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The Next Wave of Globalization: Offshoring R&D to India and China

The globalization of research and development is already under way. Two Harvard researchers explain what's going on, and why the research and development done in China and India is not all bad news for U.S.-based companies.

By Stephanie Overby

October 31, 2007 — CIO — Entrepreneur-turned-academic Vivek Wadhwa is up front about his use of offshoring and importing foreign talent in a previous professional life as founder and CEO of two technology companies. "I was one of the first to outsource software development to Russia in the early '90s. I was one of the first to use H-1B visas to bring workers to the U.S.A.," Wadhwa says. "Why did I do that? Because it was cheaper."

That tactic is even more lucrative for corporations today, says Wadhwa: "When you have a person on H-1B waiting for a green card, you have them captive for six to 10 years."

Wadhwa, who was addressing an audience at Harvard University, where he is now a Wertheim Fellow at Harvard Law School's Labor and Worklife Program , says outsourcing work to lower-cost countries and importing temporary foreign workers is all part of a larger globalization transformation that is happening "an order of magnitude faster than the industrial revolution." According to Wadhwa, the ramifications of globalization will be much greater than the industrial revolution. "It will impact our standard of living here in the U.S. in the next five to 10 years."

For better or worse? That depends on whom you ask, says Wadhwa. And it may be beside the point. "Globalization is the reality," Wadhwa says. "Whether you like it or not, it's happening."

It's no longer just "low-end" work like call center positions or data entry or even midlevel programming that's being shipped to China and India. High-value research and development work also is moving offshore, says Pete Engardio, a BusinessWeek senior editor who has been writing about globalization for 20 years in addition to being a Harvard Law School Wertheim Fellow. And while cost is still the major driver, it's also about where talent and capabilities are available - and where they are available in mass.

Challenging Conventional Wisdom About Engineering Talent, Visa Arguments

In fact, globalization is happening so fast, academics like Wadhwa (also an executive in residence at Duke University's Pratt School of Engineering can't keep pace. Inspired by his students, Wadhwa decided to fill the void with some research of his own. "I had four or five students come up to me one week and ask, 'What courses can we take that will make us outsourcing-proof?'" says Wadhwa. "These students were paying megabucks to study there and should be very well sought after and yet they were worried about their jobs. That didn't make sense to me." He and his students began to explore what he describes as commonly accepted misinformation about graduation rates around the globe and the "skills shortage" forcing U.S. companies to go abroad.

 

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