Outsourcing of USA Jobs and Opportunities - PowerPoint PPT Presentation

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Outsourcing of USA Jobs and Opportunities

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Title: Career Defense in the Face of Globalization Author: G Mc Clure Last modified by: G Mc Clure Created Date: 7/27/2004 7:27:29 PM Document presentation format – PowerPoint PPT presentation

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Title: Outsourcing of USA Jobs and Opportunities


1
Outsourcing of USA Jobs and Opportunities
  • George F. McClure
  • g.mcclure_at_ieee.org

2
Technology Makes It Possible
  • Moores Law more computer capability, lower
    cost and trivial shipping costs
  • Telecommunications ever cheaper
  • Developing nations labor cost lower
  • Expanding education opportunities
  • Half U.S. tech grad degrees to foreign students
  • Increasing tech grads, India (150K/yr. and China
    (250K/yr.)

3
Free Trade Agreements
  • Impacted manufacturing first GATT
  • AMD in Dresden
  • 23 chip foundries in Taiwan
  • Now impacting services - GATS
  • Protections for Intellectual Property iffy
  • Outsourcing offshore cuts costs
  • States start limiting tax-paid outsourcing

4
Comparative Advantage
  • David Ricardo work should be done where most
    advantageous (1816)
  • High productivity an IT advantage
  • Over 1 trillion invested worldwide in IT
  • Enterprise Resource Planning spreads
  • Central databases, terminals anywhere
  • CADCAM, CATIA
  • Supply chain management efficiencies

5
Taxation Concerns
  • U.S. corporate tax rate 35
  • Offshore rates mostly lower (e.g., Ireland
    12-15)
  • Multinationals can shift profits
  • IP moved offshore, fees earned there, too
  • No U.S. tax unless foreign profits repatriated
  • Motorola vs. IRS 500 million dispute
  • D. C. Johnston, Perfectly Legal The covert
    campaign to rig our tax system to benefit the
    super rich and cheat everybody else

6
Innovation
  • Key to competitiveness
  • New ways to combine labor and capital
  • Hard to forecast
  • Transistor
  • Fiber optics
  • Internet Networking the World
  • When? 2 usually profits (e.g., iPod)

7
Productivity and Innovation
  • India average productivity 15 of U.S. unit
    costs rise if paid gt15 of U.S.
  • U.S. manufacturing productivity 17,
    manufacturing employment 17
  • Innovation new uses of labor and capital
  • U.S. led historically
  • Diffusion of innovation others catch up

8
Boeing Dreamliner Example
  • Innovation 25 higher efficiency, lower cost
    per seat mile to operate
  • Seattle assembly from subassemblies from
  • Canada
  • Japan
  • Australia
  • More use of lightweight composites
  • Engines from GE or Rolls Royce

9
Government Regulation
  • Environmental protection
  • Pollution standards
  • OHSA
  • Employment practices
  • Taxes
  • Sarbanes-Oxley corporate governance
  • Benefits

10
The Trends in IT
  • First, a prima donna paperless factory, etc.
  • Now, a commodity
  • Buy it for less total 569 billion w.w. 2003
  • Overall outsourcing growth 7.8 CAGR between
    2002 and 2007 Gartner
  • Lose 3.4 million service jobs by 2015 Forrester
    Research
  • Cumulative 136 billion in wages, 2000-2015
  • Job loss includes 470K Computer, 184K AE, 1.7M
    Office
  • Job losses over 20 CS/SA, programmers 2000 to
    2004

11
Factors in Near-term Increase
  • Word spreads about savings est. 160
    billion/year in IT work outsourced
  • Wipro, Infosys broaden IT services offered
  • Captive centers for BPO e.g., BoA, Schwab,
    Lehman GE does accounting, payroll, financial
    reports for all divisions in India - BPO market
    682.5 billion by 2008
  • Onshore IT tech/service vendors placing work in
    India, China, Belarus for product development and
    services

12
Why Outsource IT?
  • Continual shortage predictions
  • Guest worker quotas reached
  • Cheap telecom- 8/month, LA-Bangalore
  • Cheap equipment Pentium 4 lt TRS-80
  • Centralized CADCAM work anywhere
  • Cheap labor -?better bottom line
  • Offshoring becomes conventional wisdom

13
Going Up the Food Chain
  • Simple tasks go first, e.g., software modules
  • S/w architecture, integration test, last
  • Cell phone design, but not propagation tests
  • Radiology interpretation but not patient
    interface
  • CPAs send tax preparation to India BPOs
  • Architects detail floor layouts in Hungary

14
80 Offshored to India Why?
  • English-speaking, well-educated
  • Relative political stability
  • Low living costs low wages
  • Pay 12K, bill at 45K in India
  • Pay 75K, bill at 125K in U.S.
  • Savings of 50 after 6 months in IT services
  • 2004 growth rate 30 - 40 -NASSCOM/KPMG

15
Megadeals Still Hot
  • Outsourcing megadeals worth gt1 billion
  • 9 in 2001, worth 15.1 billion
  • 14 in 2002, worth 28.4 billion
  • 16 in 2003
  • 12 in 2004, avg. 25.3B/yr. (03-05)
  • 11 in 2005
  • - Gartner Dataquest

16
But Slowing
  • More smaller deals, shorter time
  • Worldwide, expect 400B in 2008
  • Malaysia 27/yr. growth rate 5 yrs.
  • Canceled
  • JPMorgan/IBM 5B (2004)
  • Sears/CSC 1.6B (2005)

17
Senior Work Stays
  • Sales and marketing
  • Customer site 30 of WF for requirements
    definition, liaison, install, debug, and
    reporting
  • Export restrictions keep some at home
  • Security class. privacy concerns holds some
  • Overall project management, usually stays,
  • BUT.

18
RD Goes Global
  • RD Centers in India, e.g.,
  • Microsoft
  • H-P
  • Sun Microsystems
  • Motorola
  • Oracle
  • IBM has 3 of 8 RD Centers in U.S. others in
    Zurich, Haifa, Beijing, Tokyo, Delhi

19
Offsets for Foreign Markets
  • Foreign buyers keep some value-added
  • Aircraft China builds subassemblies
  • Automobiles GM builds Buicks in China
  • Chip production China discounts VAT for own
  • Boeing has 600 engineers in design center in
    Moscow
  • Intel has 15 mfg. sites, 8 outside U.S.

20
CS Graduations in U.S.
  • Graduation rate 62,000 per year
  • 2004
  • BS- 45,000, 8 on temporary visas
  • MS- 16,000, 50 on visas
  • PhD- 1,000, 50 on visas
  • Engineering MS, 40 on visas

21
EE Graduations in U.S.
  • 2002-2003
  • BS 13,627
  • MS 7,621
  • PhD 1,256
  • Total 22,504
  • Total for EE, CE, ChE, and ME 59,385
  • Source U.S. Dept. of Education

22
Foreign Grad Students Down
  • Security concerns prompt SEVIS
  • Student and Exchange Visitor Information System
  • Reengineered nonimmigrant student and exchange
    visitor (F, M, J visa categories) process
  • 9500 campuses, 770K students, visitors
  • First year, GRE testing down gt50
  • India -56 China -52
  • Europe, Canada choice for more foreign students

23
Three Answers to Shortage
  • L-1 visa intracompany transfer 5 years
  • 3 years initially, 2 yr. ext. (tech), 4 yr.
    (mgr.)
  • No limit to number
  • Job shop abuse
  • H-1B visa 65,000 per year 6 year limit
  • Extended if green card petition filed
  • 3-year extensions, not limited
  • Added quota of 20,000 in 2005 for MS/PhD
  • Outsource the work

24
Outsourcing Restrictions
  • New Jersey et al. no offshoring of state work
  • National Defense, Homeland Security require
    citizenship/clearances
  • Security clearance granted through employer
    earns a salary premium

25
Career Trends
  • Retrain, hire, or outsource?
  • Benchmark for training budget 2 of sales
  • Just-in-time leads to shamrock organization
  • Hire skills temporarily as needed
  • Only the core or stem stays
  • Charles Handy, The Age of Unreason, 1989

26
The Echo Boomers
  • Born between 1982 and 1995
  • Most wired/wireless generation
  • Nearly 80 million, 1/3 of U.S. population
  • Spend 17 billion/year
  • Overachieving, over-managed, very pressured
    very tolerant
  • Builders, not destroyers

27
Echo Boomer Biases
  • Believe everyone is above average
  • Rewarded for participation, not achievement
  • Expect immediate accolades
  • Look for daily feedback
  • Expect grade inflation
  • Expect to rise to the top quickly

28
Career Strategies
  • Know your company industry
  • Business prospects
  • Book-to-bill ratios
  • Keep current with technology
  • Keep your boss posted on your work
  • Think of your employer as your customer

29
Career Strategies 2
  • Work that wont be outsourced
  • Site specific work (e.g., power plant operation)
  • Customer interface
  • Classified defense, homeland security
  • Right-brained activities
  • Creative, broad thinking, artistic
  • People skills team leading, motivating
  • Six senses design, story, symphony, empathy,
    play, meaning

30
Career Strategies 3
  • Jobs to avoid
  • Left-brain work CAD, coding, help-desk
  • Routine, scripted, spreadsheet-based
  • Questions to answer
  • Can someone overseas do it cheaper?
  • Can a computer do it faster?

31
Career Strategies 4
  • Beyond Information Age (knowledge workers 20th
    century)
  • Conceptual Age (creators and empathizers 21st
    century)
  • Abundance Western affluence
  • Asia migration of knowledge work
  • Automation higher productivity, less drudgery
  • Important pattern recognizers and meaning makers
    e.g., e-Bay 2 to Wal-Mart now

32
Working Alone - Free Agent?
  • You are own boss cant be outsourced
  • IEEE-USA has Consultants Network
  • Ideal for mothers and other part-timers
  • Need business plan first step
  • File income tax Schedule C costs and benefits
    deductible
  • Possible aid SCORE www.score.org, SBA
    www.sba.gov/starting_business

33
Free Agent 2
  • Digital technology makes entry easy
  • 13 million microbusinesses in U.S. today
  • Grow at own rate no glass ceiling
  • Set rates to include all costs space, benefits,
    equipment, taxes, travel, marketing, pension
    see Pinks book
  • Soloist, portfolio worker

34
Career Workforce Policy Cmte
  • Tracks issues affecting WF supply/demand
  • Prepares position statements for advocacy
  • H-1B Visas, L-1 Visas, Offshore Outsourcing
  • Career Equality in Engineering
  • Cash Balance Pension Plan Conversions
  • Engineering Licensure
  • www.ieeeusa.org/ public policy

35
Resources
  • EIA Playbook, The Technology Industry at an
    Innovation Crossroads. http//www.eia.org/new_pol
    icy/innovation.phtml
  • The Race to the Bottom Why a Worldwide Worker
    Surplus and Uncontrolled Free Trade are Sinking
    American Living Standards (Westview Press).
    www.americaneconomicalert.org
  • Adequacy of U.S. SE Workforce, John Sargent,
    www.cra.org/govaffairs/sargent_adequacy_of_S-EW.pp
    t

36
More Resources
  • Daniel H. Pink, A Whole New Mind Moving from the
    Information Age to the Conceptual Age, New York
    Riverhead Books, 2005 
  • Daniel H. Pink, Free Agent Nation The Future of
    Working for Yourself, New York Warner Books,
    2002
  • Engineers as Commodities, IEEE-USA, Todays
    Engineer, Oct. 2005 www.todaysengineer.org
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