Software

Stephen Haberman was one of a handful of folks in all of Chase County,
Nebraska, who knew how to program a computer. In the spring of 1999, at the
height of the Internet boom, the 17-year-old whiz wanted to strut his stuff
outside of his windswept patch of prairie. He was too young for a nationwide
programming competition sponsored by Microsoft Corp., so an older friend
registered for him. Haberman wowed the judges with a flashy Web page design and
finished second in the country.

Emboldened, Stephen came up with a radical idea: Maybe he would skip college
altogether and mine a quick fortune in dot-com gold. His mother, Cindy, put the
kibosh on his plan. She steered him to a full scholarship at the University of
Nebraska at Omaha.

Half a world away, in the western Indian city of Nagpur, a 19-year-old named
Deepa Paranjpe was having an argument with her father. Sure, computer science
was heating up, he told her. Western companies were frantically hiring Indians
to scour millions of software programs and eradicate the much-feared millennium
bug. But this craze would pass. The former railroad employee urged his daughter
to pursue traditional engineering, a much safer course. Deepa had always
respected her father’s opinions. When he demanded perfection at school, she
delivered nothing less. But she turned a deaf ear to his career advice and
plunged into software. After all, this was the industry poised to change the
world.

Stephen Haberman Age: 22 Birth Place: Chase County, Neb., USA (pop. 4,381) Married: Wife, Amy, also a programmer, couldn’t find a good tech job and is writing a Christian novel Academics: Finishing a master’s in software engineering at Carnegie Mellon University Languages: English Computer Languages: 11, from C++ to Python Job: None yet. He hasn’t interviewed with the corporate recruiters who come to the Carnegie Mellon campus Goal: To start a sotware-services company in Omaha and become a millionaire

As Stephen and Deepa emerge this summer from graduate school–one in
Pittsburgh, the other in Bombay–they’ll find that their decisions of a
half-decade ago placed their dreams on a collision course. The Internet links
that were being pieced together at the turn of the century now provide broadband
connections between multinational companies and brainy programmers the world
over. For Deepa and tens of thousands of other Indian students, the
globalization of technology offers the promise of power and riches in a
blossoming local tech industry. But for Stephen and his classmates in the US,
the sudden need to compete with workers across the world ushers in an era of
uncertainty. Will good jobs be waiting for them when they graduate? "I
might have been better served getting an MBA," Stephen says.

US software programmers’ career prospects, once dazzling, are now in doubt.
Just look at global giants, from IBM and Electronic Data Systems to Lehman
Brothers and Merrill Lynch. They’re rushing to hire tech workers offshore
while liquidating thousands of jobs in America. In the past three years,
offshore programming jobs have nearly tripled, from 27,000 to an estimated
80,000, according to Forrester Research Inc. And Gartner Inc. figures that by
yearend, 1 of every 10 jobs in US tech companies will move to emerging markets.
In other words, recruiters who look at Stephen will also consider someone like
Deepa–who’s willing to do the same job for one-fifth the pay. US software
developers "are competing with everyone else in the world who has a
PC," says Robert R Bishop, chief executive of computer maker Silicon
Graphics Inc.

For many of America’s 3 million software programmers, it’s paradise lost.
Just a few years back, they held the keys to the Information Age. Their
profession not only lavished many with stock options and six-figure salaries but
also gave them the means to start companies that could change the world–the
next Microsoft, Netscape, or Google. Now, these veterans of Silicon Valley and
Boston’s Route 128 exchange heart-rending job-loss stories on Web sites such
as yourjobisgoingtoindia.com. Suddenly, the programmers share the fate of
millions of industrial workers, in textiles, autos, and steel, whose jobs have
marched to Mexico and China.

"Leap of Faith"

This exodus throws the future of America’s tech economy into question. For
decades, the US has been the world’s technology leader–thanks in large part
to its dominance of software, now a $200 billion-a-year US industry. Sure,
foreigners have made their share of the machines. But the US has held on to
control of much of the innovative brainwork and reaped rich dividends, from
Microsoft to the entrepreneurial hotbed of Silicon Valley. The question now is
whether the US can continue to lead the industry as programming spreads around
the globe from India to Bulgaria. Politicians are jumping on the issue in the
election season. And it will probably rage on for years, affecting everything
from global trade to elementary-school math and science curriculums.

Deepa Paranjpe Age: 24 Birth Place: Nagpur, Maharashtra, India (pop. 2.8 million) Married: Not yet. Will probably have an arranged marriage–but the man must support her career goals Academics: Finishing a master’s at the Indian Institute of Technology, Bombay. Languages: English, Hindi, and Marathi Computer Languages:Nine, including C++ and Java Job: Starts in June as a data-mining engineer at Veritas Software’s facility in Pune. Pay: $10,620 per year Goal: To "make it big" as an entrepreneur

Countering the doomsayers, optimists from San Jose, Calif., to Bangalore see
the offshore wave as a godsend, the latest productivity miracle of the Internet.
Companies that manage it well–no easy task–can build virtual workforces
spread around the world, not only soaking up low-cost talent but also tapping
the biggest brains on earth to collaborate on complex projects. Marc Andreessen,
Netscape Communications Corp.’s co-founder and now chairman of Opsware Inc, a
Sunnyvale (Calif.) startup, sees this reshuffling of brainpower leading to bold
new applications and sparking growth in other industries, from bioengineering to
energy. This could mean a wealth of good new jobs, even more than US companies
could fill. "It requires a leap of faith," Andreessen admits. But
"in 500 years of Western history, there has always been something new.
Always always always always always."

This time, though, there’s no guarantee that the next earth-shaking
innovations will pop up in America. Deepa, for example, has high-speed Internet,
a world-class university, and a venture-capital industry that’s starting to
take shape in Bombay. What’s more, her home country is luring back
entrepreneurs and technologists who lived in Silicon Valley during the bubble
years. Many came home to India after the crash and now are sowing the seeds of
California’s startup culture throughout the subcontinent. What’s to stop
Deepa from mixing the same magic that Andreessen conjured a decade ago when he
co-founded Netscape? It’s clear that in a networked world, US leadership in
innovation will find itself under siege.

The fallout from this painful process could be toxic. One danger is that
high-tech horror stories – the pink slips and falling wages – will scare the
coming generation of American math whizzes away from software careers, starving
the tech economy of brainpower. While the number of students in computer-science
programs is holding steady – for now – the elite schools have seen
applications fall by as much as 30% in two years. If that trend continues, the
US will be relying more than ever on foreign-born graduates for software
innovation. And as more foreigners decide to start careers and companies back in
their home countries, the US could find itself lacking a vital resource.
Microsoft CEO Steven A. Ballmer says the shortfall of US tech students worries
him more than any other issue. "The US is No. 3 now in the world and
falling behind quickly No. 1 and No. 2 in terms of
computer-science graduates," he said in late 2003 at a forum in New York.

Fear in the industry is palpable. Some of it recalls the scares of years
past: OPEC buying up the world in the ’70s and Japan Inc. taking charge a
decade later. The lesson from those episodes is to resist quick fixes and trust
in the long-term adaptability of the US economy. Job-protection laws, for
example, may be tempting. But they could hobble American companies in the global
marketplace. Flexibility is precisely what has allowed the US tech industry to
adapt to competition from overseas. In 1985, under pressure from Japanese
rivals, Intel Corp. exited the memory-chip business to concentrate all its
resources in microprocessors. The result: Intel stands unrivaled in the business
today.

While the departure of programming jobs is a major concern, it’s not a
national crisis yet. Unemployment in the industry is 7%. So far, the
less-creative software jobs are the ones being moved offshore: bug-fixing,
updating antiquated code, and routine programming tasks that require many hands.
And some software companies are demonstrating that they can compete against
lower-cost rivals with improved programming methods, more automation, and
innovative business models.

Hal Reed Age: 34 Birth Place: Outside Wilmore, Ky, USA (pop 4,200) Academics: Bachelor’s in math, Wesleyan University, ’91 Job: Answered an ad for entry-level programming work at cMarket, in Cambridge, Mass., for $45,000. Quick promotion to software architect nearly doubled his pay Goal: To help cMarket "take off like a rocket"

For the rest of the decade, the US will probably maintain a strong hold on
its software leadership, even as competition grows. The vast US economy remains
the richest market for software and the best laboratory for new ideas. The
country’s universities are packed with global all-stars. And the U. S. capital
markets remain second to none. But time is running short for Americans to
address this looming challenge. John Parkinson, chief technologist at Cap Gemini
Ernst & Young, estimates that US companies, students, and universities have
five years to come up with responses to global shifts. "Scenarios start to
look wild and wacky after 2010," he says. And within a decade, "the
new consumer base in India and China will be moving the world."

People Skills

To thrive in that wacky world, programmers like Stephen must undergo the
career equivalent of an extreme makeover. Traditionally, the profession has
attracted brainy introverts who are content to code away in isolation. With so
much of that work going overseas, though, the most successful American
programmers will be those who master people skills. The industry is hungry for
liaisons between customers and basic programmers and for managers who can run
teams of programmers scattered around the world. While pay for basic application
development has plummeted 17.5% in the past two years, according to Foote
Partners, a consultant in New Canaan, Conn., US project managers have seen their
pay rise an average of 14.3% since 2002.

Florentin Badea Age: 27 Birth Place: Bucharest, Romania (pop. 2.3 million) Academics: Bachelor’s in Computer Science at Polytechnic University of Bucharest Job: Day job designing Web pages for an American tech company, which he declines to name. Finds freelance work on RentACoder.com. Clears $3,000 per month Goal: To afford a bigger house, a better car, and to start his own software company in Romania

Finding those high-status jobs won’t be easy. Last summer, 34-year-old Hal
Reed was so hungry for a programming job that he answered an ad in the Boston
Globe for contract work at cMarket, a Cambridge (Mass.) startup. The pay was
$45,000 – barely more than an outsourcing company charges for Indian labor.
But he took it. Fortunately for him, he was able to convince his new boss
quickly that he was much more than a programmer. He could lead a team. Within
weeks, his boss nearly doubled Reed’s pay and made him the chief software
architect. "He had great strategic thinking skills," says Jon Carson,
cMarket’ chief executive. "You can’t outsource that."

The options Stephen and Deepa are eyeing illustrate the unfolding map of an
industry in full mutation. A software career is no refuge for the faint of
heart. Deepa, for example, could suffer if the US government moves to block
offshore development or if rocky experiences in foreign lands spark an industry
backlash. And Stephen, if he misplays his hand, could find himself competing
with lowballing Filipinos or Uruguayans.

For now, their stories reflect the moods in their two countries–one with
lots to lose, the other with a world to win. Deepa is brimming with optimism
about the future, convinced that her opportunities are limited by nothing more
than her imagination. She is thinking not only about the next job but about the
startup that she’ll found after that. Stephen, by contrast, is cautious. Even
at 22, he’s attuned to the risks of a global market for software talent. While
confident he’ll make a good living, he’s plotting out a career that
sacrifices opportunities for a measure of safety. Self-protection, an
afterthought five years ago, is a pillar of his strategy.

Seeking a Niche

It’s midday in the windowless basement labs at CMU’s Wean Hall. Stephen,
tall and lanky, wearing a white T-shirt tucked into jeans, leans back in his
chair and ponders his future. He signed up for the master’s program at CMU on
the advice of a professor in Omaha who told him that graduates with an MS could
land more interesting jobs and make more money. But now the big recruiters
coming onto the snowy Pittsburgh campus–companies such as Microsoft and
Amazon.com Inc.–are hiring cheaper undergrads, he says, and barely giving the
masters a look. Sure, other recruiters come knocking. Banks, he says with a
grimace. Insurance companies. But the idea of working in a finance-industry tech
shop leaves him cold. "I’m not even interviewing," he says.

The 17-year-old hotshot who was ready to skip college and make a mint has
undergone quite a change. He’s married, has witnessed the bumps in the world
of software, and plans to establish "an upper-middle-class lifestyle, and
maybe more" as a businessman. His plan is to carve out a niche for himself
back in Omaha. He’ll gather three or four colleagues and produce custom
software for businesses in town, from hospitals and steakhouses to law firms.
Omaha is plenty big, he says, for a good business, but it’s remote enough to
insulate his startup from offshore competition – and even from the bigger
competitors in Chicago.

Stephen understands the threat posed by smart and hungry programmers in
distant lands. He was once such a programmer himself. From his senior year in
high school all the way through college, he worked as a freelancer for a New
York software-development company, Beachead Technologies Inc. Geoff Brookins,
Beachead’s young founder, spotted Stephen’s prize-winning entry in the 1999
Microsoft Web-site design contest. He called Nebraska, sent Stephen some work,
and was blown away. "He did two months of work in three days," he
recalls. Brookins quickly signed him on at $15 an hour, ultimately paying him
$45 an hour. Like the Indians, Stephen provided a low-cost alternative to
big-city programmers – but he had an advantage because he spoke American
English and was only one time zone away from New York.

The job let Stephen work on projects that normally would have been far beyond
the reach of a student. One was to create IBM’s Web page for its Linux
operating-system technology–a crucial arm of Big Blue’s business.
"Stephen was lead engineer on that project," Brookins says. The
student also got to spend much of the summer of 2001 working at Beachead’s
office in New York City. It was a fun contrast to Nebraska, he recalls. But he
stopped working for Beachead after he moved to Pittsburgh last summer.

It was there that Stephen got a strong signal that the prospects were dimming
for programmers. When his wife, Amy, a fellow computer-science student from
Nebraska, began looking for programming work, she came back to their suburban
apartment disheartened. The only available jobs, she says, "would have paid
me interns’ rates." She ditched the profession and is now writing a
Christian-themed novel.

Then, Stephen’s old boss hammered home the dangers of coding for a living
in a wired world. Beachead’s competitors were finding cheaper labor offshore,
and Brookins, to win contracts, had to match them. Last fall, he logged on to a
Web site, RentACoder, a matchmaking service between employers and some 30,000
programmers around the world. There, Brookins found a 27-year-old Romanian named
Florentin Badea, a star from Bucharest’s Polytechnic University and the
11th-ranked programmer on the whole site. Badea was willing to charge just $250
for a project that would have cost $2,000, Brookins estimates, if Stephen had
done it.

Those same global forces, Stephen admits, could eventually hollow out his
business in Omaha. Already, Indian tech-services outfits such as Infosys and
Wipro are competing head-to-head with US companies in this country. But Stephen
is betting that by working closely with customers, he can whip bigger firms on
quality and service. He says he’ll give the venture six months to a year and
then see what happens.

Ultrafast Track

Deepa sees a reverse image of Stephen’s worldview. Where the prospects for US
tech grads seem to narrow as they peer into the future, she’s looking down an
eight-lane highway. Yet she faces her own set of challenges, she acknowledges,
while sipping tea with her classmates in a breezy open-air cafeteria on the
Indian Institute of Technology’s Bombay campus. They don’t want to be cogs
in a software-programming factory – India’s role to date. Instead, they want
India to be a tech powerhouse in its own right. "Good Indian engineers can
do good design work, but we need a venture industry" so Indians can start
their own companies, says Deepa. Her pals nod in agreement.

Deepa is positioned on India’s ultrafast track. The country pins high hopes
on the 3,000 students in the six Institutes of Technology. Their alumni are
stars locally and worldwide – including Yogen Dalal, a top venture capitalist
at Mayfield, and Desh Deshpande, founder of Sycamore Networks and Cascade
Communications. Within this elite, Deepa and her friends are a rarified breed.
They aced the grueling national exams, ranking in the top 0.2% and winning
places in the school of computer science. They’re known as
"toppers." The challenge for Deepa’s small crowd is to move beyond
the achievements of Dalal and Deshpande, who notched their successes for US
companies, and to make their mark with new Indian companies.

That means bypassing the bread-and-butter service giants, such as Tata,
Infosys, and Wipro, that dominate the Indian stage. The jobs they offer, says
Deepa, sound boring. To get their hands on exciting research and more creative
programming, she and her friends are banking mostly on US companies in India,
including Intel, Texas Instruments, and Veritas. This summer, when Deepa
graduates, she’ll be a software engineer at the Pune operations of Veritas
Software Corp., a Silicon Valley storage-software maker. Her pay will start at
$10,620 a year–plenty for a comfortable middle-class life in India. "I’m
living my dream," she says.

Now Deepa is IIT-Bombay’s star in search technology–and she’s hoping
that this specialty will be her ticket to a rip-roaring career. She routinely
works till 3 a.m. in the department’s new 20-pod computer lab, doing research
on search engines. She admits the work at Veritas, at least initially, will
involve more routine database tasks than the cutting-edge work she’s hoping
for. But if Veritas disappoints, a topper like Deepa will have plenty of other
options. Both the search giant Google Inc. and the Web portal Yahoo! are setting
up research and development centers in India this year. Deepa hopes to manage a
research lab some day, and ultimately, she says, "I’d like to be an
entrepreneur."

But she’s an entrepreneurial revolutionary and family traditionalist at the
same time. It’s part of her balancing act. Consider her eventual marriage. As
an attractive, professional woman, she’ll make a prize catch in India’s
conservative marriage market. Deepa expects she will have an arranged marriage:
Her parents will chose a suitable husband for her from within her own caste. But
she is firm: Her husband would have to be an entrepreneur, or a tech whiz, and
preferably in the same field, "so we can have a common platform and he can
understand my work," she says.

Multicultural Edge

Diversity is another advantage the US has over India. Take a stroll with
Deepa through the leafy IIT campus, and practically everyone is Indian. Stephen’s
scene at CMU, by contrast, feels like the UN Classmates joke in Asian and
European languages, and a strong smell of microwaved curry floats in the air.
This atmosphere extends to American tech companies. With their diverse
workforces, American companies can field teams that speak Mandarin, Hindi,
French, Russian–you name it. As global software projects take shape, with
development ceaselessly following the path of daylight around the globe,
multicultural teams have a big edge. Who better than US-based workers to stitch
together these projects and manage them? "These people can act as bridges
to the global economy," says Amar Gupta, a technology professor at
Massachusetts Institute of Technology’s Sloan School of Management.

The question is whether the technology industry can respond quickly enough to
a revolution that’s racing ahead on Internet time. Stephen’s former boss,
Brookins, frets that the pace could overwhelm the coming generation of US
programmers, including his former Nebraska star. "He’s a genius. He’s
the future of the country. if the question is whether there’s going to
be a happy ending for Stephen, there’s a big question mark there,"
Brookins says. Stephen is betting that quality and customer service will offset
the cost advantage of having computer programmers 10 time zones away. He still
sees software in the US as a path to wealth–"though I won’t really know
until I get out there," he says.

While Stephen is busy mounting his defenses, Deepa is setting out on the hard
climb to build Silicon India. Much like their two countries, the leader is
looking cautiously over his shoulder while the challenger is chugging
single-mindedly ahead. No matter which way they may zig or zag, both of them are
prepared to encounter rough competition from every corner of the globe. There’s
no such thing as a safe distance in software anymore.

By Stephen Baker and Manjeet Kripalani With Robert D. Hof and
Jim Kerstetter
in San Mateo, Calif  in BusinessWeek. Copyright 2004 by The McGraw-Hill Companies, Inc