R&D investments could help ease offshore pains

You've heard the candidates talk about it. But a new national campaign -- lead by concerned tech execs and university presidents -- may provide some answers to the offshore outsourcing issue.

LAS VEGAS -- A coalition of high-tech firms and university officials could be the key for the U.S. to maintain its status as a leading player on the global stage of IT innovation.

That's the opinion of author, professor, journalist and former presidential adviser David Gergen, who was a keynote speaker at last week's BetterManagement Live Worldwide Business Conference.

Gergen doesn't believe that protectionism or penalizing firms for sending jobs offshore is the way America should react to the exodus of white-collar IT jobs. "We've tried that; mercantilism doesn't work," he said.

The only solution is to invest in human capital and R&D so robust that we stay ahead of the knowledge curve.
David Gergen
Former presidential adviser

"The only solution is to invest in human capital and R&D so robust that we stay ahead in the knowledge curve."

Gergen believes the way to do that is for universities and tech firms to lead a national campaign to convince Congress, the administration and taxpayers that investment in research and development is crucial for keeping the U.S. at the forefront of discovery. Otherwise, our standard of living could suffer.

"It's not as if we can't do it," Gergen said. "What's disturbing is that the investment in hard sciences is going down, and we're producing fewer scientists and engineers." As a percentage of the gross domestic product, R&D investment is at one of its lowest levels in years -- much less than investment in the biosciences, he said.

Lost overseas

The decline of stateside IT pros combined with the cheap, skilled and abundant labor in places like India and China has hit the U.S. job market like a tsunami.

Several studies released just within the last month show the effects of offshore outsourcing, as well as the impact it may have on the future. A study from Challenger, Gray & Christmas Inc. revealed that job cuts in technology were up 60% between July and September, compared with the previous quarter. Pink slips at computer companies alone were up 127% during the period.

A report from International Data Corp. basically corroborated an earlier Meta Group Inc. conclusion that offshore outsourcing is on the brink of boom. IDC predicts that worldwide spending on offshore IT services will hit $17 billion within four years (up from the current $7 billion), with much of that offshoring centered on applications.

And a study released by the U.S.-China Economic and Security Review Commission found that up to 406,000 U.S. jobs will move overseas this year -- nearly twice the number lost in 2001.

"People will lose their jobs as a result [of offshoring]," said Nigel Holloway, Director of Executive Services at The Economist and panelist at a separate discussion of offshoring. "We must focus on softening the blow." And according to Gergen, that softening may be coming soon.

A CEO or CIO has found it very profitable to send knowledge jobs overseas, but as a U.S. citizen they may feel it's unhealthy for the country.
David Gergen
Former presidential adviser

Pride and profit

Seeing the offshore tidal wave carry off American jobs has caused a dilemma for some U.S. executives whose consciences are in conflict with their business senses and feel caught between pride and profit.

"A CEO or a CIO has found it very profitable to send knowledge jobs overseas, but as a U.S. citizen, they may feel it's unhealthy for the country," Gergen said.

Gergen believes several leaders concerned about the state of the nation will team up with university leaders within the next two years to campaign for an increase in tech research and development. He also believes they should push to get more women and minorities involved in the high-tech industry.

I can't tell you how strongly people feel about this issue," Gergen said. And he should know. Gergen not only has advised Presidents Nixon, Ford, Reagan and Clinton, he also is a professor of public service at Harvard's John F. Kennedy School of Government and sits on the advisory board for Intel Corp., so he's seen the issue from government, educational and corporate perspectives.

The corporate tax break signed last week by President Bush -- which allows tech firms with massive overseas profits to reinvest that money at home at a 5.25% tax rate instead of the usual 35% -- will provide short-term help to IT. Just this week, Democratic presidential candidate John Kerry called for an expansion of the Trade Adjustment Assistance program, which provides workers who've lost their jobs to offshoring with up to two years of income support and training services, to include more IT professionals.

But Gergen believes a 7% investment in R&D for the hard sciences would have much more long-term benefits and help the U.S. control its fate.

"You can't change the forces of the capitalist system, but you can master those forces so you ride with them, not be drowned by them," he said.

A political football

Gergen doesn't think the current White House is doing enough for IT and doesn't take science and technology nearly as seriously as the elder Bush's administration did.

For more information

Is offshore outsourcing worth the loss of IT jobs?

Offshoring erodes IT pay again

Offshore outsourcing backlash: Much ado about little?

How far off are outsourcing laws?

Universities aim for more rounded IT grads

Read what one educator/CIO has to say about innovation and offshoring

President George H.W. Bush had a top science adviser, D. Allan Bromley, who became an apostle in Washington for R&D, according to Gergen.

"He recognized that universities are a national treasure and that one of every two bills in Congress has a high-tech component," Gergen said. Bromley also served in the Reagan administration as a member of the White House Science Council.

Gergen also thinks the White House today should overhaul its sci/tech council. And although lost IT jobs have been political currency for Sen. Kerry in his push to Pennsylvania Avenue, Gergen believes offshore outsourcing is a national problem that deserves bipartisan attention.

"Kerry has shown more sensitivity to the sciences, but I don't think it should be a political football," he said.

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