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Study Claims Offshoring Doesn't Cost US Jobs

Posted by kdawson on Thu Jan 11, 2007 01:55 PM
from the uh-huh dept.
SwashbucklingCowboy writes "Infoworld has an article up about a survey by the Software & Information Industry Association claiming that offshoring doesn't cost American jobs. The article quotes the executive director of the SIIA as saying, '[Offshoring] was used almost entirely as a form of expansion, not as a replacement.' Well, if a job is created elsewhere that could have been created in the US, isn't that a job lost?"
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  • who's saying that? (Score:5, Insightful)

    by User 956 (568564) on Thursday January 11 2007, @01:58PM (#17560302) Homepage
    Well, if a job is created elsewhere that could have been created in the US, isn't that a job lost?

    Who's saying the job could have been created in the U.S.?
    • by Jason Earl (1894) on Thursday January 11 2007, @02:04PM (#17560460) Homepage

      Everyone knows that the only jobs that count are the jobs in the United States. The rest of the folks in the world don't need jobs, they just need government cheese.

      • Not relevant. (Score:5, Insightful)

        by Kadin2048 (468275) <slashdot@kadin.xoxy@net> on Thursday January 11 2007, @02:37PM (#17561210) Homepage Journal
        No, but U.S. workers, and more importantly voters, don't really care. The purpose of the U.S. government is to do what's best for its citizens; if that also helps other people abroad, then that's great -- bonus! If not, they can complain to their own government. Countries exist for the mutual benefit of the governed; if a government is doing something that's fundamentally disadvantageous for its own people, something is wrong.

        Sacrificing jobs in the United States in order to employ the rest of the world isn't something most people here are prepared to do, nor should they.
          • Re:Not relevant. (Score:5, Interesting)

            by Vicissidude (878310) on Thursday January 11 2007, @05:20PM (#17564540)
            Most free traders label everyone who doesn't agree with them protectionist, even though the label doesn't always fit. Lou Dobbs and everyone for fair trade do not want to cut off trade completely. They just want fair protections for the working class, which isn't an unreasonable request.

            Free trade never has existed. And it probably never will exist. That's because corporations have built in their own fair protections for their own benefit: copyright, patent, and intellectual property laws. In all the talk and bluster regarding free trade, people like you never ever mention these protectionist laws that benefit the big corporations.

            Big businesses are just as protectionist as everyone else. They just don't want anyone to see or point out their hypocrisy when they sing the praises of free trade and deride the rest of us for the same protectionism that they practice.
          • by hackstraw (262471) * on Thursday January 11 2007, @03:15PM (#17562098) Homepage
            Competition makes everyone better off - just look at the progress for the last century and it becomes abundantly clear.

            The problem is that for me to be "competative" to a multi-national corporation as a worker I must forgo the progress of the last century and my lifetime.

            I'm more "competitive" when I demand lower wages, lower my standard of living, lower my need for healthcare, lower my need for a clean environment, lower my expectations to talk with someone who actually knows english, etc, etc.

            Unfortunately, there is no right answer here. Outsourcing looks great on paper for the bottom line. It seems to be failing for customer support, helpdesks, and call centers because even if you get a hold of a person that speaks good english and can help you with your problem, at least here in the USA, I still feel cheated for some reason, and the liklihood that you get a person that can speak good english and help you with your problem is unlikely at best.

            Manufacturing simply makes sense for many people. It means cheaper goods for us as consumers and it moves a ton of the nastyness of manufacturing out of our back yard. None of the pollution, or any of that jazz.

            I personally have more issues with the hiring of illegals here in the us than outsourcing.

                • by JesseMcDonald (536341) * on Thursday January 11 2007, @09:16PM (#17567528) Homepage

                  I realize that those suffering from such extreme paranoia are often unable to consider things rationally, but for the sake of any other readers I submit the following:

                  1. Division of labour and capital investment are the only way the production of necessities can possibly scale to support the world's current population. The elimination of the social division of labour would condemn a significant fraction of that population to death by starvation in short order, to say nothing of the decline in general standards of living. Even if you allow for exchange within family groups (which your "philosophy" of complete self-sufficiency did not) there are not enough resources to support that level of population in the absence of capital investments. Remember that without division of labour you have no technology to speak of, and individual food production requires far more work for a given level of output than group production, technology or no.
                  2. Human ingenuity is not infinite in abundance. It is limited by both time and scarcity of individual experiences (incidently one of the reasons for division of labour). As such human ingenuity readily commands a non-zero price.
                  3. Your support of complete self-sufficiency stands in contradiction to your sig (condemning capitalism but supporting democracy). If you can't trust others you should oppose democracy just as much as capitalism, and probably more -- democracy legitimizes the mob, leaving them less inhibited about interfering with you, whereas a basic aspect of capitalism is strong support for individual choice. No true capitalist would attempt to aggress against you; your philosophy may be fundamentally stupid, but it remains your right to follow it. The same cannot be said for the citizens or officers of a democratic government.
    • Re: (Score:3, Insightful)

      Looking beyond, isn't that the same argument the **AA uses regarding theft?

      "If you download it from someone, that's a sale we aren't making."
    • Re: (Score:3, Informative)

      I remember awhile back reading an article about how IBM was opening a new center in India and "creating" 1000 new jobs, and IN A COMPLETELY UNRELATED MOVE closing a center in the U.S., where they would be cutting 1000 jobs.

      The report did correctly state at least one factor in outsourcing: "Seventy-three percent of respondents report a positive impact on profits".
    • Re: (Score:3, Insightful)

      Do you work for the RIAA?

      Just curious....

      They seem to think the same thing about sales...
      • Re: (Score:3, Informative)

        "Also, there's no correlation between the loss of American jobs and offshoring. In fact, far more offshoring went on during the 90's than the 2000's and nobody can say the US had fewer jobs afterwards."

        Um, bullshit. As someone who was working corporate during that time, many jobs were 'let' and no, those jobs did not come back home at any time. So, those jobs were lost. Saw it with my own eyes.

        "Somewhere in there it trickles down, but you can take an economics class to learn about that."

        That's an affir
        • Re: (Score:3, Insightful)

          The GP didn't say that the same jobs were created; I think the statement was that there are more jobs now than there were then.

          You've hinted at the issue that has been around for quite some time, and that will remain: all jobs are not equal. That is, if I lose 100 architect jobs, but gain back 500 retail jobs, I have a net change of +400 jobs; but that says nothing about the real value of those jobs, nor about the wealth-generating ability of those jobs.

          Personally I don't like that the (US) economy is shi

      • Personally I'm not sure what my opinion is on the free-trade vs. job-protection continuum, but since you seem to have an opinion, perhaps you can give you thoughts on a question that's been bugging me for a while.

        What, exactly, is the long-term, steady-state outcome of globalization going to look like for the U.S.? I mean, it doesn't seem like what we're doing right now is really sustainable. Massive current-account deficit (trade deficit), loss of manufacturing capacity and jobs in exchange for service-sector jobs, etc. I keep hearing people say that "the future is the service sector," but forgive me if I'm econometrically challenged, but I'm not quite sure how that's supposed to work, long term.

        If all we have left is service sector jobs, and we're basically paying each other to do stuff, while at the same time importing all our manufactured goods from abroad and exporting little to nothing (or at least less than we're importing), how do we keep going? It seems like that's a ticket to economic collapse. There's no way that people here can compete on wages with folks in Asia and other parts of the Third World, just because of the cost of living, so eventually all the jobs that can be exported and offshored, will be. The only jobs left are ones that have to be done in person: doctors, lawyers, truck drivers, waiters, etc. But they're all selling their services to other people in this country, so in the long run, you're still hemorrhaging cash.

        The line I keep hearing from politicans is that, somehow, "American innovation" is going to keep us so far ahead of the rest of the world technologically (apparently forever) that we'll be able to sustain this lifestyle. But I don't see that happening. And frankly, the basis for it seems suspiciously ethnocentric/racist. Now, I don't particularly care about ethnocentrism or racism per se, but in this case I think it's leading to a fallacious assumption, namely that Americans are somehow naturally superior to the rest of the world, and that we'll naturally figure out a way to stay on top, even when we're driving cars made in Japan using gasoline from Saudi Arabia and watching DVDs made in Malaysia on players produced in the PRC. I just don't buy it. Our educational system isn't that good, and a country filled with unemployed people isn't exactly going to roll out the welcome mat to immigrants, no matter how skilled they are (particularly if they're skilled, in fact). That we've managed to maintain the lead in technological development over the past 100 years is remarkable, but there were also two World Wars in there to spur development (not to mention razing much of Europe), plus waves of economic expansion and immigration, and a whole lot of luck. It's enough to make a nation dangerously cocky, and as an American, that worries the hell out of me.

        So what exactly does a first-world country that's gotten accustomed to a very high standard of living do, in the brave new world of free trade? I'm just not sure I see a way out through that, which doesn't involve either a sinking average quality of life, or hyperinflation followed by economic collapse.
        • by radtea (464814) on Thursday January 11 2007, @04:35PM (#17563824)
          What, exactly, is the long-term, steady-state outcome of globalization going to look like for the U.S.?

          First off, there is no long-term stability in the world economy, period. It is a system of dynamic equilibrium (we hope!) There may be a decade here or there of moderately stable conditions, usually ones of comfortable growth. The last time that happened was in the 50's and early 60's, which started to stagnate in the late '60's and came unhinged in the early '70's between the unpegging of the U.S. dollar from gold, and the first oil shock.

          That said, the U.S. position relative to the rest of the world is likely to decline in the next few decades as the rest of the world catches up. This is a good thing, certainly for the rest of the world. Wealth for Indians does not mean poverty for Americans, UNLESS Americans cease to have anything of value to offer the world. Given the dynamic nature of parts of the American market (leaving out heavily subsidized and protected industries like farming) it is likely that there will continue to be value that Americans can provide the rest of the world. It may not be sufficient to support your enormous parasite load (litigation lawyers) but it should be enough to keep you from starving.

          The squeeze for the U.S. is less from globalization as such than from the role of the dollar as the world currency. This is what is supporting the current account deficit. Because everyone wants a significant fraction of their wealth in dollars, everyone is happy selling goods to the U.S. in return for those dollars. In the short term this is ok--I once heard it described as "they send us TVs and cars and we send them little pieces of paper with 'In God We Trust' written on them". But it will maintain an artificially high value for the U.S. currency, which distorts the American economy by, amongst other things, encouraging outsourcing by making foreign workers artificially cheap.

          This is not a stable situation in the long term. Galbraith apparently once suggested the creation of an artifical unit of international currency, not unlike the Euro, to protect any one nation from this kind of thing (at the time it was the post-war British economy that was being battered by the same phenomenon, as everyone wanted pounds sterling but no one wanted British-made goods.) Encouraging an orderly transition to Euros as the world currency would help the U.S., but it would also be a blow to some of the less savoury aspects of America's self-image.

          Worst case, at some point American production falls so low that no one wants to buy anything from you any more (and protectionists step in to prevent the purchase of American land and assets by foreigners.) In that case we all get to experience a run on the dollar, and a global economic realignment. Who knows what the world will look like after that, but it won't look much like what we have now. Best case, the flexibility and robustness of the international currency system keeps things more-or-less stable, and America becomes one of the many wealthy nations around the world, but not the singular power it is now.

          The one thing we do know: free trade is almost always better for everyone than protectionism, but free movement of capital and goods must go alongside free movement of people to maximize the benefits and minimize the costs. Otherwise local populations can be held hostage to corporations and governments who can move capital in and out of regions, but the people cannot migrate to improve their own lot. Money should not have freedoms that people do not.

          • Re:Protectionism (Score:4, Insightful)

            by thePowerOfGrayskull (905905) on Thursday January 11 2007, @03:20PM (#17562244) Homepage Journal
            Silly person. It's no longer fashionable to look out for your own interests. Don't you know that in the religion of Everybody is More Important than Me, you must be willing to sacrifice your money, your possessions, and your very life for the stranger across the world or across the street?

            Hell with that. I'm against offshoring for two reasons:

            1. In my own extensive experience with work coming back from offshore, it's crap. Period. Anything that we save in up-front cost, we have to pay down the line when the the bugs are getting fixed.

            2. I am of the unpopular belief that there's nothing wrong with looking out for the self interest of my family, my friends, and myself. Our lives and livelihoods are more important to me than some stranger I've never met and never will meet. And yes, if it came to a choice between me starving, and that stranger starving, I'd pick the stranger every time. I place value on my own life above others -- it's called survival, though these days we're supposed to call it selfish.

            /rant.

          • Re:Protectionism (Score:5, Insightful)

            by Vicissidude (878310) on Thursday January 11 2007, @03:28PM (#17562430)
            What you are describing, in economic terms, is leakage.

            In Keynesian economics, there is a model called the Injection-Leakage Model [amosweb.com] that describes the circular flow of production, income, and resources between producers and consumers within a national economy.

            In short, you work for a business, which pays you for making goods or services. You then use your money to then buy from other businesses. There is a circular flow of money.

            Investment, government purchases, and exports inject money into the system, making more money available for everyone in the economy. Savings, taxes, and money spent overseas come out in the form of leakage, reducing the amount of money in the system for everyone.

            Offshoring is just another form of leakage. And no, it is not good.
  • by HangingChad (677530) on Thursday January 11 2007, @01:58PM (#17560308) Homepage

    This message was brought to you by stylusinc.com. Tank you for letting us helping you!

  • by stevew (4845) on Thursday January 11 2007, @01:59PM (#17560344) Journal
    Well - that may be what the study says, but that simply doesn't jive with Silicon Valley's experience. The valley (read US Semiconductor Industry) has never really recovered from the Dot-Bomb downturn. We lost around 200K jobs here in Silicon Valley after the downturn, and they have never really come back. What happened was Bangalore.

    Just to highlight this - there was an entire division of Intel that was closed down and re-opened in India a few years ago. You could relocate to India or loose your job. Real simple choice. Speak Hindi??

    • by the_humeister (922869) on Thursday January 11 2007, @02:08PM (#17560580)
      No, what really happened were idiots with too much money funding stupid ideas just because it was related to the internet somehow. If more rational heads had prevailed, those 200k jobs that you guys lost wouldn't have been there in the first place.
      • None of those "little victories" are victories. They're all substandard pay jobs at smaller companies.
        • Re: (Score:3, Insightful)

          Okay, sorry, I probably shouldn't have made two of the three examples dead-end jobs.

          I was just trying to make the point that the efficiency gain in shifting to Bangalore -- to the extent it exists -- simply frees up those Americans to satisfy some other demand. And, that the new jobs will come in bits and pieces that don't make the news.
          • And invariably that "other demand" will pay less and have fewer benefits, thus resulting in a net loss to the individual involved. This is accomplished by keeping the person out of work until they are bankrupt and forced to take the next offer regardless of what it is. That's how come 1/6th of America no longer has health insurance, retirement benefits, or paid family leave, and why we have HALF the vacation time on average compared to Europe.

            "frees up those Americans to satisfy some other demand." is just code for "Break Americans out of the middle class and put them into poverty".
            • Re: (Score:3, Insightful)

              And invariably that "other demand" will pay less and have fewer benefits, thus resulting in a net loss to the individual involved.

              Marxist (not a smear -- that's his handle), do you think it would be fair to say that since 1900 in America over 100 million jobs have been "destroyed" by outsourcing and technology? Such as horse trainers, carriage makers, textile workers, etc. Would you say that the forces responsible for that caused less real compensation?

              This is accomplished by keeping the person out of wor
              • Marxist (not a smear -- that's his handle), do you think it would be fair to say that since 1900 in America over 100 million jobs have been "destroyed" by outsourcing and technology?

                By technology before 1950, and by outsourcing after 1963, yes. I make that distinction of periods of time for a reason- there's a SIGNIFICANT difference in jobs created by technology that fueled the expansion of the middle class before 1963, and outsourcing that has destroyed the middle class since then.

                Such as horse train
              • Re: (Score:3, Insightful)

                "do you think it would be fair to say that since 1900 in America over 100 million jobs have been "destroyed" by outsourcing and technology? Such as horse trainers, carriage makers, textile workers, etc."

                You make it sound so logical. You know, using two jobs that occurred when there was no outsourcing and which are of virtually no current use.

                Unfortunately the local mechanic and auto factory worker who replaced them are now being outsourced out of existence along with the textile worker. So, the answ
            • Europe isn't so hot now.
              High unemployment, higher taxes and social programs pushing their governments into massive debt.
      • Insightful?! (Score:5, Insightful)

        by Travoltus (110240) on Thursday January 11 2007, @02:35PM (#17561166) Journal
        UbuntuDupe says that because some high paying IT jobs were lost overseas and were replaced by minimum wage or barely above minimum wage service jobs, we've scored a victory in the jobs arena?

        That's BS.

        That's called underemployment - the total reduction of an educated, skilled workforce to menial labor which itself can be automated.

        That means a loss of buying power which means that in the end, those SAME Northwest LA drycleaners will be hurting for customers.
  • by JavaManJim (946878) on Thursday January 11 2007, @02:02PM (#17560414)
    I worked for a major retailer for 17 years, then Feb 18 2005 wammo! My job was replaced by offshoring. The person now at my desk is a figurehead (or project manager) for a programming group in Bangalore.

    Thanks,
    Jim
  • Flawed Logic (Score:5, Insightful)

    by jarrettwold2002 (601633) on Thursday January 11 2007, @02:02PM (#17560436)
    "Well, if a job is created elsewhere that could have been created in the US, isn't that a job lost?"

    Answer: No, the job isn't lost. There are a whole lot of jobs that could be created here, but aren't.

    That same flawed logic is what drives RIAA and the MPAA to massive lawsuits. "If a cd is not purchased that could have been purchased isn't that a lost sale?"

    No, no it's not.

    I'm not a fan of outsourcing, but at least use some logic here.
  • by bunions (970377) on Thursday January 11 2007, @02:04PM (#17560482)
    Sure, we lose a 40 hour/week programmer position to [india|china|vietnam|swaziland], but we generate 40 hours/week worth of bugfixing and project management work, so it's really a wash.
    • Re: (Score:3, Insightful)

      I wouldn't call it funny: in my (albeit limited) experience, the work generated at home can far exceeed the 40 hours of work taken offshore. I've had offshoring go so poorly that it was cheaper to redo all the work than it was to *sort through* it to salvage what was usable. Seriously.

      We paid off the tab, fired the offshoring firm, and automated better at home. We wound up reducing our on-shore costs by about the same amount we were hoping to with the offshoring, only we didn't have to pay the offshoring
  • Yeah but (Score:4, Insightful)

    by tsotha (720379) on Thursday January 11 2007, @02:05PM (#17560506)

    '[Offshoring] was used almost entirely as a form of expansion, not as a replacement.'

    Yeah but when the economy turns down, who are they gonna lay off, the guy in California making $50/hour or the guy in Mumbai making $9/hour? Sure, everyone's happy when things are humming along, but the cracks will show later.

  • by yagu (721525) * <.yayagu. .at. .gmail.com.> on Thursday January 11 2007, @02:09PM (#17560616) Journal

    From the article:

    [Offshoring] was used almost entirely as a form of expansion, not as a replacement," Thomas said.

    So, how is hiring someone out of the United States be it expansion or replacement anything but fewer jobs for the United States?!?

    Above was going to be my original post, but it's pretty clear many others beat me to the punch, and it's (in my opinion) also seemingly clear there is a lot of opinion and sentiment the article is talking out its private parts.

    It's interesting to me the ones making decisions to do the outsourcing are the ones funding the studies to somehow assuage their collective guilt. There's lots of empirical evidence jobs have been and continue to be lost through outsourcing.

  • by MikeRT (947531) on Thursday January 11 2007, @02:10PM (#17560634) Homepage
    The job market is a lot like demographics. When you cut the young out of the picture, you end up with a collapse over the horizon. Just as societies that have sub-replacement level birthrates get pummeled by other nations and immigrant groups that do in the long run, countries that cut off the supply of apprentice-level work to their young find that surprise, surprise, their young people never become older replacements for their field.

    The problem is very complex. It's a cross between expensive regulation that makes Americans expensive, lack of foresight being called an asset by many business people and just general lack of concern about the future.

    One day America will look around and say, there's so much opportunity for those that know where to go, but why aren't Americans filling these jobs? Then the displaced CS, EE, hard sciences, etc. students can say "you fuckers brought it on yourselves."

    There is also a realpolitik aspect of it that should scare the hell out of our leadership. Capitalists of all stripes love to harp on human rationality, but humans are **rationalizing** not **rational** beings. Nations go to war at times for completely idiotic, abundantly obviously suicidal reasons. Witness Gulf War I and Iraq. Who actually thought that Iraq wasn't going to get pummeled into oblivion militarily? Yet they did it anyway!

    See, the thing is, we might not always be allies with India, Pakistan, Taiwan, etc. We might actually end up at war with them in the future. It's slim, but who knows. The people who poo poo these concerns need to face up to the facts of history which is that nations have no permanent allies, only interests. One day, we may find that all of this regulation cost-imposed outsourcing has put America in dire threat of having not enough engineers to actually keep its economy strong, its military well-equipped, etc. We might find that some of these nations are also feeling stronger, and want to start doing things their way.
  • by JesseL (107722) on Thursday January 11 2007, @02:12PM (#17560690) Homepage Journal
    1. You do not own 'your' job.
    2. You are not entitled to a job.
    3. If someone else is willing to do the same work for less money than you do, too damn bad for you.
    4. Yes, it is a race to the bottom. No, that isn't necessarily a bad thing in the long run. When you want to fill a container you have to fill the bottom first.
    5. If you think you're better than the people 'your' job was outsourced to, prove it.

    /flame on
    • by TheGratefulNet (143330) on Thursday January 11 2007, @03:03PM (#17561834)
      let me take a wild guess.

      you're a young-ish kid, right? 20's or earl 30's tops?

      your arrogance of 'prove it' shows you have no compassion for your own fellow US workers.

      some day this 'stuff' will happen to YOU. and maybe then you'll "get it".

  • by Jerf (17166) on Thursday January 11 2007, @02:17PM (#17560786) Journal
    The idea that the economy is a zero-sum affair is so abundantly contradicted by readily available evidence that I find it almost amusing that it holds such sway over people.

    No, a job created elsewhere instead of here does not automatically mean that it "costs" us a job here. Jobs aren't a resource that is mined from the Earth, jobs are created by the economy. If that overseas person does well enough, it may "create" two jobs here.

    It's not even right to speak of jobs being "created"; a more appropriate verb might be funded. There's a "job" that involves you being my personal punchmonkey, but there's no way we're going to come to mutually beneficial agreement about that "job", so it isn't funded.

    But the flip side holds; the net impact could be more than one job "destroyed". It's not zero-sum.

    The whole thing is very complicated, because even if off-shoring a developer creates/funds five jobs over here, it may be the case that none of them are development work. Or one off-shored developer may well create three more development jobs, but not in Silicon Valley. (No, you don't get to say all three of those jobs are cleaning up after the off-shore guy; if off-shoring is a net negative value, the economy will eventually cut off the off-shoring, even if that means driving a particularly stubborn company that refuses to see it as a negative value bankrupt.)

    But one thing it's not is "zero-sum".

    (Even if you don't "like" capitalism, it's vital to come to understand what capital is and why capital produces more capital. Communism, and to a lesser extent socialism, can be seen as starting with the assumption the economy is a zero-sum game, and they end up creating a self-fulfilling prophecy on that front as in their zeal to make sure capital/wealth is evenly distributed, they destroy the mechanisms of capital/wealth creation. Actually, they end up with a negative-sum game. I'm not defending any particular instantiation of capitalism at this time, I'm just saying you damn well need to understand why it does what it does if you want to understand how economies work.)
  • Not necessarily (Score:3, Interesting)

    by proxima (165692) on Thursday January 11 2007, @02:18PM (#17560806)
    Well, if a job is created elsewhere that could have been created in the US, isn't that a job lost?

    Not necessarily. It's entirely conceivable that a firm cannot profitably expand operations and pay the wage required to hire a U.S. worker. However, the firm might be able to expand by hiring labor in another country (for a lower wage). In that case, the owners of the U.S. company (which often includes the company's own employees) would benefit. Keep in mind that foreign labor is not necessarily a perfect (or even very good) substitute for domestic labor.

    This is not a zero-sum game, and it's very easy to oversimplify matters. I'm not saying that U.S. workers are not or cannot be replaced by foreign workers, I'm just saying that it's possible that foreign workers could be employed where otherwise there would be no job.

    A similar argument has sometimes been made regarding investment outside of the U.S. After all, if you invest money in China, you're giving up investment in the U.S, right? Well, it's not that simple. One paper [ssrn.com], for example, claims that a 10% increase in foreign investment will lead to a 2.2% increase in domestic investment.

    The point is, outsourcing/offshoring is a complex issue. Since it's such a new phenomenon, it will take some time for researchers to come to a consensus about its general effects.
  • by gillbates (106458) on Thursday January 11 2007, @02:20PM (#17560862) Homepage Journal
    "[Offshoring] was used almost entirely as a form of expansion, not as a replacement," Thomas said.

    So, IOW, while we aren't actively replacing American workers, there are jobs that would otherwise have gone to American workers had they not offshored.

    In economics, this is called opportunity cost.

    The bottom line is the same, though: Instead of hiring American workers, they are paying foreign contractors

    Now on to my experience. I was part of a team doing embedded development for a consumer electronics platform. We were under tremendous time pressure to get the product to market, so management decided to offshore the development of drivers which I had been working on. When I handed over my drivers to the offshore team:

    • The driver was responding to interrupts, and used an interrupt driven model.
    • The framework for using DMA was setup.
    • The framework to work with the kernel's block specific device driver interface was setup.
    • I estimated that it would have taken me another 4 to 6 weeks to complete the driver. The only things I had left to do were to write the routines which actually transferred the data to and from the device.
    Now, 6 months and several deadlines go by, and we haven't heard anything regarding the drivers. Finally, we get our code back:
    • The interrupt code has been removed. The driver now works on a polling basis. Keep in mind how acceptable this would be in a real time system.
    • The DMA code has likewise been removed.
    • The driver doesn't interface at all with the kernel's specific device driver interface - instead, it uses a hack by which it talks to the block layer, bypassing the development track of every other said kind of device.
    • Oh, did I mention that the driver didn't work?
    So, not only are we now behind schedule, we ended up shipping a broken driver to the customer. Several of our customers missed the Christmas selling season because our code wasn't delivered in a timely manner; worse, it's now 6 months late and doesn't work.

    We had to spend several months of engineering time to debug/redo the driver to get it to a working state. Here's what offshoring cost my company:

    • We lost goodwill with almost all of our customers.
    • The licensing revenue for these customers was delayed by two quarters. We're lucky they paid us at all...
    • We lost the royalty revenues for the Christmas selling season for all our customers whose products were delayed.

    In the end, offshoring was a net loss for everyone involved:

    • There are our customers, who lost potential revenue.
    • There is the American engineer who didn't get hired.
    • There are the overseas engineers, who were paid substandard wages.
    • There is the company, who may lose marketshare because of the reputation damage...

    The only people who are getting rich from offshoring are the offshoring companies. The only reason why this fraud is allowed to continue is because it's hard to prosecute across national boundaries.

    And, if anyone is wondering, we later learned that the engineers who wrote the broken code were formerly Java developers who had no experience writing embedded code. My company would not ever have hired these guys had they interviewed with us, yet we saw no problem in contracting a critical part of product to them.

  • "Well, if a job is created elsewhere that could have been created in the US, isn't that a job lost?"

    No... No: This one goes up to eleven.
  • obligatory (Score:3, Funny)

    by fullphaser (939696) on Thursday January 11 2007, @02:24PM (#17560954) Homepage
    I for one welcome our new Indian Tech Support Overlords.
  • Another Example: (Score:5, Insightful)

    by RexRhino (769423) on Thursday January 11 2007, @02:43PM (#17561360)
    Take a DVD player. You can purchase a cheap DVD player for about $40. Now, the plastic and metal in the DVD is not very valuable, pretty much you are paying for the labor and logistics in manufacturing the DVD player.

    Now, the DVD player is made in China, and lets say the labor to make the DVD player cost about 1/20th of what it costs in the U.S. (it is probably actually cheaper than that). That means, that the same DVD player would cost at least $800 if made in the U.S. (in reality, it would cost much more... I am not including the differences in enviornmental regulation, defending frivolous lawsuits, medical insurance, taxes, etc. all of which would be much higher in the U.S.).

    Right now, when a DVD player cost $40, it means that DVD players are cheap and ubiquitous. The store is making money selling the DVD player and the DVDs you will buy to put into the player (all that is money made in the local economy). Movie companies are spending hundreds of millions on movies, expecting to recover that money in part on DVD sales - and most U.S. movies (and virtually all DVD manufacturing) happen IN the United States, creating tens of thousands of jobs.

    Now, lets say we ban foreign manufactured media playing devices from being sold in the U.S., and now *CHEAP* DVD players are $800 (of course, assuming the same escilation of pricing, you would expect a good quality one to be around $8000). You have made DVD players into a luxury good, outside the realm of afordability to a good chunck of Americans. Not only are stores selling less DVD players and DVDs, but Hollywood cuts back on movie production because they can no longer recoup so much back from DVD sales (people without DVD players, don't buy or rent DVDs).

    Now, if you look at the jobs that would be added to the U.S. by manufacturing DVD players locally, and how many jobs would be lost because fewer people could afford DVD players, it is easy to see you aren't creating any jobs locally by requiring that DVD players be made in the U.S. In fact, most likely you would end up losing a whole lot of jobs in the U.S..

    If a company outsources IT, that can give free up money that it might use to make more TV commercials (which create jobs in the U.S.). Or it could free money to allow it to expand its retail outlets (creating jobs in construction and for the people working at the outlets in the U.S.). It could also allow the company to lower the price of its goods, meaning more people in the U.S. could afford the products being sold.

    People are also ignoring the fact that as people overseas get more jobs and more money, they now have more money to purchase OUR goods and services. China, India, and elsewhere are now customers for many American products, unlike say Cuba, or Iran, or some other country that is economicly isolated from the United States because of artificial trade barriers.
  • by gsn (989808) on Thursday January 11 2007, @07:39PM (#17566464)
    Ahh, complaints about software outsourcing...

    I studied through high school in India and came to the U.S. for college. I remember my CS classes. Our teacher was a dinosaur. He knew about pascal and some basic but he was taught by idiots and consequently his code never got beyond the Hello World level. We were supposed to be learning C++. He did mean well though and freely admitted being ignorant which helped immensely because we were forced to learn by ourselves. I count myself as being very lucky. Several teachers would have shoved what they learned by rote knew down our throats. The quality of software you get back reflects this education, and the price you pay for it. You want good software from India go hire a bunch of IIT and BITS grads and have them do it. You will pay though. Or alternatively, wait a decade or so. Software outsourcing is (paid for!) real world practical training for the next generation of teachers and thats something thats been sorely lacking.

    As for the call center jobs... well you could complain about Indians who can't speak English (or American as the case is) but frankly the communication barrier has very little to do with accents or language. I know guys from here that can understand Indian accents easier than they can understand people from central Illinois and Texas. You guys try to imitate Apu frequently enough. Rather, the headache with support people is because they have crappy scripts to read from. Support would suck even if it wasn't outsourced unless you have someone on the other end of the line who actually knows the product he is trying to support. That costs companies money and companies that value their profits more than their customers know they can get away with crap service. Ideally they'd love to not bother with support at all.
    • by khasim (1285) <brandioch.conner@gmail.com> on Thursday January 11 2007, @02:14PM (#17560724)
      I can say this study is wholly and completely inaccurate.

      It depends upon what they are measuring.

      From TFA:
      The biggest challenge for software companies was they could not build development teams fast enough in the United States because of a shortage of both engineers and H-1B visas, Thomas said. Offshoring provided a way to leverage existing developer teams, he said.

      Notice the usage of "H-1B visas" in that statement? That tells you what they're actually looking for. Cheap labour. The cheaper, the better.

      The question isn't whether there are enough H-1B visas available.

      The question is how many programmers are there in the US vs how many programming jobs there are in the US.

      I'm not seeing that question being asked. All I'm seeing is stuff on savings and such. If they're measuring cost savings, then they're not going to find any lost jobs, are they?
          • by gitchel (858517) on Thursday January 11 2007, @03:45PM (#17562810) Homepage
            Actually, I heard they switched the fast food folks to the Manufacturing sector (assemby workers, doncha know) a while back. It looked better in the stats to lose Service sector jobs - which most people assume are close to minimum wage - and to gain thousands of Manufacturing jobs - which people assume pay a good deal more. So, hocus pocus, switcherino, walla, PING. The economy must be inproving since so many people moved from low paying service sector jobs to high paying manufacuring jobs. It's clear our manufacturing secor is NOT being denuded by the Chinese, as we once thought ;-) Jeff
    • Re:Duh (Score:5, Insightful)

      by dr_dank (472072) on Thursday January 11 2007, @02:16PM (#17560762) Homepage Journal
      Temporarily it may be a job lost, but cutting costs allows for further expansion of a business.

      Expansion to where? Third world countries may benefit from having a pool of low-cost labor with little regulation, but that doesn't help the labor at home. Even if they are lower level IT/support jobs that are typically affected by outsourcing. How can you expect to train the next generation of workers if theres no bottom rung for them to start from? Take a look at Monster.com postings and see the experience demanded for jobs. A system where the entry level really doesn't exist cannot sustain itself for the long term.

      If you don't want the risks of losing your job due to IT off-shoring, go move to France. I'm sure you'll find the rewards there are in much less frequent supply than here in the U.S.

      I know France is used as an insult, but if they protect their middle class rather than let the greedheads in corporate management gut their job base for their short term gain before ejecting with their golden parachutes onto their next abomination, maybe its not so bad.
    • Indeed (Score:4, Insightful)

      by Travoltus (110240) on Thursday January 11 2007, @02:20PM (#17560870) Journal
      a Wal Mart job, for the most part.

      Offshoring IT means new people will never get into the industry at all.

      IT now demands high level network administrators and accomplished programmers. Americans cannot reach that level of expertise without starting out as a lower level programmer, software tester, sysadmin, tech support person, etc. - and those jobs have gone overseas.

      The higher level jobs can't be filled because no new qualified workers are coming into the US workforce, and the qualified people are entrenched in jobs they won't leave, or are afraid to leave. And yes, before you say otherwise, I know this. I am a data center manager and I see our ads go unfilled constantly. Which is why since before this data center came up, I kept our jobs from going overseas and made sure we grow our talent right here, in house. My lead network administratress started out as our receptionist and then a tech support rep, then a tester, then a sysadmin, then a network admin. At other companies, that ain't gonna happen. Ever.

      So no, another job was not created here - except low paying service jobs like Wal Mart cashiers, and super high end jobs that newcomer Americans can never qualify for.
    • Re: (Score:3, Insightful)

      Ok, let me get this straight. You did not cooperate with the new developers, or "teach them your code". You not only actively encouraged others to do the same, but also look for new jobs. You then in fact left the company - without, it seems, adequate documentation - and somehow you think they sold you out?

      Wow.

      Sounds like you really got screwed.