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To outsource or not to outsource?

Posted: 12 Mar 2009     Print Version  Bookmark and Share

Keywords:overseas outsourcing  engineering unemployment  high-tech industry  H-1B high-tech visa 

The offshoring debate heats up as U.S. faces the worst economic downturn since the Great Depression. Labour groups are slamming companies for shipping jobs overseas at a time of alarming U.S. high-tech unemployment, and critics have characterised the Obama administration's early efforts to reach out to high-tech executives as tacit complicity.

At the same time, a new survey has found that some offshored jobs are heading back home, as employers in one sector discover the economies of overseas outsourcing are not what they expected.

Workers cried foul in late January when IBM Corp. announced the layoff of about 2,800 U.S. employees, with union officials claiming the company was sending jobs offshore. Big Blue officials provided few details about the layoff but did launch a counteroffensive called Project Match to connect displaced U.S. workers with job openings overseas.

The project would require U.S. workers to relocate to a low-wage country like India and accept a salary at the going rate for the area, although the company said it would help with relocation costs. The gambit seemed to impress few, least of all representatives of IBM workers and other offshoring opponents.

The rising tide of layoffs has labour unions and professional groups "very concerned," IEEE-USA President Gordon Day said in an interview. "We're expecting [U.S. engineering unemployment] to go up substantially in 2009."

Layoffs accelerate in IT industries

As recently as 2007, engineering unemployment was at a historically low 0.5 per cent, according to the U.S. Bureau of Labour Statistics. But the jobless rate for U.S. engineers jumped to 2.8 per cent last year, and this year's rate looks to be much higher.

One ominous sign came just days ago, when Spansion Inc., the leading maker of NOR flash memory components, said it was filing for U.S. bankruptcy protection and laying off workers. Spansion made its stunning announcement on a Sunday. Some of the affected workers spoke out when reports surfaced that the company's new CEO could be in line for a Rs.8.70 crore ($1.75 million) bonus if he found a buyer for the troubled memory vendor.

"None of the U.S. employees got any advance notice—or severance, or medical benefit extension," one laid-off employee told EE Times semiconductor editor Mark LaPedus.

Said another: "We got zero severance pay, just vacation accrued and 35 per cent of COBRA [health insurance] for four months."

Such scenarios have become common in the high-tech industry in recent months. Besides IBM and Spansion, the list of U.S., Asian and European manufacturers that have announced job cuts and reorganisations since mid-2008 includes Advanced Micro Devices, Hewlett-Packard, Intel, Nokia, Sony, Sun Microsystems and Xilinx. According to the Web site TechCrunch, more than 300,000 high-tech workers were been laid off between August 2008 and mid-February.

Click here for data on high-tech companies that have laid off more than 1,000 employees since September 2008.

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