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Export of tech jobs could imperil US programmers

A new wave of outsourcing involving tasks that require greater skills could add to the US tech industry's woes, threatening to prolong the three-year downturn.

business Updated: Aug 12, 2003 15:20 IST

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 labour 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 haemorrhaging of tens of thousands of technology jobs in recent years to cheaper workers abroad is already a fact of life -- as inevitable, US 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 require greater skills -- could be cutting to the industry's bone, threatening to prolong the three-year US 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 short-sighted 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 labour 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 per cent 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 website, 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 non-partisan Economic Policy Institute, non-inflation-adjusted wages for tech workers grew 1.7 per cent 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 per cent.

The average computer programmer in India costs $20 per hour in wages and benefits, compared with $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 US 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 US 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.

Others say the genius of American enterprise is its leaders' knack for envisioning the next big thing -- and workers' ability to redefine job roles and retrain. Americans pioneering developments in nano-technology and biotech will have far more job security than simple programmers, they argue.

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."

First Published: Aug 08, 2003 17:32 IST