U.S. High-Tech Jobs Going Abroad

After years of sending high-tech production work abroad, U.S. companies are increasingly shipping sophisticated software development and other engineering jobs overseas because they can’t find enough qualified workers here.

The escalated hiring of brainpower abroad, however, is carrying with it concerns about efficiency, management and the spontaneous creativity that comes from having employees working on projects together in the same place.

About 10% of Southern California’s 8,000 software firms are now relying on skilled workers in foreign countries--up from barely 1% two years ago, said Rohit Shukla, president of the Los Angeles Regional Technology Alliance.

That number could jump to 30% within the next few years if the high-tech labor shortage persists and the ceiling on skilled foreign worker visas isn’t adjusted, he said.

Leonard Shneyderman, a native of Russia, is using five Russian programmers to help him build his GameColony.com Inc., a year-old Internet entertainment firm in Newport Beach. He and other immigrants who have started U.S. technology companies are quick to use skilled foreign workers.

“There is a talented pool of high-tech engineers abroad that is inexpensive and largely untapped and can be there for the taking,” he said.

Major companies that have long relied on low-skilled laborers overseas are now aggressively taking advantage of the growing pool of high-skilled engineers in countries such as India, Israel, Pakistan and Russia.

Nearly one-third of Microsoft Corp.’s 34,000 employees are based abroad, working on everything from translating software to marketing and sales. In recent years, the company has added more than 100 software developers in India and Israel and opened research facilities in China and England, Microsoft spokesman Mark Thomas said.

But some experts see little reason to increase the amount of skilled work sent to foreign lands.

Norman Matloff, a UC Davis professor of computer science, said many high-tech firms have intentionally misled the public about the supposed labor shortage as a way to boost the number of visas for skilled workers.

Besides, he said, “International outsourcing may increase, but it’s never going to be big. E-mail, fax and videophones are wonderful, but you need face-to-face communication to avoid misunderstandings and spark good ideas.”

While U.S. companies are getting programming and engineering work done abroad at a fraction of what they would pay domestically, cost is not the driving force behind the growing movement, said Alan MacCormack, an assistant professor at Harvard Business School.

“Countries like India and Russia have developed quite a sophisticated base of computer science professionals more than able to contribute significantly to development projects,” he said.

And for many company owners, the timing couldn’t be better.

This year, U.S. companies will have an estimated 1.6 million high-tech job vacancies, but less than half will be filled because of a dearth of home-grown techies, according to a new study by the Information Technology Assn. of America, an Arlington, Va., trade group representing 26,000 companies.

Frank Kavanaugh turned overseas out of frustration. The chief executive of OhGolly.com Inc., a Newport Beach builder of Web sites for small businesses, said that after an extensive search, he hired two U.S. computer programmers. But they never reported to work.

“One guy said he had found a job closer to home, and the other said he had ‘family issues’ and needed a couple months to work it all out,” Kavanaugh said.

Three weeks ago, Kavanaugh did something he had never before done: He outsourced some OhGolly software development projects to a team of three programmers in St. Petersburg, Russia.

If his Russian workers excel, he said, he likely will tap more talent abroad. Kavanaugh said he still needs up to eight more programmers.

GoldMine Software Corp. in Pacific Palisades has employed two programmers in Israel for three years to help develop customer management software, said Robert Clarke, GoldMine’s chief operating officer.

“Finding any technical talent right now is very difficult,” he said. “We’re looking to add development talent anywhere we can find it, including Israel, where the quality and standards are high.”

Contributing to the spate of overseas outsourcing is the increased difficulty of bringing foreign software engineers to the United States to work.

The Immigration and Naturalization Service said it has stopped accepting visa petitions for skilled foreign workers. The agency said it has received enough applications to dole out 115,000 of the special visas, the maximum permitted for the fiscal year ending Sept. 30.

That hits companies like Microsoft the hardest. The Redmond, Wash., behemoth has openings for more than 3,000 technical and research employees. Spokesman Thomas acknowledged that the company will have a tough time importing qualified workers in the near term, despite a hearty supply of skilled labor in some foreign countries.

India, for instance, has 4.1 million technical and scientific workers and is churning out an additional 70,000 computer programmers and developers a year, said Navtej Sarna, spokesman at the Indian Embassy in Washington.

India, like Malaysia, Israel and other nations, is beefing up its high-tech sector “with an eye toward attracting high-paying jobs from the U.S. and other developed nations,” said Harris Miller, president of the Information Technology Assn. of America.

Mahboob Akhter, a Pakistani native who lives in Orange County, knows the hidden talent overseas. He first made extensive contacts in India and Pakistan in the mid-1990s while working at another U.S. firm.

As president of Focus Software International in Tustin, Akhter has sent much of his company’s software development work to India and Pakistan over the last three years.

Focus Software employs 15 Indian programmers, who are subcontracted through an Indian firm. Akhter said outsourcing saves him at least 30% on labor costs, part of which he passes on to customers.

“I’ve been happy with the results,” he said. “Programmers have been able to deliver the projects on time and [with] good quality.”

Not everybody shares Akhter’s enthusiasm. For instance, the media-savvy Federation for American Immigration Reform, a Washington advocacy group often criticized as being anti-immigrant, is leading an effort to restrict immigration.

K.C. McAlpin, the group’s deputy director, said the nation has plenty of qualified high-tech workers, but companies bypass them for lower-paid talent abroad. “There’s not a labor shortage here,” he said. “There’s just a shortage of cheap labor.”

Foreign programmers typically earn 20% of what their U.S. counterparts make, said Matloff, the UC Davis professor. He said several companies have threatened to farm out significant amounts of programming overseas to address their “shortages,” but he doubts it will happen.

Some business owners are aware of the limitations--and the savings.

Over the last few years, Jose Dominguez has relied on Indians and Armenians to assist his six-person staff at SouthTech Systems Inc. in Santa Ana in developing computer programs.

Dominguez, the company’s president, said he subcontracts foreign programmers because they do good work and are willing to take on last-minute projects for “a fraction” of what Americans would earn.

But, he said, the challenge of managing foreign workers from Orange County makes him reluctant to outsource more than 25% of SouthTech’s programming.

“Even though I’m happy with the work they’re doing, it’s hard to oversee a project over the Internet,” he said. “You don’t have full control.”

He pointed out that communicating over the Web has increased the opportunities for misunderstandings, and the time difference between the U.S. and Asia makes it difficult to talk by telephone.

Shneyderman at GameColony.com has fewer reservations. He had planned on staffing his company with local software developers; it’s easier to oversee employees working in the same office than in one 11 time zones away, he said.

However, the few qualified candidates he found wanted $90,000 a year, a signing bonus and stock options--far more than he could afford.

Dejected, Shneyderman decided to outsource almost all his firm’s high-tech work overseas, turning to his homeland. His five Russian programmers earn about $18,000 a year each, he said.

“If you talk to any high-tech company in Southern California, they will tell you that they are considering or already outsourcing software development to India or some other country,” said Shukla of the L.A. Regional Technology Alliance. “And why shouldn’t they? The quality of offshore work is pretty damn good.”

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Help Wanted

U.S. companies will have openings for more than 1.6 million information technology workers this year. But more than half of those jobs will go unfilled in the U.S. because of a lack of qualified employees. Here are the openings, by position, and the number of jobs that won’t be filled.

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Employees What will Position needed go unfilled Tech support 616,055 327,835 Database dev./admin. 271,487 147,489 Programming/software engineer 213,890 109,948 Web development/admin. 161,301 90,137 Network design/admin. 165,585 79,374 Tech writing 63,753 31,167 Enterprise systems 46,337 22,077 Other 38,980 21,332 Digital media 31,110 13,969 Total 1,608,499 843,328

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Source: Information Technology Assn. of America