u.s. competitiveness, offshoring & technology policy ron hira, ph.d., p.e., senior member vice...
TRANSCRIPT
![Page 1: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/1.jpg)
U.S. Competitiveness, Offshoring & Technology Policy
Ron Hira, Ph.D., P.E., Senior Member
Vice President, Career Activities
March 12th, 2005
![Page 2: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/2.jpg)
![Page 3: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/3.jpg)
Why Do Companies Utilize Overseas Technology Talent?
• Cost – An “Imperative”• Exceptional Talent? • Politics & Access to the Local Market
– Trade, e.g., China & Russia – Boeing engineers• Developing Countries’ Strategy
– Tax Holidays & Incentives• 24/7 Capabilities• Collaborative Engineering Technology• Companies Aware Of Possibility & Believe
It Helps Their Performance – Trigger• Fate Of US Workers No Longer Figures
Into Corporate Decisions
![Page 4: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/4.jpg)
Overseas Engineers Can Afford To Be Paid Less
Country Purchasing Power Parity
(PPP)
Salary
U.S. 1.0 * $70k $70,000
Hungary 0.367 * $70k $25,690
China 0.216 * $70k $15,120
Russia 0.206 * $70k $14,420
India 0.194 * $70k $13,580
![Page 5: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/5.jpg)
Substituting Labor:Expansion Abroad & US Layoffs
• Substitution not Additive or Complementary• India Most Mentioned Destination• Companies Are ‘Re-balancing’ Workforce in
Favor of Offshore Share EDS – 20k US layoffs & 20k offshore hires IBM Hewlett PackardIntel CSCAOL Texas InstrumentsUnisys Siemens
• ‘Knowledge Transfer’ – ‘Knowledge Extraction’– Forcing US workers to train foreign replacements
![Page 6: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/6.jpg)
How Much Work Has Moved Offshore?
• No One Knows– No one in government is collecting data
• Commerce Department has pilot study of $335k complete
• GAO survey concludes “current government data provide limited insight.”
• $2million study underway by NAPA
• Companies are reluctant to reveal their plans• Some High Skill/High Wage Work Is Moving• We Do Know It Is Accelerating
– Driven by top level management
![Page 7: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/7.jpg)
Outsourcing SaturationJust the Beginning
2005
TIME
Sat
urat
ion
![Page 8: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/8.jpg)
Wide Variety of Jobs Have Moved Offshore
“Any Task That Can Be Sent Down A Wire”
• Accounting• Programming and
Software• News Reporting &
Editing• Legal• Architecture
• VC Firms Pushing Engineering Design
• Insurance Claims Processing
• Radiology• Call Centers• Financial Analysis
![Page 9: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/9.jpg)
Developing Countries Target R&D
• Singapore - $2billion ‘Biopolis’ - Biotech– Also targeting Optoelectronics – HP & Agilent
• China –– Requires high-level tech transfer as part of investment– Attracting recent PhD grads of US universities– Companies locate R&D closer to production
• India –– Wants to be the “Global R&D Hub”– Drug Discovery and IT R&D
• Google, Microsoft, Texas Instruments, Intel, GM, etc. etc.
![Page 10: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/10.jpg)
Just Low Level Work? Sample Intel India Job Ad
• RF Simulation Engineer (Job# 274125) • In this position you will build various antenna, RF channel and
PHY/MAC models for various RF technologies; and simulate platform noise impact. You will also interact closely with internal wireless product groups to develop solutions to enhance RF performance in notebooks.
This position requires a M.S. or Ph.D. in Electrical Engineering with experience in mobile notebooks, WPAN, WLAN, WMAN, WWAN and platform noise. You must also possess: - Experience building various antenna, channel, PHY/MAC models, prototypes, test systems; and simulating the impact of multiple radios that are integrated into notebooks
Go to: www.monsterindia.com
![Page 11: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/11.jpg)
Both Positive & Negative Impacts
• US & Developing Countries – Both gain and lose from offshoring
• Net effects are impossible to determine
![Page 12: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/12.jpg)
U.S. Impacts +
• Lift U.S. Economic Development– Lower costs
• Open New Markets
• Lift Economic Development Abroad– Geopolitical and security advantages
![Page 13: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/13.jpg)
U.S. Impacts ?
• U.S. Competitiveness/ Innovation System• U.S. Workforce –
– Displace Workers– Downward Wage Pressure– Change in Mix of Occupations
• Military Capacity – Access & Assimilation• Homeland Defense - Critical Data• Brain Circulation vs. Brain Drain• Intellectual Property
![Page 14: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/14.jpg)
Developing Country Impacts +
• Best Path to Growth? – Comparative advantage is low cost skilled
labor
• Spillover Benefits– Movement up the ladder of innovation– Learning western business practices
• Macroeconomic Advantages
• Utilize Idle Labor Force
![Page 15: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/15.jpg)
Developing Country Impacts ?• Best and Brightest Supply External
Markets Versus Domestic Problems• Loss of Sovereignty to MNC’s? • Proper Use of Scarce Resources
– Work on male baldness rather than on malaria
– Help Indian urban in lieu of rural
• Race to the Bottom? – Potential for ‘Smokestack Chasing’– Mexican Maquiladoras and China
![Page 16: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/16.jpg)
Economists Debate Trade Theory
• Nobel Laureate Paul Samuelson, MIT– Bhagwati and Irwin are promoting “polemical
untruths”– Plausible scenarios when China’s
development makes US standard of living go down
– Gomory & Baumol show this mathematically
• Jagdish Bhagwati, Columbia– Samuelson is misunderstanding outsourcing
![Page 17: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/17.jpg)
Jobs Moving OverseasIdeal Scenario
Before Offshoring
• US Workers do– A, B, C
• Offshore Workers are– Idle
After Offshoring
• US Workers do – B, C, D
• Offshore Workers do – A and some of B
![Page 18: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/18.jpg)
Jobs Moving OverseasPredicted Impacts
• Job Dislocation– Hope for quick re-employment
• Change in Mix of Domestic Occupations– US workers will shift to non-tradable jobs
• Can’t compete on price
– Will the new mix be better than the old one?
![Page 19: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/19.jpg)
Jobs Moving OverseasPredicted Impacts
• Downward Pressure on US Wages for Tradable Occupations– ‘Silver lining’ according to some industry
reps– US IEEE members experienced decline in
wages from 2002 to 2003 for the first time since surveys began in 1973
• No One Can Predict Future– Creating future competitors?
![Page 20: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/20.jpg)
Domestic IT Labor Market Record Unemployment
(source: IEEE-USA from BLS)
OccupationEmployed
(000’s)2003
Unemployment
All Managers 14,468 2.9%
Computer & Information Systems Mgrs 347 5.0%
Engineering Managers 77 3.6%
Computer Scientists & Sys Analysts 722 5.2%
Computer Software Engineers 758 5.2%
Computer Programmers 563 6.4%
Computer Support Specialists 330 5.4%
Computer Hardware Engineers 99 7.0%
Electrical & Electronics Engineers 363 6.2%
![Page 21: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/21.jpg)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
1983 1987 1991 1995 1999 2003
All Workers Managers & Profs Electrical Engineers Computer Scientists
1983-2003 Tech Unemployment Rates
![Page 22: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/22.jpg)
Job Dislocation During Low Job CreationNonfarm payroll employment (seasonaly adjusted) - Updated Nov 04
90,000
95,000
100,000
105,000
110,000
115,000
120,000
125,000
130,000
135,000
Oct-83 Nov-87 Dec-91 Feb-96 Mar-00 Apr-04
Em
plo
ymen
t (0
00's
)
![Page 23: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/23.jpg)
IT Job Dislocations Immediate Impacts
• US IT jobs are going to Bangalore – No job creation means no reabsorption– No practical advice on what they should do
• Downward Wage Pressure Already Apparent
• Future Generation Receiving a Signal– CRA’s survey showed a 23% drop in BS
enrollments in 2003 in Computer Science– MIS dept enrollments down substantially
![Page 24: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/24.jpg)
Unpredictable Longer-term Impacts on Innovation & Security
• What Will Be New Occupational Mix For US?– Will the best & brightest pursue these technology
professions? – Where will future technology leaders be developed? – Who captures the wealth & jobs created by the ‘next
big thing?’
• Impacts on Military Superiority & Homeland Security? – Can economic studies predict this?
![Page 25: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/25.jpg)
Emerging Global IT Services Business Model
• Indian-Based IT Companies Trying To Capture US Customers – Not US Workers– Infosys has 3,700 H-1B & L-1 foreign
workers in US
• US Visa Policies Give Comparative Advantage To Indian Companies – Cheap offshore labor PLUS Cheap on-site
labor: foreign workers on H-1B & L-1 visas
![Page 26: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/26.jpg)
Emerging Global IT Services Business Model
Ticker Name HQ Market CapTTMSales Employees
INFY Infosys India $ 12,135 $ 1,164 25,700
WIT Wipro India $ 10,512 $ 1,395 32,000
EDS Electronic Data Sys US $ 8,633 $ 21,834 132,000
CSC Computer Sciences US $ 8,107 $ 14,949 90,000
ACS Affiliated Computer US $ 6,404 $ 4,106 40,000
CTSH Cognizant US $ 3,215 $ 465 5,600
SAY Satyam India $ 2,892 $ 620 9,532
PER Perot Systems US $ 1,431 $ 1,618 13,500
Retrieved from Reuters.com on August 13, 2004 – Analysis by Ron Hira, RIT
Dollar figures in millions
![Page 27: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/27.jpg)
Name Price to Sales
Sales Growth % 1 Year
P/E Ratio TTM
Net Profit Margin 5 Yr Avg %
Effective Tax Rate 5 Yr Avg
Infosys 10.42 40.96 42.38 28.7 14.01
Wipro 7.53 36.37 42.96 19.5 13.42
EDS 0.40 0.55 NM 3.6 35.87
CSC 0.54 30.15 15.82 3.4 30.55
ACS 1.56 8.43 12.81 8.2 38.64
Cognizant 6.92 60.74 44.92 13.7 31.23
Satyam 4.67 23.34 24.53 2.7 14.02
Perot Systems 0.88 9.65 19.4 4.2 54.37
Retrieved from Reuters.com on August 13, 2004 – Analysis by Ron Hira, RIT
![Page 28: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/28.jpg)
Offshore Outsourcing Firms Hiring Briskly
• Hughes Software Systems (HSS) – Double staff over next 6 quarters by adding 2,500
• Tata Consultancy Services – Revenues up 44% & Profits up 51%– Added a net 3,974 employees in the quarter and
has now expanded staff by 7,000 this year
• Infosys – Profits up 49%– “To meet vigorous demand for outsourcing, Infosys
hired 5,010 people during the quarter, slightly less than 5,100 hired in the whole of the last fiscal year. Plans to hire up to 4,500 more in the next six months.”
![Page 29: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/29.jpg)
Who Wins? Who Loses?
• Winners– Shareholders– Company executives– Consumers– Some existing employees?– Countries getting those jobs
![Page 30: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/30.jpg)
Who Wins? Who Loses?
• Losers– Displaced workers– Existing employees subject to the threat of
being offshored
• US overall?– Depends on re-employment of displaced
workers– Future technological innovation– National security
![Page 31: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/31.jpg)
Spate of Industry Sponsored Studies
• Economic Studies Capture Economic Efficiency Argument But Miss Other Important Elements– Technological Innovation – Security
• Even ‘Independent’ Studies Are Funded by Industry– McKinsey & Dr. Catherine Mann (IIE)
![Page 32: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/32.jpg)
What You Can Do
1. Meet with your Congressperson in his/her district office
2. Go to IEEE-USA Legislative Action Center website and write to your legislators • Respond to an ‘Action Alert’• Russ Harrison, IEEE-USA staffer, can help
3. Write to state legislators
![Page 33: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/33.jpg)
What You Can Do
4. Enlist members of Regions/Sections/Chapters/PACE
• To be effective, we need large numbers
5. Spread the word amongst colleagues, family and friends
6. Provide IEEE-USA with individual stories• We want to better understand the situation of
members• Back up the statistics with individualized
stories to get an effective message out
![Page 34: U.S. Competitiveness, Offshoring & Technology Policy Ron Hira, Ph.D., P.E., Senior Member Vice President, Career Activities March 12 th, 2005](https://reader035.vdocuments.us/reader035/viewer/2022062618/5514c7a755034693478b4ae2/html5/thumbnails/34.jpg)
Look for my bookavailable in April ’05Published by the American Management Association