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TWO PERCENT of ALL U.S. jobs offshored by 2015

From http://news.com.com/2100-1022_3-5051028.html?tag=lh

"Forrester Research, a high-technology consulting group, estimates that the number of service sector jobs newly located overseas, many of them tied to the information technology industry, will climb to 3.3 million in 2015 from about 400,000 this year. This shift of 3 million jobs represents about 2 percent of all American jobs."

They're talking about everything from accountants and architects to engineers and computer programmers.

Great way to remain a world economic power:  make sure to take away the incentive to pursue skills and education by relocating those jobs overseas.  Just think about adding two full percentage points to current unemployment figures (plus the accompanying economic fall out) over the next 12 years.  And we're talking about some of the highest educated people in our society.

Congratulations, America.  You're succeeding at exporting all of your wealth right out of the country.

Jim Rankin
Tuesday, July 22, 2003

The number of people pursuing Computer science or technical degrees in the US is also down.


Tuesday, July 22, 2003


The sky is falling, the sky is falling!

In case this is a news flash to anyone out there, the media is not always the best place to get your opinions.

The developed world has been outsourcing jobs to the developing world for decades now. It's not new. What the media won't tell you, because they're lazy sob's, is how many new jobs we're likely to generate in that same time period.

Personally, I feel the economics of outsourcing is a shaky case since there tend to be so many hidden costs that don't get factored into the equation (time differences, language barriers, the overhead of managing projects remotely, increased travel costs, etc) but CEO's don't tend to be the brightest bunch either.

anon
Tuesday, July 22, 2003

Well, firstly I'll say that this sort of speculation goes on each and every single downturn. If you recall the early 80s, we were all supposed to be owned by the Japanese by now. That isn't to say it isn't a real thing taking place right now, or that some segments of the economy aren't being "right sized" (let's face it: IT as a market sector is grossly oversized. Every organization nowadays has significant divisions involved in doing what should be a trivial element of their organization because the software market has failed to deliver on many of its promises), but that you can expect the doom and gloomers with tenuous theories to be given more credit than they perhaps deserve. Of course then there's the capitalizers: I just saw an article on news.com talking about "Software Industry Leaders Agree on Offshore Sourcing" or some such nonsense. Reading it you realize the REALITY of this little spin: People with a vested interest in offshoring agree that they should make lots of money, and you should believe that it's the thing to do.

If you want to affect change, take numbers and keep a memory. I use to have great respect for Microsoft until I saw their Indian CIO yapping about resourcing to India. Screw you MS and welcome piracy train.

Of course we'll see what happens when the inevitable nuclear skirmish between India and Pakistan takes place...

Anonymizer
Tuesday, July 22, 2003

"What the media won't tell you, because they're lazy sob's, is how many new jobs we're likely to generate in that same time period."

WHAT jobs?  This is a serious question.  We've pretty much outsourced the manufacturing economy, now we're outsourcing the service economy.  What else is there?

I go back and forth between believing the sky is falling and then thinking I'm overreacting.  But I really don't see a way around the trend that many of the highest paying jobs requiring the most education are now perfect candidates for outsourcing, and I honestly don't see what's going to replace that.

Jim Rankin
Tuesday, July 22, 2003


Well, I'm no economics expert, but we should be able to take some lessons from Japan:

As work is transferred to Indian developers, their costs will rise. This is natural and innevitable: the more people get, the more they want. Salaries will rise, thus making them less desirable. They'll want to spend that new money, a decent portion of which will come back to developed countries as demand for goods and services. That means jobs. Sure, they may not be high tech jobs, but they will be jobs.

One other point to look at is that the developed world may not make as much stuff as it used to but it still creates stuff. Look at the new patent numbers for the U.S. Sure, you may have someone else make it, but designing this stuff employs people too. And that is high tech.

Finally, I'm not at all convinced that this outsourcing of high tech work is going to last. No offense to Indian programmers, who I am sure are highly skilled, but I've seen enough projects fail because the developers and project managers weren't in the same building, or even on the same floor. I can't imagine what will happen when your developers are in another time zone on the other side of the planet.

anon
Tuesday, July 22, 2003

From the economy perspective you might be correct., but  just like minimum wages in USA doesn't increase a lot and still you get plenty of highschool kids to work for you, similar situtation would be for Indian in hightech jobs. 

easy
Tuesday, July 22, 2003

"Look at the new patent numbers for the U.S. Sure, you may have someone else make it, but designing this stuff employs people too. And that is high tech."

But if we take away the incentive to pursue a technology education, aren't those innovations more likely to start coming from India, China, etc. in the future?

Also, the problem with waiting for wages to stabilize between India/China/etc. and the U.S. is that the India/China labor pool is vast.  It could be a good while before wages start to increase there, and things could get a lot less comfortable here in the meantime.

I'm curious, is there as much concern about this issue in Western Europe and Canada as there is here?

Jim Rankin
Tuesday, July 22, 2003

Here's an interesting quote from the linked article:

>>>  "Our aim here is not cost-driven," he said. "It's to build a 24/7 follow-the-sun model for development and support. When a software engineer goes to bed at night in the U.S., his or her colleague in India picks up development when they get into work. They're able to continually develop products."  <<<

What kind of development fits this model?  I do recall a decade or so ago when people thought they could devise software factories where software could be developed on an assembly line.  The idea is nonsense, but this makes it sound like management still believes in it.

mackinac
Tuesday, July 22, 2003

Don't forget the exchange rates.

More US jobs outsourced to India --> more dollars paid by US clients converted to rupees by Indian contractors --> greater demand for rupees, greater supply of dollars --> more pressure on the Reserve Bank of India to reduce the dollar/rupee exchange rate --> American exports to India become cheaper (in rupee terms) and Indian exports to America become more expensive (in dollar terms).

Also, if the US savings rate weren't so abominably low and the government weren't borrowing hand-over-fist, there would be even more pressure on the exchange rate.

Seth Gordon
Tuesday, July 22, 2003

"What kind of development fits this model?"

Most likely, this is just Oracle management trying to make people think they're not really replacing American jobs with overseas jobs.

Jim Rankin
Tuesday, July 22, 2003

"This is natural and innevitable: the more people get, the more they want. "

This is not true. Look at diminishing marginal utility. The more people get the less they value each increase.


Tuesday, July 22, 2003

Hmm, interesting, Seth, about the exchange rate.  I suppose this is what happened to Japan.  As it went from a cheap manufacturer to a world economic power, it's currency rose astronomically, too.

I think the current administration is trying to favor a weaker dollar right now (without being too obvious about it).

Good insight.

Jim Rankin
Tuesday, July 22, 2003

"This is not true. Look at diminishing marginal utility. The more people get the less they value each increase."

Which brings up another question:  is capitalism long for this world?  As the third world gradually catches up to the developed world, is there a limit to how much stuff people will want?  If not, what do we do with an economic system that always requires consumers to continually want more stuff?

This problem is exacerbated by Moore's law, which will continue to exponentially increase the amount of work that can be automated.  Is there a point at which human ability or willingness to stay economically relevant reaches a breaking point?

Keep in mind Kurzweil's prediction that human-brain-equivalent computing power will cost about $1000 sometime around 2030.

But maybe this is a separate thread :).

Jim Rankin
Tuesday, July 22, 2003

Remember...there is no spoon ;-)


Tuesday, July 22, 2003

Seth> "Don't forget the exchange rates...and Indian exports to America become more expensive"

Except where the currency is held at a fixed rate to the dollar.  Like in China.

Steve S
Tuesday, July 22, 2003

> What kind of development fits this model?

Supporting existing systems.

Christopher Wells
Tuesday, July 22, 2003

Personally, I think the whole outsourcing-programmers movement is a fad that is going to come crashing down like the .com phase. 

As others have mentioned, there are tons of hidden costs not considered upfront that will become obvious to companies once they've done a few iterations of outsourced work. 

Thus far I've seen outsourcing projects fail at 3 different companies and the failure rate of outsourced projects would be something around 90% in my (admittedly limited, but on the other hand 'real world') experience. 

Basically, I've seen one project kinda succeed, but painfully.  The rest all failed rather spectacularly for a variety of reasons -- language barries, time differences, general communication problems (requirements versus design versus implementation), etc.

Mister Fancypants
Tuesday, July 22, 2003

And to clarify my previous post, I think outsourcing is troublesome no matter how it is done and even without the language barriers.  I've seen failed outsourcing to Indian programmers and also failed outsourcing to American programmers and other than the language issue, the reasons all tend to be about the same.

Mister Fancypants
Tuesday, July 22, 2003

I meant to reply to a previous post on the same topic.

I work for small, growing, profitable engineering software company. We don't do anything sexy, just shrink wrapped windows apps that our customers are (mostly) happy to pay for. Our main office is in the SF Bay area, but not in SV.

Back during the internet craziness, we wanted to hire some programmers. We couldn't. At any salary. With any skill level. None.

Anyone who could spell programmer was going to work for web van, commerce one, etc where they got lots of stock options and the idea that they would be millionaires next week. We couldn't compete.

So, our solution was to build an organization overseas. It was tough going to start with, but we now have thirty people over there being managed by us here. We write specs, design stuff, but most of the heavy lifting is done there.

So, now that we can hire people locally again, should we abandon all of this? Are you kidding!?

pdq
Tuesday, July 22, 2003

Seth> "Don't forget the exchange rates...and Indian exports to America become more expensive"

Don't forget that these outsource countries are third-world and located in more volatile regions. War and corruption is more likely there.

Wonder if any insurance companies offer policies for outsourced projects.


Tuesday, July 22, 2003

Less Cnet and USA Today, and more sources.  Does anyone have any credible opinions by an economist or historian about outsourcing?

Or do you guys get all your opinions on .NET and Java from the New York Times?

waiting for info
Tuesday, July 22, 2003

Does anyone have any credible opinions by an economist or historian about outsourcing?

Their opinions are not anymore worthwhile than other's opinins. Show me two economists and you'll have six theories.

Thomas Malthus
Tuesday, July 22, 2003

Does Forrester Research count?  Not sure if they're good or bad prognositcators, but that was the source of the claim in the original post.

Jim Rankin
Tuesday, July 22, 2003

The claim by Forrester is, "This shift of 3 million jobs represents about 2 percent of all American jobs."  Does that mean these jobs are irretrievable?  If this happened 50 more times, we'd have 100% unemployment for perpetuity?

And while economists do argue, programmers do too.  Joel says rich Windows clients are the best, some other pundit says the Web obsoletes rich clients...  So should someone say that techies are full of it too because you'll get 100 opinions from 100 people, so we might as well get our news from Gartner?

I think programmers may be full of it, but I'll learn a lot more listening to their BS than some newspaper's.

waiting for info
Tuesday, July 22, 2003

Steve S: if India wants to hold the $/R exchange rate steady while they have more and more dollars coming in, they have a number of other options, but those options have costs of their own.

The government could print more rupees, but that would lead to inflation, so Indian programmers would demand higher rupee-denominated salaries for the same work ... which, at a fixed exchange rate, translates to a higher dollar cost as well. This would also raise the interest rate on rupee-denominated securities, which makes the business climate less attractive for investors.

They could tighten the existing restrictions on converting rupees to dollars, but this would make Indian companies less attractive to foreign investors.

What else?

Seth Gordon
Tuesday, July 22, 2003

anon, what's occurring now, and has been occurring over the past six years, is not normal. Some smart people have been pointing this out for a while. Finally the effects are starting to become obvious to everyone, and they are quite serious.

These developments provide benefits to CEO's, HR managers, and some classes of shareholders, at massive cost to everyone else. It's not part of some great improvement in the economy. It's another Enron stuff-up.

By the way, the CEO's who benefit are not just the American ones. Indian CEO's are raking it in too.

.
Tuesday, July 22, 2003

By the ay, 2 percent of all jobs means about 50 percent of programming jobs. That probably means about 80 percent of all new jobs that might otherwise have been created.

.
Tuesday, July 22, 2003

waiting for info, I would love to see you in a flood. "Are there any meteorologists here? Do you get all your information from the river?"

.
Tuesday, July 22, 2003

Set some goals.  Be in the top 20% of your field and you will NOT be laid off.

Mike
Tuesday, July 22, 2003

>"Set some goals.  Be in the top 20% of your field and you will NOT be laid off."

You'll still get laid off, because the bean counters will see your bigger salary and sack you in the name of cutting costs.

You need to be in the top 10%, then start your own company.

T. Norman
Tuesday, July 22, 2003

Set some goals.  Be in the top 20% of your field and you will NOT be laid off.

More like be in the bottom 5% of the top 30%. In that area you are competent but not threatening. You're income is not enough for the bean counters to see you, and you're skills are not good enough to be noticed.


Tuesday, July 22, 2003

The issue of losing my job to outsourcing is not what worries me, but the problem of trying to retrain in another field and finding employment. 
I would love to go back to school to learn a new field like mems or nanotechnology. The problem is that I have to pay for that training, pay my bills and hope that after 4-8 years  that I will not be considered too old to employ.
I guess if a company considers it profitable enough to outsource my skills, I should be provided with a retraining option. No just be dumped on the street and stuck working for minimum wage as a WalMart greeter.

db
Tuesday, July 22, 2003

I have a question. What are "U.S. Jobs" ?

We buy our cars from japan & germany... are those US jobs that have gone overseas, or japanese and german jobs to begin with?

How do you measure whether or not a US job has gone overseas? How do you define what a US job is? A job that was formerly done by people in the US? A job created by a US corporation?

OK I didn't RTFA (where a = article), but it seems to me that there are so many ways you can slice this, even if there is an "official" definition for US Jobs, that official definition must've been based on no small amount of smoke & mirrors.

www.marktaw.com
Wednesday, July 23, 2003

No, ".", I'm bored of all these repetitive articles we find in the newspaper.  If we had a flood every two weeks, I'd start wondering what a scientist had to say.

But if you enjoy the uninteresting culture of fear, as you did the recent one of irrational exuberance, go right ahead.  I guess if I don't like the mood, I might as well leave the bar.

waiting for info
Wednesday, July 23, 2003

>>I'm curious, is there as much concern about this issue in Western Europe and Canada as there is here?

I can't speak for Canada, but most people I know in the UK aren't overly worried. One thing we've learnt from history is that they'll always be new threats but, as always, with news threats come new opportunities.

From a macro level I'm confident we'll deal with outsourcing as we've dealt with numerous threats to our economy over the course of our history.

Anyway threats are, like competition, a good, thing they keep people on their toes and force organizations/people to reinvent themselves.

I say bring it on.

Yanwoo
Wednesday, July 23, 2003

"Also, the problem with waiting for wages to stabilize between India/China/etc. and the U.S. is that the India/China labor pool is vast.  It could be a good while before wages start to increase there, and things could get a lot less comfortable here in the meantime."

Salaries have already been rising rapidly there, because the demand for them is increasing much faster than the supply.  Indian programmer salaries are now more than double what they were (in US dollar equivalent) 5-6 years ago.  Ask any Indian.  In fact, one Indian guy at work recently resigned to go back to India to work.

What the heck, even some Americans are wondering if they should go to India to work.  With the $1000/month an experienced developer would make there, you can afford a house staffed with servants to do your lawn, cook your food and clean your house.

But although the Indian programmer salaries are 10-20% of US levels, when you consider the overall cost of paying Indian programmers (office real estate and hardware infrastructure is generally the same as in the US, for example) they are already very close to the point where it isn't profitable to use them.  Still, because corporations tend to be like sheep and follow each other for no good reason, like they were doing in the dotcom craze, many will continue to outsource even as the total costs increase beyond doing the work in-house, and they won't realize or won't admit they got burned until after millions of lost dollars and jobs.

T. Norman
Wednesday, July 23, 2003

I second the emotion of Mr. waiting for info. Does ANYONE know of any credible analysis, and could they please post a link?

Fernanda Stickpot
Wednesday, July 23, 2003

Below, is one of the better opinion articles on outsourcing that I have recently read.

Globalization and the Offshore Outsourcing of White-Collar Jobs
http://www.newwork.com/Pages/Opinion/Raynor/Outsourcing.html


Wednesday, July 23, 2003

>"The issue of losing my job to outsourcing is not what worries me, but the problem of trying to retrain in another field and finding employment."

My biggest problem with it is that much or even most of it isn't resulting in genuine savings for the companies who do it.  If genuine savings result from it, profits will increase making stock prices go up, and goods and services will become cheaper.  Those factors will combine to create opportunities elsewhere, just as the increased efficiencies provided by robots and computers reduced jobs in some areas but created more high-paying jobs in other areas.  But most companies aren't saving as much as they thought they would, if they are saving anything at all.

First of all, the cost to US corporations for using offshore development isn't as cheap as Indian salaries would suggest.  The major offshore firms like Wipro, Satyam, Infosys and Cognizant charge $30-$40/hour, compared to the $50-$60/hour cost of salaries, benefits and overhead for a typical US programmer employee.  Why?  For a start, office real estate, hardware, and infrastructure costs are more or less the same there as they are in the US.  Out of the $60/hour it takes to keep you employed, $10 of that might be for giving you a cubicle and its related space, equipment, electricity, and connectivity. Doesn't look so bad compared to your $70K salary.  But when that $10/hour adds to the $5/hour programmer salary in India, you're already talking about $15/hour even before paying for benefits or the profit component for the offshore firm. Yes, there are some smaller firms in less expensive areas that don't charge as much, but then quality becomes even more of a crapshoot.

So generally, AT BEST, we're talking about a maximum savings of 50%.  But when you add the hidden costs you're lucky to save as much as 25%.  Communication requirements increase significantly.  If a two-page spec was sufficient for an in-house programmer, now you need to write ten pages. And even after that, you often have to send it back for rework, or rewrite major chunks of it in-house because it doesn't do what you want.  A question that would be answered with a two-minute phone call now requires you to leave an email or voicemail and wait until the next day (ok, so Indian programmers should work nights? Fine, you'll pay more for that privilege and deal with higher turnover and more fatigue on their part).  Your review processes have to be much more intensive (which isn't always a bad thing though). Some system changes that would be implemented after a basic amount of discussion and documentation now require big negotiations between the US and offshore managers (as an employee, you would just go ahead and make the change, but as an external firm the cost of the change means more or less money for you and it may not fit with the requirements of the original contract).

Ultimately, if they don't save real money from this, there won't be money freed up to create jobs in other areas.  That will hurt not just programmers, but also people in many other occupations.  Just as the failure of the majority of dotcoms has hurt lots of people in different types of jobs (although a tiny percentage became millionaires from it).

T. Norman
Wednesday, July 23, 2003

"I do recall a decade or so ago when people thought they could devise software factories where software could be developed on an assembly line.  The idea is nonsense, but this makes it sound like management still believes in it. "

Of course this delusion is alive and well... if management didn't believe us programmer types were as interchangeable spare parts (i.e. widgets), there wouldn't be any outsourcing.

Joe AA
Wednesday, July 23, 2003

Regarding the interchangability of programmers ... they believe that programming jobs can be done by any random unknown person across the globe, but when they advertise any position it requires an exact match of ten different programming languages and platforms.

They won't allow telecommuting except in rare exceptions, because they MUST be able to see you sitting in your cubicle to make sure you are working, even though they could save millions of dollars in office real estate costs.  But they will gladly send the work 12,000 miles away in pursuit of more dubious savings.

They make you sign all sorts of confidentiality agreements and do background checks before hiring you, but they gladly give people in far away places access to their systems and data, where they have no reliable means of verifying their character and no effective recourse if their intellectual property is infringed.  What are they going to do, sue an Indian or Chinese programmer whose total bank balance is $600?

T. Norman
Wednesday, July 23, 2003

"I'm curious, is there as much concern about this issue in Western Europe and Canada as there is here? "

Why do you think we are expanding the Union?

Just me (Sir to you)
Wednesday, July 23, 2003

>"Back during the internet craziness, we wanted to hire some programmers. We couldn't. At any salary. With any skill level. None.

>Anyone who could spell programmer was going to work for web van, commerce one, etc where they got lots of stock options and the idea that they would be millionaires next week. We couldn't compete.

>So, our solution was to build an organization overseas. It was tough going to start with, but we now have thirty people over there being managed by us here. We write specs, design stuff, but most of the heavy lifting is done there."


Back then is when companies should have been outsourcing if they were really interested in saving money, not now when Indian programmers are more expensive and American programmers are much easier to find and keep.  That might have prevented the wild rise and crash of the tech sector, and kept more pretenders out of the field.

But instead, those were the days when they were throwing $80K at HTML monkeys just because that's what the rest of the herd was doing, and now they're jumping on the offshore bandwagon to follow the herd again.

T. Norman
Wednesday, July 23, 2003

Maybe we should take some responsibility for this problem then?

Perhaps if we had not been wasting our time on crazy dot coms times maybe we could have been figuring out ways of differentiating ourselves from the impending threat from the outsourcing countries?

What I find hard to understand is how countries so 'immature' in IT can match western countries that have so much more experience. It's a sad reflection on the progress of IT in the Western World - we've been complacent.

Yanwoo
Wednesday, July 23, 2003

JR > We've pretty much outsourced the manufacturing economy, now we're outsourcing the service economy.

Management views software development as manufacturing labor. Software dev is a commodity that has probably no intrinsic value; only the end product matters.

I remember reading years ago that The Simpson's is storyboarded and keyframed drawn in the US, with the remaining tens of thousands of "tween" cells generated mostly by hand in Korea. [Maybe this scenario has changed in the last decade...]

At your software dev job, you need to be the equivalent of the storyboard guy or the keyframe artist. Any other position and you're probably viewed as a semi-skilled manufacturer/laborer, ripe for export.

Edoc
Wednesday, July 23, 2003

Seth: I have no issue with your example for outsourcing to India where the rupee and the dollar both float.  I was pointing out that not all currencies float relative to the dollar, and in that case, things won't naturally balance. 

You can look here http://business-times.asia1.com.sg/news/story/0,4567,73945,00.html for more details.

Steve S
Wednesday, July 23, 2003

> What I find hard to understand is how countries so 'immature' in IT can match western countries that have so much more experience. It's a sad reflection on the progress of IT in the Western World - we've been complacent.

Actually, those countries can't, really. The sadness is not that there's no difference between first and 2nd/3rd world developers, but that decisions about this are not in the hands of development experts. They're in the hands of managements focussed on short term goals.

> Perhaps if we had not been wasting our time on crazy dot coms times maybe we could have been figuring out ways of differentiating ourselves from the impending threat from the outsourcing countries?

Dot coms actually share several factors with offshoring. Both are trends driven by non-developers seeking to control and profit from software. This would occur in other fields too except that other professions have legal protections restricting decision making and profit taking to members of those professions.

.
Wednesday, July 23, 2003

For anyone wanting to look, there is a substantial literature on this and related subjects. A lot of it is in related fields. Watch this space.

.
Wednesday, July 23, 2003

"Well, I'm no economics expert, but we should be able to take some lessons from Japan:"

Do you mean the same Japan that's effectively been in a depression for the last fifteen years? Yeah, that's really making me excited about offshoring.

Mike
Wednesday, July 23, 2003

>>Actually, those countries can't, really.

If that's truly the case we have nothing to worry about.

Most companies once realizing this, and the -ve affect on short term profit, will soon head back to what they know and move onto the next fad.

If we're truly better in the longer run they'll be plenty of development jobs in the Western World. If you're wrong, however, . . .

Yanwoo
Wednesday, July 23, 2003

Here's somewhere to start( I put it on the other thread; might as well put it here too.)

Alan Tonelson: The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade Are Sinking American Living Standards.

Re the comment above on job stats, that all someone needs to do is aim to be among the top 20 percent - that shows an ignorance of economics. There will be only one fifth as many available jobs, but an accumulation of the people who would otherwise have taken the other 80 percent of jobs. So you will be competing against perhaps 20 times as many people. This will reduce your pay between 20 and 50 percent.

Also, it means that many people who get sacked will never get another job in this field, and that new graduates won't get jobs, which is happening now.

In any case, what about the other 80 percent; they have rights too.

The ultimate incongruity in this subject is that managements represent that they're offshoring to reduce costs, yet keep giving themselves giant bonuses. The thing most programmers don't get is that this is a battle.

.
Wednesday, July 23, 2003

Blank Name linked to an article that quoted the following BW article:  http://www.businessweek.com:/print/magazine/content/03_05/b3818001.htm?mz

Ted Graham
Wednesday, July 23, 2003

Dot: You're right. Many people still do not realize that

(1) most director's and officer's who decide to outsource to India do not OWN the company. They are employed by the company, so they do not act like someone who wants to protect his 'baby' from the perils of wrong decisions, but they try to get out of the company as much as they can (salary, stocks, etc.), not caring if it turns out to be bad in the future.

(2) those same people are not loyal towards the American economy or some unemployed graduate. At best, they pretend to be loyal towards their company so long as they work for it.

(3) most IT companies who are suspected to move jobs to India or China ARE profitable - MS, IBM, Oracle. MS alone has some 40 billion dollars cash. They don't want to reduce costs - they want to increase profit.

Johnny Bravo
Wednesday, July 23, 2003

T. Norman, I have to disagree with your analysis.

Let's say I'm a developer and in nice round numbers my salary is $100,000 a year. Now, let's assume Jakob Nielsen is right and it costs a company twice that to keep me. That's $200,000 a year. Now I don't remember the numbers, but when we moved from Manhattan to Queens, they said that the cost per month of our space was something approaching my rent per square foot, let's say $500. Okay, let's give each employee 10 x 10 square feet for cubicle, and infrastructure... meeting rooms, kitchen, etc. That's 100 x 12 x 500 = 600,000. That's a quarter of a million dollars per employee.

Now let's take those Indian developers. Bangalore and other big cities are going to have expensive real estate, but if a developer costs 1/10 as much one here (according to you), then let's say the real estate is the same... $60,000 a year.

Now their salaries... I believe the developers working here in the states with us were making about $50 a day.. $50 x about 300 working days in a year.. no wait, they work weekends too, ok $50 x 365 = 18,250.. again multiplying that by two 36,500.

So there you have it. $260,000 v. $96,500 - and most of that $100,000 is real estate, and I bet that real estate figure is seriously wrong, so let's cut it in half again... $260,000 v. $66,500. An Indian developer costs 1/4 of the equivelant American developer.

Ok we have to factor in long distance phone calls, and overtime for people so they can call halfway across the world in the late evening, though I bet the indian guys stay late/wake up early to call us during our business hours, and we do the best we can with e-mail.

Now let's take the scenario of Indian developers on H1-B Visas living in the states.

We put them up in relatively inexpensive digs out in Jersey so their commute is hellish... why should they want to go home anyway? $600 a month. Their salary is still $50 a day, but let's say the consulting company charges 3 times that, $150 a day. And we have the figures for office space already.

$600 x 12 = 7,200
$150 x 365 = 54,570
office space = 600,000

wow look at that, compared to the building they're in, the developer costs nothing, but the American developer costs 3 times what it costs to keep them in an office.

Of course, these real estate figures are all bloated because I worked for a company that didn't do anything small, and I happen to be in one of the most expensive cities in the world, but you get the idea.

And of course, if you're going to bloat Indian salaries by the consulting company, then you also have to bloat American salaries by their consulting companies... $50 a day Indian developers cost $150 a day, then $50 an HOUR American developers will cost $150 an hour, or $1,050 a day or more.

Did someone want to know how much tea there was in China?

www.marktaw.com
Wednesday, July 23, 2003

That does not compute, marktaw.  If you are figuring that infrastructure per employee is the same whether in the US or India, you should apply that quarter million to the Indian developer also.

About the other point: I was comparing American employees to Indian consultants because corporations are laying off their in-house programmers and using Indian consulting firms in the name of saving costs.

It would be one thing to stop outsourcing to EDS in Texas and outsource to India instead, since both have most of the same communication problems that surface when the developers are miles away (except that EDS is in a nearby time zone). But they are outsourcing to India claiming that they are saving costs, when the reality is that most of them aren't saving anything when total costs are considered, and those who do save something aren't saving anything close to what the hype would suggest.

Those who promote outsourcing will shout that they can get 5 Indian programmers for the price of 1 American, but if you work out the actual figures they will be lucky if the ratio is as high as 2 to 1 before even accounting for the hidden costs like the various risks and the increased communication effort.

T. Norman
Wednesday, July 23, 2003

Third paragraph, second sentence should read "But they are outsourcing to India _in place of using employees and_ claiming that they are saving costs,..."

T. Norman
Wednesday, July 23, 2003

There is a silver lining to this (silver hair, that is):  Those jobs lost may be offset by the retirement of the baby boomers.  Unless many of them find out they can't retire because the offshoring caused massive job losses which sent the economy into a decade-long depression and their retirement accounts tumbled as a result.

T. Norman
Wednesday, July 23, 2003

T. Norman, I suspect your claims would be bolstered by good sources on the (short-term financial) costs of Indian outsourcing vs. using local programmers.

While I may seem like I'm against people worried about outsourcing, it's almost to the contrary:  Good sources are always more convincing to one's case than pure analysis, at least where hard numbers are concerned.  You are making a case that sounds rather exaggerated, and you'd do yourself a great favor by citing something.  Otherwise you'll have to repeat yourself to many unconvinced people.

waiting for info
Wednesday, July 23, 2003

Yanwoo:

1. People who claim to welcome competition and to thrive on it are actually revealing that they've never faced real competition. Big business might tell you competition is terrific for you, yet one of their own main activities is crushing competition to make things easier for themselves. This occurs via pricing, manipulation of government policy, attacks against siting of competitors, and PR campaigns.

2. You mention something about managements realising their short term quests aren't working and bringing the jobs back, so to speak. That's not how it works.

The damage caused by short term business goals takes 18 months or longer to eventuate, and a CEO can survive another 18 months after that. Then others have to fix the damage. That damage can be to the company itself, and certainly to the economy and society.

In the case of offshoring, even after the damage is recognised, there's no guarantee fixes will be feasible. It might have permanently shifted technology industries to other countries.

3. Long term competition - ask Rome and a few other ancient empires about big mistakes.

.
Wednesday, July 23, 2003

>"T. Norman, I suspect your claims would be bolstered by good sources on the (short-term financial) costs of Indian outsourcing vs. using local programmers."

OK, for a start, look at the office costs of cities around the world:

http://www.forbes.com/global/2002/0527/066sidebar1_2.html

Compare New Delhi and Bombay with the US cities.  Office space ain't cheap in India.

T. Norman
Wednesday, July 23, 2003

Comparing a $260k developer living and working in Manhattan to the lowest paid Indian employee you can find elevates the art of disingenuous argumentation to new heights.

Also, if I recall Nielson's argument about total employee cost being double the salary, he is including real estate.

Pretty transparent attempt there, martaw old boy.

not fooled
Wednesday, July 23, 2003

Let me take a try at this... it might be fun.

Gosh, the President makes $120,000 a year. that's a lot! And on top of that is the cost of heating the White House which is probably a million dollars a year.

Now, Edith, the Neighborhood Watch Chairperson here in Fargo, ND, draws $20/month out of petty cash.

Clearly, replacing the President with Edith will save a lot of money.

What is the average cost of a developer in the US anyway?

not fooled
Wednesday, July 23, 2003

Speaking of not coming back, there was a nice article somewhere today (too lazy to look up the link) about how the greater San Jose region (used to be called the greater San Francisco region, but so many jobs have bled out of SF that the US Census now recognizes SF as an outlying region of the larger metropolitan San Jose area) has become economically depressed. Vacancies at 20%. The dotcom boom drove out blue collar jobs, drove out artists, drove out culture, drove out everything except hysterical and foolish tech ventures. The tech ventures are gone. The artists are gone. The blue collar as gone. SF is left a ghost town and a dump lacking the tax base to support its expensive maintenance. The people who made it a cool place to live are gone and they aren't coming back.

The US will be be the same. As a nation, we are outsourcing not drudgery and boredom, but our core competancies.

These competancies won't be coming back because there won't be the money to jump start it after the tax base has been bled dry.

Dennis Atkins
Wednesday, July 23, 2003

heh heh

martaw, how do you respond to the documented fact that office space in Bombay costs $53/sqft/yr and in midtown New York, it costs $45/sqft/yr?

Kinda shoots your whole premise completely to hell, doesn't it?

not fooled
Wednesday, July 23, 2003

Where exactly are you paying $500/sq ft rent, martaw? I didn'tn catch the exact details. If it isn't just a load of more of your usual bs you were dumping, you might want to have a long talk with your real estate agent. Didn't you check around before signing the lease? Well, there's one born every minute isn't there?

not fooled
Wednesday, July 23, 2003

> I'm curious, is there as much concern about this issue in Western Europe and Canada as there is here?

That's difficult to quantify.

In Canada there are optimists such as http://www.compuware.com/services/1392_ENG_HTML.htm and pessimists such as http://groups.google.ca/groups?hl=en&lr=&ie=UTF-8&selm=3F1C92E0.2F1A9D6E%40yahoo.com&rnum=1

I'm intrigued by the 'Sponsored Links' for that Google article...

another canuck
Thursday, July 24, 2003

Oh... Yeah. OK. Maybe I added a zero. Sorry.

www.marktaw.com
Thursday, July 24, 2003

Office space in Bangalore is cheaper than Mumbai; and as Walter Rumsby knows the Mumbai IT sector is located in a special suburb.

I'm in Sri Lanka now buying land to build a house and prices for land vary from $6-$7 a square foot in the  country to $300 a square foot in central Colombo. Commuting is a nightmare which explains the difference.

There are also massive differences in land prices in the States. A colleague of mine has got a house on 3 acres in Long Island; says it's worth about a quarter of a million.  That's a hell of a lot cheaper than land in a suburb of Colombo.

Stephen Jones
Thursday, July 24, 2003

ok marktaw, no problem, all is forgiven

not fooled
Thursday, July 24, 2003

A quick way to put a stake in this:

"Remember how Japan took all our manufacturing jobs, driving unemployment to 25% and permenanently improverishing the country?"

Jason McCullough
Thursday, July 24, 2003

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