Headcount: Offshoring, Dude!

Headcount is intrigued by strong hints that outsourcing -- or "offshoring," as the kids call it -- is more than just a temporary blip.

Case in point:
  • Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) is outsourcing its international product manufacturing to Elcoteq Network Corp., a move that affects 300 jobs.

  • At least 1,000 jobs are being affected by Sprint Corp.'s (NYSE: FON) decision to move some applications development overseas, according to a report in the Kansas City Star. The outsourcing deals are old news, but now there's an inkling of how many jobs are cut (see Sprint Springs Outsourcing Deals).

  • AT&T Wireless Services Inc. (NYSE: AWE) is making plans to lay off more than 10 percent of its 30,000 workers over the next year as it farms out jobs overseas, according to a Wall Street Journal report.

  • Infosys Technologies Ltd., an outsourcing beneficiary based in India, is worth $1 billion more than its U.S. competitor Electronic Data Systems Corp. (EDS), even though EDS has about 121,000 more employees and more than 20 times the revenues.

  • Would it be wrong to bring up the Montreal Expos here? Why does a Canadian team play "America's pastime" so close to the equator for so much of the year?

Okay, Headcount will cease the outsourcing observations for now. Better yet, we'll hire a room full of wise-cracking columnists in Beijing to handle next week's column duties. And we're not giving them bathroom breaks, either. Until then, there are plenty of hirings and firings to ponder this week:

  • Maryland-based Sentito Networks is in the hunt for a VP of product marketing, according to sources close to the company. A job description handed to candidates reveals some interesting bits about the 85-person voice switch vendor. Privately held Sentito tells candidates it has landed 15 customers and trials with three RBOCs since releasing its product four months ago. Its revenues this year are projected to reach $3 million, climbing to between $80 million and $100 million in 2005, sources say.

  • Riverstone Networks Inc. (Nasdaq: RSTN) says Peter McGann, its executive VP of sales, has left the company after his job was made redundant. Regional VPs who once reported to McGann now report directly to Riverstone president and chief executive officer Oscar Rodriguez. Suresh Gopalakrishnan, formerly the executive VP of engineering, has also left the company this year, according Riverstone's filings with the Securities and Exchange Commission (SEC).

  • Components vendor Onetta Inc. confirms that its CEO, Orlando Reyes, has left the company. Until a replacement is found, his duties will be handled by founder and CTO Yan Sun and finance VP Allen R. Morton. Reyes took over for former CEO Dennis Barsema in January, according to Onetta founder and VP of product management Robert Macdonald (see Barsema to Leave Onetta).
  • Photuris Inc. has furloughed a number of its staff, putting them on unpaid leave while they retain employee status, chief operating officer Bill Gartner says. The metro WDM company has made sales to Verizon Communications Inc. (NYSE: VZ) and is in trials with two other RBOCs and an IXC. It has completed the third release of its product but has to make a tradeoff between future product development and conserving cash, Gartner says.
  • Sprint's annual Thanksgiving Day charity run begins at the company's Overland Park, Kan., headquarters at 9 a.m. on Nov. 27. The run is open to the public, and the first 3,700 entrants get a commemorative T-shirt. But if you send some funny or embarrassing photos from the event to [email protected] –- photos so good that we publish them -- we'll send give you a Light Reading T-shirt to add to your collection.

    And now here's a rundown of some other notable appointments (and disappointments) from the past few days: That's all for this edition of Headcount. We may be able to get in one more column before Headcount goes offshoring for the Thanksgiving holidays, so don't be shy about sending your tips to [email protected]. Gobble. Grobal.

    — Phil Harvey, Senior Editor, Light Reading

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    startup_shutup 12/4/2012 | 11:07:21 PM
    re: Headcount: Offshoring, Dude! Gephardt says he opposed NAFTA

    'The other candidates, now they sound just like me'

    startup_shutup 12/4/2012 | 11:07:22 PM
    re: Headcount: Offshoring, Dude! Long live BobbyMax -- truth comes from you!
    startup_shutup 12/4/2012 | 11:07:22 PM
    re: Headcount: Offshoring, Dude! subscribe
    BobbyMax 12/4/2012 | 11:07:29 PM
    re: Headcount: Offshoring, Dude! The US has lost close to 20 million jobs to China, India, Malasia,and Singapore. It did not happen by accident. It was the deliverate attempt of the corrupt CEOs who engaged in in-shoring and off-shoring activities with a single purpose of getting rich, The government failed to safeguard the employment interests of American workers. The Indians living here in the US followed the same strategies that was followed by the slave traders in Africa.

    Any government that dep[rives its workers of secure employment is essentially criminal government. In the final analysis it is the ability to bribe and give money for campaign contributions that determines the industry to be tageted.

    The health cost in our country has become so prohibitive that about 48 million Americans do not have any insurance and another 70 million Americans live in state of poverty. In view of stark reality, the government supports excessive immigration from third world countries that take away jobs from us. Many parts of our country look like Third World Countries.

    Many million prgramming jobs that our graduates can do are exported to India and China. The labor certification scheme that somewhat protected our workers have been thrown out of the window.

    Why does the government not permit physicians from the Third Wold Countries come in? Thanks to American Medical Association that opposed the immigration of physicians from the Third World Countries.
    keelhaul42 12/4/2012 | 11:07:30 PM
    re: Headcount: Offshoring, Dude! It's a very serious problem for those holding dollar denominated assets (such as US Treasury bonds). Those assets would lose value corresponding to the exchange rate shift. Also, you can expect domestic inflationary pressures to grow when the yen/rupee are revalued vs the dollar.

    We've been down this road before though: recall the situation with Japan <--> US trade in the early 1980's. Back then the yen was about 240 to one USD. A few years later the yen was about 120 to one USD. Was there a massive capital flight from the US then? No, perhaps because there was nowhere else to go.

    Realistically, the adjustment has to happen sooner or later. One suspects a gradual adjustment (i.e. over 2-3 years) would be better than a sudden step.

    my .02 (US) ...
    basic2 12/4/2012 | 11:07:41 PM
    re: Headcount: Offshoring, Dude! We have to be very careful how we approach the problem though. I think tax incentives may be helpful. And I don't think that import taxes or tariffs are necessarily bad but they must be multilateral and they must be targeted at leveling the playing field and applied intelligently with full appreciation of the law of unintended consequences. What does not work must be fixed quickly.


    Thanks for the reply. These are good answers. But I still have some doubts on how effective they are.

    First, giving tax incentives to the companies that don't do outsourcing certainly would help to keep jobs here. But we as tax payers will have to pay to have their product competitive (in price). That will be a lot to pay.

    Second, I don't know how import taxes or tariffs would prevent companies from using foreign cheap labor.
    whyiswhy 12/4/2012 | 11:07:42 PM
    re: Headcount: Offshoring, Dude! Gardner:

    Actually, exchange rates are not in and of themselves a reason to invest (or not to invest) in US bonds. The short term change in exchange rates might be, but only for for foreign capital. US bonds compete for funds like all other debt, but with (hopefully) lower risk-cost.

    Exchange rates must be used in concert with tarriffs. Tarriffs blunt the sudden movement of capital offshore. They make certain foreign manufactured goods more expensive to the US consumer, considerably lowering their sales or forcing them to live with lower margins.

    Broadly speaking, the government should act so as to:

    1) perfectly balance the trade between the US and all other countries - at least when averaged over periods of five years (or so, my number) and taken in aggregate (integrated ins equal integrated outs).

    2) maximize federal tax returns over roughly the same period of time, though not necessarily in phase - this means (in particular) individual income taxes i.e. maximal employment times maximal income (I have earlier posted the calculus of corporate / investor returns versus individual income and showed the latter is at least four times more important)

    3) operate the government at the lowest possible aggregate (tarriff plus tax) burden to the individual - ie.e don't spend more than necessary.

    In order to achieve this, tarriffs are needed in the short term. If operated properly, they will be transient and laser focussed. Exchange rates will take care of longer term and broad based issues.

    I fully realize that none of this is achievable with federal laws as they are presently written by our representatives. They are purpose-written-bought by the monied special interests to allow them to prosper at the expense of "the commons".

    The founders fathers fully recognized this problem, and the consequences it would have for their (upper crust monied) class. Which is why we have a Senate and a Congress.

    Only direct democracy has a chance.

    gardner 12/4/2012 | 11:07:52 PM
    re: Headcount: Offshoring, Dude!
    Exchange rates is something you can fix to stave off offshoring. If the USD is devalued vs Rupee, it will be cheaper in rupee terms to employ americans in USD rather than risk offshoring. It brings your cost of living closer to the rest of the world and makes it financially viable for companies to retain you.

    There is a very serious potential problem with this due to the national debt. If the weak dollar makes investing in the US prohibitive then we face a financial meltdown of the foreign owners of American debt cut their losses by withdrawing en masse from the American debt market. This is potentially an Argentine style meltdown that would cause more suffering than it would relieve. We have to apply these solutions very carefully. That is why I say we have to be aware of the unintended consequences of any solution.
    volkot 12/4/2012 | 11:07:52 PM
    re: Headcount: Offshoring, Dude! Atmguy,

    Your post looks like an implicit answer to my question from a subject line.

    PS. Sorry, but your guesses are completely wrong and, most importantly, irrelevant. Let us keep this discussion clean and professional.
    gardner 12/4/2012 | 11:07:53 PM
    re: Headcount: Offshoring, Dude!
    Gardner, what is your solution to this offshore outsourcing dilemma?

    I don't think anyone has "a" solution. The search for a single, one size fits all solution is a fools game and a peculiarly American pre-occupation. I do know this: until we (a) recognize the problem, (b)stop believing the propaganda (i.e. that it is a fair fight that we have to just buckle down and compete to win), and (c) start investigating remedial measures we don't have a chance to protect ourselves.

    We have to be very careful how we approach the problem though. I think tax incentives may be helpful. And I don't think that import taxes or tariffs are necessarily bad but they must be multilateral and they must be targeted at leveling the playing field and applied intelligently with full appreciation of the law of unintended consequences. What does not work must be fixed quickly. I think we middle class people and knowledge workers in particular have to become more politically active. We have been lulled into a sense of false security and have been tricked into thinking that soliarity isn't important by people who profit from the hollowing out of the middle class in the so-called developed world. Our media have become very effective propaganda tools that have worked to isolate us and make us feel powerless to change our lives. We have to become aware of this trap and act collectively to defeat those who benefit from our isolation. We must use the skills we have to fight back. Use what you do best to contribute. If you are good at web site design then do that, if you have a facility with writing and influencing people then do that, whatever you can do best use it in the service of the cause of preventing the race to the bottom. It is not healthy. Help save capitalism from those would pay it lip service but actually destroy it with their unbridled greed and unregulated commercial behavior. Contrary to the propaganda we have been fed, capitalism needs regulation to work properly and effectively. When markets get out of balance because of excessive market power in a small number of hands the miracle of "market pricing" no longer works. And we should also realize that markets don't work for everything. A national park for example is a very poor field of application for market principles because of the problem of the commons. The problem of the commons is known in economics but for some reason (ha ha) not talked about much by our moneyed class in the US. As a result the quality of life in the US and the west in general is deteriorating.
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