Caught in the Pull of Globalization

When Natasha Humphries went to Bangalore, India, in December to train Indian contract workers to do quality-assurance testing for her employer, Palm, she realized that her own job coordinating that work could be done by local workers there, as well. "I'm fairly intuitive – I saw the writing on the wall," said the 30-year-old Santa Clara resident.

Humphries was indeed laid off in August. Her former employer, now known as palmOne, says her layoff was not directly related to its outsourcing in India. Humphries, however, disagrees. And in unemployment, she has become an activist.

"I am not angry with companies for trying to conserve costs, but at the same time, we do have to acknowledge that it's going to create more problems for us domestically if we don't create more jobs for U.S. citizens," said Humphries in an interview last month before she testified in front of a congressional committee examining the effect of white-collar jobs moving overseas.

With the American economy finally gathering steam but employment growth still uncertain, the offshoring of U.S. tech and service jobs has become a hot-button issue. It has challenged the economic futures of white-collar workers and stirred the globalization debate like never before.

Grass-roots backlash

On one side are American workers in Silicon Valley and elsewhere who feel anger, fear and profound uncertainty as white-collar tech jobs quickly move to lower-cost countries like India and China. Offshoring has sparked a small backlash of grass-roots protests from New York to California and spurred protectionist legislation in eight states. The issue promises to become a contentious election-year topic.

On the other side are business executives and economists who argue that the offshoring of jobs is unstoppable and ultimately healthy for the United States, spurring this country to shed certain jobs and create more sophisticated ones in order to stay atop the ladder of innovation. The shift of tech work overseas is just the latest chapter in decades of globalization, they argue.

"I think overall, long term, the U.S. economy can take it. But there's going to be a huge amount of restructuring pain," said Rafiq Dossani, senior research scholar at Stanford University and co-author of a major offshoring study.

Such forecasts are of little comfort to the tens of thousands of tech workers -- many of them in the valley -- who have seen their companies create jobs in India, China and other countries even as they lay off workers here.

While not every job created overseas is the result of a layoff in the United States, it's clear that demand for technical talent in India is taking off -- to the point that companies are recruiting in Silicon Valley for positions in India. About 40 tech companies did just that last week at a job fair in Santa Clara. About 750 job hunters attended, most of Indian origin, according to Karthik Sundaram, managing editor of siliconindia magazine, which organized the fair.

Yet some American workers see a direct connection between the job boom overseas and their own unemployment.

Humphries, for instance, said that she was let go after a lower-paid worker in India filled in for her during a 10-day vacation. She is now helping lead TechsUnite SV, a local group protesting the movement of U.S. jobs overseas.

But Milpitas-based palmOne says both the layoff and the outsourcing were part of a larger business restructuring, and the specific work Humphries used to do is still being done in Silicon Valley.

Whether or not she was directly replaced by an Indian worker, Humphries embodies the worker angst now sweeping the tech workforce in the United States.

"What Humphries represents -- having had to train her own successor -- that's like digging your own grave," said Rep. Don Manzullo, R-Ill., chairman of the House Small Business Committee, who has proposed a new wave of "Buy American" legislation to limit federal agencies from outsourcing government jobs overseas.

`Will Code for Food'

Worries over being displaced have spurred some American workers into action. In one local protest this fall, about 40 offshoring opponents and unemployed workers took to a street corner in Concord, waving signs with slogans such as "Will Code for Food."

One programmer at the protest said she has watched her employer, Kaiser Permanente, shift jobs to a contractor in India. "They say they're freeing us up to do more exciting jobs and sending more mundane work to Indian companies," said the programmer, who asked that her name not be printed. "Nobody believes them."

Kaiser Vice President Mary Henderson acknowledged the company has transferred about 200 information-technology jobs to Indian companies, paying between $25 and $30 an hour instead of $80 to $100 an hour in the United States. No Kaiser employees have been laid off because of the shift to foreign contractors, Henderson added, but some Kaiser workers have been moved to other positions and had to train Indian workers to do their old jobs.

Cynthia Chin-Lee of Palo Alto began looking for work after she was laid off in the summer of 2002 from her job as a documentation manager at software firm i2. After several months, she landed a full-time position as a technical writer with software firm Remedy in Mountain View. Still, Chin-Lee said she feels "bewilderment and worry" as she sees more technical writing jobs move overseas. "It does make me think, maybe I need to develop some other skills."

Legislation

What's making the loss of jobs all the more scary for tech workers is the speed with which companies can now send jobs overseas because of today's sophisticated communications technology. "Thousands of jobs can literally be moved to India overnight. Last week, three of my friends' jobs moved there. That's just the experience of one person," said Arvinder Loomba, professor of operations and international supply chain management at San Jose State University.

Indeed, say economists and historians, tech jobs seem to be moving to India faster than manufacturing jobs moved overseas in decades past. "What that means is there could be much less adjustment time," said Martin Kenney, professor of Human and Community Development at the University of California-Davis, who co-authored the offshoring study with Dossani.

Some lawmakers are feeling a need to respond to the trend. With union support, legislation has been proposed in eight states to limit offshoring. None of the bills has yet become law.

In New Jersey, a bill to outlaw offshoring of state jobs passed the state Senate unanimously after legislators discovered that welfare recipients were calling Mumbai, India, when they had questions about their food-stamp payments. The bill was defeated by the full legislature after technology trade groups lobbied against it. But the state did move about 10 welfare department jobs back to New Jersey – at a cost of more than $1 million a job.

While cases like New Jersey's may be an exception, many executives, economists and academics say that offshoring jobs ultimately helps American companies compete in a global economy, especially in tight economic times. And companies say that to stay competitive, they have no choice but to hire the low-cost labor available.

"In business, there are only two levers: the cost side and the revenue side. Since the economy is not improving, you redirect your cost. There's no other way," said Ajit Gupta, chief executive and co-founder of Santa Clara-based Speedera Networks.

Global effects

In fact, India's National Association of Software and Service Companies, the country's largest technology trade group, offers numerous studies to U.S. lawmakers arguing that offshoring is a "win-win" for both India and the United States, saving U.S. companies money to reinvest at home.

"The development of software has to continue somewhere for the betterment of everyone, and if U.S companies cannot afford to do it, then it wouldn't happen at all if not for here in India," said Nishith Desai, whose Mumbai law firm is the leading legal adviser to U.S. companies moving jobs to India.

Yet for all their talk of competitiveness and long-term strategy, corporations are sensitive to the negative imagery of hiring overseas workers while laying off Americans. They have begun shunning the dreaded "O" words – "offshoring" and "outsourcing" – using instead gentler-sounding, more generic terms like "sourcing," "multishoring" and "partnerships."

"We don't even use the term 'outsourcing.' We believe it has a negative historical reference," said David Sanders, senior vice president of BearingPoint, a global consulting firm in McLean, Va. "We simply call it 'sourcing.' We find the best source for particular work, no matter what country."

Most economists, executives and academics say they're hopeful that, as it has in the past, the United States will more than survive the latest wave of offshoring.

"It has always been the trend that as soon as technology products and services become commodities, then they face competition from overseas producers," said Steve Cochrane, senior economist at Economy.com. "The American economy and the global economy have been going through this transformation ever since the 1960s, at least."

William Miller, professor emeritus at Stanford University and chairman of Borland Software, said he believes the valley's workforce will change even more as the latest offshoring trend plays out. Williams pointed to the example of software employment in the valley, which made up about 5 percent of tech employment locally in 1975, and grew to its current 40 percent, as markets changed. In the future, the bulk of workers will have to move on to new technologies and higher-level jobs, he said.

Valley vulnerable

Silicon Valley has long been vulnerable to competition from less expensive places – both inside and outside the United States. The key to the valley's future, experts say, is in a new wave of innovation, maybe in nanotechnology, biotech or something else.

While new jobs are likely to emerge, the transition could be difficult for many workers, especially those who are too old to easily switch to another profession but too young to retire on savings.

Chris Parkes, for instance, is hedging his bets. The 45-year-old Moraga resident cashed in his 401(k) to pay living expenses after he lost his job as an electronics engineer in October 2001. After almost a year of fruitless job hunting, which he attributes at least partly to companies sending work overseas, Parkes decided to follow in his mother's and grandmother's footsteps and become a nurse. He is taking out loans to pay for his training.

Parkes eventually found an engineering job with a state agency, but he is continuing his nursing training just in case.

The changes taking place in the U.S. economy leave Parkes, like many workers, uneasy at best about the future: He sees U.S. workers being left behind by globalization.

"I think people identify our economy with the corporation: If we can get the corporation to do well, that's good for the citizens," he said. "That's not true with the way things are in a global economy. The corporation can save money by having the work done elsewhere."