Software the way of the textile industry?

Meltsner, Kenneth
Wed, 16 Jan 2002 10:12:55 -0500

Judging from another departed industry, the steel business, it's no longer a matter of labor cost.  In most cases, the U.S. isn't competitive against *higher* wage nations like Germany.  The foreign steel producers manufacture better steel and do it with less labor per unit.  Quality control is another problem -- when I was at Chevron, we couldn't get any U.S. manufacturers to bid on our piping orders because of stringent QC requirements.  The Germans had no problems with the specs -- they did them all the time.  The Koreans weren't accustomed to the QC practices, but were willing to eat the cost to learn how to produce high quality piping.
[The steel pipe was for sour wells, which are filled with hydrogen sulfide, sulfuric acid, etc., which is both corrosive and explosive.  "Run of the mill" wouldn't do given the cost, capital and human, for a failure.]

At GE Research, the management came up with the brilliant idea of moving most of the tungsten research from the U.S. to Hungary, which had a decent lamp manufacturing company as well as very good researchers.  "Dollars a day for a PhD. metallurgist!"  Unfortunately, the PhDs continued to do their own research, regardless of GE's orders to the contrary.  They figured they were researchers, not industrial technicians.  U.S. researchers, while more expensive, understood the connection between their research and the required development efforts.  Cheap as they were, from the business's point of view, their productivity was close to zero.

Ken Meltsner