Small Business

My Son, It's Time to Talk of Outsourcing...


By Vivek Wadhwa When I got involved with a venture to produce a Hollywood movie in Bollywood, I was very excited about helping educate Americans on India and its culture, thinking we could make the world a better place by entertaining audiences for two hours. We were creating some jobs in the US, many more in India, and providing huge financial upside to American investors.

True, we were going to film the movie in India to save money. But we were also planning to spend about half our budget in the U.S. And if we couldn't film in India at a lower cost the movie might not happen. So I figured some money spent in the U.S. economy is better than no money spent in the U.S. or India. In that sense, we were doing plenty to help the U.S. economy.

FAMILY FEUD. I didn't imagine that anyone could call this unpatriotic or wrong. Not only was I mistaken, but my own 16-year-old son, Tarun, was the one who objected and called me unpatriotic. He said it was wrong to ship more jobs to India. The debate about outsourcing has become so heated and emotional in this election year that it is difficult to have a rational discussion about it, even at home.

This isn't the first time I have had to deal with the issue of outsourcing. In the late 1980s, I was a vice-president at a major Wall Street financial institution, in charge of building technology to help improve the way the investment banking arm of the outfit did its business. Eventually, we spent about $150 million to modernize the computer systems, and the company was happy with the results. That success in 1990 led to a joint venture with IBM to market the technology we had created.

There was one technical problem we were never able to solve even after spending $150 million. That solution could have cut the cost of the project in half. We needed an automated way of translating old IBM mainframe code to modern computer languages that run on the latest computer platforms. To solve this problem, we needed computer programmers who excelled in both mathematics and computer science, and we simply couldn't find the right people for this task. We spent millions of dollars trying, however.

HOMEGROWN JOBS. As fate would have it, I visited Russia, in 1992, just after the break-up of the Soviet Union, and hired a team of 30 brilliant and hungry computer programmers who boasted just the right skills. They were grateful to work for a small fraction of American wages, and labored for years to solve this complex problem. Eventually, this technology led me to start my own company, Relativity Technologies. That company would not have existed, or saved its customers many millions of dollars if we hadn't outsourced development to Russia.

Relativity Technologies employed nearly 100 people in the U.S., paying many of them close to $100,000 per year -- jobs that would not have existed without help from our 50 Russian programmers. Despite this fact, I often received angry e-mails from people who learned about my company from news articles describing our venture. They accused me of "taking jobs away from the U.S." Some of the messages asked if I was ashamed of myself, and challenged my patriotism.

Now, this was all before outsourcing became an election issue. I have always done everything possible to give back to the community in which I live. I have been loyal to America, the country which readily accepted me as a citizen, and have helped to create jobs. So I thought my logic was beyond reproach. But I must admit that the recent debate with my son really shook me up.

A WORLD OF POSSIBILITIES. My current project is to help produce a feature film in India. We have American producers. The script was written by Americans. We will have an American director working side by side with an Indian director. The lead actor will be British, but we will also have many Indian actors. We will shoot the movie in Mumbai using local talent, but expect to do the final production and editing in Los Angeles. We expect to spend $300K on marketing in the US. The budget of this film is less than $1M. I hope that it will gross many times that sum and deliver magnificent returns for its American investors, who will turn around and hand that money to money managers and accountants and car dealerships -- maybe even donate some of it to charity.

And if the movie turns out the way I hope, it will educate both Americans and Indians about their respective cultures. Maybe those Indian directors will collaborate on more projects with American directors, perhaps and start their own studio with offices in Mumbai and Hollywood. They will employ actors, writers, directors, electricians, and computer wizards in California, where they will do the special effects. Films that could not be made before because of the cost or risk might now become feasible.

The point of all this is that the current view of outsourcing and resulting job loss is simplistic and binary. The economies of the world are now interlinked more tightly than ever before. Witness my film and my story. A child of India, immigrates to America from Australia, where he has been educated, starts a technology company and invests his own money to employ Americans. When I was growing up in Canberra, the Australian capital, such a trajectory would have been nearly unimaginable. Foreigners didn't start technology companies in the U.S. Today, it's an old story. In fact, the story today is that I am involved in making a movie in India. And the technology company that I started is now expanding rapidly and is looking for more employees in the US.

GRUDGING CONVERSION. Back to my 16-year-old son. I am always grateful when my American-born teenager has time to talk to me. Between all those instant messages and cell phone calls, teenage life is really busy. I was delighted that he wanted to talk to me, but the fact that the discussion was about outsourcing really surprised me. His views were even more unexpected. His concern was that, with so much unemployment and poverty in America, we needed to create jobs locally. Why was my company employing all those people in Russia, and why was I now working on creating jobs in India? He lectured me about the need to give back to the local community before we gave back to the world.

Fortunately, it is easier to convince a teenager than a politician in an election year. After a discussion lasting hours, and walking him through some of the details, and showing him that we were making the pie bigger for everyone, he said that maybe what I was doing was okay, after all. He still believed that outsourcing was bad, but maybe we could do things in a way that everyone wins. Vivek Wadhwa has co-founded two technology companies, and is currently chairman of Relativity Technologies in Raleigh, N.C. When not producing movies or battling venture capitalists, Wadhwa mentors fledgling entrepreneurs.


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