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November 25, 2005
America's response to outsourcing: Automation
I had an interesting interview with Paul Horn, the head of IBM Research, when I was working on a story about smart machines that was published in BusinessWeek this week. Four years ago, he coined the term "autonomics" to describe a new approach to computing. He saw back then that computing was becoming too complex, for corporations and individuals, and that could stifle the tech industry. So his solution was to get the whole industry--and academia, too--collaborating to come up with ways to make machines behave like the autonomic nervous system. They'd be self-regulating, self-managing, self-diagnosing, and even self-healing. When I asked him what the future of autonomics would be, he surprised me. Instead of talking about super-brainy computers capable of talking among themselves, he said autonomics could be American's answer to job outsourcing.
Horn said: "I like to think of about it in terms of Thomas Friedman and the world being flat. The Internet allows the building of software and the management of computing operations to go to low-labor-cost geographies. Meanwhile, major pieces of the IT industry are commoditized--hardware, software, and services. So the labor goes to low-cost places. If you take labor out of computing through automation, you take the labor-cost factor out to some extent. When you do that, you can the place the work in high-labor-cost places."
"If you go out 10 to 20 years, the more you can take labor out of the equation, the better it is for the more innovative and high-labor-cost parts of the world. It makes succeeding in services more about who has the best technology to get the work done fastest--not who has the lowest labor costs. In this way, a highly innovative society can trump a lower-labor-cost society."
This makes sense, but it doesn't really address the job-loss side of the equation. American workers are still going to lose their jobs, whether it's to Chinese and Indian workers or to American automation. At least, with automation, the losses are probably more gradual--and the automation adds value to American companies.
One other thought: The more time I spend talking to Indian and Chinese entrepreneurs, the harder it is to see the world from a purely US-centric point of view. The role of nationalism in biz is becoming pretty damned fuzzy.
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The US had better wake up if it wants to keep what is left of an innovative edge. Good article. I spoke with Dr. Horn back in 1999 regarding advanced networks specifically for sensors and I agree with him in that, ?highly innovative society can t... [Read More]
Tracked on November 29, 2005 04:57 PM
When outsourcing is referred, most people in US tend to think that all innovation happens in US and other operations/building software etc will go to low-cost nations like India. People are conveniently omitting the innovation capabilities of these countries. What if Indian techies/companies catchup with American companies in R&D as well? The trend has already started, particularly in the Animation sector. Hollywood is increasingly relying on Indian creativity. And, the new startups from Indian techies like Webex, Juniper n/w have proved their mettle and increasing the market shares everyday. The innovative distributed softswitch from Spatial wireless, acquired recently by Alcatel has already showed what Indian techies are up to.
Posted by: Murali at November 25, 2005 11:42 AM
Murali is right. The US had better wake up if it wants to keep what is left of an innovative edge. Good article. I spoke with Horn back in 1999 regarding advanced networks specifically for sensors and I agree with him in that, ?? highly innovative society can trump a lower-labor-cost society."
Posted by: Jonathan at November 29, 2005 04:43 PM
I agree that "...automation adds value to American companies." So does outsourcing.Global Sourcing is a more apt term.Its about moving different tasks in your process to a place where it is cost effective and efficient to execute them.Many organizations are moving towards collaborative distributed development models.If it makes economic sense to do architecture in the US,design in Hungary,development in India and Testing in the Carribean so be it.Geography is no longer relevant.
Posted by: Dinesh at November 30, 2005 03:23 AM
" American workers are still going to lose their jobs, whether it's to Chinese and Indian workers or to American automation"
I don't entirely agree. I think americans simply continue to move up the value chain. Just like we have a very small percentage of american farmers and factory workers compared to what we had 100 years ago, we are going to have many fewer call center workers and the like in the future.
This doesn't mean that there is a corresponding loss of work. We have far more output from farming and factories than we did 100 years ago with many less people. This is due to automation. The people that stopped being farmers and factory workers started working more and more in white collar jobs.
The same thing will happen today, we will automate more and get more productive for low value jobs. People will move up to higher value jobs like sales, product management, design, and other management and design type tasks.
We don't have millions of out of work farmers today from the automation we've put in over the last 100 years, although we have more output. Those displaced farmers ended up finding new jobs and their children are almost certainly making a lot more money today than they would be if they took over the farms.
The US still still leads the world in lowest unemployment. There's plenty of jobs, people are just afraid to go learn something new (even if it's better than what they do now). Most call center workers aren't all that happy to be doing it anyawy.
Posted by: Sean Straus at December 6, 2005 11:28 AM