Tech execs look to expand--outside U.S.

The technology industry is seeing a rebound, but top executives say any jobs added to meet growing demand will likely be in countries where labor is cheaper than the United States.

Tech companies are seeing a rebound in business, but top executives said this week that any jobs added to meet growing demand will likely be in countries where labor is cheaper than the United States.

Executives speaking at the Reuters Technology, Media and Telecommunications Summit in New York said they see increased hiring in countries like India and China, but few jobs will be added in the United States.

Michael Jordan, chief executive of technology services provider Electronic Data Systems, said the company's employees in low-cost locations like India will rise from 9,000 now to 20,000 by 2006.

Bruce Claflin, chief executive of network products maker 3Com, said the company's joint-venture with Huawei Technologies of China will add 1,000 engineers, all supplied by Huawei.

In the future, customers "won't know where the technology comes from,'' Claflin said.

Anne Mulcahy, chief executive of Xerox, which has about 40 percent of its 60,000 employees outside the U.S., expects little hiring. "I don't really think we'll be adding people the way we used to,'' she said. Xerox has already handed over manufacturing of most printers to Flextronics International of Singapore.

Only a few companies, such as IBM, the world's No. 1 technology company, have announced plans to add jobs this year. But even IBM, which derives most of its sales abroad, plans to shift jobs to remain competitive.

U.S. employment fell
U.S. technology employment fell 4 percent last year to just below 6 million, the American Electronics Association estimates, the lowest level since 1999. The unemployment rate for electrical and electronics engineers rose to a record 6.2 percent, according to the Institute for Electrical and Electronics Engineers (IEEE).

Ron Hira, a professor at Rochester Institute of Technology who analyzes manpower for the IEEE, said a recent decrease in the U.S. government's outlook for employment growth reflects the move to send U.S. technology jobs abroad.

Non-U.S. technology companies had a banner year in 2003. Jim Thomas, U.S. marketing vice president for Tata Consultancy Services of India, said Tata had double-digit growth in the United States, estimating overall U.S. business reached almost $1 billion from $880 million in fiscal 2002.

Tata, India's largest technology services company, saw "across the board'' gains in many U.S. sectors, Thomas said.

Tata, which is privately held, as well as the publicly traded Indian service companies like the Wipro Technologies unit of Wipro and Infosys Technologies have bumped up U.S. sales.

In response, more than a dozen states are considering legislation to ban hiring non-U.S. workers to handle government contracts but none has passed yet. Indiana's Senate this month passed such a law but its House hasn't acted yet, said Sen. Jeff Drozda, its Republican sponsor.

In New Jersey, Sen. Shirley Turner, sponsor of a similar bill, said, "We are shooting ourselves in the head if we don't adopt protective laws.''

Congress is considering related legislation.

Ill-advised protectionism?
But EDS' Jordan said such moves are ill-advised, preferring federal programs that could invoke existing trade-adjustment laws.

"There are lots of ways to skin the productivity cat,'' Jordan said. "India's only one of them.''

Michael Turner, president of the Information Technology Institute, an industry study group, said European countries that have laws prohibiting the transfer of personal data abroad may be better protected against offshoring.

Some institutional shareholders also plan to take a stand. Dan Steininger, chief executive of Catholic Knights, a Milwaukee-based mutual funds group with assets around $1 billion, said he plans to introduce resolutions to deal with offshoring this year.

"CEOs never think of reducing their own pay,'' Steininger said. "Why do they always think the pain must start out at the bottom?''

Story Copyright  © 2004 Reuters Limited.  All rights reserved.

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