Intel's Grove: US software, services face meltdown

Skunk works

By Andrew Orlowski in San Francisco • Get more from this author

Posted in Business, 11th October 2003 00:09 GMT

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Acknowledging that it was National Depression Day, Intel co-founder Andy Grove warned that US software and services would go the same way of the US steel industry. "It would be a miracle if it didn't happen in the software and services industry,'' he said.

Grove attributed the crisis to higher labor costs in the US, and the diminishing number of people with "advanced qualifications". US steel manufacturers saw their share fall from 50 per cent to 10 per cent. He confessed to being a "skunk at the garden party" before his Washington DC audience.

His honesty is commendable, and Grove has done the industry a service if he can alert complacent politicans. But Grove all but admitted that he was part of the problem. Intel's CEO Craig Barrett said recently that 1,000 new jobs created by Intel since the crash were offshore, in India and China. Grove said CEOs faced a conflict between generating profits for shareholders and "doing the right thing for the country". He advocated higher R&D funding at universities, better collaboration between companies and "raising the hurdle for intellectual property litigation".

Short of drastic cuts in salaries for software and services engineers in the West, it's hard to see what will even the balance. Software CEO Brad Wardell of Stardock Systems says IT staff simply expect too much.

"The majority of IT people still want to be paid at dot.com wages. The job simply isn't worth that much," he told us. "Let's say I had to pay $120,000 a year for one American IT guy: we wouldn't hire as many artists and designers. The IT guys is costing two other American jobs."

"Eventually wages will come back down to more competitive levels," he predicted. "There are still cultural issues and we'll need a local services and software. I can't see India sucking away the entire IT department." ®