As far as outsourcing stories go, I find this one to have a very nice silver lining for developed countries.
R&D is not factory floor oppressive work for people who have no options and often little political power. It is the domain of the intelligent; people with options who are more fully aware of what their options are. IOW, a true middle class. The more the thinking class grows the better all of us are.
R&D is not a zero sum game like manufacturing. With manufacturing there is only so much demand for the manufactured goods; only so much material with which to make the goods etc. With R&D the only limiting factor that comes to mind is the size of R&D budgets. It is relatively easy to increase the size of that pie if R&D brings results.
This class of people will be in a better place to act on opportunity as well compared to the low payed laborers whether it be to move to more developed countries once they have some valuable experience or to take their ideas and experience and create enterprises on their own or to simply demand higher compensation with these other options in mind. I'd bet they'd also have more political clout as well.
In short, more R&D in these countries will accelerate parity with their counterparts in more developed countries and might even pull their labor class with them.
> R&D is not a zero sum game like manufacturing. With manufacturing there is only so much demand for the manufactured goods; only so much material with which to make the goods etc.
The material wasn't really a problem in most industries since early 1950s. The demand is also permanently growing, with population levels increasing, wealth being created etc.
R&D however always follows manufacturing, it's just the nature of their relationship. It can not last long in ivory tower, no matter what politicians tell.
"the demand is also permanently growing" I'd argue that nothing is 'permanently growing' but I get your point. That increase in demand, however, is not pulled out of thin air, it is deeply tied to a limited phenomena -- it is far more inelastic.
"R&D however always follows manufacturing, it's just the nature of their relationship" This is true but R&D leads to whole new markets with explosive growth as opposed to commodity plateaus and slower incremental growth based on population or other rate limited market phenomena.
Wait, wasn't R&D the piece of a corporation's work that was going to stay in the US, because every worker here was talented, good at problem solving and so forth?
The truth of the matter is that everything that can be outsourced will be outsourced. The idea that "brain work" would remain in the US was just a rationalization to enable the first wave of outsourcing to get underway.
In the 1980's the driving force was quality and the ones to emulate were the Japanese. Now the driving force is cost, quality is not that important, and the ones to emulate are the Chinese/Indians.
Exactly. The "brain work" rationalization was just a way to sell outsourcing to the middle class, enabling conservatives to break working-class political power. The next wave, well underway since the tech bubble reduced communication costs to zero, will break the middle class.
The quicker we can get the entire world to wage parity, the sooner we can stop arguing about nationality and outsourcing and get back to improving humanity.
Wage parity is a pipe dream. Each country has different social, political and educational systems that lead to uneven economic progress. You will wait a long time to get back to improving humanity.
WSJ article seems to be talking about offshore R&D work, not necessarily outsourced R&D work. 787 Dreamliner problems seems to be due to outsourcing to contractors and subcontractors (combined with offshoring): http://articles.latimes.com/2011/feb/15/business/la-fi-hiltz...
You're right, of course, and I meant my comment more rhetorically than it appeared.
From the point of view of a board of directors or senior mgmt, if outsourcing is such a good idea, why not outsource management? It would be more cost-effective, and just as efficient.
Or the lawyering. The law department seems like a very costly line item, one that could be done remotely, as long as you set up the proper procedure for the outsourced lawyers to follw.
As someone who has gone through offshore outsourcing and offshoring, I can offer a couple of thoughts.
1. Just like in the US, quality is dependent on the people you hire (duh).
2. In India, unlike the US, it seems the more oversight you offer (while observing #1), the better the results. In the US, you generally hire smart people and get out of the way. In India, I found it was necessary to do high touch dev....I don't think this is a result of developer quality, but rather shared understanding and culture. In the US you can say "we are doing X b/c of Y sorta like Z" and usually you can get to the point without being too explicit. That is lacking, making MORE effort needed to communicate. Again, not a bad thing, just a point.
3. I never, ever understood thinking offshoring to a place that doesn't speak your native language (well) AND has a huge timezone offset was a good idea.
The absolute best experience I had and will constantly advocate for US companies is to use New Zealand. Native English speakers, 4 hour (and 1 day) offset from SF... a place your developers would LOVE to visit to train people. About a 1/4 - 1/2 the cost situation as well, so bang for the buck is usually much, much higher than China, India and Vietnam where timezone and language is usually a problem.
Note the bit about Infosys establishing comprehensive training programs, implying they are taking STEM graduates and bringing them up to speed on the current technologies. 30 years ago Intel had training programs (I don't know if they do now). So did Apple in the late 80's. (n.b., I was employed by both). Now the expectation for many large employers is that the applicant have already mastered the technologies. "No training for you!"
How much is attributable to "R$wages + R$cost of training" < "US$ wages" I cannot say.
I think there is a little bit more to this atricle than just a simple push for moving r&d to emerging markets to get cheaper labor. For example, I heard some pharmaceutical companies bhave started developing labs in Russia, not to reduce costs, but as a way to make it easier to get past a lot of beaurocratic red tape. I had heard there were some laws requiring the company to use only Russian companies in the transportation of their pills, the pharma used some companies not approved by the state, and thus were slapped with some big antitrust suits. In order to make the suits go away, they set up a big, rather costly, lab facility, and then they didn't have to worry any more about these regulations.
(I heard the story recently on NPR, but I can't find a link to a written story about it).
I guess what I'm getting at, is that I wonder how much of these R&D facilities are being set up as a way to reduce costs as some people are speculating, and how many are being forced in order to side step red tape and continue pushing their products into new markets?
This should be a wake up call. What about north american universities? Aren't they the best?
Maybe, but they're not affordable to every american. This countries subsidize upper studies so their citizens can access this kind of education.
I think is just a matter of priorities. Instead of spending so much on X thing, spend more on scholarships for the top students in the country in specialized science areas. Universities know how to compete.
"Five years from now, Mr. Wadhwa said he believes Indian workers will be developing software on par with programmers in Silicon Valley."
Russian/Estonian/[insert any country] are doing that for a while. Just not in their own country, but in Silicon Valley (50% of Silicon Valley startup has at least one founder that's not from USA). For creme de la creme products you need more than just good Indian "worker".
I thought part of the globalist/"free trade" snake oil was supposedly that we ship the dumb jobs to the third world, and all of us here in the US become programmers and scientists though some magic process.
R&D is not factory floor oppressive work for people who have no options and often little political power. It is the domain of the intelligent; people with options who are more fully aware of what their options are. IOW, a true middle class. The more the thinking class grows the better all of us are.
R&D is not a zero sum game like manufacturing. With manufacturing there is only so much demand for the manufactured goods; only so much material with which to make the goods etc. With R&D the only limiting factor that comes to mind is the size of R&D budgets. It is relatively easy to increase the size of that pie if R&D brings results.
This class of people will be in a better place to act on opportunity as well compared to the low payed laborers whether it be to move to more developed countries once they have some valuable experience or to take their ideas and experience and create enterprises on their own or to simply demand higher compensation with these other options in mind. I'd bet they'd also have more political clout as well.
In short, more R&D in these countries will accelerate parity with their counterparts in more developed countries and might even pull their labor class with them.