Wednesday, May 09, 2007

Offshoring Debate on Daniel Drezner Site

(This blog pertains to a post on namely ‘DO I HAVE BLINDERS ABOUT BLINDER?’)

I have been programmer ever since my post graduation in 1989; started making living by exporting ‘software services’ from India when the offshoring wave was yet to catch in India; then folded my business in India because I could not afford any programmers for my business; came to USA in 1997 and rode the DotCom boom and have survived that bust; all in Silicon Valley. I am quite content to be a USA citizen and still work competitively in Valley along with so many coworkers in India.

So it is sad to say so much misinformation and lack of understanding is going on here. I will not be able to put forward a coherent theory about all this in short space as like a competent Economist might do; but I will simply list the points in this regard.

1. I am not alone in Valley who is able to make living here despite the cut throat competition of engineers from India. In fact so many of them are successful even not being entrepreneur – plain vanilla engineers. The reason is skill set acquired by these engineers is simply not available outside USA in many cases. How are you going to get programmers who have worked with all versions of Java and JBoss with all the latest technology quite well understood? Those are in short supply in India as well as here. So companies simply pay for the competence wherever it is available. Companies are not averse to spend that money at a high cost location if the value addition is justified.

2. Have you read quarterly reports of Indian IT biggies (Infosys, TCS, Wipro and Satyam)? The single most important aspect what a Bombay Stock Exchange Broker looks at it is the footnote of quarterly employee turnover (say apart from the Rupee Dollar exchange rate). What it indicates is these businesses are operating under tremendous shortages of skilled engineers and managers. For many of those people salaries are comparable to what you may pay to such skill set in Valley. In short it is true global market for skill sets. Not for nothing Mathematicians from French topnotch institute would command premium anywhere in the world – despite French economy not doing that well.

3. Why are these economists losing their sleeps about Programmers and Accountants? Do you know stories of Nuclear Physicists? That was boom profession when Cold War was in full force, Defense funding was high and Nuclear Industry was not totally a bad word in America. After 1989, these Nuclear Physicist and Physics Ph.D. technologists started to loose lot of jobs. The first company I joined in USA in 1997 had shortage of web programmers so much so that it had 3 Physics Ph.D. holders happily working as programmers. And now that America cranked out its first new Nuclear Power Plant after almost 30 years, do you think we are going to have enough engineers in that field? Of course not.

4. Next, how do you produce all these Alternative Energy industries in ‘offshore’ manner? Who is that fool who is saying those Billions in India and China will provide these Alternative Energies to USA and rest of the world? How on Earth are you going to have that industry without having qualified Physicists and Chemists and Electrical Engineers; all 100% working within America? Go and read public papers published by Indian Government which keeps on hopelessly watching perennial decrease in number of university students in Physics and Mathematics; leave alone the quality issue. Every one over there wants to go Engineering – because they will do the offshore jobs – but then there is no competent talent to develop and execute this Alternative Energy industry. You Economists and Media people keep on missing the virtuous possibilities of this industry and just get engaged in creating noise about irrelevant issues. Check Germany and Japan for their competitive edge in Solar Technology over Americans. Engineer / Labor costs are higher than USA and USA does not have any less competent technologists. Still these countries are excelling in these technologies along with respectable employment generation.

5. One Valley engineer lost his job in the DotCom bust and he simply started the business of contracting to install solar panels in Valley. His is company called ‘Akeena Solar’ employing hundreds of people now.

6. Agreed, not all may be in the position of acquiring sophisticated skills all the time. But is it not the topic for policy makers about how to continuously educate / train people? USA is still having tremendous shortage of Nursing personnel and all Nursing Colleges are bursting at seams by the students who are scrambling for that profession. The word is out that there is shortage and jobs are plenty and hence people are going there. Some Doctor professions will come under offshoring pressure. But the biggest reason will be the mess of American Health Care System, part of which is forcing Doctors to pay for higher education for around 12 years before earning a dime where as rest of the world does that in 6 years. If the costs do not come down, ‘medical travel’ will get boost and people will start getting preplanned surgeries from India and Global Insurances and Corporations will buy those services. Lawyers will work out the deals. The point is there are so many policy battles which need to be worked out for employment generation; harping on ‘offshoring’ is misplaced.

7. Look at Sarkozy election in France – he did not sale any rosy stories to French people. But people still voted him knowing that the way forward is hard work. I do not think we Americans are any dumber than French. Which means, when rightly and honestly explained; Americans will understand the benefits of offshoring and all the adjustments one has to do due to Globalization. Fear mongering is not the way. For Economists to worry that ‘oh, how these bad politicians and gullible public will face this crisis’ is simply arrogant.

8. Concrete suggestion for workers displaced by offshoring or by any loss of job is – offer basic medical insurance for that worker and her family for a year or so. We only give 6 months of Unemployment allowance. In addition there should be 12 months of some basic medical coverage. That will be a big help for these displaced workers to concentrate on new opportunities. I am speaking this because, I have personally gone through that ordeal.

Umesh Patil
Cupertino, CA 95014.
May 9, 2007

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