Silicon Valley feels the crunch of outsourcing
Workers and some tech bosses are fearful. Others see an upside to the pain.
By JENNIFER LIEN
THE heartland of the world's infotech revolution is feeling the raw edge of outsourcing, the new corporate trend that is reshaping businesses around the world.
Here in Silicon Valley in California as the slump wears on, outsourcing is fast becoming a dirty word among tech company workers fearful over their job security.
Companies desperate to keep costs down have begun to send more and more jobs abroad. Fearful that many of the jobs cut during this downturn will not come back, white-collar tech workers increasingly are speaking up against this outsourcing trend. Some have organised pickets.
Adding to the anxiety are reports that major enterprise software house Oracle Corp would cut some R&D jobs in the US and move them to India, where the company is doubling its workforce from 2,000 to 4,000 in the next two years.
Oracle chief Larry Ellison recently pronounced Silicon Valley to be a mature economy - which, if true, would mean diminished prospects for job creation in the Valley.
Workers on the receiving end are not the only ones worried. Intel co-founder Andy Grove, whose company's chips run on some 90 per cent of the world's PCs, warned earlier this month that the US software industry was being weakened by outsourcing to countries including India and China. Not all tech bosses, however, see it that way.
And the Valley is not alone in feeling the business and job market changes being wrought by outsourcing. Other industries in the US are seeing higher-value-added jobs being moved overseas. These include financial analysis and market research. Many Fortune 500 companies, including banks, have been using software engineers in India to work on their global computer systems. Little wonder that global outsourcing is estimated to have grown from US$2 trillion in 1998 to US$5 trillion in 2003.
In the tech industry, jobs such as telephone call centres and help desk assistance have long been farmed out, often to India. So have low-end software programming jobs. And now, even quality-assurance jobs and some software engineering jobs are beginning to move, says Chinese-American businessman Hong Chen.
The next wave of jobs, says Dr Chen, founder of Internet roaming service giant GRIC and also a Valley financier, will involve higher-end core software engineering.
His company has had a software development centre in India for the last two years. 'We feel good about it, and most of our new engineering hiring is now done in India,' he told BT.
Companies are outsourcing jobs not just because it's cheaper to hire workers overseas. The tech slump and the increased restrictions on immigration since Sept 11, 2001 have forced US-trained tech workers from other countries to leave in large numbers. In the meantime, fewer young Americans, many schooled in mediocre local school systems, are showing an interest in the sciences.
Stanford University president John Hennessy told the San Francisco Chronicle the other week: 'It's now attractive to go back to India, Taiwan, Korea or mainland China after you do your graduate work in the US. When I first came to Stanford, nobody went back. That's a real change, and it's going to affect our ability to have the talent we need to make this country successful.'
Companies looking to outsource jobs - including Microsoft and Intel - have even organised job fairs in Silicon Valley for foreign-born, US-trained tech workers willing to go back to their homelands. India's rediff.com estimates that 10 per cent of Oracle's India employees were formerly based in the US.
'The real question is not whether jobs are leaving the Valley, but whether there are higher-paying jobs being developed to replace the ones that have left,' says management consultant George Koo, who specialises in US-China business relationships.
'Now, with the post-9/11 scare, we actually have a policy that actively discourages foreign students from entering the US. And, unfortunately, our school systems are, frankly, horrible - and deteriorating.'
If the Valley is able to retain strong tech talent, it may not lose out in the long term, Mr Koo believes. 'If Silicon Valley is competing for jobs that went offshore, it no longer is the centre for high-tech development and innovation. One can argue that by sourcing lower-valued-jobs offshore, creative energy is freed up to innovate, to begin the next high-tech revolution.'
This is a view echoed by Dr Chen. If outsourced jobs succeed in making Valley companies financially healthier, these companies could 'become more competitive and create either better earnings, or more competitive products', he says.
Also, shipping lower-end software jobs overseas leaves US-based 'power programmers' with more R&D dollars to create new technology and products, George Gilbert from San Francisco's Tech Strategy Group told the weekly Silicon Valley Business Ink recently.
And these power programmers - who are intimately involved in the marketing and delivery of these new technologies - are less likely to have their jobs farmed out than their lower-skilled colleagues, says software company owner Steven Schoch.
Indeed, market research firm Evalueserve released a report earlier this month arguing that outsourcing actually boosts growth in the US. Commissioned by an Indian IT industry group, the report says US$130 to US$145 is re-invested into the US for every US$100 worth of work shipped abroad.
Or, in Mr Koo's words: 'The more regions that are involved in high-tech development, the higher is the tide that will float all boats.'
In the meantime, Silicon Valley would do well to examine itself critically and maintain the ingredients needed to stay ahead of the innovation curve, says Dr Chen.
One option could be to encourage companies to keep, or set up, their international headquarters in the Valley. 'After all, Silicon Valley has the reputation, the best weather I have ever seen, and the proximity to Asia. Many successful Chinese CEOs are buying multi-million-dollar houses in the Valley. Their kids come here for their education,' he says.
TheBusinessTimes
By JENNIFER LIEN
THE heartland of the world's infotech revolution is feeling the raw edge of outsourcing, the new corporate trend that is reshaping businesses around the world.
Here in Silicon Valley in California as the slump wears on, outsourcing is fast becoming a dirty word among tech company workers fearful over their job security.
Companies desperate to keep costs down have begun to send more and more jobs abroad. Fearful that many of the jobs cut during this downturn will not come back, white-collar tech workers increasingly are speaking up against this outsourcing trend. Some have organised pickets.
Adding to the anxiety are reports that major enterprise software house Oracle Corp would cut some R&D jobs in the US and move them to India, where the company is doubling its workforce from 2,000 to 4,000 in the next two years.
Oracle chief Larry Ellison recently pronounced Silicon Valley to be a mature economy - which, if true, would mean diminished prospects for job creation in the Valley.
Workers on the receiving end are not the only ones worried. Intel co-founder Andy Grove, whose company's chips run on some 90 per cent of the world's PCs, warned earlier this month that the US software industry was being weakened by outsourcing to countries including India and China. Not all tech bosses, however, see it that way.
And the Valley is not alone in feeling the business and job market changes being wrought by outsourcing. Other industries in the US are seeing higher-value-added jobs being moved overseas. These include financial analysis and market research. Many Fortune 500 companies, including banks, have been using software engineers in India to work on their global computer systems. Little wonder that global outsourcing is estimated to have grown from US$2 trillion in 1998 to US$5 trillion in 2003.
In the tech industry, jobs such as telephone call centres and help desk assistance have long been farmed out, often to India. So have low-end software programming jobs. And now, even quality-assurance jobs and some software engineering jobs are beginning to move, says Chinese-American businessman Hong Chen.
The next wave of jobs, says Dr Chen, founder of Internet roaming service giant GRIC and also a Valley financier, will involve higher-end core software engineering.
His company has had a software development centre in India for the last two years. 'We feel good about it, and most of our new engineering hiring is now done in India,' he told BT.
Companies are outsourcing jobs not just because it's cheaper to hire workers overseas. The tech slump and the increased restrictions on immigration since Sept 11, 2001 have forced US-trained tech workers from other countries to leave in large numbers. In the meantime, fewer young Americans, many schooled in mediocre local school systems, are showing an interest in the sciences.
Stanford University president John Hennessy told the San Francisco Chronicle the other week: 'It's now attractive to go back to India, Taiwan, Korea or mainland China after you do your graduate work in the US. When I first came to Stanford, nobody went back. That's a real change, and it's going to affect our ability to have the talent we need to make this country successful.'
Companies looking to outsource jobs - including Microsoft and Intel - have even organised job fairs in Silicon Valley for foreign-born, US-trained tech workers willing to go back to their homelands. India's rediff.com estimates that 10 per cent of Oracle's India employees were formerly based in the US.
'The real question is not whether jobs are leaving the Valley, but whether there are higher-paying jobs being developed to replace the ones that have left,' says management consultant George Koo, who specialises in US-China business relationships.
'Now, with the post-9/11 scare, we actually have a policy that actively discourages foreign students from entering the US. And, unfortunately, our school systems are, frankly, horrible - and deteriorating.'
If the Valley is able to retain strong tech talent, it may not lose out in the long term, Mr Koo believes. 'If Silicon Valley is competing for jobs that went offshore, it no longer is the centre for high-tech development and innovation. One can argue that by sourcing lower-valued-jobs offshore, creative energy is freed up to innovate, to begin the next high-tech revolution.'
This is a view echoed by Dr Chen. If outsourced jobs succeed in making Valley companies financially healthier, these companies could 'become more competitive and create either better earnings, or more competitive products', he says.
Also, shipping lower-end software jobs overseas leaves US-based 'power programmers' with more R&D dollars to create new technology and products, George Gilbert from San Francisco's Tech Strategy Group told the weekly Silicon Valley Business Ink recently.
And these power programmers - who are intimately involved in the marketing and delivery of these new technologies - are less likely to have their jobs farmed out than their lower-skilled colleagues, says software company owner Steven Schoch.
Indeed, market research firm Evalueserve released a report earlier this month arguing that outsourcing actually boosts growth in the US. Commissioned by an Indian IT industry group, the report says US$130 to US$145 is re-invested into the US for every US$100 worth of work shipped abroad.
Or, in Mr Koo's words: 'The more regions that are involved in high-tech development, the higher is the tide that will float all boats.'
In the meantime, Silicon Valley would do well to examine itself critically and maintain the ingredients needed to stay ahead of the innovation curve, says Dr Chen.
One option could be to encourage companies to keep, or set up, their international headquarters in the Valley. 'After all, Silicon Valley has the reputation, the best weather I have ever seen, and the proximity to Asia. Many successful Chinese CEOs are buying multi-million-dollar houses in the Valley. Their kids come here for their education,' he says.
TheBusinessTimes
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