Outsourcing Debate Rages On

At the Hot Chips conference, Silicon Valley executives take sides in the hotly contested outsourcing debate.

STANFORD, Calif.—A conference of the meritoriously employed debated the benefits and pitfalls of outsourcing Monday night, largely concluding that the trend toward shipping jobs abroad was inevitable.

The post-dinner panel discussion at the Hot Chips conference here topped 2 hours, with questioners lining up to question, challenge and debate a panel of Silicon Valley executives, at least two of whom have tried to use their U.S. education to benefit India, a touchstone for the outsourcing debate.

Outsourcing, also called offshoring, has been among Silicon Valleys most hotly debated issues since companies started eyeing their bottom lines in the wake of the dot-com bust. On one hand, high-tech employers have realized that there are hundreds of thousands of foreign-born engineers willing to work for a fraction of the cost of American workers. Those same American employees, on the other hand, have found themselves on the down side of a global economy finding its level.

Panelists included Ron Hira, an engineer and now assistant professor of public policy at the Rochester Institute of Technology, who joined Natasha Humphries of the TechsUnite Silicon Valley chapter in a largely critical stance toward outsourcing. Vinod Dham, co-founder of VC firm NewPath Ventures, and Pratul Shroff, founder and chief executive of eInfoChips, both said outsourcing could work, if managed correctly.

/zimages/5/28571.gifWhere do the candidates stand on outsourcing? Find out here.

According to Hira, the chief problem with outsourcing is that its effects have not been quantitatively studied and its terminology is open for debate. "Outsourcing" assumes jobs move in one direction, away from the United States to a foreign country. Foreign employers also come to the United States to employ workers, other panelists pointed out, but the effects of "insourcing" are equally unknown. A Commerce Department study is currently being vetted by the White House, and its results have not been made public.

Panelists largely ignored the issue of free trade, which assumes that jobs can move to and from the United States without being hindered by tariffs or protectionist practices. Hira noted that a Russian or Indian employee can make a fraction of what a U.S. employee is paid, as little as 20 percent, and still maintain his standard of living.

The problem is that Humphries, a former senior software quality assurance engineer with Palm Inc., was forced to train her replacement three years ago before receiving less than 48 hours notice of her impending layoff. She was not offered the opportunity to work in India, even at a fraction of her former salary. She said the global drop in IT salaries has affected her ability to be re-employed.

"Overseas they have protectionist policies," she said. "We dont have these protectionist things."

Next Page: Taking the employers side.