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The Almighty Buck United States

Andy Grove Speaks out on Offshore Outsourcing 701

molarmass192 writes "Andy Grove, of Intel fame, "spoke out" at a recent technology summit in Washington about the current trend towards offshore outsourcing and how it's causing the US to slowly but surely lose its edge in the tech sector. He states plainly that the US government must step in to restore balance between the need for profits and the lure of offshore outsourcing. There are also pokes at the patent system and slow adoption of broadband internet access. An interesting insight into what's going on inside the heads of the US's tech leaders."
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Andy Grove Speaks out on Offshore Outsourcing

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  • by Sevn ( 12012 )
    Good posting Michael. Even though you seem to have this band of traveling yoddelers that follow you around bitching about your posts, I appreciate this one. Anything having to do with job outsourcing is timely and topical as far as I'm concerned. Thanks.
    • Interesting comments about the U.S. patent system slowing innovation!

      "Grove also criticized the nation's overburdened patent system, which he said is causing an abundance of innovation-slowing litigation.

      "He said that the inability of patent examiners to handle the workload has led to a backlog of important applications, but also less than thorough vetting of patents that perhaps should not be granted. "

  • Interesting (Score:3, Informative)

    by CooCooCaChoo ( 668937 ) on Friday October 10, 2003 @11:26PM (#7187560)
    People want lower prices, better pay and competition. Now these same people complain when they lose their job.
    • "People want lower prices, better pay and competition. Now these same people complain when they lose their job."

      What's so interesting about that? It's not ironic, if that's what you're implying. It's kind of hard for businesses to sell products if the people who buy them are unemployed.
    • What is interesting about that?

      Can't we have lower prices, better pay, competition without losing our jobs?

      Why not?
      • >> Can't we have lower prices, better pay, competition without losing our jobs?

        Where exactly is the money going to come from?

        Are you one of those people that gets surprised that the cost of goods goes up and college kids get laid off when the minimum wage gets hiked up?

        • Historically, before the minimum wage is raised companies make dramatic statements about how the government would force them to fire lots of workers, and then after the minimum wage is raised nothin happens (except that the workers with the crappiest jobs get paid a bit more).
  • Shocking (Score:2, Funny)

    by Now15 ( 9715 )
    How dare countries outside America try to compete! It's so... un-American!
    • "How dare countries outside America try to compete! It's so... un-American!"

      The problem isn't the competition, it's the short-sighted decisions to use these companies. It may be cheaper to produce this stuff, but the people who make the tech stuff tend to be the people that buy the tech stuff. Can't do that if you don't have a job.

      I have a piece of advice for you: When you're making comments like "How dare countries compete with America", 9 times out of 10 you are missing a huge chunk of information a
  • Thank God that someone out there with a little bit of cred is finally saying what we all who work in the industry have known for so long.

    Now, how to stop it? I favor use of tariffs to force up the price of offshore workers (might be tough to enforce, but if a company *sells* in the US, which is where you want to sell if you want to make the big bucks, we have some influence; if they can keep the Big 3 in business, they can help us out, too).

    My jerkoff company just shipped a huge section of its QA effort

    • Re:Oh, Thank God! (Score:5, Insightful)

      by darkov ( 261309 ) on Friday October 10, 2003 @11:53PM (#7187712)
      Now, how to stop it? I favor use of tariffs to force up the price of offshore workers

      Nice idea, except that the US economy's success is predicated on open trade and open enterprise. Your attitude doesn't surprise me much. Free enterprise and trade is great until it effects you, and the average American has no qualms about being hypocritical when it serves.

      The fact is that introducing tariffs will make the situation worse, not better. More industry will move offshore because the cost of doing business in the US will rise. Countries will retaliate with their own tariffs and the amount of business going to the US will fall.

      The fact is that most IT jobs are commodities: system administration, building web pages, support, most programming (visual basic, etc) and the like can be done by anyone. The only solution is to innovate, become more efficient and smarter in how you do things.

      I live in a country with a relatively small, export oriented economy. Reform and increasing exposure to international competition has made the economy more robust and efficient.
      • >> Countries will retaliate with their own tariffs

        Many of these countries already have the high tariffs of their own, and that is part of the problem.

        Free trade doesn't mean "get taken advantage of". If they're gonna tariff your goods and try to balance things so that you buy from them but can't sell to them, then the way I see it, you're free to counter such things.

    • Why don't the "big" CEO, CTO, CFO, etc. ship thier jobs over seas? That would save the company MUCH more then shipping a few QA salaried employees over seas. Greed and power, that is the state of most US companies and the US government. Remove the little man to "save" the company money and then give themselves a bonus for the effort.
    • Re:Oh, Thank God! (Score:3, Interesting)

      by Radical Rad ( 138892 )
      I heartily agree with you. Grove is saying what I have been thinking and saying for some time now. Corporations will go for the short term profits and fuck themselves in the long haul. They will do it for the same reasons that politicians do it. The CEO's know they won't be around when the bill collector can no longer be put off, so they will fuck the company they run for their own personal benefit; Make short term profits higher and get huge multi million dollar bonuses. Make short term profits higher and
  • Regulation. (Score:2, Insightful)

    by FooAtWFU ( 699187 )
    This is regulation. I thought regulation was bad for the Internet... and in any case, merely saying that the government should do "something" about it is inviting vague foolishness down on our heads to the detriment of business. Any "solution" implemented on a vague platform like that would probably be worse than the problem, and at best a marginal improvement.
    • Yeah, you're right, so long as citizens like you remain frozen with mistrust of the government.

      We, meaning regular citizens, need to get involved in government, not live in fear of it. And that means a lot more than voting (though half of us registered voters don't even do that). This is a democracy, remember? You can work to affect change. But so long as we continue to just throw up our hands and chant "government is evil" over and over, you can bet the government we eventually end up with will be st

    • That's because there is no one solution to all problems. Not regulation, not the free market, not the Internet, not open source, not anything. Government regulation can help here, and it can help anywhere, as long as it's done intelligently. Same as anything else I mentioned.
  • Um... excuse me... (Score:3, Insightful)

    by Guppy06 ( 410832 ) on Friday October 10, 2003 @11:29PM (#7187578)
    "Andy Grove, of Intel fame, "spoke out" at a recent technology summit in Washington about the current trend towards offshore outsourcing"

    And where are Intel processors manufactured again? Or is it only a problem when it effects white collar workers?
  • Ironic... (Score:5, Insightful)

    by MisanthropicProggram ( 597526 ) on Friday October 10, 2003 @11:35PM (#7187607)
    that the places that big US corps are outsourcing software development are also the biggest software pirates - according to the "The Economist's Book of Figures for 2004"

    China #2

    India #22

    As the IT mgt books say, "Don't outsource your strategic intellectual capital!". Unfortunately, most corps don't seem to think of this and they're outsourcing everything they can just to save a few bucks.

    I saw an article a few months ago, I think CIO.com, that mentioned how United Technologies saved a whole $7 million (US) on their IT budget by sending some work over to India. I thought, "Wow! Seven million dollars US!". Then I looked. Their IT budget is over a billion dollars. So they saved a whole 0.7% by going overseas. In the meantime, their employees are demoralized for having seen their buddies lose their jobs and some poor bastard(s) have to stay in the middle of night to deal with people on the other side of the world, because if they don't - it's their ass too!

    There I go again, ranting!

    • offshore
      adj 1: (of winds) coming from the land; "offshore winds" [ant: inshore]
      2: at some distance from the shore; "offshore oil reserves";
      "an offshore island"
      adv : away from shore; away from land; "cruising three miles
      offshore" [ant: onshore]

    • Ironic that the places that big US corps are outsourcing software development are also the biggest software pirates

      This is not a coincidence! Imagine how much cheaper software development can be if you don't have to pay several thousand dollars per seat for software tools! This is what the BSA is succeeding in doing - driving work to places where that have no enforcement. I'd like to see the figures -- exactly how many copies of Visual C++ have those hundreds of thousands of Indian software developers purc

  • ... time zones, demand, and communications barriers will make India less attractive to outsource to.

    • ... time zones, demand, and communications barriers will make India less attractive to outsource to.
      Only if they get complacent. So long as you can ship a task to coders in India at 5pm on a Friday night and have it on your desk like clockwork by Monday morning -- if not Sunday afternoon -- there will be a place for offshore development.
    • Actually (I've done some outsourcing) the time zones work out quite nicely. We had the team in india working on the software during their daytime (our night) and then they'd ship us a build to install and test in our daytime, so that we could log bug reports that they'd fix. The result was a 2x accelleration in software development. Required some management tricks to keep working smoothly, but worked like a champ for me.
  • by ozzee ( 612196 ) on Friday October 10, 2003 @11:39PM (#7187624)

    I'm currently unemployed and directly due to off-shoring. It sucks to be unemployed - trust me. However I think that it is really silly to put barriers in place.

    No 1. You inevitably get what you pay for. After having lost my job, the company I worked for now has a team of people in asia and they cost far more than the team we had here in the valley and they have yet to deliver squat.

    I think that these off-shore arrangements only work if you have a very strong cultural match between off-shore supplier and local organization or if it is managed very carefully. Very few US organizations are capable of pulling off such a feat and it is inevitable that most of these off-shoring relationships will result in huge craters.

    The US tech recession is the result of the "perfect storm", a) Bubble pops, b) oversupply of skilled immigrants c) Oversupply of "cheap" skilled workers. So, a) the bubble popped and it's now starting to come out of recession, b) immigrant quotas have been curbed, and c) there is only so much you can outsource.

    It will recover, just be prepared to hold out for a few more months (up to 12 months). Keep abreast of the skills you need with your spare time.

    • >just be prepared to hold out for a few more months (up to 12 months).

      It always surprises me when people give dates to these sort of things.

      I do hope you find a job soon, but people have been saying "next quarter will be better" for the last 2 years.
    • they cost far more than the team we had here in the valley and they have yet to deliver

      if you dont work there, how do you know?

    • I'm currently unemployed and directly due to off-shoring.

      You're unemployed because you don't have skills that are in demand. Just because you have a skill doesn't mean that someone will give you a job. No-one owes you a job. Why don't you get some training in something that people want?

      I've worked in the IT industry for near on 20 years and I've had lots of work when my skill has been in demand. Inevitably it drops off after a few years, so I learnt something else and got lots of work in that. It had no
      • The IT industry for near on 20 years.. quite a claim.

        I'm also curious what skills you've learned that tailed off after a few years only to learn another, over this 20-year span. I'm not sure that 'network security' or 'network administration with 10-15 years experience' is something that really tails off, per se'.

        Nonetheless, it seems your 20 years of experience hasn't taught you that while nobody owes anyone else a job, people who have been outsourced owe nobody their platitude in accepting conditions a
        • The IT industry for near on 20 years.. quite a claim.

          Uh-ha. So you're insinuating I'm telling a lie? Why is it so challenging to accept that I've worked for 20 years in IT? They did have computers in 1983, you know.

          You obviously haven't worked for very long in the industry, becuase it's obvious things go in and out of fashion. In the local industry database work is plentiful. Within that various front ends have come and gone and are being replaced by Java. Same with databases and report generators. I've
      • "You're unemployed because you don't have skills that are in demand. Just because you have a skill doesn't mean that someone will give you a job. No-one owes you a job. Why don't you get some training in something that people want?"

        This used to be true. But these days it's hard for a software engineer to get a job even if he's got the perfect skillset, simply because his cost of living makes him, by definition, far more expensive than someone offshore. The "problem" is that software is perfectly portable,
    • Been working with an offshore team on a brand new project. These people are in Mumbai. It's my first time delegating work to an offshore team.

      I swear to god, these guys are running a scam. The workers only get about 1/2 the work dont that I expect. I have a feeling that the developers are doing the work of more than 1 project at a time. So I suspect that they're working for my project about 1/2 the time, but billing me 100%.

      I can't prove it. But I can't get these guys to get their productivity up. In a wa
      • >I have a feeling that the developers are doing the work of more than 1 project at a time.

        Or they are less skilled than they say/you think. Actually, if I knew the client was as physically far away as possible without leaving the planet, I might try and rip off clients like this to maximize profits while I can.

        What is my reputation to an industry half a world away? They know they are getting programmers on the cheap, what do they expect when they exploit my fine employees? How much pressure or motiv
  • by davejenkins ( 99111 ) <slashdot&davejenkins,com> on Friday October 10, 2003 @11:40PM (#7187631) Homepage
    Governemnt interference with the market is bad. Huge subsidies that distort thetrade in agricultural products is bad, and it is killing Africa (literally).

    Tariffs or other protectionism would not work-- what would we do? demand that XX% of code is written in North America?

    The software sector is simply waking up to something that has happened to every other sector: as the segment matures, labor becomes portable, and therefore companies will seek the cheapest labor possible. Trying to stop this only costs consumers, and-- perversely-- the very segment they are trying to protect via regulation compliance costs, taxes, and loss of overseas marketshare.

    You want a job? innovate. Become efficient. Figure out howto make money by "exploiting" all that cheap Chinese labor yourself. Find something that those rising Chinese and Indian middle-class consumers want.

    If you want action from the government, demand that they stop supporting 19th century industries and that they demand open trade with other countries. Protectionism is going back.

    Let me voice my opinion in /. terminology: Protectionism is proprietary; free trade is free.
    • Damn, I didn't know that software dev/other IT fields were 19th century industries.

      Thanks for letting me know!

    • Grove is being kind of hypocritical as well as Intel has chip packaging plants and possibly fabs all over the world.

      I agree, market protectionism can only backfire. It screwed up the US steel trade, it will probably sink the US IT industry if carried out. Countries that we put up barriers against generally put up reciprocal barriers against the US.
      • I used to agree, but now I'm not so sure.

        I don't know that business owners really control their business as much as we imagine they do.

        For one thing, when businesses get really really big and complex, I suppose the left hand doesn't know what the right hands doing, and the business "owners" don't really know what it's doing either. It just sort of runs, but they don't really know how.

        Maybe, theoretically, they could issue an order down, like "Hey, only package your chips over here," right? But could i

  • DMCA eh? (Score:2, Insightful)

    by JW Troll ( 607432 )
    the USA should reconsider the software patents that have crippled American innovation for decades, and also the DMCA which has effectively denied Americans their fair use rights.
  • We could have tech workers form strong trade unions. OK so that one probably won't fly in the US.

    The alternative is to have computing be a profession like lawyer-ing and doctor-ing. They have trade asociations that are so powerful they can't be ignored. To practice law or medecine you must be part of the profession. To what extent does this protect lawyers and medics from overseas outsourcing?
    • Doctors can't easily be outsourced. Are you going to fly out a patient to India? Video conferencing probably won't cut it.

      I think that a bigger threat to the medical professionals will be intelligent databases that are able to diagnose patients better than a doctor could. A doctor that makes a diagnosis is following some sort of standard decision tree that they all learn about in med school. A well trained database could theoretically do the same job. It could potentially be better than a human if it
      • I think that a bigger threat to the medical professionals will be intelligent databases that are able to diagnose patients better than a doctor could

        While computer-diagnoses may one day do a better job than human doctors, that day ain't here yet, nor it is visibly on the horizon. Just the history of the patients current and prior problems requires a degree of insight that computers don't have. You also have to know about current disease epidemics, social issues involving their health, etc.

        But the bigg

        • Yes, you would still need a human to do the diagnosis, but that human wouldn't have to go through the grueling years of med school. That person could be a technician studying a 2-3 year degree. The computer would tell the technician what diagnosis to perform (check for abdominal pain, then check eyes, then whatever else the computer comes up with). The key is of course in asking the right questions. The decision tree is vast and appropriate heuristics are needed to prune the tree down to manageable leve
          • Well, you're also missing out that patients expect humans for doctors, and they need communication and somebody who actually cares. For patient education, you'll have to program the computer to recognize the patients socioeducational level and tailor that information to him as well.

            AI has for years now promised all sorts of wonderful new improvements to life, but for the most part it's still very pie in the sky. They're pretty good at playing chess now though!

            Physical exam isn't as simple as you seem to

    • The alternative is to have computing be a profession like lawyer-ing and doctor-ing. They have trade asociations that are so powerful they can't be ignored. To practice law or medecine you must be part of the profession. To what extent does this protect lawyers and medics from overseas outsourcing?

      It isn't unions or professional organizations that prevents lawyering and doctoring from going off-shore. It's the fact that to perform the duties necessary to those professions, you actually have to physicall

    • For various reasons I've been to the "urgent care" clinic a few times in the past couple of years. Usually it was because the ailment was too trivial to deal with the appointment/timeoff process with my regular doctor.

      Each time I've been there, I've been treated by a doctor who was foreign born and in one case, had been in the US less than a year (I asked). One doctor was from Egypt and the other was from Romania. Both appeared to be what I'd call "awkwardly competant" -- they treated my ailments, but t
  • before it is too late.

    I mean, English at least is a subset of the alphabet used in the majority of the occident. Currently almost every computer language is "english based" meaning the keywords are in English, or English based, and thus easy to learn to roman alphabet users.

    However if this trend continue, maybe we soon will have Bali based languages, or wordt yet, 3000 characted Mandarim based computer language.

  • by melted ( 227442 ) on Friday October 10, 2003 @11:48PM (#7187689) Homepage
    Just let those outsourced projects fail (most of them do) and see those "bright minds" who came up with the idea of outsourcing getting fired without a severance package.

    I've seen the results of several outsourced projects. These projects are so fucked up, it's unbelievable. This must have to do something with the management there, because I've seen some very impressive Indian developers over here in the US (not that many, either, but then I'm hard to impress) and I don't believe they can't find any good developers there. It's just that the results of the outsourced work are often unmaintainable piles of horrendously written spaghetti code.

    I have yet to see one single exception from this.
    • I'm a web consultant based in Canada. Our clients tend to be organizations that outsource most of their IT, and we've seen an increase in overseas offshoring, primarily to India, in the last couple of years. Almost without exception the quality of work is awful. Projects are poorly planned and code is indecipherable.

      I find it hard to believe that this is because there aren't any good Indian developers. The situation seems to be more reminiscent of the bubble days of the tech economy in North America, when

  • disingenuous (Score:3, Informative)

    by Wansu ( 846 ) on Friday October 10, 2003 @11:53PM (#7187713)
    Intel has been one of the worst offenders. Have a look at http://www.faceintel.com/
  • 1) The tax code. It's too expensive to comply with the tens of thousands of pages of federal tax regs. Copy the Russians and pass a flat income tax. This does wonders for compliance too: it's just not worth dodging the lower rate, especially when the government is now able to do a helluva lot more audits. Cuts corruption big-time as well.

    2) Lawyers. We're feeding trial lawyers when we should be feeding engineers. Everything from the SCO idiocy to suing McDonald's because some maroon burned themself
  • Here's a way to shut down overseas call centers quickly...

    Place a tax on outbound international toll free calls of about 50 cents per minute. So much for the cost savings...
  • Think about it--what's the alternative? China and India are getting ever more educated. Do you think two billion people are going to do sweat shop labor forever? They are smart, young, and the media are showing them the kind of wealth they can attain. They want nice jobs and they are going to get them.

    The US was incredibly lucky and advantaged for about 50 years following WWII. There is no way that kind of disparity and advantage can continue, even if the US were continuing its strong initial investme
  • We could encourage people to buy products that are locally made, but as we consider choice to be something that is only present in other markets, we've got no-one to blame but ourselves.
  • subject title (Score:5, Insightful)

    by gmajor ( 514414 ) on Saturday October 11, 2003 @12:39AM (#7187924) Journal
    Quoth Michael: from the learn-to-speak-indian dept

    Indians don't speak Indian.
  • If I hear another stupid fucking comment about how I have to innovate and work smarter to out-perform my Indian and Chinese counterparts I'm going to scream.

    It's not about being innovative. It's about being cheap.

    I can't compete with 3 people who are just as smart as I am and work for 1/10 my wages. And I'm not so fucking arrogant as to think that I am in the top .001% of the world's population in IQ.

    So I guess that means I should just work at the Gap for a living right (if I'm lucky) ?

    The only answer
  • Here's an idea (Score:3, Interesting)

    by mc6809e ( 214243 ) on Saturday October 11, 2003 @12:59AM (#7188006)
    Stop beating down bright, but anxious boys in school. Let them do what they love instead of forcing some idea of "social adjustment on them". Allow them more time for science and engineering. Devote less time to "teaching" them how to bullshit their way to a 6 page term paper about nothing. Give them less Ritalin.

    Some may not like to hear this but boys are the primary source of young engineers and right now, public education is taking a big dump on them.

    I have several friends in the industry that are good engineers, but without degrees. Public education pushed them away. They are the kind of people I'm talking about. What's a PHB going to do when he compares them with someone from another country that has his degree?

    There's some other stuff here:

    The War Against Boys [theatlantic.com]

  • I'm not against outsourcing of jobs to the UK, Canada, Australia, Germany or Sweden. Principally then, I'm not against the outsourcing of jobs to India or China -- except that the playing field is far from level.

    I believe that one of the reasons that labour is significantly cheaper in India is because the socioeconomic system is vastly different. India has government sanctioned bonded child workers. And whenever you can introduce virtual slaves into an economy, you can dramatically drive down the price

  • by theolein ( 316044 ) on Saturday October 11, 2003 @01:46AM (#7188178) Journal
    Western Europe has the same problem to a certain extent but not as badly as the USA. The reason not so many European IT jobs have gone to India and China is partly because of the language barrier. There are tens of millions of Indians and Chinese who can speak English but almost none who speak German, French, Italian, Swedish, Danish, Dutch etc. (I assume some Spanish and Portuguese IT has gone to South America) This doesn't prevent IT companies trying to outsource call centres to Germany from Switzerland for example (although the language spoken in Switzerland is a dialect of German that Germans don't understand).

    Apart from this a fair amount of manufacturing, production (and coding) has been flowing towards Eastern Europe as those countries join the EU. The EU hopes that it will somehow balance itself out in that very large companies in Western Europe will have branches in Eastern Europe and that that way cash will flow backwards as well.

    I think one thing that can really stay local in the IT world (and this applies to the US as well) is for people to start their own small companies specialising in other small companies in other sectors in the local economy. Programmes such as Tax or local business oriented stuff as well as doing consulting and support on a small scale are a good answer.

    Another answer is to start a local company that adresses the problems that the people's previous companies cause by outsourcing coding to people who have low QA and communication skills in the local language.

    As an example, let's take, for example a certain Desktop publishing layout software from a company in Denver Colorado. This company's product has had a virtual monopoly in DTP for more than 13 years. About three or four years ago, IIRC, that company (use your brains as to who that is) outsourced the entire software development to India. About six months to a year later, Indian developers from this company started popping up in developer mailing lists asking really basic C/C++ questions and acting very arrogant when they didn't get immediate answers. Aparently those Indian developers were so bad (relatively speaking, probably more a management problem) that it took them almost three years to port that DTP programme to Mac OSX, where it finally turned up a few months ago.

    That would have been and was an opportunity for competitors to step in and develop alternatives.

    Think about it. Tarifs and high import taxes will not solve anything in the long run, as the USA is no longer in the position to be able to simply dictate economic terms to the EU, India or China (or SE Asia to an extent), and if such measures are taken, sonner or later they'll reply in kind, and then you truly will be f**ked.
    • This whole mess is nothing new. In many ways this is the same as what has happened in the past with the primary sector (imported raw materials that competed with the domestic coal, oil, agricultural producst) and the the manufactring sector (those Nikes from Mexico etc).

      I live in New Zealand and work (embedded firmware etc) for a company owned by an American corporation. My salary + overheads are a third of what it costs to put an American behind a desk to do the same job. OK, we're not talking complete swe

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