationalism is just something to keep the rubes in line. That's the major failure of capitalism. Adam Smith assumed small shop owners who had a stake in their community, and who themselves suffered if the community went to hell. Now global capitalists just move away from their rotting comminities. The slums are exported to poor countries, and the rich live where they don't have to worry about the crime, violence and polution they're creating.
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Just let those outsourced projects fail (most of them do) and see those "bright minds" who came up with the idea of outsourcing getting fired without a severance package.
I've seen the results of several outsourced projects. These projects are so fucked up, it's unbelievable. This must have to do something with the management there, because I've seen some very impressive Indian developers over here in the US (not that many, either, but then I'm hard to impress) and I don't believe they can't find any good developers there. It's just that the results of the outsourced work are often unmaintainable piles of horrendously written spaghetti code.
I have yet to see one single exception from this.
Now, how to stop it? I favor use of tariffs to force up the price of offshore workers
Nice idea, except that the US economy's success is predicated on open trade and open enterprise. Your attitude doesn't surprise me much. Free enterprise and trade is great until it effects you, and the average American has no qualms about being hypocritical when it serves.
The fact is that introducing tariffs will make the situation worse, not better. More industry will move offshore because the cost of doing business in the US will rise. Countries will retaliate with their own tariffs and the amount of business going to the US will fall.
The fact is that most IT jobs are commodities: system administration, building web pages, support, most programming (visual basic, etc) and the like can be done by anyone. The only solution is to innovate, become more efficient and smarter in how you do things.
I live in a country with a relatively small, export oriented economy. Reform and increasing exposure to international competition has made the economy more robust and efficient.
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It isn't unions or professional organizations that prevents lawyering and doctoring from going off-shore. It's the fact that to perform the duties necessary to those professions, you actually have to physically BE THERE.
In law, local variations in law make it such that it's utterly impossible for lawyers from other countries to just practice law in the US from far away. Plus, you actually have to show up to court sometimes.
In medicine, you actually have to talk to and physically examine the patient to perform most duties in medicine. Tele-medicine and such are interesting experiments, but there's only so much you can do from a 2-D TV quality image. You have to be able to put your hands on the patient, poke and prod, smell their breath, etc. You can't do that from the other end of a telephone line. Plus, again there are regional variations in the standard of care such that doctors from other countries won't be practicing in concordance with those customs. Diagnositic radiology, however, is one field that you can perform largely from afar, and some of those jobs are being outsourced to other countries via high-speed telecom lines (primarily for middle-of-the-night needs).
"No, no, no. Don't tug on that. You never know what it might be attached to."
Not only that, Americans only represent 5% of the worlds population! Yet they expect to be treated as the majority and the only ones that matter. I guess that is because the USA has taken more then 50% of the worlds wealth. The only reason I can think of that 5% of the worlds population needs 50% of the worlds wealth is greed. Yes, I am a native born American and I served in the US Marines. I am saddened by the state that my nation has acheived. I wish that Americans had a broader view of the world and understood that the WORLD is MUCH larger then just America.
If Tyranny and Oppression come to this land,
it will be in the guise of fighting a foreign enemy. -James Madison
Quoth Michael: from the learn-to-speak-indian dept
Indians don't speak Indian.
What you are saying is wrong because the following flaw:
This is falacious reaoning. Most of these workers are taking the jobs because they are the best paying jobs available in their local economy...
Although it is true that these jobs in the developing countries are the best paying, that point is moot. Why? Because people will work, not just in those "high paying" jobs, but also in practically everything else. The crux of hte problem is that the majority of the workers in the world are underpaid and exploited. You can literally go to any one of a hundread countries and find workers to do WHATEVER you want.
That's why I find it interesting that capitalists are all in favour of a global (capitalist) economy. But they never explain what is going to happen. I claim that Western wages will have to be dragged down significantly but capitalists don't think so...
BTW, you are wrong in saying that you can't oppose a global economy. There is no such thing as a global economy. It is a bogus concept cooked up by neo-liberal economists. If free-trade agreements fail, that's the end of the global economy. Also, you will never truly have a global economy because countries will always value themselves--their sovereignty--more than a global economy. This isn't happening right now but it will once things get a little bit worse. How much do you want to bet that traditional conservatives (like Pat Buchanan, who are nationalists) will gain power at the expense of neoconservatives (who are mostly neo-liberal economists and are against US protectionism)?
RAM
Sivaram Velauthapillai
Seeking the meaning of life... @slashdot of all places
Western Europe has the same problem to a certain extent but not as badly as the USA. The reason not so many European IT jobs have gone to India and China is partly because of the language barrier. There are tens of millions of Indians and Chinese who can speak English but almost none who speak German, French, Italian, Swedish, Danish, Dutch etc. (I assume some Spanish and Portuguese IT has gone to South America) This doesn't prevent IT companies trying to outsource call centres to Germany from Switzerland for example (although the language spoken in Switzerland is a dialect of German that Germans don't understand).
Apart from this a fair amount of manufacturing, production (and coding) has been flowing towards Eastern Europe as those countries join the EU. The EU hopes that it will somehow balance itself out in that very large companies in Western Europe will have branches in Eastern Europe and that that way cash will flow backwards as well.
I think one thing that can really stay local in the IT world (and this applies to the US as well) is for people to start their own small companies specialising in other small companies in other sectors in the local economy. Programmes such as Tax or local business oriented stuff as well as doing consulting and support on a small scale are a good answer.
Another answer is to start a local company that adresses the problems that the people's previous companies cause by outsourcing coding to people who have low QA and communication skills in the local language.
As an example, let's take, for example a certain Desktop publishing layout software from a company in Denver Colorado. This company's product has had a virtual monopoly in DTP for more than 13 years. About three or four years ago, IIRC, that company (use your brains as to who that is) outsourced the entire software development to India. About six months to a year later, Indian developers from this company started popping up in developer mailing lists asking really basic C/C++ questions and acting very arrogant when they didn't get immediate answers. Aparently those Indian developers were so bad (relatively speaking, probably more a management problem) that it took them almost three years to port that DTP programme to Mac OSX, where it finally turned up a few months ago.
That would have been and was an opportunity for competitors to step in and develop alternatives.
Think about it. Tarifs and high import taxes will not solve anything in the long run, as the USA is no longer in the position to be able to simply dictate economic terms to the EU, India or China (or SE Asia to an extent), and if such measures are taken, sonner or later they'll reply in kind, and then you truly will be f**ked.
You're 100% right. I have seen overseas outsourcing in action twice. Both times it was a *MEXICAN* company outsourcing to India. Both times the project just dragged on, drained money, and honestly didn't produce results. In one case, what was supposed to be a $500k contract in 6 months dragged on for a year and a half and they doled out $2 million as the Indian company kept asking for more and more time, more and more money, etc.
Once you sink $500k into a project it's hard to write it off as a loss--so they just kept spending more and more money on it. Eventually, they just cancelled the Indian outsourcing, brought it back home to Mexico--and even had me (an American) on board as a consultant to help them!
Andy Grove says that all the telecomm infrastructure makes it as if a guy in India was in the next cubicle. That's the simplistic promise of outsourcing that tempts companies to do it. There may be some industries where it will work. Software development is NOT one of them.
I'm a software engineer and I'm NOT worried about outsourcing at all. Yes, we'll have some short-term pain as many companies experiment with it. But the two cases I've seen of MEXICAN companies trying to save a buck by outsourcing to India made it very clear that it just won't work long-term. I completely believe many jobs will be outsourced to India and China, but many (if not most) will bounce back to the U.S. after the 1-2 years it takes to realize it has failed.
The thing is, we have this huge built-in cost that we, as individuals, cannot overcome. We have far higher real-estate costs, fixed living expenses. We have high taxation, government entitlements, economic and environmental regulations, health care for our aging (and soon to be non-tax-paying) populations, and so on. These are expenses that most developing nations do not have. Workers in western society can only compete to a point on price, before the wealth we have stored in fixed assets (homes, real estate, investments, so on) have to take a hit.
The problem will get only worse... many have a belief that a new, unforeseen industry will pop up to employ not only those who are displaced by foreign competition in "old" industries, but also all the new workers entering the economy each and every month. Yet, with the advances in foreign skills, communication and transportation continuing, there is no reason that the incubation period of a new industry will be long enough to create many long-term jobs in the United States, other than in service sectors.
The solution will be, as you said, a re-balancing. The standard of living, expressed in real money, must fall in the western nations. The EU attempts to fight this through the UN and treaties on global environmental/labor/human rights standards and so on, which we in the US ironically often fight on principle. In reality, we cannot compel the developing world to voluntarily raise the costs of their labor and products; they do, and will, resist. The solution will be painful for us, as we have nowhere to go but down. The rest of the world has nowhere to go but up. We will have to get used to no longer being the dominant wealthy societies, better educated, better able to demand high wages and high social/governmental benefits. Developing nations will become more expensive as their populations demand more of the "benefits" we have, yet they will be starting with, essentially, blank slates, while we have decades, even centuries, of built-up high costs and expectations to overcome. Hopefully rising costs overseas will be expressed in "Internet time." We will all see.
Larry