Outsourcing R&D holds the key

It is all very well for US politicians and the media to blame the country’s job loss on Bangalore.  But would a cut-back on Bangalored jobs and a freeze on outsourcing improve the employment situation? Bangalore-ing is no longer in vogue; it is a disincentive for companies seeking Obama’s stimulus package. But job losses are reported still. 

It is not because of the concern of the rich for the uplift of the developing world or the benovelence of corporate America, but because of their enlightend self-interest that so many jobs got Bangalored, for so long,  till some time back. A pity,the US can’t bring  the Bangalored jobs back to Boston. Instead, the US recession  has had a seismic impact on India, by way of loss of high-paying jobs, notably, in the software industry. Economists reckon the end of recession is in sight, but the six million plus lost jobs won’t be re-created anytime soon. In earlier recessions, they say,  the US economy had managed to bounce back  because of a steady stream of  tech innovations that gave impetus to economic growth with   high-value jobs creation on a large scale.  The current recession appears to have drained innovative juice out of the entreprenuerial America.

According to Businessweek, America’s position as innovation leader is no longer unrivaled. Time there was when the country had the best of universities, the strongest corporate research, and a government that invested agressively in areas such as advance communications and space exploration. Upshot was a steady stream of world-changing innovations such as the transistor at Bell Labs, and the Internet at the Defence Dept. It was in such a scenario US companies outsourced jobs to India  for cost advantage, but a lot more high-paying jobs were created within the US through breakthrough innovations. This time, they say, the outsourced software and manufacturing jobs have largely been replaced by low-wage service jobs in fast-food and retail sectors. The trend is attributed to a dearth of  breakthrough innovations in recent years; and this is happening  at a time when millions of jobs have been  lost to recession. The point made in the Businessweek article  is that the devil is not in outsourcing.  The key to a bounce-back in the US economy may well be in outsourcing  R&D. 

IBM is already into it, with plans to set up overseas ‘collaboratories’  that match up company researchers with governments, universities and companies in other countries. IBM is looking at Saudi Arabia, Switzerland,China, Ireland,Taiwan and India. It is their enlightened self-interest that drives IBM and a few others into making deals to tap global R&D potentials for breakthrough innovations. The projects are in basic research,  the benefits of which may not be evident, or seem tangible,  for the next three to five years.  The research process  tend to  have  innovative  spin-offs  with commercial  potential. 

Companies that have strong R&D base may well see that it is in their best interest to look beyond national boundaries and their own corporate walls, and seek radical, and globalised collaboration for life-changing innovations.


2 Responses

  1. Hello.

    I am an indian and I am from bangalore. I accept the fact that the US companies are outsourcing the jobs because of cost advantage. I also agree with the point that US can come out of this situation through innovation. However, this is not the only way to come out of this problem.

    I am working in a leading software company in India. I know what is happening here and I also know the untapped market here.

    You must know that already many companies have started sending R&D jobs to India, making the people in their companies, believe that by sending such jobs they can innovate and lead the market. But if the corporation leads the industry, it doesn’t mean they will still employ you. My hunch says that they will move their whole company to India. Again you will be jobless.

    However there is a plan by which you can overcome all these things.


  2. Nice writing GVK as usual. America thrives on competition not just within the country but internationally. American shareholder owned companies are answerable to the owners-the shareholders. If they can get a product or a service anywhere in the world with comparable quality as is available domestically with lower cost, they will go there. There is no altruistic purpose here. More money for the shareholders is good for America. If other countries produce the same quality products and services that were outsourced by the US to India at a lower price, you better believe those will move from India. The Indian businesses know this. It is naive to assume that most or substantial software engineering work is outsourced by the US to other countries. It is reasonable to expect that in the absence of an alternative major high value innovative work that will revolutionalize the next phase and reward the shareholders are still being done here in the US. America is a risk taking nation and the insatiable urge to innovate and profit from it is permanently embedded in its psyche. The talk of job losses due to outsourcing is political talk. Don’t write America off that fast.

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