Tuesday, July 17, 2007

Outsourcing begins at home

CRA, the main advocacy group for Computer Science research, recently cited a report on how companies decide where to locate R&D efforts. This is a hot topic in CS circles as perceptions of international outsourcing are at least partly responsible for the dramatic drop in student enrollments in recent years. [Note to students and parents: the perception is overhyped: more IT-related jobs are available now in the US than at the height of the boom according to a taskforce on the subject]. According to the summary, costs are not the main factor behind where to locate R&D efforts. Other economic factors, such as local growth potential and university infrastructure, are also key. If you prefer Richard Florida's view of a "spiky" world to Thomas Friedman's "flat" one, this summary will not surprise you.

This weekend's NYTimes ran an article about public schools' efforts to achieve racial diversity through socio-economic diversity (subscr reqd). While the article mostly discusses how districts have struggled to make this work in practice, it also cites successes in Raleigh, North Carolina, where performance on state reading tests has improved dramatically within traditionally poor-performing racial groups following socio-economic school assignments. The results are attributed to getting more disadvantaged students into schools with stronger cultures of achievement.

It's a fairly similar goal to outsourcing in many respects: establish a stronger innovation culture in countries with developing economies. This strengthens the local economy while creating new markets (and product ideas) for the company doing the outsourcing. The opening of R&D labs in China, India, and other Asian countries by western firms follows this vision. Yet doing this on the international scale induces much hand-wringing in contrast to the praise it induces done within our own borders. Success on both fronts could creates competition for jobs at home, but we fear the international competition more, partly because revenues leave our borders. Perhaps deep down we also believe international groups will make progress faster than our own disadvantaged groups. The CRA-cited report describes different metrics used to gauge outsourcing to developed versus developing economies. Where do our own disadvantaged communities fall in that spectrum?

Of course, investing at home or abroad isn't an either-or decision. The juxtaposition of these articles just reminded me that we talk a fair bit about international economic development, without nearly as much focus on how to foster domestic talent. It seems to say a lot for our problems here at home.

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