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An outsourcing/offshoring opinion article

from a programmer.

Outsourcing and Offshore Coders: Good or Evil?
By Adam Nelson
http://www.codeproject.com/gen/work/offshore.asp

While I haven't thoroughly read this article yet (just skimmed it and saved it to my hard disk), I did read around 30 of the 393 commentary posts.

Even though I don't agree with many of the author's beliefs/opinions, I thought he did a good job because he didn't just whip up an opinion piece and throw it on the web.  He also spent a lot of time responding to people who took the time to post comments on the article he wrote.  Imo, this fact along with author's stance (he seems to be a pro multi-national corporation advocate) is about the only thing that differentiates this particular outsourcing/offshoring opinion article from say a similar recent posting that was made at the Slashdot web site where over a 1000 people responded.

Anyway, I posted this link here for those folks who are interested in reading more about this topic.

One Programmer's Opinion
Friday, November 21, 2003

Interesting article, but I believe it a bit utopian. We are a planet of people who want to be the "winners."  His example of New Jersey is the reason many companies do not tell anyone they are using off-shore resources.  Or they keep it secret from the staff (at least as long as possible.)  Avoid the bad PR, by just not mentioning it.

First, everyone striking out on your own, would be equivalent to farming.  Just as it is impractical to grow my own wheat, how many Office products can be consumed.  "Well, if yours is better…", someone else's will be worse and the net result is one job replaces one job.  ZERO sum gain. 

Even if you have the "one sure thing"  it will only last as long as it takes the $12/hour programmer to make a copy, and distribute it at 1/10 the cost.  Negative gain.

Then there is the fallacy that is constantly repeated and that is that we are in a competition with India, Russia, Costa Rica, etc.  No we are not.  A competition is like a race.  We are all on the same track, running the same course, and trying to figure a way to overcome the course.  How many people would consider the 100-yard dash a fair race if the team from India got to run a flat track, and the team from England had to run a 40 degree incline?

Third world/Emerging nations have learned a lot.  First, competition with the US can be one-way.  For example, an company from India, bidding on a state contract (like NJ), gets additional points from being a minority.  That they are going to off-shore the entire deal is not considered.  Indian's in the US get minority status.  (+1 for India).  A NJ company attempting to off shore work from India cannot.  In order to bid in India, you have to prove (as the bidder) that such resources are not available locally.  If anyone bids against you, it is obvious your claim is without merit.  (+100 for India)

Well then, let's just move to India.  …Sorry.  India does not have an open immigration policy.  Much like bidding, you have to be hired by an Indian company (or a company with a base in India), who must provide one of two pieces of information.  Either, your skills are unique and cannot be found in India, or you are providing the expertise needed to import the work to India.  (Important note:  Cannot be found in India, means anywhere in the entire country, with such few exceptions that it falls on the ridiculous.)

But let's just say you manage to make it through all these requirements.  All you need to is get a permit.  Ask anyone who has ever attempted it, without subbing the work to an Indian company, and this process makes the DMV look like Valhalla.  It is a process that is designed to prevent foreign competition within the country.

Emerging nations want our business.  They don't want our help and they don't want to help us.  The street is very much one way.  It is American arrogance that believes that because we have rules about how companies compete, everyone does.  They do, but they are in most part protectionist.    His analogy about Steel Tariffs was correct, but misinterpreted. 

When we attempted to stop steel from being dumped, it was not just tariffs that increased the price, the companies did too.  They wanted American businesses to put pressure on political leaders to stop interfering.  Once we lose all ability to produce steel, do you really believe another country will look out for our best interests?  What happens when an Anti-American leadership takes over India, or the countries we now import steel from decide they don't like our policies toward…woman in the workplace?

It all falls back to the claim that protectionists are "bad".  I will agree.  If they stop, we should too.  But until they do. Until it is as easy for me to get a job in Costa Rica, India, or Russia, this is an exercise in utopian  principles.

Alan Wilson
Friday, November 21, 2003

Alan asks: Once we lose all ability to produce steel, do you really believe another country will look out for our best interests?

Yes.  Because they earn valuable dollars for it.

Foolish Jordan
Friday, November 21, 2003

Nope - that would be a reason to look out for their best interest. 

If XYZ country is the maker of all our steel and they decide they now want to be the maker of all our automobiles, just  cut steel costs to their own auto companies by 80%. 

We would still need to buy steel, our price did not go up, but we are losing the auto industry.

Alan Wilson
Friday, November 21, 2003

Allan, you speak on behalf of some unknown entity and call it we.

100yrs ago, the US did not have an auto industry. Why is it now suddenly critical to the survival of mankind?

If the US auto industry dies because it can't compete with cheap imports, then good.  It means every household is now paying less per car. Any amount of subsidy is free money from whatever govt is subsidising their industry.

Folk will have more $$ to spend on other purchases. This boosts other sections of the economy.

Sure, people will lose jobs, and some businesses will go bankrupt, but that's life. If we wanted to protect jobs at all costs, we would still all be cruising around on horses and horses drawn carriages.

IIRC, 17 companies went bust within the first month of Stephenson opening his rail link between Liverpool and Manchester.

Tapiwa
Friday, November 21, 2003

Another story on washingtontimes saying that R&D work is also moving to India

http://www.washtimes.com/technology/reed.htm

john
Friday, November 21, 2003

The article is a pretentious load of crap that fits the old paradigm of seeking to boost the author's own standing by imputing problems to defeciencies in those affected.

Most of it reads as if it was lifted from JOS. So it's not only bankrupt and pretentious; it's also dishonest.

Please don't post this type of crap to JOS.

me
Friday, November 21, 2003

Tapiwa - you make it sound that cheaper is always in our best interest.  If America could not compete because our auto industry was old, lacked ideas, or was inefficient, I would also agree. 

But what if, the island of Salamasond  produced steel so cheaply that they sold it for $.01/ton.  Soon, they would become the only resource for steel.  They decide to get into the auto business.  So, they start selling it to their auto companies for $.0001/ton. Would you say the auto industry had failed?  That GM should figure out a way to make their cars 100 times cheaper to compete?

The problem with conceptual arguments are they imply all things are equal.  At $100/oz, everyone would become Steel barons.  But the problem is that the process of become a manufacturer takes years.  In that time we would all be driving Salamas.  At the same time, the sales in autos would be used to buy out anyone who attempted to compete.

If in doubt, consider diamonds.  They are possible the most artificially controlled substance on the planet.  Their cost having nothing to do with the creation or mining, but control of all outlets.

Alan Wilson
Friday, November 21, 2003

Alan,

Here's three reasons why countries keep trading (there are others):

1) Fear. No country only exports. They all import as well. So if they shut off their exports, all the other countries will stop exporting to them in retaliation which will cripple them.

2) Greed. Foreign money coming into your country is really good.

3) Enlightened self interest. Read up on "comparative advantage".

Bill Tomlinson
Friday, November 21, 2003

Is software fundamentally different from other goods that have import tariffs?  It's possible to imagine a scenario where US Customs would enforce criminal penalties against those who didn't pay tariffs on import of intellectual property.

Obviously, this couldn't be strictly enforced, but it would be dangerous for a legit company to hire overseas remote workers without it appearing on their financials somehow.  The tariff would be a markup on salaries paid to foreign workers or contractors.

I'm not making an argument for protectionism, but I am curious as to why software is viewed as an exception to protectionist policy, given the large amount of potential job losses...

Bill Carlson
Friday, November 21, 2003

My argument against this article is that it's so one-sided.  He doesn't have the objectivity to provide a scientific article where he actually knows what he's talking about.  There are reasons to restrict free trade between nations.  Nations go to war and transportation occasionally suffers catastrophes.  There is a large case to not be dependent on other geographic regions.  So you must find the balance on benefitting from trade, but ensuring you don't suffer certain levels of risk.

There are regions that actually can supply things as cheaply as Alan's $.01/ton steel.  The material is oil.  And we see the cost of dependence.  Another example is our dependence on drugs, which is artificially scarce so it imprisons many citizens and leads to additional crime.

I am not arguing pro/con anything, except maybe against economic extremism.

anonymous
Friday, November 21, 2003

The diamond example is pretty good, actually. Just search for artificial diamonds on Google.

http://www.wired.com/wired/archive/11.09/diamond.html

There's the first link.


Friday, November 21, 2003

There are competitive advantages (e.g., large capitalization, higher technological and labor skills) and comparative advantages (e.g., access to natural resources, low cost labor). When someone states that "competition is not fair" should take both into account. Protectionism will keep costs higher than necessary for the customers and will stifle innovation, because companies won't have the need to introduce changes if their position in the market is not challenged.

Then you get things like Brazil's computer industry or certain agricultural sectors in Europe and USA, which make costs much higher than necessary. I certainly prefer to see my taxes used in a much more useful way (e.g., better access to education and health) rather than supporting inefficient producers.

uncronopio
Friday, November 21, 2003

You could say that offshoring stifles innovation -- US workers can not work for $8/day because the living expenses are too high in the US. Shoot, that's not even enough to pay for your gas and auto insurance. So the result of IP workers able to accept $8/day is to remove the US from the field. That means less competition and poorer products.

Product improvements require *healthy* competition. Healthy competition is where there is a level playing field. This is not that situation. In this situation, pretectionism would level the playing field and increase competition and improve the quality of products.

-
Friday, November 21, 2003

uncronopio,

Dozens of studies ovwer the decades have shown that american farmers are by far the most productive in the world. So when you say price supports are supporting inefficient production, I wonder what you are comparing it to? Name one country, just one, that has more efficient farm production that the US.

-
Friday, November 21, 2003

http://www.purdue.edu/UNS/html4ever/9703.Martin.productivity.html

"Since World War II, farm labor productivity has increased over sevenfold," says Marshall Martin, professor and associate head of the Department of Agricultural Economics at Purdue University. "In contrast, labor productivity in the nonfarm business sector during the same time period has increased only 2.6 fold."

--

The fact of the matter is that American farm productivity is so massive, so overwhelming, especially compared to other segments of the economy, such is IT which have had  zero productivity gains, that there is a massive glut of product being created -- far more than can be consumed in the US. This is good for the world because foreign countries with inefficient farming practices would starve if not for the possibility to buy American farm products, which we have kindly subsidized in order to make them affordable to poor folks overseas. For Nigeria or Taiwan to grow their own foodstuffs would colt htem many times more than the cost to import from the US.

-
Friday, November 21, 2003

New Zealand's dairy industry is more efficient and  competitive than USA's.
Fruit and Salmon producer's in Chile are more efficient.

I could keep going if you want...

uncronopio
Friday, November 21, 2003

Productive needs to be defined on terms of inputs and costs of production. If you produce large quantities but do require  massive amounts of inputs, then your efficiency is very low. For example, if your cows are very big, but require lots of food, their feeding efficiency is crap, so you won't make much money with them.  If you were efficient why would you require any subsidies? New Zealand dairy farmers are not subsidised.

uncronopio
Friday, November 21, 2003

...and they dominate the milk world market (pressed post too early) and have high living standards.

uncronopio
Friday, November 21, 2003

Most American farm subsidies don't make food cheaper ... they are designed to make food more expensive.  The subsidies aren't used to lower the cost of production; they are used to buy produce from the farmers at artificially high prices, or to pay them to burn crops or get rid of livestock, in order to keep supply down and prices up.

T. Norman
Friday, November 21, 2003

> Protectionism will keep costs higher than necessary for the customers and will stifle innovation, because companies won't have the need to introduce changes if their position in the market is not challenged.

This is not necessarily true. Countries in South America have dreadful ecomomies precisely because they believed the globalisation rubbish in the early 1990's and removed all protections for their economies, which are now a joke.

In contrast, China maintained very strict protection and thrived.

From the office of ...
Friday, November 21, 2003

Full protectionism is often better than the one-sided protectionism that takes place in these so-called "free trade" agreements.  Goods are free to move from country to country, but the workers who produced the goods are almost always stuck in their country of citizenship.

With protectionism of labor in place, work flows to the places where it is more efficient on a per dollar basis, even though it is often much less efficient on a per person per day basis.  When a country loses jobs because of the cheap labor elsewhere, the workers cannot move to the countries where the work is.  The result is a set of unemployed individuals who don't produce anything until and unless they are able to find other jobs, which may not be possible for many of them in an economy that was hit by a massive loss of jobs.

Much of the offshoring of manufacturing, programming, and other services would not have happened if there wasn't protectionism in place restricting who can work in which country.  Large numbers of workers would not be willing to accept extremely low wages if they could freely move to another country that pays five times as much.  And offshoring largely depends on access to large numbers of cheap workers.

But with a free market for goods AND labor, the work would flow to places where it is more efficient per person per day, because wages could not be artificially depressed by taking advantage of a captive workforce.

T. Norman
Friday, November 21, 2003

Are you guys aware of the fact that the Freedom to Farm Act eliminated government price supports on American farm products?

What are your sources of information? The World Socialist Worker's News?

The US has no tarrifs on almos all agricultural products. This is very very different from the situation in almost every other country.

I think you guys have an understanding of the situation that is pretty much the opposite of reality.

-
Friday, November 21, 2003

T Norman,

Do you have information on farmers being paid to burn crops any time within the last 15 years? Not saying it's not happening, but I've never seen it or heard of anyone who has done it, though I did study in school that it was done many years ago.

-
Friday, November 21, 2003

Here's one where Indian farmers are having the crops burned agaidnst their will by Indian Government Stormtroopers who are shills for the multinationals:

http://www.kisanwatch.org/eng/special_reports/spr_bt_ctn1.htm

And here's one where farmers in the US burn to improve soil conditions (the soot makes it more alkaline and it kills weed seeds), mimicking the natural order of prarie fires:

http://www.northidahofarmers.org/factsvsmyths.htm

But information about uncle sam paying farmers to burn crops in order to destroy them and thus create artificial shortages (that's what your talking about right?), just isn't something I can find references too, even though I do hear about this all teh time from Racical Leftists, Anarcists and One-World-Order Advocates.

-
Friday, November 21, 2003

unc,

It's absolutely true that salmon fishing is more productive in Chile where they have no environmental regulation  than in the US.

Here's some information about the excessive salmon regulation in the US salmon industry:

http://www.juneauempire.com/stories/060202/sta_fishindustry.shtml

Note that there are currently NO price supports for salmon, though fishermen are asking for them since they are going broke trying to compete with other countries like Chile that don't have a problem with trashing the environment.

I hadn't though of fishing as being a form of farming. US fishing is definitely a lot less efficient than that of most other nations due to all teh environmental and other regulations.

Do you have information on price supports for US fruit producers, your other information? I find no evidence that there are US price supports for US fruit producers.

-
Friday, November 21, 2003

"This is not necessarily true. Countries in South America have dreadful economies precisely because they believed the globalisation rubbish in the early 1990's and removed all protections for their economies, which are now a joke."

"In contrast, China maintained very strict protection and thrived."

Countries in South America do not owe their economic situation to free trade, but to political instability, common place corruption and reliance on commodities. In fact, they have had "dreadful economies" for much longer than any free trade agreement or since opened to international markets. Many countries tried strict protection, but most of them do not have China's negotiation muscle (and market size). The USA's economy is much more dependent on trade, and if it decides to close will certainly face retaliation from other countries that will close to imports from the USA.

While it is truth that some of USA's competitors do not have the same level of environmental regulations, they are coming into place (slowly), in many cases as part of the conditions in free trade agreements.

Incidentally, I normally include agriculture, forestry and fisheries as one package in this type of discussions, because they usually have similar structures and even are assigned to the same ministry (like here in Australia).

It is interesting that some people in the forum ask for a level playing field. Some (many?) programmers offshore do not have access to the quality of infrastructure, books, transportations, etc that programmers in the USA take for granted, and I don't see them here whining about level fields.

As I mentioned in another thread, programmers never cared about the consequences of their work, reducing staffing in other sectors of the economy or even for allowing off-shoring to succeed. Programmers stayed silent while weren't affected, so shouldn't expect much sympathy from the rest of the population.

uncronopio
Saturday, November 22, 2003

I don't have any information on support to fruit producers in the USA, and I think they are not subsidised. I believe that they do not face that strong competition from Chile and New Zealand (with lower production but higher transportation costs) because of seasonality: the latter are in the Southern Hemisphere, with opposite production seasons.

uncronopio
Saturday, November 22, 2003

The one thing that farmers in the third world want is to be able to "inefficiently" produce their own food instead of being undercut by US and EU subsidized farmers.

The export subsidies are a mess; I can buy Danish butter cheaper than New Zealand butter, which as anyone who knows the comparative costs will tell you is nonsense.

American steel is a mess because it is inefficient. We are not dealing with dumping here and the WTO has decided that there is no justification for the tariffs (the EU is in the process of drawing up a WTO approved multi-billion packet of retaliatory tariffs aimed at hurting states where the republicans won mariginally in the last election).

I worked in the steel industry in Saudi from 1998-1999. We sent a load of trainees over to the US and Mexico. The general opinion was that the organization in Monterey was much more efficient than the American one.

Wage rates have little to do with the steel industry's competiveness. There is a million dollar or higher capital debt for each worker at the Saudi plant. The three main costs are the start up cost, electricity or  gas (which explains why you have steel factories in Saudi) and raw materials (a country with a lot of scrap such as the US is actually in a very strong position here).

The most important figure is the yield, which is the percentage of steel that can be used the first time around and in Japan this gets to 98% or 99%, which explains how Japan has a steel industry. There is also a lot of profit to be made in speciality steels.

And finally there is the penalty of being the first. Long standing plants will be less efficient than new ones. Incidentally in terms of efficiency the US is well ahead of the ex-USSR or Chna, which have absolutely horrendous yields, often below 50%. Check up Encarta or Brittanica for the latest figures.

Stephen Jones
Saturday, November 22, 2003

Farm Subsidy Payments to Fortune 500 Companies vs. the Average Payment to the Bottom 80 Percent of Farm Subsidy Recipients Nationally (1996 - 2000)

http://www.ewg.org/farm/subsidies/fortune500.php


Saturday, November 22, 2003

uncronopio, the fact remains that the South American countries embraced free trade and opened their markets exactly as they were told to do, and their fortunes declined relative to other economies that refused to do this.

From the office of ...
Saturday, November 22, 2003

Depends which country; Chile seemed to do OK (although the changeover in the 70's was literally brutal). Argentina collapsed though.

In general rapid free marketism as a development strategy depends on their being a large number of losers to buttress the smaller number of winners.

Stephen Jones
Saturday, November 22, 2003

As a community we have power. When a corporate takes their business - our jobs - offshore we can boycott them. Remember how Adobe vs Sklyarov buckled, it was quick and easy.

Between us we generate, handle and turnover billion$ - don't let the greedy corps steal our jobs and exploit the 3rd world.

Marx
Saturday, November 22, 2003

Dear Marx,
                What a joke! Why on earth should Japanese, EU and South American programmers boycott a product to favour Americans over Indians or Russians? Out of sympathy for Bush's foreign policy perhaps?

              Perhaps we should all start to boycott companies that use American programmers to keep jobs local?

               

Stephen Jones
Sunday, November 23, 2003

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