Nortel goes overseas to side-step labour shortage

Nortel Networks decided in 1989 that it needed to quadruple its sales figures, but the task force created to achieve that goal realized there were simply not enough available IT workers in Canada to drive that growth. So it decided to look across the water.

“It didn’t matter what (business initiatives) we came up with, we knew we wouldn’t have the people,” said Diju Raha, until recently the vice-president of international R&D operations at Nortel. He spoke at the Informatics 1999 conference in Edmonton.

The solution was a far-reaching initiative that saw Nortel outsource much of its development work to schools, labs and companies in India, China, Russia, Vietnam and, recently, Brazil. Underpinning that work was a vast intranet tying together the far-flung groups.

One of the first steps for Raha’s group was to create a selection criteria with which to assess the potential of foreign countries. Political stability, plentiful skilled labour, established copyright and patent laws, a viable communication infrastructure and some level of fluency in English were all considered vital.

The first successful candidate was India. In 1989, the country had 4.1 million technical personnel, an impressive number considering the staffing shortage at home. Also, 55,000 additional IT workers were coming out of schools each year. “India has a reverence for learning,” Raha said.

The decision to target India has delivered significant benefits. Between 1991 and 1998, the company outsourced 3,200 person-years worth of software development work to India. Nortel also leveraged time zones: workers typically leave computer capacity dormant for two thirds of each day, meaning residents of India could use telecommunications technology to exploit latent North American capacity during the Indian work day.

“In India, we pioneered software development over a distance,” Raha said.

But working in other countries also incurs some difficulties. India, for example, had no fibre infrastructure. After a search, Nortel found a satellite in East Africa that could bounce data to Newfoundland, from where it could then be sent via land-line.

The success of the work in India prompted Boris Yeltsin to issue a challenge to Nortel during a visit to the Ottawa labs. Russia, Yeltsin said, would also be a good candidate for joint development work.

There was truth to Yeltsin’s claim — “their education system and prowess for research and development was impressive,” Raha said – but “it was also the most perplexing time of my life.”

One issue involved learning how other cultures view the world. Years of Communist rule often left Russian IT workers with an unwillingness to take risks, Raha said. Where a North America, faced with a challenge, may say “No promises, but we’ll give it a shot,” a Russian is more likely to commit to a very conservative set of goals according to Raha.

Also, the Russian social infrastructure was in turmoil. Banks, for example, would fail from time to time, and more than once Nortel staff had to fly over tens of thousands of U.S. dollars to meet salary commitments.

Despite those difficulties, Nortel managed to outsource 200 person-years of scientific and engineering work to Russia and Romania in 1998, with a total of 600 person-years racked up from 1993 to 1998.

Conducting this type of long-distance work creates huge amounts of network traffic. Nortel’s international intranet handles over a terabyte of WAN traffic per month, and carries 1.2 million e-mail messages per day.

But while international development efforts can yield impressive results, it is not an approach that will work indefinitely. Raha said as large-scale telecommunications technology improves and becomes less expensive, more and more North American companies will employ foreign workers, and pools of untapped labour will become progressively shallower.

“Those countries that have a surplus now will at some time have a shortage.”