Count QLogic Corp. among the Orange County companies pushing jobs to India,though it’s taking a different tack than larger peers in the technology sector.
H.K. Desai, chief executive of the Aliso Viejo-based storage network gear maker, recently said QLogic has outsourced about 100 to 110 jobs to India during the past 18 months.
The company has boosted its total worker count from 820 to about 850 during the period.
QLogic has tapped India’s Wipro Ltd. for most of the work in India. Wipro is the second-biggest technology services provider in the country and works with many U.S. companies.
The shift to India will help “grow the company,” Desai said during a presentation in Irvine at a meeting of The Indus Entrepreneurs of Southern California, or TiE-OC.
“You can’t just look at cost,” said Desai, a native of India.
Desai expects the company’s outsourced and employee counts to increase, he said during an interview following the speech.
He declined to give specifics.
The jobs going to India are for “non-core” engineering work, including basic testing of products, Desai said.
If a problem is found during the testing, it’s still addressed by QLogic’s U.S.-based engineering team.
Desai calls the outsourced jobs “overflow” work.
QLogic makes host bus adapters and other gear for linking computers on data storage networks.
The transition to outsourcing began a couple of years ago as engineers at QLogic grew tired of overseeing mundane projects that would last three or six months and require seven or eight people, he said.
“You still have to manage these things,” Desai said.
He decided it was time to outsource the work.
“They have all the infrastructure” in India, he said.
With that shift, QLogic’s engineers in the U.S. are getting more resources to focus on core development.
“We can use that money to really do more projects here,” said Desai, who has a master’s degree in electrical engineering from the University of California, Berkeley, and a bachelor’s in electrical engineering from Maharaja Sayajirao University in India.
Outsourcing For Now
Desai said he has no immediate plans to open operations in India,unlike other OC technology companies.
Newport Beach-based Conexant Systems Inc.’s expansion into India has been big enough to earn it national attention.
The chipmaker said earlier this year it plans to spend $250 million to expand its engineering operations in India during the next few years.
The expansion could boost its number of workers in India to more than 2,000 in five years. About 775 of Conexant’s 2,400 workers are in India.
Conexant has had operations in India since 1996. But last year it boosted its efforts, adding about 575 people. The move was meant to drive down costs as Conexant worked to get back to profitability after several quarters of losses.
Indian engineers work for lower wages than U.S. engineers,hardly a secret in technology.
Broadcom’s Path
Meanwhile, Irvine-based communications chipmaker Broadcom Corp. also has its own operations in India.
Its move to India has been just one of its international expansions.
Broadcom employs more than 4,000 people around the world.
Broadcom has tapped Indian engineers through a couple of acquisitions, the first in 1999. Its India work force is approaching 200 and more could be on the way as the company looks for more acquisitions.
QLogic isn’t planning to open an engineering site in India.
The company isn’t big enough to justify the resources it would take to open up a shop there, Desai said. He’s not sure when the company will reach the “critical mass” to fund that kind of expansion.
“It’s easier to use different companies,” he said. “This is working out very well for us.”
Also, Conexant and Broadcom can justify their India operations because their products are sold in the country. Devices such as modems and wireless phones use chips from the OC companies.
But QLogic has few sales in India with its high-end devices that connect computer storage equipment.
Outside of a few insurance companies or banks, there aren’t a lot of companies that are ready to ante up for the higher-cost gear QLogic sells.
“The predominate portion of the market is still low- to middle-end,” said Kaushik Roy, an industry analyst with Bala Cynwyd, Penn.-based Susquehanna Financial Group LLP.
Outsourcing has gotten a bad rap in the past few years as U.S. technology workers fret about competition. But the strategy has become a key tool for chief executives looking to cut costs.
“It’s definitely helpful to shareholders,” Roy said. “As a CEO, he has one goal, and that is to maximize shareholder value. If he isn’t doing that he’s not doing his job.”
Roy said he wasn’t sure if outsourcing could be tied directly to lower operating costs at QLogic, but it hasn’t hurt.
Good Profits
He said QLogic has some of the best profit margins in its industry at 40%. Hopkinton, Mass.-based data storage device maker EMC Corp.’s margins are less than 20%.
And QLogic and Desai have Wall Street’s respect.
The company’s shares are up about 40% since late October.
Part of the gains came after QLogic beat analyst expectations in the quarter ended Dec. 31.
Sales were up 11% to $129.2 million during the quarter, versus a year earlier. That was higher than the $125 million analysts were looking for.
Net income from ongoing operations fell 1% to $32 million, but beat analysts’ estimates of $28 million.
QLogic rival Emulex Corp. in Costa Mesa didn’t respond to a request for comment on whether it outsourced work to Indian companies.
