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Intel, HP chiefs praise offshore outsourcing

It may be unpopular with U.S. workers, but Craig Barrett and Carly Fiorina say offshore outsourcing is essential. Separately, they made their cases at the Gartner ITxpo.

ORLANDO, Fla. -- The CEOs of two technology giants on Tuesday issued an unapologetic defense of offshore outsourcing, saying that their firms need the talent that lies outside the U.S. and calling for increased investment in areas that will keep American workers competitive.

Intel CEO Craig Barrett and Hewlett-Packard CEO Carly Fiorina, in separate appearances at the Gartner Symposium ITxpo, both said that what the U.S. needs is investment in education and research and development -- not a boycott of offshore labor.

Of the two, Barrett was the more provocative, complaining that K-12 schools do "an excellent job of weeding out anybody who's interested in math and science," in part by encouraging students to go into other areas, such as business and law.

The issue of offshore outsourcing, he added, is "a microcosm of a bigger issue, which is how the U.S. will compete going forward."

Barrett and Fiorina were two of four keynote guests who agreed to be interviewed on stage by Gartner analysts during the weeklong conference. Microsoft CEO Steve Ballmer was an earlier guest, and MCI CEO Michael Capellas is scheduled to appear today.

Both Barrett and Fiorina, in response to analysts' questions about outsourcing, noted quickly that, in addition to their companies' use of offshore labor, they derive much of their revenue from offshore sources.

Barrett said that Intel, in fact, garners about 70% of its revenue from outside the United States. "So, to a degree, we're following our customers." He estimated that 60% of the Intel work force is U.S.-based, while 40% is overseas.

Barrett added that there's been a "sea change" in the world economy during the past few years, noting that Russia, China and India -- which were absent from the technology table in 1990 -- have now become players. Those three countries are home to 2.5 billion people.

Even if one assumes that 80% to 90% of those people are agrarian and have no interest in becoming knowledge workers, Barrett said, the remaining 250 million or so still constitute a work force to be reckoned with.

The answer, Barrett said, is revitalization of U.S. public schools and investment in R&D. In addition, he said, the government must "do no harm" when it comes to making the U.S. an attractive place to do business. For instance, he criticized the current proposal before the Financial Accounting Standards Board requiring companies to list stock options as expenses, an idea developed as a response to accounting scandals at Enron and other companies.

Critics see the measure as one that would dissuade employers from offering stock options, essentially depriving U.S. firms of a recruitment tool.

"What really surprises me is that consultants in the U.S. aren't speaking out more forcefully on these topics," Barrett said, in one of many quips aimed at the Gartner analysts interviewing him.

Quality talent overseas

During Fiorina's appearance several hours later, analyst Jennifer Beck asked the HP chief about the issue of the company "sending U.S. jobs offshore" and "HR backlash."

Fiorina responded by noting first that 62% of HP's revenue comes from outside the U.S. She said that revenue stream is valuable, and the talent that exists in those countries is valuable, too.

"When you think about the number of people that are graduating from Chinese and Indian universities, and the quality of that talent, we have to tap into that to maintain our leadership," she said.

At the same time, Fiorina said, it's even more important that the U.S. invest in education, training and R&D. Noting that American developers are unparalleled in the area of fabric-level innovation, she said it's crucial that those skills be continually upgraded, which will happen as a byproduct of investment.

Fiorina added that, 20 years ago, the conventional wisdom was that Japan would take over the world. What the U.S. did, she said, was the right thing; it invested in competitiveness, while Japan invested in protectionism.

"I think the consequences of those two choices are very clear," she said. "We shouldn't make the same mistake Japan made. There is never any future in sticking our heads in the sand and pretending that something that is competitive out there doesn't exist."

Questioned after the presentations, some attendees said that the speakers' messages resonated.

"From one standpoint, you hate to see the jobs go offshore," said Gene Smith, who works in technical architecture and strategy. "It impacts people's lives, and these are real people. From the other perspective, though, I can't fault a company for doing what makes business sense and finding a cheap resource."

John-Marc Clark, director of worldwide market research for Citrix Systems Inc., said that the developing-country population figures Barrett quoted are significant. He summarized the Intel chief's message as: "Get ready, guys, because the rules of the game have changed."

Clark added, though, that he sees no problem with other parts of the world having a piece of the technology wealth. And, noting that Barrett also advised attendees to invest, Clark said he found the overall message encouraging.

"I thought it was really, really positive," he said. '"I was excited by what he had to say."


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