13 Articles Worth Reading
13 Articles Worth Reading
Date: Monday, March 28, 2005 10:00 AM
JOB DESTRUCTION NEWSLETTER
by Rob Sanchez
March 28, 2005 No. 1223
Article 1:
http://www.counterpunch.com/roberts03212005.html
A Threat Greater Than Terrorism
Delusion has settled over America. Washington cannot tell fact from
fantasy. Neither can sycophantic media nor nothink economists. What
outsourcing is doing for America is destroying entire sectors of US
manufacturing, entire high tech occupations, the value of a college
education, . the design and innovative capabilities of the US economy,
and the dollar as reserve currency. This is a lot of destruction. It
goes far beyond what terrorists can inflict.
Article 2:
http://www.theregister.co.uk/2005/01/07/tesco_tech_jobs/
Tesco offshores 400 IT jobs to India
UK supermarket chain Tesco is to move hundreds of IT support jobs to
India. The UK retailer has set up a subsidiary company to provide
service and support, which already employs 190 people. Tesco says that
by the end of 2005 its Indian operation will have 770 employees in
total. The Times of India reports that 400 of the new jobs will be for
software professionals. It also quotes Philip Clarke, director of IT
and international operations at the company, as saying that these jobs
will be "transitioned out of the UK".
Article 3:
http://www.smh.com.au/news/Breaking/Dell-opens-1500seat-Indian-call-centre/2005/03/21/1111253940593.html?oneclick=true
Dell opens 1500-seat Indian call centre
US personal computer giant Dell Inc. has opened a new call centre in
the northern Indian state of Punjab which will give jobs to 1500
graduates and computer engineers, a company official said. Dell brushed
aside the fuss about foreign accents and said the US firm enjoyed big
cost savings by shipping out customer care, technical support and back
office jobs to India.
Article 4:
http://crossword.uniontrib.com/news/business/20050320-9999-mz1b20trade.html
Imbalance of power
China now produces half of the world's DVD players and digital cameras,
more than one-third of its personal desktop and laptop computers, and
about one-fourth of its mobile phones, televisions and car stereos. The
latest trade figures demonstrate how China is expanding more into
high-tech trade. As recently as June 2002, the United States exported
more high-tech equipment than it imported. But that trade advantage no
longer exists. Last year, the United States ran a record $37 billion
tech deficit, with 99 percent of the deficit attributed to China.
Between 60 percent and 80 percent of the goods China exports to the
United States are the products of such companies as Adidas, Sony,
Mattel, Walt Disney, Dell Computers or other multinationals that have
set up shop in China to take advantage of its low costs.
Article 5:
http://online.wsj.com/article/0,,SB111151806639186539,00.html
In India's Outsourcing Boom, GE Played a Starring Role
In September 1989, Jack Welch, then General Electric Co.'s chairman,
flew to India for a sales call. He hoped to sell products like airplane
engines and plastics to the Indian government. But during a breakfast
meeting with top government advisers, it was Mr. Welch who got pitched.
"We want to sell you software," Sam Pitroda, chief technology adviser
to the late Indian Premier Rajiv Gandhi, told a surprised Mr. Welch.
Mr. Pitroda explained that India needed business for its emerging
high-tech sector. "If I kiss your cheek, what do I get in return?" the
GE chairman replied, according to two men who were present.
Article 6:
http://www.nni.nikkei.co.jp/AC/TNKS/Nni20050316D15JSN05.htm
Leading call center and outsourcing company, Transcosmos, has announced
that over the next 3 years, it will increase from 300 to 1,000 the
number of software engineers it has working at its Chinese subsidiary.
Transcosmos estimates that by doing so, it can cut personnel costs by
2/3,
Article 7:
http://www.sfgate.com/cgi-bin/article.cgi?file=/n/a/2005/03/17/financial/f093227S02.DTL
IBM to Lay Off 500 Workers in Sweden
International Business Machines Corp., the largest provider of computer
hardware and consulting services, said Thursday it will lay off about
500 workers in Sweden, or nearly 9 percent of its work force in the
country, shutting down most of its operation in five cities. Union
officials said they feared the jobs would be outsourced to countries
like India where expenses are cheaper, but Barsness said no decision
had been made whether to move the jobs.
Article 8:
http://www.infoworld.com/article/05/03/18/HNibmservicecuts_1.html?source=rss&url=http://www.infoworld.com/article/05/03/18/HNibmservicecuts_
1.html
IBM plans service job cuts across Western Europe
Big Blue eliminates jobs in Germany and Sweden while eyeing cuts in
France as well
Two weeks after announcing plans to cut 600 service jobs and close two
locations in Germany, IBM (Profile, Products, Articles) on Friday said
it intends to eliminate 538 similar positions and shutter five sites in
Sweden. While some workers may be redundant, other jobs will move
elsewhere, possibly outside of Europe, McNeese said. "An international
location is possible, although no final decision has been made," he
said.
Article 9:
http://news.ft.com/cms/s/58bf936e-9b10-11d9-90f9-00000e2511c8,ft_acl=,s01=2.html
Texas summit to discuss extension of Nafta
Security and trade are likely to dominate the Wednesday meeting at
President George W. Bush's ranch in Crawford, Texas, with Vicente Fox,
president of Mexico, and Paul Martin, the Canadian prime minister. The
three will discuss plans for an ambitious extension of the North
American Free Trade Agreement (Nafta), which took effect January 1
1994. According to Mexican officials, the new "North American
Initiative" would include measures to improve the region's overall
competitiveness by enhancing co-operation in sectors that already see
heavy cross-border trade, such as auto-parts. It would also include
measures to facilitate and regulate the flow of migrants between the
three Nafta countries. Mr Bush last year unveiled a plan for a
guest-worker programme. That programme remains a priority for Mr Fox,
who launched his presidency in 2000 with a call for a more radical
treaty on migration, but who now faces opposition from Republicans in
the US Congress.
Article 10:
http://sify.com/news/othernews/fullstory.php?id=13687293
LeT planned to target software cos in Bangalore
The Lashkar-e-Toiba militants killed in an encounter at New Delhi on
Saturday night planned to attack software companies in Bangalore
besides Indian Military Academy in Dehra Dun, Delhi police said on
Sunday.
Article 11:
http://www.baselinemag.com/article2/0,1397,1778436,00.asp
Does Outsourcing Deliver the Goods?
What is now referred to as Coase's Law states that a company will
purchase goods and services from suppliers (that is, outsource work) if
the suppliers' costs, plus the costs of completing such transactions,
are less than the costs of getting identical work produced by a
company's own employees. My object was to see whether the company with
a higher "outsourcing ratio," defined as purchases as a percentage of
revenue, was indeed more profitable.
Article 12:
http://boston.bizjournals.com/boston/stories/2005/03/07/daily44.html
Lucent to cut 40 Westford jobs
Boston Business Journal
Lucent Technologies Inc. plans to cut 40 positions in Westford and 110
jobs in Landover, Md., according to an Associated Press report. Lucent
will transfer the work to a Bangalore, India, facility.
Article 13:
http://www.dallasnews.com/sharedcontent/dws/bus/columnists/all/stories/032805dnbusworldview.55fa4.html
India's tech elite thrive at home and in the U.S.
India's elite colleges - the seven Indian Institutes of Technology -
are holding their alumni bash in Washington this spring. It turns out
that tens of thousands of the Indian Institutes of Technology grads are
working in the United States. They call themselves IITians
(eye-eye-tee-ans). And their story is worth pondering in the debate
about whether outsourcing technology jobs is good, bad, inevitable or
dangerous. "These are transnational individuals who have roots in more
than one place, who I think are going to lead this global world," said
anthropology professor Caroline Brettell of Southern Methodist
University, who has studied the Indian community in Dallas. "That's
just the nature of the world, and we've got to get with the program."
1. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.counterpunch.com/roberts03212005.html
March 21, 2005
Soma Nation
A Threat Greater Than Terrorism
By PAUL CRAIG ROBERTS
Delusion has settled over America. Washington cannot tell fact from
fantasy. Neither can sycophantic media nor nothink economists.
The Bush administration is the first government in history to initiate
a war based entirely on fantasy--fantasy about nonexistent "weapons of
mass destruction," fantasy about nonexistent "terrorist links," fantasy
about "liberating" a people from their culture, fantasy about a
"cakewalk" invasion, fantasy about America's omnipotence.
Reality has yet to penetrate the Oval Office or America's "red state"
consciousness. The gratuitous invasion of Iraq, the torture and the war
crimes have made America despised the world over. Our once formidable
alliances are shattered.
The Muslim world, which perceives America as Israel's enabler of
Palestine's oppression, has uniformly turned against us.
$300 billion--red ink to the last cent--has been wasted in a pointless
war and occupation that has emboldened Islamic revolutionaries, who
will be more successful than the US in changing the face of the Middle
East.
Bush's invasion of Iraq has proved the limits of America's "hegemonic"
military power: Eight heavily armored high tech US divisions are tied
down by a few thousand lightly armed insurgents who control most of the
roads and many towns and cities.
Any Iraqi collaborator with the US occupation who is foolish enough to
leave the heavily fortified "Green Zone" is shot down or blown up in
the streets.
Such an outcome is proclaimed a "success" by the White House,
Republican politicians and a cheerleading media.
The reality is that an ignorant and blundering Bush administration has
created a Shi'ite crescent from Iran to Lebanon that is revolutionizing
the Middle East. The reality will not penetrate the Bush
administration. Reality contradicts Bush fantasy and is "against us."
Facts that don't support Bush fantasy are "liberal" and
"anti-American." Truth is dismissed as anti-Bush propaganda.
It is America that has undergone regime change. The Bush administration
constitutes a Jacobin revolution. Its fanatics have declared world war
on political diversity. The first victim of Bush's "war on terror" is
the Bill of Rights. In its place we have an incipient police state.
One might easily conclude that Bush is first among the deluded, but the
more one observes economists' romance with outsourcing, the more one
wonders if economists are not the most deluded of all.
Outsourcing converts domestic supplied goods and services into imports.
It divorces Americans from the incomes and careers associated with the
production of the goods and services that Americans consume.
That divorce is highly detrimental for Americans. As foreign labor is
substituted for US labor in the production of tradable goods and
services, the displaced US work force seeks employment in domestic
services that cannot be outsourced. This increases the supply of labor,
thus depressing wages, in those labor markets already impacted by the
entry of high rates of legal and illegal immigration.
By turning domestic production into imports, outsourcing increases the
trade deficit. America pays the import bill by turning over the
ownership of her wealth, and the income streams that wealth produces,
to foreigners. Thus, Americans not only lose jobs and careers but also
the ownership of their companies, real estate, corporate and government
bonds. The incomes from these lost assets pass from Americans to
foreigners.
Today America's consumption and the government's budget deficits are
financed by foreigners, principally Asians. There are now so many
dollars in foreign hands that the willingness of foreigners to hold
more is declining. For the past three years foreign central banks have
been diversifying their reserve holdings away from dollars into other
currencies.
The result has been to drive the value of the dollar down sharply
against many other currencies. As prices adjust to the changed currency
values, Americans become poorer.
When economists preach that America benefits from outsourcing, they
deny all the hard facts, just as do Republicans when they proclaim
"success" in Iraq. How does America benefit from a process that
destroys jobs, lowers incomes, and reduces the exchange value of the
dollar?
What outsourcing is doing for America is destroying entire sectors of
US manufacturing, entire high tech occupations, the value of a college
education, . the design and innovative capabilities of the US economy,
and the dollar as reserve currency. This is a lot of destruction. It
goes far beyond what terrorists can inflict.
So far in the 21st century, the US has experienced a net loss of jobs.
Fewer Americans are employed today than when President Bush was first
inaugurated. This has not happened since the Great Depression in the
1930s.
When economists claim that the US is made better off by outsourcing,
they ignore the evidence of job loss, stagnant incomes, and a
collapsing dollar.
A perfect example is a recent "study" by three economists reported in
the March 21 issue of Barron's. The economists used economic models to
calculate the benefits to Americans of outsourcing. An economic model
is comprised of assumptions about relationships. Many relationships are
historical and reflect America's post-World War II economic dominance,
which is no longer the reality.
The economists concluded that the benefits to Americans from
outsourcing ranged from $7,100 to $12,900 per household.
According to the Bureau of Labor Statistics, the average hourly wages
of private, nonfarm, nonsupervisory production workers produced an
annual income of $33,072 as of February 2005.
Only economists completely detached from reality could believe that
American households owe such a large percentage of income to
outsourcing, which is threatening them with a depreciating currency and
the loss of their jobs and careers.
One of the dumbest defenses of outsourcing is the claim that history
shows that America benefits from free trade. First of all, there has
been precious little free trade. Economists mean that America has
benefitted from trade during the decades following World War II when
the rest of the world was recovering from war or smothered in
socialism. It is easy to benefit from trade when you are the only
economy.
Second, outsourcing is not trade; it is labor arbitrage. Outsourcing is
a new phenomena birthed by the collapse of world socialism and the rise
of the high speed internet. It reflects the operation not of
"comparative advantage" but of "absolute advantage" --the flow of
capital and technology across borders to the cheapest labor.
Outsourcing is the substitution of foreign labor for domestic labor. It
reduces the demand for domestic labor and drives down incomes.
Paul Craig Roberts was Assistant Secretary of the Treasury in the
Reagan administration. He was Associate Editor of the Wall Street
Journal editorial page and Contributing Editor of National Review. He
is coauthor of The Tyranny of Good Intentions.He can be reached at:
pcroberts@postmark.net
2. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.theregister.co.uk/2005/01/07/tesco_tech_jobs/
Tesco offshores 400 IT jobs to India
By Lucy Sherriff (lucy.sherriff at theregister.co.uk)
Published Friday 7th January 2005 11:37 GMT
UK supermarket chain Tesco is to move hundreds of IT support jobs to
India. The UK retailer has set up a subsidiary company to provide
service and support, which already employs 190 people. Tesco says that
by the end of 2005 its Indian operation will have 770 employees in
total.
The Times of India reports that 400 of the new jobs will be for
software professionals. It also quotes Philip Clarke, director of IT
and international operations at the company, as saying that these jobs
will be "transitioned out of the UK".
Clarke explained that the offshoring of so many staff is part of an
overall program to consolidate services. He explained that two years
ago the company began to standardise its IT platforms across its 2,400
stores worldwide. The result, dubbed Tesco-in-a-box, is a combination
of off the shelf apps, custom-built software and a range of integration
services.
Tesco first announced plans to move offshore in July last year. The
company says that it does not expect too much criticism for the move
because it has also created many UK jobs in the last three years.
The new facility will be part of developing and rolling out the
products to the parent company. It will offer other services too, such
as financial processing, which is why Tesco opted to set up a
subsidiary company, rather than simply outsource the work.
According to newswire reports, Tesco also has longer-term plans to move
some customer facing operations to the site. The company did not reveal
how much it had invested in the new facility. .
3. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.smh.com.au/news/Breaking/Dell-opens-1500seat-Indian-call-centre/2005/03/21/1111253940593.html?oneclick=true
Dell opens 1500-seat Indian call centre
Chandigarh, India
March 21, 2005
US personal computer giant Dell Inc. has opened a new call centre in
the northern Indian state of Punjab which will give jobs to 1500
graduates and computer engineers, a company official said.
The US firm carried out a survey of 19 Indian cities before building
the large facility in Mohali, on the outskirts of Punjab's state
capital Chandigarh.
"We looked at 19 cities but eventually decided to take a bet on
Chandiagrh as it has a large population of young, educated people who
have good accents," said Romi Malhotra, managing director of Dell
India.
"We have hired 300 people and my feeling is that we will get together
1500 people very quickly to fill this Dell customer contact centre this
year. Chandigarh should be able to support the talent we are looking
for," he added.
India has been called the "back-office" of the world, with some 2000
foreign firms outsourcing their operations to the country to take
advantage of its vast pool of educated and less expensive
English-speaking workforce.
About 800,000 graduates and professionals are employed in the
outsourcing and technical support industries.
Analysts have warned, however, that India may lose its strong grip on
the multi-billion dollar outsourcing industry if it does not brush up
on its spoken English.
Dell brushed aside the fuss about foreign accents and said the US firm
enjoyed big cost savings by shipping out customer care, technical
support and back office jobs to India.
"The centre in Mohali will be our third customer contact centre in
India and so as far as we are concerned the experiment has worked and
worked well," said Malhotra.
"How much effort does it take to neutralise an accent which may have
inflections of the mother tongue? India has enough graduates with
technical aptitude and good communication skills," he added.
Dell opened its first call centre in India in the southern city of
Bangalore in 2001 and had a second one up and running in another
southern city, Hyderabad, two years later.
4. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://crossword.uniontrib.com/news/business/20050320-9999-mz1b20trade.html
Imbalance of power
As U.S. trade gap balloons, China soars with more high-tech products
and leaves behind its cheap-export reputation
By Dean Calbreath
UNION-TRIBUNE STAFF WRITER
March 20, 2005
YANTIAN, China - A dozen years ago, Yantian was a tiny fishing village
surrounded by a brush-covered shoreline, known only to weekend
beachcombers from the nearby industrial city of Shenzhen.
In the past decade, the fishing village has exploded into a megaport
that handles more cargo containers than New York or Long Beach, and it
is one of the most humbling examples of what the growing trade
imbalance between China and the United States really means.
When cargo ships leave Yantian's sprawling docks, they are laden with
20-foot containers of toys, garments, furniture and other goods, mostly
bound for the United States. When the ships return from abroad, 70
percent of the containers are empty.
There are so many empty containers that the port has set aside a
special platform to speed them through customs, so they can be refilled
quickly with export items and shipped back overseas.
"If empty cargo containers were a product, they would be our largest
export to China, which sort of begs the question of who is the advanced
country and who is the developing country," said Bob Baugh, who heads
the Industrial Union Council of the AFL-CIO.
"China imports raw materials from us and exports finished goods," said
Peter Schiff, president of Euro Pacific Capital in Newport Beach.
"That's what America used to look like not too many years ago. But
judging from our trade activity, now we look like a colony and they
look like the empire."
The U.S. trade gap with China has been widening ever since Deng
Xiaoping opened his nation to foreign trade in 1978. From 1978 to 2001,
Chinese exports rose more than 15 percent a year - nearly twice as fast
as U.S. exports and easily besting the performance of any other major
economy.
That was just for starters.
Since China entered the World Trade Organization in 2001, its exports
have grown more than 30 percent a year, helping China unseat Germany
last year as the world's third-largest trading power behind the United
States and Japan.
Last year, the U.S. trade deficit with China soared 31 percent to $162
billion - the biggest imbalance ever recorded between any two
countries. Seven years ago, the U.S. trade deficit with the entire
world was lower than its current deficit with China.
"China's export growth represents extraordinarily fast-paced
integration for an extraordinarily fast-paced economy," said Edward
Gresser, director of the Progressive Policy Institute in Washington,
D.C.
Gresser said the United States has never had 30 percent export growth
except after wars: 1946, after World War II; 1919, after World War I;
and 1866, after the Civil War. The only two-year period of such growth
was 1815-16, after the War of 1812.
"China's growth makes the competitive world a lot tougher for the
U.S.," Gresser said.
In the early days of Chinese trade, most Chinese exports were cheap,
low-quality, labor-intensive products such as toys, shoes and clothing.
As with many developing countries, China's chief tool for attracting
foreign manufacturers was to offer low-wage semi-skilled labor,
bolstered by an artificially low currency.
The salary and benefits of a Chinese factory worker average about 92
cents an hour, according to a 2004 study by the Goldman Sachs
investment firm. That compares with $1.20 in Thailand, $1.70 in Mexico
and $21.80 in the United States.
But Goldman Sachs may be overestimating. A study commissioned late last
year by the U.S. Bureau of Labor Statistics estimated that the average
Chinese factory worker makes 64 cents an hour, including benefits.
The low wages have drawn businesses from around the world to China.
Between 15,000 and 20,000 new manufacturing facilities open each year
in China - mostly subcontractors to U.S. and other foreign firms. Many
of the factories are more modernized than their rivals overseas, giving
them a competitive edge. Nearly half of Chinese factories are less than
10 years old, compared with less than 10 percent of U.S. factories.
"While America's industrial base continues to erode, China has been
investing steadily in new plants and equipment, adding state-of-the-art
production capacity," said Jim Pinto, founder of Action Instruments,
who now works as a business consultant in San Diego. "America is just
not investing in machinery the way that China is."
More than 1.7 million U.S. factory workers have lost their jobs to
China over the past 15 years, according to the Economic Policy
Institute in Washington, D.C. The rate of job losses has been
increasing steadily: 70,000 per year between 1989 and 1997; 105,000 per
year between 1997 and 2001; and 234,000 per year since China entered
the World Trade Association in 2001.
As long as only low-skilled jobs were being transferred to China,
relatively few politicians or economists complained. They maintained
that the United States could ship its low-wage work overseas while
keeping a lead in high-tech industries.
"For the past few decades, the Western world assumed that it could let
countries like China do all the cheap, low-cost manufacturing while the
West concentrated in more knowledge-intensive industries," Pinto said.
"But that's not true with China. They're coming up with companies that
can challenge Cisco, which has some of the best technologies around.
And they're competing in biotech and a lot of other areas, too."
Cisco, the world's largest computer networking company, is facing tough
competition from China's Huawei, which has teamed with 3Com to produce
rival equipment.
China now produces half of the world's DVD players and digital cameras,
more than one-third of its personal desktop and laptop computers, and
about one-fourth of its mobile phones, televisions and car stereos.
In Shenzhen, the toy and clothing production lines that feed the ports
of Yantian are being supplemented with new high-tech campuses exporting
telecommunications and electronics equipment.
"In the past few years, we've really pushed forward the intellectual
life of Shenzhen so that we can industrialize our intellectual
property," said Zhang Hengchun, deputy director-general of the Shenzhen
High-Tech Industrial Park, one of five government-supported science
parks in the city.
Zhang said his park exports more than $3 billion in telecommunication
and high-tech products each year, more than half of which were produced
and developed within the park rather than being contract work farmed
out from abroad.
Even in Shenzhen's low-tech factories there are signs that a high-tech
revolution is taking place. Many of the factories offer computer
classes to help their workers prepare for their next jobs.
Luo Yong, a 19-year-old from rural Jiangtze province, said she took her
job in a Shenzhen shoe factory specifically so she could take advantage
of its after-hours computer training classes.
"My parents, who worked in the fields, weren't satisfied with the
education I was getting in the countryside, especially since our school
didn't have any computers," Luo said. "I figured I would get more
exposure to computers in Shenzhen. I'd really like to work in computer
design."
The latest trade figures demonstrate how China is expanding more into
high-tech trade. As recently as June 2002, the United States exported
more high-tech equipment than it imported. But that trade advantage no
longer exists. Last year, the United States ran a record $37 billion
tech deficit, with 99 percent of the deficit attributed to China.
At a time when U.S. colleges are reporting declining enrollments for
engineers, Chinese colleges are churning out 350,000 engineers a year,
which suggests that greater technology deficits are in store in the
future, as China pushes more of its own products onto the market.
Politicians in Washington are becoming vocal about the trade gap. A
dozen senators last month a measure to impose tariffs on China unless
it begins to boost the value of its currency, the yuan, to alleviate
the trade deficit.
So far, the White House has voiced lukewarm support for revaluing the
yuan, although it opposes the idea of tariffs. Its main tools for
fighting the trade deficit have been anti-dumping suits, which accuse
the Chinese of exporting goods below the cost of production.
In the past several years, the White House has filed anti-dumping suits
involving a wide variety of items, including socks, bras, televisions,
shrimp, furniture and steel.
The drawback of anti-dumping suits is that they only affect companies
that are headquartered in the targeted country - in this case, China.
The bulk of the U.S. trade deficit with China does not come from
Chinese companies.
Between 60 percent and 80 percent of the goods China exports to the
United States are the products of such companies as Adidas, Sony,
Mattel, Walt Disney, Dell Computers or other multinationals that have
set up shop in China to take advantage of its low costs. Those
multinationals would not be affected by anti-dumping rules.
"China is unfairly singled out because it is at the end of the
production chain," said Gordon Hanson, an economist at the University
of California San Diego.
The recent rumbling about tariffs and dumping in Washington suggests
that trouble is brewing over the trade deficit. The attacks on China
are reminiscent of the "Japan bashing" that occurred in the late 1980s,
when labor unions and politicians pushed "Buy American" campaigns to
counter cheap Japanese imports, going so far as to smash Japanese TV
sets on the steps of the Capitol.
Few pundits envision that happening with Chinese goods.
Because the United States has moved so much of its factory work
overseas, whole categories of goods are almost entirely made abroad,
including textiles, toys, televisions, computers and DVD equipment.
If consumers tried to "Buy American" goods in those categories, they
would come away empty-handed, because most no longer are made in the
United States. Fewer than 10 percent of Chinese imports compete
directly with U.S.-produced goods.
"The problem is not that foreigners shun American products, but simply
that America is not producing any that are worth buying," said Euro
Pacific Capital's Schiff. "We're working hard these days, but we're not
producing anything. All that China is doing is being our enabler,
providing us with goods as we don't produce anything."
5. +++++++++++++++++++++++++++++++++++++++++++++++++++
URL for this article:
http://online.wsj.com/article/0,,SB111151806639186539,00.html
March 23, 2005
Western Exposure
In India's Outsourcing Boom, GE Played a Starring Role
Early Investments Helped Fuel Tech and Service Sectors;
A Cheap Source of Talent
Jack Welch Hears a Sales Pitch
By JAY SOLOMON in New Delhi and KATHRYN KRANHOLD in New York
Staff Reporters of THE WALL STREET JOURNAL
March 23, 2005; Page A1
NEW DELHI -- In September 1989, Jack Welch, then General Electric Co.'s
chairman, flew to India for a sales call. He hoped to sell products
like airplane engines and plastics to the Indian government.
But during a breakfast meeting with top government advisers, it was Mr.
Welch who got pitched. "We want to sell you software," Sam Pitroda,
chief technology adviser to the late Indian Premier Rajiv Gandhi, told
a surprised Mr. Welch. Mr. Pitroda explained that India needed business
for its emerging high-tech sector.
"If I kiss your cheek, what do I get in return?" the GE chairman
replied, according to two men who were present.
Fifteen years later, the answer is clear: the global outsourcing
revolution.
India today earns more than $17 billion from corporations world-wide
seeking low-cost overseas talent to do everything from write software
to collect debts to design semiconductors. GE in large measure stoked
the phenomenon, playing an unheralded role as the Johnny Appleseed of
India Inc. and reaping billions in savings for itself along the way.
GE's technology partnership with India came amid the country's economic
opening, which began in 1991 when New Delhi began systematically
dismantling tariff and export controls. Indian executives say early
investments by GE in India gave their technology and business service
sectors crucial credibility and cash when other companies still viewed
the country as a risky backwater. Moreover, exposure to Mr. Welch's
culture of cost-cutting and efficiency taught them business skills they
are now using to compete globally, often against U.S. firms.
"What we learned out of [the relationship with GE] is phenomenal," says
S. Ramadorai, chief executive of India's largest software company, Tata
Consultancy Services Ltd. Business from GE helped TCS boost its annual
revenue to nearly $1.6 billion in the year ended March 2004 from just
around $37 million in the early 1990s, says Mr. Ramadorai. Today, GE
still accounts for 15% of TCS's overseas revenue and the Bombay company
has used the GE relationship to spread into new markets such as China
and Eastern Europe.
Publicly, GE has been reluctant to take credit for its singular role.
Shipping white-collar jobs overseas has proved controversial in the
U.S. Demoralized American workers have had to train their foreign
replacements. During the 2004 presidential campaign, Democrats
threatened to impose tax penalties on companies that move jobs
overseas.
But the strategy has been pivotal for GE. In 2000, it inaugurated a
Jack F. Welch Technology Centre in Bangalore that employs thousands of
researchers working on everything from new refrigerators to jet
engines. This year, the conglomerate plans to spend about $600 million
on computer-software development from Indian companies, according to a
recent company report. The company estimates that similar products
would cost it as much as $1.2 billion in the U.S.
GE also recently unleashed a big new player in Indian outsourcing. In
November, it sold a controlling interest in GE Capital International
Services, or Gecis, a company with about 17,000 employees that GE
started in 1997 to answer mail from its credit-card customers. With the
$500 million sale of the Indian unit to private investors, it will
start going after business from other corporations looking to save
money.
Helped by the outsourcing boom, India's economy is on track to grow 7%
for the fiscal year ending this month. Services now make up roughly
half of India's total economic growth, and the revenues from India's
technology sector are expected to exceed $28 billion during the current
fiscal year, according to Nasscom, a trade organization representing
India's high-tech sector.
Indian businessmen and politicians widely credit Mr. Welch and GE for
seeding their country's economic boom. "The breakfast meeting was the
turning point" for India's information-technology industry, says Jairam
Ramesh, a senior economic adviser to India's ruling Congress party who
was present at the 1989 meeting.
The first teams of GE executives Mr. Welch dispatched to India set foot
in a country where cows meandered freely in the streets and
temperatures often rose above 100 degrees Fahrenheit. "I was tasked to
make sure nobody got sick," says Sunand Sharma, a former executive with
GE's India operations who helped coordinate the conglomerate's initial
software partnerships.
GE Medical System's former Asia chief, Chuck Pieper, was among the
first to arrive in 1989, seeking an Indian partner to help develop a
low-cost ultrasound machine. Because India was still a closed economy
protected by steep tariffs and red tape, GE needed a domestic partner
to sell its instruments there.
Among Mr. Pieper's first contacts were with Wipro Ltd., a Bangalore
software-services company which until the late 1970s largely profited
from selling vegetable oil. He says he quickly became enthralled with
Wipro's chief executive, Azim Premji -- today India's richest man --
who picked him up at the Bangalore airport in a hulking Ambassador
sedan, a 1950s design famed for its rugged endurance but lack of air
conditioning or power steering.
Mr. Pieper felt confident that he could get a "good night's sleep" with
Mr. Premji as GE's partner. Within a year, the two companies had formed
a joint venture to manufacture and distribute an ultrasound machine.
GE's industrial-equipment sales into India didn't take off as
anticipated. But executives realized they'd found a cheap source of
talented programmers and engineers. GE's Mr. Pieper quickly set aside
$5 million annually to hire Wipro to write more software code for GE
ultrasound machines and computer tomography, or CT, scanners.
GE's taste for cost-cutting came as a shock to Wipro executives such as
48-year-old Ramesh Emani, who helped manage the software partnership.
He says GE soon began playing one Indian software firm against another
to drive down costs, demanding constant productivity gains. "GE was
very brutal," says Mr. Emani, who now heads a Wipro unit developing
software for automobiles and cellphones.
By the mid-1990s, top GE managers began encouraging other units to
follow the medical division's lead in India. In some cases, Mr. Welch
gave the order directly, says Mr. Pieper, now vice chairman of Credit
Suisse First Boston's alternative capital division in New York. "For
the same amount of engineering dollars, we were getting 50% more people
thinking about stuff world-wide," he says.
A software programmer in India with two to four years' experience makes
about $10,000 a year, compared with $62,000 in the U.S., according to
Hewitt Associates LLC, a Lincolnshire, Ill., consulting firm.
GE contracts helped underwrite the growth of India's technology sector,
Indian executives say. At one point during the 1990s, Wipro's software
unit, Wipro Systems Ltd., received 50% of its revenue from GE. At TCS
and another leading technology company, Infosys Technologies Ltd., the
figures were between 20% and 30%, the companies say. Combined these
three firms now account for a third of India's total software exports.
For the fiscal year ended March 31, 2004, Wipro's
information-technology businesses generated more than $1 billion in
revenue, up from just $15 million in 1989. Its headquarters in
Bangalore is an oasis of blue fountains and manicured lawns amidst dirt
roads and parched fields. In a December interview there, Wipro's chief
executive, Mr. Premji, said GE "helped us understand global companies."
By the late 1990s, GE began turning its attention from simply buying
software from India to using the country as a base for data entry,
processing credit-card applications and other clerical tasks.
Other companies such as American Express Co. and British Airways PLC
had already moved some back-office operations to India. But with Mr.
Welch's enthusiastic support, GE eventually went much further, shifting
thousands of jobs and untold dollars in operational expenses to India.
Savings on backroom operations alone amount to about $300 million a
year.
Nigel Andrews, a former top GE Capital executive who oversaw India,
says the "light went on" for GE in 1997 as the financial unit was about
to create an Indian office to process credit applications for a
credit-card joint venture with a local bank.
Mr. Andrews says he realized that India's 100 million English speakers
offered an almost limitless pool of inexpensive, educated labor for
such tasks. "We started to think, we can do this for the rest of the
world," says Pramod Bhasin, 53, a former GE Capital executive who
helped create Gecis and serves as its chief executive.
Their first move was to hire away the Indian executive then managing
American Express's Indian outsourcing unit, Raman Roy. The new Gecis
operation quickly took on a number of assignments for GE's U.S.
businesses, such as pulling together mortgage applications. By late
1998, Mr. Roy began patching together a prototype for the company's
first international call center in New Delhi.
That effort met with skepticism from U.S. executives, who thought
India's telephone and electricity infrastructure was too unreliable.
Mr. Roy's team worked with Indian regulators to install reliable phone
lines and bought generators to guard against frequent power cuts. They
strung bed sheets between cubicles to meet U.S. requirements for
privacy of financial data.
"The phone company initially told me there wouldn't be outages for much
longer than six minutes," Mr. Roy says. "I told them I couldn't survive
an outage of even six seconds."
The venture offered clear economic advantages. An Indian call-center
worker earns around $3,000 annually, compared with more than $27,000 in
U.S., according to Hewitt, which says its comparison is based on
secondary sources. Mr. Bhasin says 8,500 people responded to a
newspaper ad for the first 20 positions.
After the call center's first trial in early 1999, GE allocated more
than $10 million to expand the operation, as well as other processes.
Mr. Roy says former GE Capital Chief Gary Wendt told him: "You don't
know the revolution you just created." Mr. Wendt didn't return phone
calls seeking comment.
In the U.S., GE's outsourcing push continued to meet resistance.
Executives worried about replacing American workers with overseas
labor. Mr. Andrews says that managers at GE Capital's credit-card
operations feared U.S. clients might take offense at being called by
foreigners.
As the cost savings, efficiencies and quality became apparent, GE
increasingly came to view outsourcing as a weapon to drive its profits.
Mr. Welch challenged his top managers to meet with Indian staff. At
GE's annual gathering of top management in Boca Raton, Fla., he gave
the stage to Messrs. Andrews and Bhasin, who pitched their operation.
"You weren't a fully fledged player if you weren't doing something in
India," says Mr. Andrews, who today serves on several corporate boards
and as a governor of the London Business School.
GE's Gecis unit eventually employed 12,000 people at two expansive
office buildings outside Delhi and a glittering new tower in Bangalore,
and several thousand more in other countries. It also started proving
more sophisticated services like accounting and analyzing new markets
for GE businesses. In 2004, Gecis estimates, it did about $400 million
of work, mostly for its parent company.
In November, GE sold 60% of Gecis to U.S.-based investment firms
General Atlantic Partners LLC and Oak Hill Capital Partners LLC. The
sale has allowed Gecis to begin working for companies other than GE,
including Japan's Nissan Motor Co., which recently signed on as a
customer.
GE leaders have discovered limits to overseas operations. India's
nuclear standoff with neighboring Pakistan in 2002 caused executives to
worry the company had become too "concentrated" in the subcontinent and
led to a pause in investment, says Scott Bayman, head of GE's India
subsidiaries.
Some other GE units have also withdrawn business from India. Last year,
GE's health-care business stopped using India to handle
customer-service calls, after a GE health-care survey showed that
hospitals and physicians "prefer to work with local, U.S.-based
customer services." The calls are now being routed to call centers in
Wisconsin and Florida. GE's health-care unit still does some work with
Gecis.
Alumni of GE's India operations say they aren't worried about a
backlash against outsourcing. Indian entrepreneurs are churning out
dozens of new technology and outsourcing companies, many based on
business models learned from the American conglomerate.
Mr. Roy, the former Gecis executive, founded Spectramind which was
acquired by Wipro. Now with 15,000 workers under him at Wipro, Mr. Roy
says he's looking forward to competing with his former employers.
"Technology companies and outsourcing firms in India need to recognize
that if it wasn't for GE, they wouldn't be here today," he says.
Write to Jay Solomon at jay.solomon@wsj.com3 and Kathryn Kranhold at
kathryn.kranhold@wsj.com4
6. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.nni.nikkei.co.jp/AC/TNKS/Nni20050316D15JSN05.htm
Leading call center and outsourcing company, Transcosmos, has announced
that over the next 3 years, it will increase from 300 to 1,000 the
number of software engineers it has working at its Chinese subsidiary.
Transcosmos estimates that by doing so, it can cut personnel costs by
2/3, while still retaining Japanese-language reading ability. To
achieve transparent servicing for Japanese clients, traditionally the
most difficult task in off-shoring Japanese-language development work,
Transcosmos will retain 40 "bridge system engineers," who speak
Japanese and gather specs, troubleshoot, and generally interface with
the Japanese clients. (Source: TT commentary from nikkei.co.jp, Mar 16,
2005)
7. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.sfgate.com/cgi-bin/article.cgi?file=/n/a/2005/03/17/financial/f093227S02.DTL
IBM to Lay Off 500 Workers in Sweden
Thursday, March 17, 2005
(03-17) 13:35 PST STOCKHOLM, Sweden (AP) --
International Business Machines Corp., the largest provider of computer
hardware and consulting services, said Thursday it will lay off about
500 workers in Sweden, or nearly 9 percent of its work force in the
country, shutting down most of its operation in five cities.
IBM spokeswoman Aasa Barsness said the company will close offices in
Vaesteraas, Eskilstuna, Linkoeping, Alingsaas and Huskvarna, and that
all workers on those sites were given notice Thursday of the pending
layoffs.
A report posted on the trade union Sif's Web site said 300 of the jobs
will be cut in Vaesteraas, a city located about 60 miles west of
Stockholm. IBM has been providing mainly outsourcing services in
Vaesteraas, for companies like LM Ericsson and the Swedish postal
service.
Union officials said they feared the jobs would be outsourced to
countries like India where expenses are cheaper, but Barsness said no
decision had been made whether to move the jobs.
But, she added, "We're looking at how to coordinate our operations to
continue to be profitable in Sweden, and international locations may
become an option."
Armonk, N.Y.-based IBM has about 4,000 employees in Sweden.
Shares of IBM fell 79 cents to close at $89.86 in Thursday trading on
the New York Stock Exchange, in the middle of their 52-week range of
$81.90 to $99.10.
8. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.infoworld.com/article/05/03/18/HNibmservicecuts_1.html?source=rss&url=http://www.infoworld.com/article/05/03/18/HNibmservicecuts_
1.html
IBM plans service job cuts across Western Europe
Big Blue eliminates jobs in Germany and Sweden while eyeing cuts in
France as well
By Joris Evers, IDG News Service
March 18, 2005
Two weeks after announcing plans to cut 600 service jobs and close two
locations in Germany, IBM (Profile, Products, Articles) on Friday said
it intends to eliminate 538 similar positions and shutter five sites in
Sweden.
Additionally, as many as 2,000 jobs could face the axe in France,
according to French news reports. A spokesman for IBM in Europe, Fred
McNeese, confirmed the planned reductions in Sweden and Germany. Yves
Ravez, a spokesman for IBM France, said the company is in discussions
with unions about "the evolution of IBM in France," but has not
announced any cuts.
In Sweden and Germany, IBM plans to cut the jobs of people who provide
help desk, application management, and other services to IBM customers
who have outsourced their IT operations to the Armonk, New York-based
company, McNeese said. Customers should not notice a lapse in service
because of the reorganization, according to McNeese.
IBM is evaluating all of the German and Swedish jobs that it plans to
eliminate. While some workers may be redundant, other jobs will move
elsewhere, possibly outside of Europe, McNeese said. "An international
location is possible, although no final decision has been made," he
said.
German IBM employees, protesting last week against the closing of their
offices during the Cebit trade show in Hanover, said their jobs would
be outsourced. The jobs involve development and hardware support tasks
carried out at IBM Hanover and Schweinfurt, Germany, sites, the
employees said. Development jobs will likely go to local companies and
support tasks to either Hungary or China, they said.
In Sweden, IBM told employees in five cities that they will be laid
off. In Vasteras, this affects 284 employees, in Linkoping, 36, in
Alingsas, 39, in Huskvarna, 57, and in Eskilstuna, 122. The plan is to
close down operations entirely in these locations, IBM said. The
company expects negotiations with trade unions and authorities to be
completed later this year.
The Swedish cuts could be the result of IBM losing several major
contracts in the country. For example, Skandia Insurance Company Ltd.
decided not to renew its outsourcing deal with IBM, instead choosing
Volvo Information Technology AB for its mainframe operations.
In France, IBM expects to be able to provide more clarity in mid-April,
after it finishes its discussions with the unions, Ravez said. He
declined to say whether any cuts should be expected. "It is too early
to talk about restructuring and any plans," he said.
(Jonnie Wistrand and Karin Myren of Computer Sweden contributed to this
report.)
9. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://news.ft.com/cms/s/58bf936e-9b10-11d9-90f9-00000e2511c8,ft_acl=,s01=2.html
Texas summit to discuss extension of Nafta
>By John Authers in Mexico City
>Published: March 22 2005 20:39 | Last updated: March 22 2005 20:39
Security and trade are likely to dominate the Wednesday meeting at
President George W. Bush's ranch in Crawford, Texas, with Vicente Fox,
president of Mexico, and Paul Martin, the Canadian prime minister.
The three will discuss plans for an ambitious extension of the North
American Free Trade Agreement (Nafta), which took effect January 1
1994. According to Mexican officials, the new "North American
Initiative" would include measures to improve the region's overall
competitiveness by enhancing co-operation in sectors that already see
heavy cross-border trade, such as auto-parts.
It would also include measures to facilitate and regulate the flow of
migrants between the three Nafta countries. Mr Bush last year unveiled
a plan for a guest-worker programme. That programme remains a priority
for Mr Fox, who launched his presidency in 2000 with a call for a more
radical treaty on migration, but who now faces opposition from
Republicans in the US Congress.
The new initiative would not include "convergence funds" which the
European Union uses to subsidise less wealthy members in spite of calls
for such measures from Mexico. It also would not require a
renegotiation of Nafta. But the three leaders will also have to deal
with tensions over US-Mexican border security.
Such tensions have intensified in recent years with an increase in the
number of Mexican migrants, and with claims that Islamic terrorists
could use the border as their easiest US point of entry. Some US border
states have seen vigilante groups organise to repel migrants, and
Congress has authorised the building of border walls south of San
Diego. Mr Fox told reporters last week that he would demand that any
such wall should be pulled down. "No country that is proud of itself
should build walls," he said.
Comments by US security officials have also ruffled Mexican feathers.
Porter Goss, director of the Central Intelligence Agency, said in his
recent confirmation hearings that Mexico's presidential elections next
year would make it hard to pass economic structural reforms.
And James Loy, deputy homeland security secretary, recently told
Congress: "Several al-Qaeda leaders believe operatives can pay their
way into the country through Mexico, and also believe illegal entry is
more advantageous than legal entry for operational security reasons."
Santiago Creel, Mexico's interior secretary and a close ally of Mr Fox,
said that Mexico would protest against Mr Goss's "offensive" language,
which he said represented an attempt to "manipulate Mexico's internal
affairs".
10. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://sify.com/news/othernews/fullstory.php?id=13687293
LeT planned to target software cos in Bangalore
Sunday, 06 March , 2005, 18:14
New Delhi: The Lashkar-e-Toiba militants killed in an encounter at New
Delhi on Saturday night planned to attack software companies in
Bangalore besides Indian Military Academy in Dehra Dun, Delhi police
said on Sunday.
The militants visited Bangalore in December last year and surveyed the
location of several software companies there, joint commissioner of
police (special cell) Karnal Singh told reporters.
"They planned to hit economic installations to hinder the economic
development of the country," he said.
Three LeT militants, including two Pakistani nationals, were killed in
an encounter at Suraj Vihar in Uttam Nagar area of southwest Delhi.
The encounter followed the arrest of two of their associates earlier,
one of whom had arrived from Jammu with a cache of ammunition for the
militants.
Singh said documents seized from the slain militants of the
Pakistan-based LeT revealed that they planned to carry out suicide
attacks on the IMA.
The Pakistani militants had been identified as Bilawal (24), who hailed
from Sargodha in Pakistan and Shahnawaz (25), who was from Sindh
district.
The third militant killed was Shams alias Pervez Ahmed (26), a resident
of Patna, who had set up a base of the outfit in the Bihar capital.
11. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.baselinemag.com/article2/0,1397,1778436,00.asp
Does Outsourcing Deliver the Goods?
March 7, 2005
By Paul A. Strassmann
What is now referred to as Coase's Law states that a company will
purchase goods and services from suppliers (that is, outsource work) if
the suppliers' costs, plus the costs of completing such transactions,
are less than the costs of getting identical work produced by a
company's own employees.
To validate this application of Coase's Law from a technology
perspective, I looked up two comparable pharmaceutical companies,
Johnson & Johnson and Wyeth, in my database of public-corporation
financial results. My object was to see whether the company with a
higher "outsourcing ratio," defined as purchases as a percentage of
revenue, was indeed more profitable.
Calculator: Calculating an Outsourcing Ratio
Outsourcing: What Ratio Is Right?
Ratios such as R&D costs-to-sales (13.4% for Johnson & Johnson, 13.2%
for Wyeth), transaction costs-to-sales (182% vs. 196%) and net
assets-to-sales (64% vs. 58%) were close enough to suggest that the
firms were comparable in their financial structure.
However, Johnson & Johnson paid its 110,600 employees an average of
$90,461. That was 58% higher than what Wyeth paid each of its 52,385
employees, on average. Clearly, J&J was the higher-cost firm.
Yet, Johnson & Johnson was actually outsourcing less than Wyeth. The
J&J outsourcing ratio was 45.2%, whereas Wyeth's ratio was 59.2%.
If a firm with higher employment costs were purchasing lesser amounts
from lower-cost suppliers, it would follow Coase's Law that J&J would
be less profitable. Right?
Wrong. Key financial indicators led to opposite conclusions. Johnson &
Johnson vs. Wyeth ratios were as follows: return on shareholder equity,
26.8% vs. 22.1%; return on assets, 14.9% vs. 6.6%; sales growth, 12.8%
vs. 6.1%; total annual return to shareholders, 11.7% vs. 1.3%.
But this is only one case. It might be explained by J&J's innovations
in medical products, which require it to retain high-priced talent.
So I dug deeper.
The Standard & Poor's Compustat database made it possible to calculate
the outsourcing ratio for 1,100 widely diversified companies (see
chart). As is customary for similar analyses, the entire sample was
ranked by return on shareholder equity (ROE). The top quarter of firms
-- the winners -- recorded a median ROE of 18.0%; the bottom quarter --
the losers -- a median ROE of minus 55.4%.
The winners and losers were then ranked according to their outsourcing
ratios. The higher-ranking half of the 277 winners outsourced a median
value of 49.1% of sales. The bottom-ranking half of the losers
outsourced 83.2% of sales.
The statistics suggest that outsourcing does not appear to follow
Coase's Law. Increasing purchases indefinitely in search of the
cheapest source of supply does not seem to deliver profitability, as
measured by the return generated on shareholders' investments in their
companies.
I also applied a wide range of other conventional measures (such as
return on assets, shareholder returns, Information Productivity and
sales growth) and came up with nearly identical results.
Do these findings suggest an inexplicable contradiction -- a paradox --
that runs counter to widely believed ideas about the benefits of
outsourcing for gaining the lowest costs?
Probably not. The costs of making the purchases of lowest-cost product
and services may explain the difference. Coase makes it clear that a
purchase makes sense only if the transaction costs are lower than the
difference in the costs of purchasing something compared with doing it
in-house.
The conclusion: Either the costs of purchasing outside work are too
high for the "losers" -- that is, they don't manage their purchases
well -- or their businesses have inherent flaws.
Flaws that cannot be cured by shifting work to others.
Cheaper, But Not Better OUTSOURCED WORK as a percentage of sales
Comparison of Outsourcing Ratios for 1,100 Firms Median ratio for
high-ranking half Median ratio for low-ranking half
Top-ranked 277 firms by return on shareholder equity
(median ROE = 18.0%) 49.1% 54.6%
Bottom-ranked 277 firms by return on shareholder equity
(median ROE = minus 55.4%) 71.1% 83.2%
12. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://boston.bizjournals.com/boston/stories/2005/03/07/daily44.html
March 9, 2005
Lucent to cut 40 Westford jobs
Boston Business Journal
Lucent Technologies Inc. plans to cut 40 positions in Westford and 110
jobs in Landover, Md., according to an Associated Press report. Lucent
will transfer the work to a Bangalore, India, facility.
The affected employees work on Lucent's PacketStar PSAX media gateway,
which Lucent acquired for $1 billion in 1998. The device is used to
load voice, video and data streams onto a single network.
An industry trade publication called Light Reading first warned of the
PacketStar cuts last fall, but reported Lucent was considering shifting
the Landover work to Westford. Lucent made Westford one of its primary
technology bases with its 1999 purchase of Ascend Communications,
valued at $20 billion at the time.
Lucent last reported having 1,600 employees in the Boston area, and
31,800 in all.
Under chief executive Patricia Russo, Lucent has posted several
consecutive quarters of profitability. But the company's shares are
down 22 percent this year, closing Wednesday at $2.96.
13. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.dallasnews.com/sharedcontent/dws/bus/columnists/all/stories/032805dnbusworldview.55fa4.html
Jim Landers
India's tech elite thrive at home and in the U.S.
09:28 PM CST on Sunday, March 27, 2005
By JIM LANDERS / The Dallas Morning News
WASHINGTON - India's elite colleges - the seven Indian Institutes of
Technology - are holding their alumni bash in Washington this spring.
That sounds like a geography mixup. Texas A&M system grads wouldn't
have their big fete in Tokyo - unless, perhaps, most of them were
working in Japan.
It turns out that tens of thousands of the Indian Institutes of
Technology grads are working in the United States. They call themselves
IITians (eye-eye-tee-ans). And their story is worth pondering in the
debate about whether outsourcing technology jobs is good, bad,
inevitable or dangerous.
The IITians are survivors of what may be the world's toughest entrance
exam. About 100,000 high schoolers take it, but just 2,000 are
accepted.
Graduates often come to the United States to get advanced degrees and
stay to work technology jobs under H-1B visas where employers assert a
shortage of skilled Americans.
Many then start businesses of their own, hiring thousands of Americans
but also using the Internet to send work back to India.
They were criticized when they left India for draining brains away from
a country that badly needs their skills. They were criticized in the
United States for taking jobs from Americans.
Today the brains flow back and forth, both literally and, thanks to the
Internet, virtually. And the IITians are caught up in the outcry
against outsourcing.
"These are transnational individuals who have roots in more than one
place, who I think are going to lead this global world," said
anthropology professor Caroline Brettell of Southern Methodist
University, who has studied the Indian community in Dallas. "That's
just the nature of the world, and we've got to get with the program."
Raj Menon of Plano, who graduated from the Indian Institute of
Technology in Bombay, runs the 350-member North Texas IIT alumni
association. He came here to pursue a Ph.D. in chemical engineering at
the University of Texas in Austin and stayed to work at Dallas Trinity
Consultants.
Business model
He became a U.S. citizen and, with three other IIT alumni, started
Intigma. At its peak, the software firm had 10 employees in Dallas and
60 in Pune, a city east of Bombay. The business failed when the
Internet bubble broke, but the business model continues.
"Not just for software development, but for outsourcing all kinds of
business processes - engineering, accounting, finance," Mr. Menon said.
"It's a purely economic proposition."
The IEEE-USA sees that proposition from the perspective of American
electrical engineers who have lost jobs.
"I don't think the problem is for the American companies. The problem
is for the American workers, the American engineers," said Ron Hira, an
IEEE-USA vice president. "When American semiconductor companies were
losing market share to the Japanese in the 1980s, they went to
Washington and lobbied for protection. ... They got $500 million in
research and development subsidies. Now these same companies are going
overseas to do R&D.
"If we outsource our innovation, that was supposed to be our ace in the
hole," he said.
Mr. Hira says the model represented by the IIT graduates has gone from
"brain drain" to "brain circulation," but public policies haven't
changed to reflect that.
Here and there
IITians say they've created jobs and wealth in both the United States
and India. They started firms such as Sun Microsystems, Juniper
Networks and Cirrus Logic that employ thousands of Americans.
Sudhakar Shenoy is co-chair of this year's IIT alumni conference. He is
the founder, chairman and CEO of IMC Inc., a Reston, Va., company that
employs nearly 500 people in the United States and 100 in Pune.
"We hope to get up to eight or nine hundred employees here in the U.S.,
and maybe two to three hundred in India by the end of the year," Mr.
Shenoy said.
IMC has done work in India that Mr. Shenoy says he would not have done
with his U.S. team. The company spent $500,000 to have Indian
programmers design software for genetic research that runs on massive
parallel computers in Virginia. The package would have cost $3 million
in the United States. It is cutting problem solving from three weeks to
five minutes for some clients.
"Would I have done it without the Indian facility? Absolutely not," Mr.
Shenoy said. "I could not afford a $3 million risk."
At the same time, Mr. Shenoy argues the IITians have done great things
for America.
"These people employ over 170,000 in the U.S., and they're not all
Indians. They're local people," he said.
E-mail jlanders@dallasnews.com
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