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By Paul Festa, 22 December 2003 17:10

NEWS AOL is quietly laying the groundwork to hire software engineers in Bangalore, India - a decision that is sparking some pointed criticism but also is becoming de rigueur among technology companies.

AOL's plans slipped out on its website in a 10 Dec job posting seeking a global program manager to "coordinate software development teams" in the US, Dublin and Bangalore.

The posting bothered some people because it appeared at the same time AOL announced it was laying off hundreds of software engineers at its Netscape Communications unit in Mountain View, California, as well as other West Coast offices.

One former Netscape manager said: "It's America Online with code built where? There's an image issue that they should address, especially with all the people they just chucked."

Besides raising concerns about exporting high-paying, high-skilled jobs abroad, many of these workers have long griped that higher-ups at AOL allowed Netscape to falter.

AOL said the job posting and the layoffs are unrelated.

A spokesman said: "We are considering opening a small (engineering) office in Bangalore. That action is completely unrelated to the Netscape job actions that were taken."

Like Ireland and other foreign countries, India isn't a new frontier for AOL. The company already operates a call centre in Bangalore and has relied on software engineers in India previously through an alliance with Sun Microsystems. Still, this would mark the first time AOL turned to India to help build its flagship internet software.

AOL's Bangalore explorations come as US-based businesses are increasingly tapping cheaper labour abroad, typically to handle low-level jobs such as customer service. In a newer wrinkle, some software companies are experimenting with hiring skilled programmers to assist on higher profile projects, including product development.

In July, AOL rival Yahoo! outlined plans to hire programmers in Bangalore to help build its web products. Google also is planning to open a Bangalore office and expects to hire 100 software engineers by year-end 2004.

These actions have heightened fears among US technology workers that their jobs will be shipped abroad.

More than eight in 10 software companies are exporting their work offshore this year or next, according to a July study by research firm Sand Hill Group.

Cost cutting is the most commonly cited reason for this practice. Hewlett-Packard has pegged the cost of a talented programmer in India at about $20,000 a year, well below the cost of a top US tech worker. Companies also face facilities costs and the expense of managing offshore work, offsetting the impact on the bottom line. The total savings from hiring an IT service provider to perform foreign work may be as high as 40 per cent to 50 per cent, IDC analyst Ned May said.

AOL appears poised to jump on the bandwagon at a time when it is paring back software engineering in Silicon Valley. It laid off 450 employees in its California offices earlier this month. Many of the employees who were laid off were software engineers at Netscape. AOL has offered to relocate 100 of the workers to its Dulles, Virginia headquarters or its office in Columbus, Ohio.

One former AOL executive doesn't expect the company to outsource key programming projects any time soon, suggesting an India software engineering office probably would handle lower-profile tasks such as quality assurance, at least to begin with.

"There has not been much software-product off-shoring so far," this person said. "It can only be more difficult managing the process from afar."

Paul Festa, Alorie Gilbert and Ed Frauenheim write for News.com