

More Companies Plan to Put R&D Overseas - petethomas
http://online.wsj.com/article/SB10001424052748703803904576152543358840066.html

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clavalle
As far as outsourcing stories go, I find this one to have a very nice silver
lining for developed countries.

R&D is not factory floor oppressive work for people who have no options and
often little political power. It is the domain of the intelligent; people with
options who are more fully aware of what their options are. IOW, a true middle
class. The more the thinking class grows the better all of us are.

R&D is not a zero sum game like manufacturing. With manufacturing there is
only so much demand for the manufactured goods; only so much material with
which to make the goods etc. With R&D the only limiting factor that comes to
mind is the size of R&D budgets. It is relatively easy to increase the size of
that pie if R&D brings results.

This class of people will be in a better place to act on opportunity as well
compared to the low payed laborers whether it be to move to more developed
countries once they have some valuable experience or to take their ideas and
experience and create enterprises on their own or to simply demand higher
compensation with these other options in mind. I'd bet they'd also have more
political clout as well.

In short, more R&D in these countries will accelerate parity with their
counterparts in more developed countries and might even pull their labor class
with them.

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varjag
> R&D is not a zero sum game like manufacturing. With manufacturing there is
> only so much demand for the manufactured goods; only so much material with
> which to make the goods etc.

The material wasn't really a problem in most industries since early 1950s. The
demand is also permanently growing, with population levels increasing, wealth
being created etc.

R&D however always follows manufacturing, it's just the nature of their
relationship. It can not last long in ivory tower, no matter what politicians
tell.

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clavalle
"the demand is also permanently growing" I'd argue that nothing is
'permanently growing' but I get your point. That increase in demand, however,
is not pulled out of thin air, it is deeply tied to a limited phenomena -- it
is far more inelastic.

"R&D however always follows manufacturing, it's just the nature of their
relationship" This is true but R&D leads to whole new markets with explosive
growth as opposed to commodity plateaus and slower incremental growth based on
population or other rate limited market phenomena.

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bediger
Wait, wasn't R&D the piece of a corporation's work that was going to stay in
the US, because every worker here was talented, good at problem solving and so
forth?

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kstv
Soon most of the management will be outsourced as well. It makes sense to have
someone who understands the culture of the workers.

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valjavec
Not too wise.

Google for "787 Dreamliner outsourcing". It was costly experience for Boeing.

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ckcheng
WSJ article seems to be talking about offshore R&D work, not necessarily
outsourced R&D work. 787 Dreamliner problems seems to be due to outsourcing to
contractors and subcontractors (combined with offshoring):
[http://articles.latimes.com/2011/feb/15/business/la-fi-
hiltz...](http://articles.latimes.com/2011/feb/15/business/la-fi-
hiltzik-20110215)

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fingerprinter
As someone who has gone through offshore outsourcing and offshoring, I can
offer a couple of thoughts.

1\. Just like in the US, quality is dependent on the people you hire (duh).

2\. In India, unlike the US, it seems the more oversight you offer (while
observing #1), the better the results. In the US, you generally hire smart
people and get out of the way. In India, I found it was necessary to do high
touch dev....I don't think this is a result of developer quality, but rather
shared understanding and culture. In the US you can say "we are doing X b/c of
Y sorta like Z" and usually you can get to the point without being too
explicit. That is lacking, making MORE effort needed to communicate. Again,
not a bad thing, just a point.

3\. I never, ever understood thinking offshoring to a place that doesn't speak
your native language (well) AND has a huge timezone offset was a good idea.

The absolute best experience I had and will constantly advocate for US
companies is to use New Zealand. Native English speakers, 4 hour (and 1 day)
offset from SF... a place your developers would LOVE to visit to train people.
About a 1/4 - 1/2 the cost situation as well, so bang for the buck is usually
much, much higher than China, India and Vietnam where timezone and language is
usually a problem.

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M8R-jt5iq1
Note the bit about Infosys establishing comprehensive training programs,
implying they are taking STEM graduates and bringing them up to speed on the
current technologies. 30 years ago Intel had training programs (I don't know
if they do now). So did Apple in the late 80's. (n.b., I was employed by
both). Now the expectation for many large employers is that the applicant have
already mastered the technologies. "No training for you!"

How much is attributable to "R$wages + R$cost of training" < "US$ wages" I
cannot say.

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harshpotatoes
I think there is a little bit more to this atricle than just a simple push for
moving r&d to emerging markets to get cheaper labor. For example, I heard some
pharmaceutical companies bhave started developing labs in Russia, not to
reduce costs, but as a way to make it easier to get past a lot of beaurocratic
red tape. I had heard there were some laws requiring the company to use only
Russian companies in the transportation of their pills, the pharma used some
companies not approved by the state, and thus were slapped with some big
antitrust suits. In order to make the suits go away, they set up a big, rather
costly, lab facility, and then they didn't have to worry any more about these
regulations. (I heard the story recently on NPR, but I can't find a link to a
written story about it).

I guess what I'm getting at, is that I wonder how much of these R&D facilities
are being set up as a way to reduce costs as some people are speculating, and
how many are being forced in order to side step red tape and continue pushing
their products into new markets?

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joseacta
This should be a wake up call. What about north american universities? Aren't
they the best?

Maybe, but they're not affordable to every american. This countries subsidize
upper studies so their citizens can access this kind of education.

I think is just a matter of priorities. Instead of spending so much on X
thing, spend more on scholarships for the top students in the country in
specialized science areas. Universities know how to compete.

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valjavec
"Five years from now, Mr. Wadhwa said he believes Indian workers will be
developing software on par with programmers in Silicon Valley."

Russian/Estonian/[insert any country] are doing that for a while. Just not in
their own country, but in Silicon Valley (50% of Silicon Valley startup has at
least one founder that's not from USA). For creme de la creme products you
need more than just good Indian "worker".

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sfphotoarts
And those countries produce the top super-models too.

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Duff
I thought part of the globalist/"free trade" snake oil was supposedly that we
ship the dumb jobs to the third world, and all of us here in the US become
programmers and scientists though some magic process.

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buckwild
I've kind of always felt like R&D is the heart and soul of silicon valley.
It'll be a shame if things pan out this way.

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michaelty
The giant sucking sound has become deafening.

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guywithabike
Capitalism in the U.S. is not new. That sucking sound has been around for over
a century. Maybe two.

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anonymous246
PSA: outsourcing, offshoring, and offshore outsourcing are all different
things.

What the WSJ article was describing is offshoring.

