University of Massachusetts Amherst Boston Dartmouth Lowell Worcester UMassOnline Globalism,...

University of MassachusettsAmherst Boston Dartmouth Lowell Worcester UMassOnline

Globalism, Outsourcing, and Globalism, Outsourcing, and the American Universitythe American University

By:Jack M. Wilson

PresidentUniversity of Massachusetts

August 9, 2004

University of Massachusetts

Amherst Boston Dartmouth Lowell Worcester UMassOnlineOutsourcing

• The flow of jobs to countries with lower wages and higher productivity.

• A huge political hot potato• Lowers costs• Raises productivity• Stimulates economic development around world• Creates unemployment in the sending sector


Amherst Boston Dartmouth Lowell Worcester UMassOnlineHow big is the problem?

• U.S. labor Department: 4633 jobs moved overseas in first quarter of 2004.– This is 2% of layoffs

– Caveats: only large (>50) companies who laid off at least 50 persons!

• Indian Nat. Assn. of Software and Services:– 200,000 jobs created in India in year ended Mar 31, 2004

– 50,000 per quarter

• Someone is missing something somewhere!


Amherst Boston Dartmouth Lowell Worcester UMassOnlineHow big is the problem - 2

• Forrester Research: 3.3 million jobs by 2015– $ 136 billion in wages lost

• Gartner Inc.: estimates 10% of Computer services and software jobs to be outsourced by 2004 end.

• Deloitte Research surveyed 100 of the worlds largest financial services companies– Expect to outsource 2 million jobs in next five years.

– Outsource $356 billion in operations in next five years


Amherst Boston Dartmouth Lowell Worcester UMassOnlineHow big is the problem -3

• According to Business Week– Intel: 3,000 chip design jobs to India by 2006.

– Microsoft 500 software design jobs to India and China in 2003.

– Oracle: 4000 software design jobs to India in next five years.

– Phillips: 700 consumer electronic design jobs to China in next few years.


Amherst Boston Dartmouth Lowell Worcester UMassOnlineCost of Engineers

• U.S. $70,000

• Hungary $25,690

• China $15,120

• Russia $14,420

• India $13,580

• In spite of the wage differential, overseas wages make engineers well paid by local standards.

Engineers Wages

$0 $20,000 $40,000 $60,000 $80,000

U.S.

Hungary

China

Russia

India

(Source: Ron Hira, R.I.T.)


Amherst Boston Dartmouth Lowell Worcester UMassOnlineHistorical Trends?

• Steel making• Automobiles• Textiles• Call Centers• Engineering• Software


Amherst Boston Dartmouth Lowell Worcester UMassOnlineIssues with outsourcing

• Cost• Language• Culture


Amherst Boston Dartmouth Lowell Worcester UMassOnlineCost

• As a country develops, cost advantages tend to lessen rapidly, but do not disappear immediately

• Japan quickly lost a cost advantage in automotive manufacturing just as Germany had done decades earlier.– Some production moved to U.S.

• India is starting to experience some inflation in the call center cost structure.– Indian Companies are now trying to acquire some U.S.

companies.


Amherst Boston Dartmouth Lowell Worcester UMassOnlineStrategies for success?

• Protectionism– History is not kind to this strategy, however politically

necessary it might become

– Best used in transition and is not and end game.

• Innovation– Historically our best strategy, but it requires investments that

we are not making!

• Higher Education seems to be the key everywhere.• Collaboration between government, higher ed,

industry, and schools.


Amherst Boston Dartmouth Lowell Worcester UMassOnlineWhy?

• Gail Dundas, Intel Corporation

– “You have to look at all the factors. There are times when cost effectiveness is a part of it, but it is not the stand alone reason. We have growing markets, good talented people in those markets, and people who are more educated than ever before.”


Amherst Boston Dartmouth Lowell Worcester UMassOnline

American Universities are the Greatest in the World!

• Well, yes, but….• Have you ever visited:

– Tsingua University– Beijing University– Shanghai Jiao Tong University.– The Indian Institutes of Technology– The Max Planck Institutes– Etc.

• U.S. ranks 6th among O.E.C.D. countries in BA/BS by 20’s.



American Public Higher Ed. Under Stress• “To economists, higher education is like motherhood

or apple pie. It will cure anything, from globalization and outsourcing to technological change and income inequality.”– Jeff Madrick, “Why Higher Learning Gets the Ax”, New

York Times; (August 5, 2004).

• Compare Boston and Detroit: “Aside from climate, skill composition may be the most powerful predictor of growth.”– E.L.Glaeser, Harvard and A. Saiz, Univ. of Pennsylvania



Reverse the dramatic disinvestment in higher education

UMass funding as percent of state budget

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04



Cumulative growth in state spending UMass vs. K-12

11.0%

23.1%

37.4%

51.3%

63.3%

76.0%

85.2%

92.0%

101.6%97.2%

3.8%8.4%

13.4%

19.2%

27.4%

45.7%40.9%

35.6%

10.7%

99.9%

39.5%35.3%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

% change K-12 $$

%change UMass $$


Amherst Boston Dartmouth Lowell Worcester UMassOnlineMessages to our universities

• While the ability to solve complicated models and equations will remain important, it will by no means be enough.

• Educating Engineers, and all students, more broadly to understand:– Communication,

– Culture,

– Economics,

– People skills and team dynamics,

– Entrepreneurship

– Ethics,

• Tapping women and underrepresented minorities

• Take quality and standards to the next level!



Universities must connect to communities.• Work force development

– Community needs in bio-, nano-, info-, medical- technologies.

• Educating underrepresented groups• Collaborating with industry• Research and Venture Capital are the fuel-air mixture

for innovation.• Technological entrepreneurship


Amherst Boston Dartmouth Lowell Worcester UMassOnlineUMass Focus and MissionUMass Focus and Mission

• UMass is a state-wide, high-quality learning and discovery institution that transforms the lives of students and communities in Massachusetts.

• The path to the economic and social development of Massachusetts and its diverse regions goes through UMass.


Amherst Boston Dartmouth Lowell Worcester UMassOnlineA Substantial Economic Force A Substantial Economic Force

and Higher Education Resourceand Higher Education Resource• $1.5 B enterprise in FY04 ($326M state appropriation- $400M+- in FY05)

• Over $320M in sponsored research (90% outside of Rt 128)

• 5 campuses and 80 off-campus sites throughout the Commonwealth

• 14,000 employees, making UMass a major employer across the state

• About 58,000 undergraduate/graduate/continuing education students

• UMassOnline: 14,700 students in workplace

• Over 10,000 graduates annually

• Over 450 BS/MS/PhD programs

• Over 320,000 alumni – 2/3 living and working in Massachusetts

• $1.2 B capital program with huge deferred maintenance needs


Amherst Boston Dartmouth Lowell Worcester UMassOnlineA Major Force in Research, A Major Force in Research,

Development and InnovationDevelopment and Innovation• Over $300M in R & D – ranking #3 in Massachusetts, #4 in New England, top

50 in US (Over $150M of R&D is in the life sciences.)

• Targeted R&D initiatives – in emerging fields such as gene silencing, bioinformatics, nanotechnology, remote sensing, green chemistry, vaccine development and renewable energy

• Office of Commercial Ventures and Intellectual Property – generating over $25M in annual license income, ranking UMass in top 20 US universities

• Mass Technology Transfer Center – home to new state-funded center to promote tech transfer from public and private universities to Massachusetts companies

• High Tech incubators – located in Lowell and Fall River, housing more than a dozen companies, with several successful spin-offs (e.g., Konarka), plans for New Bedford and Springfield

• Corporate partnerships – R&D and license agreements with companies ranging from Biogen and Sepracor to Natick Labs and Raytheon



Recent UMass SuccessesRecent UMass SuccessesFederal Grants– $40 M UMA ERC in Atmospheric Sensing (with Raytheon)– $17 M UMD/Tufts Botulinum Center– $16 M UMW Immunology Grant– $12 M UMB-Boston Science Ed Partnership– $3 M UMB BATEC GrantTech Commercialization– $20 M CVIP last year and $13 M in Q1 of this year– $10 M + Licensing of RNAi (Araios start-up)State Support– $100 M Emerging Technology Bill– $25.9 M Faculty and staff contracts funded– $10 M Supplemental– $2.7 M Star Store at UMDPhilanthropy– $20 M Environmental initiative– $3 M Blais Chair to Craig Mello at UMWUMass Online– $12.7 M in UMassOnline


Amherst Boston Dartmouth Lowell Worcester UMassOnlineA Recent Case in Point

• CASA: And Engineering Research Center– Collaborative Adaptive Sensing of the Atmosphere

– University partners: UMass Amherst, University of Oklahoma, Colorado State University, and the University of Puerto Rico, Mayaguez

– Industrial partners: Raytheon, IBM, MA/COM, Vaisala, Vieux and Associates, Telephonics, and The Weather Channel

– Government partners: NSF, NOAA’s National Severe Storms Laboratory and Oak Ridge National Labs


Amherst Boston Dartmouth Lowell Worcester UMassOnlineCASA: Not an accident

• Began with ~ $1 million donation from John Armstrong, former VP of IBM wihcih was matched to create the Armstrong Chair at UMA.

• David McLaughlin fills chair.• Research Constellation develops with Computer

Science Professor Jim Kurose and others.• Research funding grows• Local investment to prepare ERC• Governor gives $ 5 million match in difficult time• Potential $ 40 M ++ Center is funded.


Amherst Boston Dartmouth Lowell Worcester UMassOnlineCASA: What does it mean?

• Ensure leadership in research in area.• Collaboration positions key Massachusetts employers

for continued success.– Raytheon: microarrays of collective radars

– IBM: Real time data analysis from multiple sources.

• Yields possibility for new company spin-offs.• Provides economic stimulus in western Mass.


Amherst Boston Dartmouth Lowell Worcester UMassOnlineAnother Case in Point

• RNAi Discovery (2 of 3 researchers at UMassMed)• Promises opportunities for both research and treatment

of genetic or DNA and RNA based diseases.• Science magazine designates this as the number one

discovery of 2002.• Initial license for $10 million to existing company.• New company created in Worcester.• Worcester positioned to be the center of development

of RNAi technologies


Amherst Boston Dartmouth Lowell Worcester UMassOnlineAnd there is more

• Konarka Technologies – Lowell• Avant Immunotherapeutics – Fall River• Green Chemistry – Boston – Lowell• Fisheries and Marine Sciences – Dartmouth• UMass Amherst – BayState Partnership


Amherst Boston Dartmouth Lowell Worcester UMassOnlineThe Vision

• Innovative Undergraduate programs– Engaged, Interactive, Service, URP, International, Wired

• Broad Graduate Programs of Distinction– Nano-, Info-, Enviro- and Bio- Tech; Public Policy, Medicine,

Management, Health Professions, Education, etc• Research doubling to $600 million (15% per year)

– Washington Office?• The Maintenance Contract for our degrees• A Proud and Connected Alumni group

– UMass Club ?, Basketball, Hockey, (Football?)• A Community of Supporters

– Business, Legislative, Media, Federal• An Enhanced Endowment• Appealing Physical Facilities


Amherst Boston Dartmouth Lowell Worcester UMassOnlineS&T Role of the UMass President’s S&T Role of the UMass President’s

OfficeOffice• Advocate for Matching Funds from the Governor for UMass Amherst ERC and

Lowell Nanotech Center Proposals -- $6 M COMMITTED • Advocate for UMass Role in S&T Proposals with Governor and Legislature –

ENACTED• Secure Support from Industry and Tech Councils (High Tech, Bio, MassMedic,

Telecom, Software, etc.) – ACHIEVED, ONGOING• Establish UMass High Tech Executive Council – FIRST MEETING HELD • Co-sponsor S&T Roadmap and Strategic Alliances Study – RELEASED IN

FEBRUARY • Launch CVIP Development Fund ($100 K) – 10 GRANTS AWARDED• Launch S&T Initiatives Fund ($1 M) – 7 GRANTS AWARDED• Support Mass Taxpayers Study of UMass Policy/Reg Reforms –RELEASED IN

MAY• Develop Campaign to Market UMass as a high-quality learning and discovery

institution – SavingOurChildren UMassOnOurSide Imagine


Amherst Boston Dartmouth Lowell Worcester UMassOnlineThe Changing Environment The Changing Environment

Presents Challenges and Presents Challenges and Opportunities for UMassOpportunities for UMass• Individuals without a high quality 4-year degree have difficulty achieving

middle-class status in Massachusetts.• Regions outside Boston/128 are generally not well positioned for economic

growth in the Innovation Economy.• The state is steadily losing its market share of national R&D funding.• Massachusetts suffers from stagnant population growth and a “brain drain.”• Massachusetts is not effective in capturing the high-end manufacturing jobs that

result from R&D. • Other states (and nations) are aggressively competing with Massachusetts for

talent and innovation.


Amherst Boston Dartmouth Lowell Worcester UMassOnlineUMass Can Reposition Itself as a Key UMass Can Reposition Itself as a Key

Resource to Meet New State Resource to Meet New State ChallengesChallenges• Strategic investments (public and private) in UMass can directly

address the above challenges.• Given its quality, relative affordability and retention of graduates in

the state, UMass can help grow/keep a highly-educated workforce.• Given the geography of its campuses, UMass can extend the

economic benefits of R&D to under-developed regions of the state.• Given its strong record of R&D growth and recent S&T successes,

UMass can help the state maintain/expand its R&D leadership. • Given its commitment to industry links and econ. devt., UMass can

help the state capture more of the economic benefits of its R&D base.


Amherst Boston Dartmouth Lowell Worcester UMassOnlineSaving Our Children

UMass On Our Side

Imagine

University of MassachusettsAmherst Boston Dartmouth Lowell Worcester UMassOnline

Globalism, Outsourcing, and the Globalism, Outsourcing, and the American UniversityAmerican University

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