Posted , April 4, 2004
This and several subsequent pages are from several blogs I've written over the years about international trade and the impact of offshoring on U.S. jobs, the technology sector, and the American economy. I wish I could share the hundreds of posts, many very insightful, that expanded on my ideas.
"As an American citizen, I would have to be worried about ... jobs ... outside the U.S. ... As a citizen, I see all these resources and I think this puts my country in danger." —Craig Barrett, Intel CEO
Finally, an executive who is honest enough to admit that while his company is sending high-tech jobs offshore for competitive reasons, he knows this is a threat to the American economy.
Craig Barrett, Intel CEO, gave his quote in an interview from Beijing, published in Monday's San Jose Mercury News. While the article focuses on the semiconductor industry, it presages what will happen to the U.S. software industry if American leaders don't wake up soon.
China's combination of huge local markets, coupled with arm-twisting (not free trade, but coercion) to build local manufacturing will make China the leading manufacturer of semiconductors. The question isn't if, but when.
"In five years, they will be the equal of anybody," according to George Burns, president of Strategic Marketing Associates, quoted in the Merc. Semiconductors are merely further ahead on the curve than software, but the software curve is likely to be much steeper because software doesn't require massive capital investments, like the $1 billion Intel alone has invested in Shanghai.
Fortunately, a byproduct of poor overall job growth in the U.S. is the harsh spotlight being cast on offshoring, with some light finally starting to shine on software. The forces pushing for offshoring of software are extensive and well financed. Venture capital firms make this their top agenda with new investments.
Apparently, the VC wolves are dropping their last shred of sheep's clothing: For years, the sole moral justification VCs have used for their rapacious greed has been job generation. Now, they simply say, like Ivan Boesky, "Greed is good." Opsware founder Marc Andreesen has become the poster boy for the phony free trade argument, touting the "If I don't do it, someone else will" argument on the CBS Evening News, in the The San Francisco Chronicle, and everywhere that will give him attention. Opsware is getting more attention from the press than from customers.
Truth is, American industry never believes free trade applies when it loses sales. The high-tech industry has a lifelong history of seeking funding from the U.S. government, then seeking protection when it loses markets—arguing that America can't afford to lose strategically important industries. Examples are too numerous to list here, but include DRAMs, where tariffs were imposed on Japanese manufacturers; and airlines, where the government protected Boeing from the EU's Airbus and Brazil's Embraer.
So far, the Bush administration has toed the big industry line. But there are signs that building pressure is having an effect. For months, the Bush administration has fought a lawsuit by computer programmers, actively working to prevent programmers from getting benefits given to other workers under the Trade Adjustment Assistance program. But after U.S. Trade Representative Robert Zoellick argued for months that the law didn't allow for coverage of programmers, Zoellick suddenly hinted this week that more workers would be made eligible. Apparently, bad press changed the meaning of the law.
Giving out benefits after the jobs are lost is like putting a Band-Aid on a tumor. But it is a start.
India has one of the most protected, closed markets in the world, and China isn't far behind. For the U.S. to export its software expertise, while not getting free access to India's and China's markets, is flat out short-sighted and foolish. Here is a list of recent coverage of interest:
- Major unions and grass-roots organizations that have sprung up around the country to fight the offshoring of IT and manufacturing jobs have formed the Jobs and Trade Network to fight for their cause.
- Silicon Valley could lose one in six jobs.
- More than 50 U.S. congressmen will shortly introduce a bill into Congress designed to bar U.S. companies from receiving government financial aid if they do not protect local jobs to the same extent that they protect jobs they provide outside the U.S.
- Offshoring is no silver bullet. Hardly a day goes by when I don't get a call or e-mail from an overseas company offering outsourced IT services, particularly software development. Just today, an e-mail popped into my inbox that read: "Would you like to save up to 80 percent on your software development costs?" The e-mail went on to tout the highly intelligent labor force in China and how this particular firm's software development processes "ensure delivery of high quality software on time and within budget." Sounds great, but I don't think any such guarantees exist in the real world, regardless of where the development work is done.
- Is it your patriotic duty to keep IT jobs from going offshore?
- Outsourcing jobs to offshore destinations can sharply increase data privacy risks and the complexity of managing that risk, several experts at the Fourth Annual Privacy & Data Security Summit here warned this week.
- Indian outsourcers tackle high-end IT.