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Boomerang of offshore outsourcing?

I had a conversation recently with an Indian colleague who has had his green card for a few years.  He is actually seriously thinking of selling his house and going back to India, partly because of the collapsing the US economy and the now-booming offshore programming sector in India.

He was pointing out that:

- Indian salaries are now more than double what they were 4-5 years ago, in real US dollar terms.
- With the low cost of living in India, an experienced programmer can afford to live in a good-sized house with servants to cook, clean, and take care of the lawn.
- Indian companies are very hesitant to lay people off, unlike US companies who lay off 1000 people if the wind direction changes.

The more US and European companies outsource to countries like India, the more expensive and less productive it becomes as a whole.  Increased offshore outsourcing sends up the price of those services, while decreasing the quality at the same time because they will eventually need to decrease hiring standards to keep up with the increasing demand for labor.

The result could be either a lose-lose situation, where companies send out large amounts of work but don't profit from it because it isn't cheap enough to compensate for the delays and communication gaps involved, while American programmers are out of jobs at the same time.  Or it could result in a mad swing back the other way, with companies realizing they got burned and pulling back loads of work into America, resulting in another hiring frenzy like in the late '90s.

So, what are your thoughts?

T. Norman
Saturday, March 15, 2003

This scenario is unlikely to be implemented:).
1) I highly doubt that good Eastern European programmers or Indian ones are worse than American ones.
2) I'm not sure about communication gap. These communication problems aren't so critical. I've seen a lot of good outsourced projects.
3) Had TV sets, videos, computers assembly jobs or steel jobs returned to US? No. And I highly doubt that this will happen in the near future.

Slava
Saturday, March 15, 2003

By "communication gap", I meant the gaps in time and interpretation that occur, as compared to someone on-site who has face-to-face interaction with users and managers.  That gap is always going to be there, even if it is small sometimes.

T. Norman
Saturday, March 15, 2003

Does anyone know why our politicians are welcoming these offshore companies?

http://www.buffalonews.com/editorial/20030308/1046850.asp

Especially when they are using shady practices?

http://www.businessweek.com/careers/content/mar2003/ca2003036_6655.htm

*Sigh*

-Giorgio
Software Developer, soon to be street-cleaner

GiorgioG
Saturday, March 15, 2003

Indian companies are less keen to lay off staff because their staff are a lot cheaper. If the salary rates go up then things will change.

Salaries are still a lot lower than the States or Western Europe. One of the advantages of outsourcing is that when the almost-inevitalbe cost overrun ocurrs it is nothing like as ruiniously expensive as it would be if you hired locally.

You would probably get a clearer idea if you just forgot that the outsourcing went to another country.  Imagine you're outsourcing to Minnesota instead of Mumbai. or Bimrningham Alabama instead of Banglalore. I think you'd agree that a balance would come into being; after all after a couple of years the guys in India are going to be more conversant with your product and company culture than  newbies in Seattle or Santa Clara.

Also remember that plenty of IT work cannot be outsourced because proximity to the client is an absolute necessity. I've spoken on this before.

The limit to outsourcing in Inidia is most likely to be the creaky infrastructiure; in China there are 59 million internet users. In India there aren't that many telephone users, let alone PC users.

Stephen Jones
Saturday, March 15, 2003

Contrary to what you might think, the software industry doesn't exist to keep you employed. If you can't create the product people want at a competitive price, why would anyone feel obliged to buy it? What's good for you isn't neccesarily good for the country after all.

If you assume that say half of the best programmers in the world (price/product) live outside the US - what should the US do about them?
Option 1:  Defend against them, let other countries hire them, and and watch those 'foreign' products beat you out of the market.
Option 2:  Hire them and an outsourced US product will beat you out of the market.
Option 3:  Bring them to the US and they will beat you out of the market with a pure US product.

Obvoiusly they are trying three as hard as they can, settling for two, and laughing at most of the rest of the world doing one. There is a reason the US is the richest country in the world, despite seeming to get beat at every turn.

And if you don't like it, you can move to India too - I moved to China and now live in a big house, have help, and can program all day. You are the one with the freedom to move, unlike most people here, so maybe its time quit whining about others having it better.

Robin Debreuil
Saturday, March 15, 2003

Maybe the question to ask is, Why should ANY jobs remain in the United States when salaries are lower in other countries?

Yoav
Saturday, March 15, 2003

While goods can (should?) be produced whereever is cheapest and then shipped, service industries need to be locally based. It is far cheaper to hire an American plumber (say) than to fly in his non-union Mexican counterpart.

When IBM was running the computing industry show, writing software was seen as a service. If you wanted some software on your Big Iron, you called IBM and they sent a team to provide the service of writing it for you.

One of the effects of the PC revolution was to commoditize (most) software. In the minds of most people in the U.S., software is a manufactured item -- something you get in a box with a UPC on it down at Staples or Best Buy or WalMart.

As long as upper management believes this, programming jobs will follow the manufacturing jobs overseas.

Devil's Advocate
Saturday, March 15, 2003

I don't personally have a problem with the offshore outsourcing, if it actually results in increased profits and genuine cost savings.  If that is what occurs, and I can't provide the price/performance to justify my US salary, then so be it.  I will still benefit from cheaper goods and services and an improved stock portfolio, and there are other types of jobs that I can do to make decent money, even if it isn't quite as much as what I make now.

The problem right now is that many companies are jumping into it as the latest management fad, thinking that they will magically save money just because the foreign salaries are lower.  Just as in the '90s they all thought they would magically mint money if they put something on the Internet.  They aren't carefully considering the types of projects that are good candidates for outsourcing, or the increased preparation and documentation involved in successfully completing projects offshore.

Sometimes the companies won't even know when they're losing money as a result of outsourcing.  For example, if an offshore project got completed with 10 people in 6 months, the American executive who sponsored the project will report to the directors and shareholders that it would have cost a quarter-million dollars more to do it in-house, because 10 American programmers for 6 months cost that much more (and of course, the exec gets a nice bonus for himself).

But the reality could be that it would have taken just 5 in-house programmers 4 months to do the job, because of their familiarity with the company's products and systems and their direct interaction with users - in which case sending it offshore actually cost the company $100,000 dollars *more* in project costs AND two months of additional time to market.

A result like that is a lose-lose situation where both the shareholders and employees end up worse off because the company isn't really saving money, and the employees' jobs are gone. (Of course, it's not lose-lose for the execs and CEOs who collect nice bonuses while this is going on). That is the situation I do have a problem with.

In their enthusiasm to send more and more work offshore, some are failing to do the proper cost/benefit analysis to determine what and when and if to send work overseas.  Some are even mandating that some arbitrary percentage of their systems must be outsourced.  If they think it is an automagic money-making machine like they used to think of the dot-coms, the US economy will be in for an even bigger meltdown in a few years.

T. Norman
Saturday, March 15, 2003

"Maybe the question to ask is, Why should ANY jobs remain in the United States when salaries are lower in other countries?"

Because programmer salaries are just one part of the equation.  Once you outsource something, whether it is sent overseas or to a remotely located US firm, other factors come into play against you, such as one or more of the following:

- A lower probability of producing exactly what the users want, as a result of the lack on-site interaction

- Security concerns

- Communication delays and time-zone issues (although the time zone thing can be a benefit in some cases)

- Overall increased labor in terms of hours (such as the increased documentation requirements and the need for double-testing, i.e. the remote QA team will test it in addition the US client's QA team)

- Lack of familiarity with the company's products, processes and systems

- Differing interests: the US client's decision to send offshore is the prospect of saving money, while the offshore vendor's interest is to make money.  This can result in ambiguous or "gray area" requirements being interpreted in a way that favors the vendor ("Oh that's what you really meant?  This is a fixed price project, we already developed what the contract said, it'll cost you $200K more to redo it in that way!")

- No long-term stake in the maintainability of the systems they develop (unless the vendor also is signed to a multi-year maintenance/support contract)

T. Norman
Saturday, March 15, 2003

Maybe the question to ask is, Why should ANY jobs remain in the United States when salaries are lower in other countries?

Not only is IT being outsourced but also backoffice work. I know of some big banks/brokerages sending there backoffice reconciliation and clearing overseas as well as there financial analysis and pricing. Also, telemarketing and call centers seem to be popular exports.


Saturday, March 15, 2003

I meant to add to the point about the increased overall labor hours above -- that it may result in increased time to market, which may not always compensate for the direct cost of the labor itself being less.

T. Norman
Saturday, March 15, 2003

I'm curious if you view outsourcing to a domestic company, that isn't necessarily cheaper, the same way? A lot of these arguments were made as software spread out of Silicon Valley.

Also, don't forget that these countries are markets as well as competition. The biggest opportunities are usually in a place with growth potential...

Robin Debreuil
Saturday, March 15, 2003

> - Indian companies are very hesitant to lay people off, unlike US companies who lay off 1000 people if the wind direction changes.


Yes, and they also HIRED 10000 people when the wind changed directions.  Why do you think you had a job the last 10 years?  Ingrate.  Live by the sword, die by the sword.

Bella
Saturday, March 15, 2003

> Maybe the question to ask is, Why should ANY jobs remain in the United States when salaries are lower in other countries?

How else would people pay for their new cars, housekeepers, and exotic vacations?

Bella
Saturday, March 15, 2003

Managements have been revealing their inadequate understanding of software development for years, blaming their IT departments, their software developers, their anything.

Anyone who thinks this offshore outsourcing gig is going to be some nice smooth ride is in for a big shock. It won't be long now before managements start kicking some blame again, and based on what I've seen of offshoring, there will be heaps.

.
Saturday, March 15, 2003

I agree with the original poster that Indian and other off-shore salaries are going to continue to be driven up. Good ol' suppy and demand. Unless you have a tyrannical government chaining techno-serfs to their keyboards, free markets will prevail.

I've only had one experience with a project that had portions of it outsourced to India and the time-zone and communication differences made it quite difficult. I'm sure some projects lend themselves better to outsourcing.

At either rate, there is an intrinsic cost in communcations when outsourcing. Combine that with increasing salaries overseas and I don't see outsourcing as the death of the American software industry.

I do have to shake my head sometimes at my fellow American programmers who wring their hands at the prospect of losing their job overseas, but often fail to take even basic steps to make themselves more valuable.

Mark Hoffman
Saturday, March 15, 2003

Well, just to satisfy my curiosity I did a job search for jobs in India.  A VB/Oracle programmer with 3 years experience gets between $450-$550 per month.  Offshore salaries may be going up, but they're going to have to go up a hell of a lot before they're up to our rates. 

As far as making yourself more valuable in the States, I don't see how in the long run there's any way to make a developer more valuable here than in some 3rd world country who has the same technical knowledge.  Specialization may help, but there's little stopping a guy in India from doing the same thing.  There's very few barrier sto entry in this field...

GiorgioG
Saturday, March 15, 2003

Most of the stuff I've seen offshore is either low quality crap or heavy process, long duration.  Compete by offering high quality and short lead times.  Know your business, be able to talk to the people purchasing your services in their language.  Most of all, DELIVER.  Stop bullshi**ing your customers with buzzwords and other kinds of nonsense and bring some value to the table.  Understand their problems better than they do.  Make their lives easier.  They will reward you.

anon
Sunday, March 16, 2003

> Most of the stuff I've seen offshore is either low quality crap or heavy process, long duration.

Blanket statements like "offshore is crap" makes you look like a stupid inexperienced ignorant flake.  The sooner you accept that you're a commodity, the sooner you can start dealing with reality. 

Bella
Sunday, March 16, 2003

> Stop bullshi**ing your customers with buzzwords and other kinds of nonsense and bring some value to the table. 

Funny, its the american's who flounder in this bullshit.  Offshore developers simple provide what the client desires.  you're pathetic argument is nothing more than an endorsement for offshore, vs. self-interested american coders who think firms exist for the sole reason of providing people a place to make a living.

Bella
Sunday, March 16, 2003

Would you rather I give a statistical analysis of each item I've seen produced that way?  It's a general statement to be brief.  Prepared to offer an analysis of your own, or do you just like to gripe and snipe?  Get off your high horse. 

"Funny, its the american's who flounder in this bullshit."  "Offshore developers simple provide what the client desires."  So what, you have monopoly rights to blanket statements?

And my argument *is* for americans to stop bitching and start producing if this supposed threat is bothering them.  Read it again, this time with your eyes open and your brain engaged.

sincerely, anon
Sunday, March 16, 2003

I suspect the Oracle/VBA programmer they will get in India for $550 will probably be pretty useless. I reckon the policy is hire half-a-dozen at the price and hope that one will be some good. Also VBA is small business stuff - you wouldn't dream of outsourcing an Access project to India because it's qucker to write the code than write the specifications (in fact Access is commonly used for writing speciifications). So I suspect he'll be used for internal work.

It's the good guys on $2,000 a month you need to be worried about.

Just to give you an idea of the competition at the bottom end, our college in Saudi (Indian or Saudi IT staff) has just send us an hour ago a list of "community courses". One of the things they are offering is a course for making small business applications using VB6 for the front end and Access for the BACK END. Methinks a certain misunderstanding of the correct tools here. However I did refrain from suggesting improvements to the course designer's back-end involving lubricants and metal tubing, if only because I am still puzzled as to why another  course in "Designing Static web pages with Front Page" should have knowledge of a scripting language as a preferred pre-requisite!

It could be that both these cases are simply an example of the guy expressing himself badly, but this is precisely one of the problems that perennially comes up in the outsourcing debate.

Stephen Jones
Sunday, March 16, 2003

Lot's and lot's of talk about the quality of offshore-coded software ....

Does anyone know of a product(s) in wide use -- good or bad, buggy or not -- that's sold by a US company though entirely coded offshore?

Yoav
Sunday, March 16, 2003

"A VB/Oracle programmer with 3 years experience gets between $450-$550 per month.  Offshore salaries may be going up, but they're going to have to go up a hell of a lot before they're up to our rates."

Remember that salaries are not the only factor.  For example, companies spend millions of dollars a year for office real estate.  The annual cost of the floor space, air conditioning/heating, electricity and other infrastructure related to the cubicle in which you sit is easily as much as 30% of your salary.  If it wasn't beneficial to have programmers on-site, they would make all the programmers work from home and save those millions.

By outsourcing development, corporations are giving up the benefits of on-site interaction, which is something important enough that they normally pay millions for it.  At the same time, they are also paying for the real estate and infrastructure costs of the remote developers, which although cheaper than office space in a US city, it isn't as low as the 10-20% level that salaries are at.  Rent in a software hub like Bangalore isn't so cheap, and it's rising rapidly.

Also remember that unless the US company owns the Indian software firm, they'll be contracting the work out to the Indian firm, and the firm will put a markup on top of their salaries and infrastructure costs.  As a result, the amounts charged to US firms are sometimes as high as $40/hour - not the 10% level that you'd get if you just look at programmer salaries.

If Indian salaries go higher than about 1/3 of US salaries for the same skill level, very few offshore projects will be profitable.  Salaries and commercial real estate there are going up while average skill levels are going down; it is much easier to get hired now in India than it was 3-4 years ago, and a study reported in an Indian newspaper actually projects India having a shortage of programmers within the next 3-5 years.  Programming is not like manufacturing where there is a global supply of billions of people who are capable of being trained to do the job.

Perhaps the long-term trend, after companies learn what really works and doesn't work, is that the projects that would have been outsourced to somewhere like EDS in Texas will instead be sent abroad (since if you have to deal with the remoteness and markups anyway you may as well do it cheaper), while what is done in-house will stay in-house.  And the larger corporations will set up some of their own software centers offshore instead of using vendors.

T. Norman
Sunday, March 16, 2003

"Does anyone know of a product(s) in wide use -- good or bad, buggy or not -- that's sold by a US company though entirely coded offshore?"

Oracle Developer 2000 was coded in India.  What a buggy piece of junk.

T. Norman
Sunday, March 16, 2003

The Visual J++ part of Microsoft's Visual Studio, back when Micosoft was supporting Java. VJ++ 6.0 was bad.

.
Sunday, March 16, 2003

Does anyone know a major product that wasn't at least partially outsourced?

Robin Debreuil
Sunday, March 16, 2003

Oracle Developer 2000 was the biggest piece of shit garbage I have EVER touched.  Oracle lost ALL credibility in my eyes or ever having the NERVE of trying to foist that complete JUNK onto the software dev community.

Bella
Sunday, March 16, 2003

There are still surprisingly many companies using Developer 2000. They got into it because they were using the Oracle database and they operated under the common management fallacy that it is better to have a single vendor for all or most of their IT products.  They never would have bought it if it was from an independent company. Now they are locked in because they have so much code already built with it.

I don't know who is worse -- Oracle for having the nerve to foist that junk on the industry, or the managers who decided to purchase it.

T. Norman
Sunday, March 16, 2003

What's the worst in our case is the junk that they wrote with it!

Stephen Jones
Sunday, March 16, 2003

Bella,

Anon's was clearly stating his experience with offshore development. He used clever phrases like "most of the stuff I've seen". How you saw that as a blanket statement is beyond me. You are the one looking ignorant here, Bella.

Of course, I see you aren't above making blanket generalizations, though:

"self-interested american coders who think firms exist for the sole reason of providing people a place to make a living. "

And what in the world do you mean by "self interested"? Do you mean someone that has the gall to want to protect their own job? Gasp! Get a rope!

You claim that programmers are nothing more than a commodity. While I agree that some companies do treat people this way, I'd say this provides some insight into your past experience. Most true professionals with solid skills don't feel that way. Why? Because they've crossed the chasm of being a "rank and file" coder to being someone that can offer more valuable skills than just coding up a VB 6.0 form.
If you feel like you're just a commodity then try making yourself more valuable.

Mark Hoffman
Sunday, March 16, 2003

>>Does anyone know of a product(s) in wide use -- good or bad, buggy or not -- that's sold by a US company though entirely coded offshore? <<

CuteFTP, CuteFTP Pro. Coded in Russia.

Slava
Sunday, March 16, 2003

Wipro coded some Corel products, or part of them like parts of the Corel Office Suite

anonymous
Sunday, March 16, 2003

There is no threat whatsoever of american IT jobs being lost to overseas. It's all hysteria bought into by insecure people who don't know any better:

> [T]he fear that great numbers of tech and other white-collar jobs have been permanently transferred offshore is probably hysterical. "As a cyclical phenomenon, jobs moving offshore isn't that important," says Robert Shimer, an associate professor of economics at Princeton. The concern, says Kevin Hoover, an economist at the University of California at Davis, is based on the misapprehension that if our wages are high and other people's are low, all our jobs will be exported. "It turns out we are more efficient than the people we are competing with," he adds.

see: http://www.business2.com/articles/mag/0,1640,47135%7C2,00.html

That article also references credible salary and employment information showing that not only is unemployment in the US at historical lows right now, but salaries are going up and pries of goods going down, producing a massive surge in the quality of life. Those of you who in the Parade magazine thread though $45k was a good salary for a developer are totally out of touch with reality. If you are making less than $70k doing anything in IT you are probably a janittor, incompetant or too stupid to know your own worth. Here's the real salary info. these are nationwide averages too. If you live in a hotspot or are of above average talent, your salary will be even higher:

http://www.business2.com/worth/0,,,00.html

Dennis Atkins
Sunday, March 16, 2003

How much or is any MS software coded overseas.

I think it is not much.  The "evil" empire are actually better about keeping jobs here than some of it's bretheren, i.e. Oracle.

Mike
Sunday, March 16, 2003

"That article also references credible salary and employment information showing that not only is unemployment in the US at historical lows right now"

Um...there are some folks at the Department of Labor that might disagree with that.

http://www.whitehouse.gov/fsbr/employment.html

There is reason to believe that the unemployement rate is dipping, but it's hardly at "historical lows".

And your comment that if you make less than 70K in the IT industry then you are "incompetant, a janitor or too stupid to know your own worth" is laughable. Are you honestly suggesting that someone fresh out college is going to earn 70K a year? In all areas of the country? So the thousands and thousands of people in our industry that are looking for work and can't find anything paying even 50K a year..Are they just all stupid too?

Mark Hoffman
Sunday, March 16, 2003

Dennis -

I don't know if I would go so far as to call those cited salaries "credible". Firstly, their salary collection methodology is never properly explained (certainly not on the Methodology page). Secondly, if we combine their "sample" salary data with some fairly recent census data ( http://www.census.gov/prod/2002pubs/p60-218.pdf ), we see that 149 of the 150 listed professions (including 'Executive Housekeeper', excluding 'Senior Retail Clerk') earn more annually than 50% of all full time working women in this country (or about 30% of all households).

This strikes me as unlikely in any reasonable subset of professions from the economy at large. My suspicion is that these numbers are based on very few data points and / or were carefully chosen to reflect the biases of the core readership.

Devil's Advocate
Sunday, March 16, 2003

I live in India, and run a software business - an "outsourcee" if you may. A few thoughts from this end:

a) Indian companies are less keen to lay off staff: Yes, sometimes to some obscure degree of fanatism. I don't know if it's leftover socialism from the past, our archaic labor laws, or just the fact that we have absolutely no social security. But managers aren't too keen to fire staff for non-performance or incompetance, let alone lay offs. Social issues play a part too - there are tons of languages spoken in India, and nepotism among common-language-speaking-people is...well...common. (I personally can't stand it, for the record) "Taking care of their own" is like a mission statement in some places.

b) Salary increases - While IT salaries have been going up, the last two years have been much lesser in terms of growth. From an industry average raise of 50% annually, we're down to something like 10%. Also, it's taking a while for other industries (manufacturing, banking, retail etc.) to catch up with the salaries - so the standard of living for an IT person is very high. But even now, the highest payers are not "outsourcee" companies - that credit goes to the offices of fully owned foreign companies (e.g. GE, Oracle, IBM)

c) Outsourcing quality,differing benefits and the fact that US companies are not evaluating cost/benefits enough:

True, a company could twist glazy specs in fixed bid projects, but they won't get their biggest source of customers - references. Plus it'll teach both parties to keep the requirements VERY well specified - I've been burnt by partial specs on fixed bid projects, where I've had to do a lot more than what I believed was promised.

In terms of quality - it's probably true that some companies have hired by the dozen without too much emphasis on skills, and maybe because the salaries are so low, but in the long run these companies are either going to die, going to fire the incompetent people, or the people might make themselves valuable. What's happening right now is perhaps best for the Indian industry - that the outsourcers are concentrating more on quality, so companies here have to address that or die.

If American companies aren't addressing cost/benefits enough, then they'll learn after they get their fingers burnt. My company stands to lose if a client decides purely on price - I offer intangible things like communication skills, and higher quality which costs me higher (and so I can't offer the lowest price). In fact we stand to lose if a customer does no cost benefit analysis even if we get the project, because expectations are way too high. There are enough hurdles in just the time zone issues to warrant serious problems, and one has to understand that this will happen in an outsourcing scenario.

d) A point on salaries - while in the US and Europe salaries are the highest % spend of a company, out here (in my company at least) we spend between 40-60% on infrastructure and other costs (Internet, admin etc.) So if a company has spent tons on infrastructure they hire like crazy even if there's no current use for the people - because, or so they say, the investment does them no good otherwise. (I don't subscribe, but that's a different story). That might explain why a number of large companies have more than 20% of staff "on the bench". (Yes, there is such a thing as a resource buffer, but 20%????)

That might explain excessive hiring but again, as the competition with other countries (China, Russia etc.) heats up, these companies will have to shed all their flab, and start moving faster. In fact, some of the companies here are also planning offshore outsourcing to China and Phillipines!

e) Products built offshore - there's a couple of companies I know that are developing famous products - iFlex, Citibank's banking software arm is one of the biggest players in the banking industry - that's developed in India. There's a CRM product called "Talisma" that's done here too. Most of the rest I know are heavily vertical. Mass market apps usually take a lot more cash in terms of marketing, support etc. which might be the reason they're not done here (or if they are, the partners abroad might be branding them)

One other reason for outsourcing has been the work itself - maintenance on large projects is very important for companies, but their best staff wants nothing to do with them. Maybe because they're boring or offer no space for growth and learning etc. Such maintenance work has, in my experience, benefited from outsourcing - a maintenance company can focus on maintenance itself.

Just my 2<currency_unit>.

Deepak Shenoy
Sunday, March 16, 2003

Deepak,
              A fabulous analysis. One thing you mentioned is the cost of  infrastructure.  Presuming computers are the same price in India they are in Sri Lanka we will be talking of a 30-50% premium compared to the States, and possibly more for business buyers. To the best of my knowledge the only broadband in either courntry are leased lines at mid or early nineties US prices, and phone charges for dial up are around $1 an hour in Inida I believe (in Lanka they go up to $3 an hour at peak times). I also suspect you either have to provide your own generators or rent in a fairly limited area of the centre of the city as although most of both courntires are electrified outages are common (the lLankan government has allowed the import of oil so we no longer have the scheduled cuts for drought, but I still find there is at least one day a week the power is off for some reason).

Perhaps you could tell us where you are and what the office rents are. I remember seeing that Mumbai office rents were 80% of downtown New York (which was incidentally a lot cheaper than London, and even Birmingham England). In the States there is not as steep a difference in land prices as there is in Lanka, where a perch (25 square metres) of building land in Colombo can cost as much as $8,000 to buy, whilst  only 30 kilometres away the price goes down to $300  or lower.

Stephen Jones
Sunday, March 16, 2003

"Maybe the question to ask is, Why should ANY jobs remain in the United States when salaries are lower in other countries?"

I'm going to twist your question around and ask "If offshore programmers can offer the same quality and efficiency* as in-house American or European programmers, why would they continue to accept a significantly lower salary?"

*efficiency being net of the problems associated with remoteness, such as communication issues and time delays, etc.

T. Norman
Sunday, March 16, 2003

But Mark, someone fresh out of college is probably the first and the third. Not to say that can't change with experience.

Dennis
Sunday, March 16, 2003

"carefully chosen to reflect the biases of the core readership"

Devil's Advocate,

I don't know, it's Business Week. It's for managers and executives right? Wouldn't their bias be to hear that there is a surplus of low priced engineers, desperate people willing to accept any job just to have a job in the supposed high unemployment, outsourcing is good, etc? Instead they are saying companies will be increasing wages this year, engineers make a good wage, outsourcing is pointless since americans are THAT much more productive, and unemployment is at historical lows. What purpose would these things serve to Business Week's readership of executives?

Dennis
Sunday, March 16, 2003

Dennis,
          The positions chosen are those which the readers of the magazine are likely to hold. You don't see janitor's salaries because janitors don't buy the magazine (they probably can't afford to).

          And I don't exacltly know what a "help desk analyst" is biut at $61,000 you can get out the L1 or whatever (or better still pay me $40,000 and outsource me to South India or Sri Lanka!)

Stephen Jones
Sunday, March 16, 2003

Mark,

I followed your link to the white house and went to see the graph at:

http://data.bls.gov/servlet/SurveyOutputServlet?request_action=wh&graph_name=LN_cpsbref3/

and was greeted with:

>500 Internal Server Error

>SurveyOutputServlet:

>java.lang.NullPointerException

Which reminded me of the thread a couple weeks back on exceptions -- this is exactly the problem! Low quality unstable code!

Dennis Atkins
Sunday, March 16, 2003

Stephen,

Many janitors in the US make much more than you are asking. Janitorial work is often unionized. $70k is not uncommen, nor is $120k for a dock worker.

Dennis Atkins
Sunday, March 16, 2003

Dennis -

I don't know where you are getting your numbers, but according to salary.com's salary wizard (for what it's worth) 75% of "Senior Janitors (3-5 years janitorial experience)" living in NYC or San Jose, CA (the highest cost-of-living metro areas I could think of) earn less than $33,000/year. While there are certainly some janitors in the US who earn more than that.

As to your other point, I am not familiar with Business 2.0 and cannot speak of it specifically (but I think it is a different entity than Business Week). There are any number of reasons a (less prestigious?) subscription magazine might want to report extra rosy news. It makes the subscribers happy, and higher circulation is good for the magazine.

I take issue with their study because the methodology is secret, hence the conclusions are irreproducable. Additionally, the numbers they have reported do not agree well with what I have seen either in my area (greater NY metro) or in other publications (census documents linked previously), which convinces me not to give them the benefit of the doubt.

Devil's Advocate
Sunday, March 16, 2003

Should be "While there are certainly some janitors in the US who earn more than that, I don't think $70K can reasonably be considered 'common'"

Devil's Advocate
Sunday, March 16, 2003

Ack! You're right; I don't know why I thought it was Business Week, it does seem to instead be some sort of self-serving tech-worker rag, and you're also right that without the methodology reported in a way to make it replicable, the 'study' is worthless. Back to our cages everyone!

Dennis
Sunday, March 16, 2003

>>How much or is any MS software coded overseas.<<

I don't know how much do they outsource, but yes, Microsoft outsources to Russia. I don't know which software they outsource.

Slava
Monday, March 17, 2003

Stephen,
I'm in Bangalore, so my comments below reflect what I see locally.

In terms of computer hardware - we "assemble" computers from parts most of the time, and this gives us machines which are very close to US prices. Sometimes cheaper. (Though high end machines, dual/quad processors etc. can get a little more expensive due to lower demand here) If you go for vendors like Dell, Compaq, Cisco etc. they tend to price at least 25% more than US prices. Even higher for stuff like routers, muxes etc. There's recently been an excise and import duty cut on hardware, so I expect prices to go south.

Electricity wise - we have a 2 hour backup on our UPS systems and we've not needed generator backup (powers never gone more than 2 hours at a stretch) But yes, bigger companies do put in generators additionally. If you rent an office in commercial buildings, the building might have a backup generator which you pay for in the rent itself.

Internet charges - $1 an hour is quite high for India, dial-ups are available for as less as Rs. 3200 for 500 hours, which is around Rs. 6.50 per hour. (At today's rates around 14 cents (US) per hour) We have a back up ISDN line at 64 Kbps for Rs. 18 per hour, which is around 35 cents per hour. Of course phone costs are there - around 40 cents per hour. (But phone calls to ISPs will become free soon)

Broadband - I pay around $3500 per year for a 128 K leased line, but that's going to get cheaper as fiber takes over. Cable and DSL are pathetic in terms of throughput, but that can only get better. (I'm an optimist, amn't I?)Higher end leased lines are expensive at the moment - around $20,000 or so for a 1 MBps line.

Rents: Where I am I pay Rs. 12 per sq. ft - that's 25 cents a square foot. (1$ = Rs. 48 approx) A more centrally located office could be obtained for Rs. 20-Rs.35 per sq.ft. (I'm going to be looking at more centrally located space in the next few weeks, so if you need info mail me)

Hope this helps.

Deepak Shenoy
Monday, March 17, 2003

Deepak,
              Thanks for the figures. When I was quoting $1-$3 an hour for dialup internet I was referring to the phone line. For the internet connection itself I pay $9 for 150 hours, which is actually half the Indian price. It does seem that your dial up charges are cheaper, particularly if they do end up giving you free calls to the ISP, though I am suspcious as to whether that is not just a temporary marketing ploy by the telcos.

              The rents are cheaper than I thought; exorbitant no doubt by Indian standard, but still cheaper than anywhere in the States or Western Europe.

              Best of luck anyway; maybe I'll pop over to Bangalore from Sri Lanka for a week or so this summer. Living two hundred miles away from Iraq, I can't have anything certain at the moment.

Stephen Jones
Monday, March 17, 2003

Stephen,

The free Internet calls is probably a marketing ploy, but since they've opened up telecom to private investment, enough telcos have come up to keep prices down...so it might just stay cheap...

Rents have gone really down after the dotcom crash. They're picking up now that all the BPO hype is in - and I can see them go higher until the BPO bubble bursts...

Thanks for the luck, and I hope you don't get caught in any crossfire!

Deepak Shenoy
Monday, March 17, 2003

"Rents: Where I am I pay Rs. 12 per sq. ft - that's 25 cents a square foot. (1$ = Rs. 48 approx) A more centrally located office could be obtained for Rs. 20-Rs.35 per sq.ft."

Is that per month or per year?

T. Norman
Monday, March 17, 2003

For a comparison with the competition India may come in for eventually...

In China I would guess the infastructure is quite a bit more advanced beause the growth has been more even, and probably more industrial which requires better infastructure. In Xiamen, small city on the coast, the power never goes out, phones are about $12/month, which includes adsl. We have a second T1 line that is about $40/year, though that is only within China. Rent is about $100/month for a normal office, a good furnished apt is about $200. Salaries are under $100/month for unskilled labor, and $300 would be towards the top end (programmers are towards the top end). The skill level is very high, but there is a larger language barrier here for western companies. There is not a big software thing happening yet, but there are a lot of programmers/engineers, and it is in the 'five year plan'. Ceratinly they have set their sites on that industry, some success is certain just because of domestic demand, and I don't see how they could fail to make inroads internationally too.

This is all for Xiamen, a very developed small coastal city. The famous cities are more costly with higher skill levels, the rural areas are of course almost free, but harder to find the right mix of skills...

Robin Debreuil
Monday, March 17, 2003

Norman,

"Is that per month or per year?"

Per month. But you do have a concept of "deposit" here - if you rent a new place they ask for 10 months rent as a deposit (This is NOT adjusted against rent...it's given back to you when you vacate the premises)

Deepak Shenoy
Monday, March 17, 2003

Do you consider Oracle's moving much of it's corporate accounting to India outsourcing? Many U.S. companies are moving non location critical functions to India and other Asian countries.  As with manufacturing, most of these jobs are gone from the U.S. forever.

An economic upturn will not bring these jobs back, but will provide new opportunities. What those opportunities are remains to be seen.

As for the increasing cost of talent in India, it will continue.  Unlike most other Asian countries, India has the advantage of an English-speaking population. However, China is producing even more enginerring graduates. Many U.S. companies are already operating there:

http://www.webex.com/about_employment.html?Track=hometext

India is very concerned about China.

global opportunist
Monday, March 17, 2003

[How else would people pay for their new cars, housekeepers, and exotic vacations? ]

This is such a broad swipe at Americans I thought I'd shoot one back. Aren't you the one BELLA that was swaggering around like your shit doesn't stink, bragging about all the money you've made in the past? Talk about the pot calling the kettle black.

You know it really is amazing, around the world the perception of Americans and who everyone thinks we REALLY are. I bet you wouldn't know and couldn't point to an AVERAGE American to save your life. Get to know us and maybe you'll realize that we are just like you, trying to make a living in a world that is out of our control.

I am not a commodity, I am a person just like you. And I don't think wanting fair treatment is asking too much, regardless of the bottom line and accounting equations. A person's life cannot be summed up on a spreadsheet.

trollbooth
Monday, March 17, 2003

To the guy who asked why a business magazine would be upbeat about programmer and engineer salaries if it wasn't true -

There is actually a very good reason for this. By painting a rosy picture for programmer job prospects, big business is able to claim pay rates are too high and thus win concessions from government to import lots of programmers. This reduces the wages bill for big business.

Industry groups such as the ITAA have been doing this for six years. When the market is down, they claim a big turnaround is just around the corner. I think the ITAA has been claiming 1 million programming jobs will be created in America next year.

I vote and I vote
Monday, March 17, 2003

> Aren't you the one BELLA that was swaggering around like your shit doesn't stink, bragging about all the money you've made in the past? Talk about the pot calling the kettle black.


Yes, I made and saved a lot of money during the boom.  (And I wasn't bragging, I was stating how lucrative and overheated the market was)  but how exactly is this pot calling the kettle black?    I never ONCE tried to justify my absurd payrate, and certainly NEVER blamed firms for outsourcing IT work, and i CERTAINLY never demanded a large paycheck solely for the reason that I needed to finance a particular lifestyle.  People with a vested interest NEVER see things clearly.  I have left the IT field, and that is why I can be unbiased. 

Bella
Monday, March 17, 2003

>Yes, I made and saved a lot of money during the boom.  (And I wasn't bragging, I was stating how lucrative and overheated the market was)  but how exactly is this pot calling the kettle black?    I never ONCE tried to justify my absurd payrate, and certainly NEVER blamed firms for outsourcing IT work, and i CERTAINLY never demanded a large paycheck solely for the reason that I needed to finance a particular lifestyle.  People with a vested interest NEVER see things clearly.  I have left the IT field, and that is why I can be unbiased. 

Defence of one instance of your absurdity. Please find the others and defend them as well so I can sleep well tonight

codem0nkey
Monday, March 17, 2003

Let's make it simpler.  Find ANYTHING I've said in this forum, EVER, that you call "absurd", and I'll be glad to discuss it. 

Bella
Tuesday, March 18, 2003

Bella -

At the cost of veering entirely off topic, in the 'Job Prospects', thread, you will find my rebuttal to your post, "Seth, It's no wonder you're unemployed. You're an idiot." I think you will discover that your own position was flawed, and hence that this attack upon Seth was absurd, at best.

Cheers,

Devil's Advocate
Tuesday, March 18, 2003

To pull the discussion back on-topic:

I've had one experience with outsourcing to India.  The development manager confided in me that she never wanted to do it again.

The communication problems were large enough that it just wasn't worth the effort.  We spent so much time describing things to the Indian company, and the company kept delivering things that didn't do what we wanted (out of pure miscommunication; no malice on either side), that it would have been cheaper to hire people locally, even at a higher rate than the Indian company was paid.

I was given to understand that technical issues that could have been described to an on-site developer in ten minutes took two hours to describe by e-mail or over the phone.

Brent P. Newhall
Tuesday, March 18, 2003

Bella,
Oh so you are getting angry because I made a broad swipe against you? Well you don't like the heat, get out of the kitchen. You made a broad swipe against IT workers in the US, implying that we are all greedy because we need to support our lavish lifestyle. This cannot be further from the truth.

trollbooth
Tuesday, March 18, 2003

I think as a general rule, any posts by Bella can be safely ignored/skipped.  I can't remember the last time he wrote anything positive about anyone.  It sounds like he's an intelligent, bitter, socially inept (ex?)software developer.

GiorgioG
Tuesday, March 18, 2003

so what does bella do now? throw me a bone, man. i've been trying to get some alternate career ideas for the past year.

choppy
Thursday, March 20, 2003

Bella asks people if they would like fries with that.

Old jokes home
Thursday, March 20, 2003

Not French ones I hope

Stephen Jones
Thursday, March 20, 2003

A nuclear war in India would really change things.

I wonder if the US companies that are shifting jobs to India are considering this?

anan
Wednesday, July 23, 2003

I have a blog on Outsourcing - An Indian viewpoint at http://blogs.ittoolbox.com.

Kindly visit it if you have the time.

I would appreciate your suggestions and feedback.

Many thanks in advance.

Mahesh Khatri.
Kaytek,India.

Mahesh Khatri
Saturday, February 14, 2004

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