Offshore Competition

Note: the following speech excerpt wasn't from CES, Fiorina and Barrett were speaking at the Computer Systems Policy Project in Washington D.C., the CES keynote featured Fiorina unveiling HP's new iPod killer, an iPod.

One of the keynotes at CES this week featured HP CEO Carly Fiorina and Intel CEO Craig Barrett. The keynote generated some controversy because of the offshoring and outsourcing issues that were touched on and Fiorina's comment that "there is no job that is America's God-given right anymore".

First and foremost, the mainstream media does a horrible job of reporting these subjects, the biases that they naturally come to the table with bleeds all over the pages. For example, the SF Chronicle headlined the story with "Tech bosses defend overseas hiring" and later "Economists back tech industry's overseas hiring" while the Dayton Daily News ran the story with "Firms want freedom to move jobs overseas" (first of all, these firms ALREADY have the freedom to move these jobs... you idiots). Most of the media coverage I have read also misses the point that 'offshoring' and 'outsourcing' are two independent trends... I can outsource without it being offshore, and I can offshore without it being outsourcing... get it? Good.

More importantly, much of the rhetoric surrounding these topics misses the point that in labor, much like in automobiles, detergent, and steel, the U.S. functions in a global market where the competitiveness of developing countries has risen dramatically to the level of Western countries, which in turn have only incrementally improved, and in some cases, have dramatically fallen. An economy, and it's host nation cannot stem the loss by closing itself off, it's historically evident that nations who enact protectionist measures will inevitably do more damage than good, and besides, it's just plain un-American to quit and take your ball home because your getting beat on the basketball court.

The reporters who cover these stories, and the politicians and labor activist who react to them, also miss the point that it's not just about money. We are an industry where a majority of our products and services are consumed in markets other than the U.S., it is vital that we not only have people in those local markets, but also develop our products in those markets as well. There is an undeniable cost benefit to doing so, but the advantage is not nearly as great as bystanders project. Yes, it is true that the total comp package for a developer position in India, or Eastern Europe for that matter, is about 1/5 of what it is in the U.S. or Europe, but if you consider the additional operational non-comp expenses that you realize the total operational cost package advantage is still about 60% of what it is in the U.S., in other words, you save about 40%, not 80% as the labor stat would suggest. More importantly, is that by developing in India or Eastern Europe you realize a 24 hour development cycle that is not possible in the U.S. because those regions are on the other side of the clock. If you stagger the work processes you can have developers turning code loose for overnight QA and documentation, and then coming to work the next day to fix bugs, etc. It can be a very productive cycle that results in high quality products getting turned out with increasingly compressed schedules.

The thing people have to get over is that the technology labor market in the U.S. is not getting smaller, quite the contrary. The expansion of technology into all aspects of modern life is well documented and it's the technology experts behind that scenes that make this happen, and the people that support them in QA, documentation, and support roles. Our industry will continue it's dramatic growth, but we no longer reign supreme when it comes to technology talent, that's a fact and rather than bitch and cry about it, the U.S. should be doing what it takes to become the #1 competitor on every benchmark. Many U.S. industries have faced these challenges and fought back by improving not by locking out foreign competitors, others like the textile industry have gone away because they didn't compete on innovation, but by tariff.

Fiorina and Barrett are correct in asserting that the American education system is failing our industry, it's statistically and anecdotally evident that this is the case. Legislators on both sides of the aisle must stop making excuses for the sorry state of education, and stop making piecemeal proposals (Sen. Boxers' broadband initiative is a perfect example) and start fixing the real problems in K-12 education, the lack of real accountability at the administrator and teacher level. California's recent decision to postpone exit exams because too many students would fail is an example of where the system fails us, the power that the state's teachers unions exert of issues like school vouchers is another. 43% of the state's budget goes into education, yet we've barely moved the dial on student performance, and Sacramento beaurocrats raise the cheer "yeah, we're #38 in the country!" as if being 12th from the bottom is something to be proud of.

Comments

[Dancer]

I don't want to pick up my ball and run home... I want to invite low end foreign companies to come play ball and compete with the american companies that are exporting jobs. Lets have apex, daewoo and others design cell phones for american markets (maybe with some ex-motorola american engineers handling the american approval process (fcc, etc).

American companies are certainly free to export jobs, and I am free to spend my money on their foreign competitors products (especially if the foreign competitor employs americans).

[jn]

Foreign companies do have large facilities in the U.S. Need I mention SAP as an example, we employ at least 6,000 people in the U.S., including 1,500 in Palo Alto that are primarily R&D professionals.

Nokia has a big development group in San Diego that does CDMA phones (Qualcomm is in SD), Toyota, Nissan, Daimler all have big factories in the southeast, big pharma has R&D facities and biotech subsidiaries all over the U.S., and the list goes on.

The entire point is that the mobility of professional jobs is not a trend that will reverse itself, the U.S. competes with every developed economy on earth to attract those jobs and if we intend to remain the #1 destination in the world for foreign companies we must do it on the backbone of our talent and productivity edge. Government regulation, or even well-meaning consumer activism will not motivate foreign companies to create jobs in the U.S., there is absolutely no historical evidence to suggest it will, absent of tax policies that will in fact be a carrot for foreign companies.

Federal, state and local government absolutely must make fixing public education a priority, not because "no child should be left behind", but because if we don't there won't be jobs for those young people to go to when they do get their graduation certificate. Throwing more money at education is not the answer, we've done that to an unprecedented level and it is not yielding results; retooling the cirriculum, achieving productivity gains out of the teacher corps, and increasing accountability at the administrator level, along with giving administrators the tools and power they require to make changes when required is the answer.

[Nick Gray]

I've been hanging out with this GREAT team of really savvy marketing kids that work for a company called Hun gam a.com here. (Remove spaces to avoid Technorati search results.) The company is on the block/"looking for a strategic American partner" - a great buy for anyone interested in this market. Seriously, the team of people that they have at Hungama is AMAZING. I'll gush gush gush for hours about how savvy they are and the great work they produce. Education had next-to-nothing to do with building this team's fundamentals. Real-world experience at a young age = beautiful.

Thanks for the Daily Dish, Jeff. I still love it.

[Nick Gray]

Here's another URL for that company- http://www.branding brands.net/

Again, remove the space in the URL.

[Sohail Ahmed]

Here is another:

http://www.hhtraders.com

[sohail polani]

It would be much better if we try to do a job in our own Homeland.It could bring an opportunity to get hired by companies and paying us ,thus removing financial problems.no matter earning is less or high but moto should represent the loyalty factor.The only way to grow our country is to work hard,with keen interest and devotion.Obviously the result will be concluded in decades by rising Economy and culture.