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Out Sourcing of US jobs ,a view from Andy Grove(Mr. Intel)

By pgm554 ·
Computer Software
Grove Says U.S. Is Losing Edge In Tech Sector
Jonathan Krim, 10.10.03, 1:18 PM ET

One of the founding fathers of the nation's high-technology industry warned in dire terms yesterday that U.S. dominance in key tech sectors is in jeopardy, threatening the country's economic recovery and growth.

Speaking via satellite to a global technology summit in Washington, Intel co-founder and chairman Andrew S. Grove said that the software and technology service businesses are under siege by countries taking advantage of cheap labor costs and strong incentives for new financial investment.

"I'm here to be the skunk at your garden party," Grove said, noting wryly that his remarks coincidentally fell on the same day as one devoted to promoting nationwide screening for psychological depression.

Grove, 67, singled out China and India as key threats. India's booming software industry, which is increasingly doing work for U.S. companies, could surpass the United States in software and tech service jobs by 2010, he said.

More ominously, Grove said, the software and services industries -- strong drivers of U.S. economic growth for nearly two decades -- show signs of emulating the struggles of the U.S. steel and semiconductor industries.

In the case of steel, U.S. companies never recovered, dropping from nearly 90 percent of worldwide market share to roughly 10 percent. The semiconductor industry, Intel (nasdaq: INTC - news - people )'s core business, faced similar challenges in the 1980s, when it began its drop from 90 percent to 40 percent of the world market, Grove said, before aggressive trade and other U.S. policies helped it recover and stabilize at about 50 percent.

Grove said that even as the U.S. economy is improving, tech employment is not.

According to industry data, more than 500,000 technology jobs were lost between mid-2001 and mid-2003. Many of these were due to a contraction of the tech sector in the wake of the bursting of the dot-com bubble in 2000.

But Grove acknowledged under questioning that the tech industry itself is responsible for numerous jobs leaving the United States, as firms take advantage of considerably cheaper labor costs in India and elsewhere.

Grove said he is torn between his responsibility to shareholders to cut costs and improve profits, and to U.S. workers who helped build the nation's technology industry but who are now being replaced by cheaper labor. Grove did not offer a solution, saying only that the government needs to help decide the proper balance between the two. Otherwise, he said, companies will revert to their obligation to increasing shareholder value.

Recent estimates from financial consulting firms paint a stark picture of "offshoring," which allows companies to get software development and other services at one-third to one-sixth the cost.

The Gartner Group (nyse: IT.B - news - people ), a market research firm, estimates that 10 percent of jobs at U.S. information technology vendors will move offshore by next year.

Throughout all U.S. companies, Forrester Research (nasdaq: FORR - news - people ) predicts the loss of roughly 3.3 million jobs by 2015.

Grove said that the move offshore has been aided by the telecommunications bubble of the late 1990s. So much infrastructure for high-speed Internet connections was laid, much of it never used, that the cost of achieving high-speed communication plummeted. As a result, Grove said, "the engineer sitting 6,000 miles away might as well be in the next cubicle."

Grove chided U.S. policymakers for all but ignoring the problem.

"What is the U.S. public policy?" he asked. "I am hard put to find a document" outlining a policy strategy.

He said he had detected no recognition of the problem from any of the presidential candidates.

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.

Grove also said the country lags dangerously behind in popular use of high-speed Internet connections, funding for science and technology research, and education.

So all of you IT guys,let it be known to your favorite politicians, that we need to come up with some sort of national policy or the mantra of frys with that shake(or paper or plastic) will become part of the future economy.

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Sounds like a liberal - Here's a problem but I don't have a solution

by SkipperUSN In reply to Out Sourcing of US jobs , ...

He sounds like a typical liberal - The government isn't doing enough or is doing it wrong about this problem - but I don't have a solution. I just know the government has to do something - but what they are doing today is Wrong. But I don't have a solution.

The majority of the 500,000 jobs lost were from the DOT.COM bubble bursting - another large percentage was from HelpDesk call centers. (just look at the large number of Call Centers in India from other industries - Credit Cards, Order lines and telemarketing...)

Liberals are always talking about a world Economy until it comes to effecting the US - you can't have it both ways... When it is cheaper to outsource to India or China - guess what will happen...

This is the One World Economy the American Liberal wanted - now that they got it they don't like it... To late! Who was in the White house and signed agreements with China? Hum - Wasn't Bush... Signed agreements with India? Wasn't Bush! Oh Yes - He was a Democrate - His Wife is wanted Socialized Healthcare - If I remember worse Commander and Chief I ever servered for - William Jefferson Clinton!

So Ask Kerry how he plans to keep the jobs! - Doesn't really have a plan - because his wifes company has 64% of the goods are made out of the Country! (Cheaper overseas!) OOOPS - That shouldn't of slipped out... Ohhh bad Heniz employee...

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more info...

by mrbill- In reply to Sounds like a liberal - H ...

From http://www.snopes.com/politics/kerry/heinz.asp

"Although Senator Kerry has been critical of the Bush administration for rewarding "Benedict Arnold CEOs" who move "profits and jobs overseas," the above-quoted attempt to link Kerry (through his wife) with the very outsourcing he decries is flawed in two major ways. First off, Teresa Heinz Kerry does not "own the Heinz Corporation" ? she has no involvement whatsoever with the management or operations of the H.J. Heinz Company, nor does she own anything close to a controlling interest of the company's stock. According to Heinz itself, the Heinz family trust which Mrs. Kerry inherited sold most of its shares of Heinz stock back in 1995 and currently holds less than a 4% interest in the company:

Neither Mrs. Heinz Kerry nor Senator Kerry nor any of the Heinz trusts or endowments ? either individually or collectively ? holds a significant percentage of shares of the H.J. Heinz Company. In 1995 the Heinz Endowments and family trusts sold a large percentage of Heinz shares in a secondary share offering to diversify their holdings. As a result, their current holdings are under 4 percent.

There is no connection between any philanthropic programs of the H.J. Heinz Company and its Foundation and the Heinz family interests (including the Howard Heinz Endowment, the Vira Heinz Endowment, and the Heinz Family Philanthropies).
(A 4% stake in a company as large as Heinz still represents a considerable amount of money, but it isn't nearly large enough a share to give the holder any significant control or influence over the company's business decisions.) "
...

"As the H.J. Heinz Company notes, well over half its sales come from foreign markets, and it therefore operates overseas facilities to serve those markets:

Currently, 60% of the sales of the H.J. Heinz Company are outside the United States and to accommodate those customers by providing facilities closer to those markets, the company maintains a number of overseas facilities that provide products for consumers in those markets. This allows Heinz to pack the freshest ingredients, tailor its recipes to local tastes and deliver the finished products in a timely and efficient manner. In the United States, Heinz makes its flagship ketchup in factories in Fremont, Ohio; Muscatine, Iowa; and Stockton, California. "

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