Outsourcing is Good for You 963
gManZboy writes "Catherine Mann, from the Institute for International Economics, has a look at What Global Outsourcing Means for U.S. IT Workers up over at Queue. She's got an interesting argument: outsourcing means cheaper IT products, meaning businesses will buy more, meaning more products to make & manage = net gain of IT jobs in the US. Ummm, did you follow that?"
bah (Score:2, Interesting)
Something Similar (Score:5, Interesting)
If you ask me, I think Economists have it tougher than Computer Scientists, but that's just my opinion.
-Devin Torres
This is a totally outrageous claim... (Score:4, Interesting)
Last time I checked the market set the price (with obvious unnamed monopoly exceptions *coughMicrosoftcough*). The price the company pays for the production of the item has negligable impact on price--and that's fine. The price people are willing to pay for something has a much bigger impact on the price. All outsourcing overseas does is fatten the profit margin for the sales of these IT projects. So right there, her basic premise is crap.
I mean, is she REALLY saying that companies will have more money to pay you with, because they don't have to pay you? WTF.
Hello Catharine. (Score:5, Interesting)
One more time (Score:3, Interesting)
Nuttles
Saved By Grace
Re:Outsourcing your own job. (Score:5, Interesting)
Scary, but it works.
Basic economics (Score:5, Interesting)
Perhaps the thing that really needs to be looked at is that IT support is viewed as a commodity. Support offered in India or Russia is viewed as the same quality product as that offered in the US. If this is the case, quitcherbitchin. I doubt you are buy American in other walks of life. If there is a difference in quality, it's time to express that. Was it Dell who found that their business customers wanted US tech support instead of Indian tech support? (or HP?) The product wasn't a commodity, so it couldn't be switched.
Rather than gripe about losing your job, explain why it's better that you have it than someone in another hemisphere.
And if you made it this far, here's a link to a non unreadable article [slashdot.org]. Will Taco et al. ever admit they are wrong with this color choice?
Re:I've heard this argument before... (Score:4, Interesting)
Re:Executive Summary (Score:3, Interesting)
Net Result [Appendix A]: Those employees are now doing essentially the same job for substantially reduced income and benefits.
Its does delay some price increases. (Score:3, Interesting)
Of course its all a vicous circle. Eventually one of the companies succumbs to the fact it will have to raise prices... and they lose a little marketshare but it evens out usually as others end up with the same issue.
However it is just as outrageous to not believe that using cheaper resources doesn't result in lower costs.
Seems to me that too many people can justify the milkman losing his job to technology, the seamstress to technology, and even the gas attendants to technolongy. Yet threaten the geeks and they act as if its the coming of the end.
Face. The economy churns through jobs all the time. Some of these go overseas which does result in lower costs for people here. Just as the cost of clothing is less when it comes from China so can the cost of tech.
Like that nice PC you got there? Cheap memory eh? Where is the crying over the person whose job was lost to a PC?
Sorry but the world maturing does suck at times for those caught up on the wrong side of it. Getting emotional and claiming its all a lie won't make it stop.
Remember 138 million jobs exist in this country and compare that to the number outsourced. Also remember that the number of people who are employable will decrease over the next 10 to 15 years... so...
One key assumption many have (Score:5, Interesting)
What the author is trying to point out is that whole new markets of opportunity will open once the cost of basic programming activities is low enough. One of the benefits of open source software is that poorer countries can now obtain technology that before was out of their reach (or they can at least extract higher discounts from proprietary vendors).
I have a friend who works as a software consultant customizing proprietary accounting software for small/medium enterprises like those described by the author. That's the basic outline of the future -- smaller companies could benefit from technology that goes beyond office applications, but to more backroom ops, or e-commerce opportunities, or whatever. You won't get paid based on your ability to write something that can be written cheaply overseas to target a generic problem -- you'll be paid to tweak that piece into something that gives a competitive advantage to your customer
Many industries assemble cheaper components into an overall design that delivers a value greater than the cost of the parts. Software, as an intangible good, provides some interesting (perhaps worrying?) differences that make economic analogies a little tricker to apply.
But I think while some components are open to a research/science approach (algorithms, maybe frameworks) I think the majority of software is close to manufactured goods in that customer requirements drive a solution that isn't generically applicable or saleable (a problem for Microsoft-ish companies that try to sell the same thing to everybody). The world of de facto standard products gets a lot of press because it's typically winner-take-all (google, MS Office, MS IE), but the growth in demand and in jobs will be in the world of tweaked software.
Re:Something Similar (Score:1, Interesting)
Your body constantly recycles blood cells.
But if you start losing blood cells faster than they're being produced, you're in deep shit.
Re:This is a totally outrageous claim... (Score:5, Interesting)
Lou Dobbs Says No (Score:5, Interesting)
"Exporting America : Why Corporate Greed Is Shipping American Jobs Overseas"
by Lou Dobbs
"The power of big business over our national life has never been greater. Never have there been fewer business leaders willing to commit to the national interest over the selfish interest, to the good of the company over that of the company's they head."
See also:
http://www.pbs.org/now/transcript/transcript334_f
DOBBS: I want to hear one of these candidates sharply and clearly say this country is about the people who live in it.
DOBBS: You have a responsibility not only to your investors, you have a responsibility to the marketplace, you have a responsibility to your customers, to the community in which you work. You have a responsibility to the country that makes your business possible in the first place.
MOYERS: Heresy. Are you a traitor to your class? The investor class.
DOBBS: Well, I'm, you know, I think most of us are investors. And I hardly think I'm a traitor. I think it's traitorous and treasonous and absolutely ignorant for these people to be out ballyhooing double-digit returns on equities when first we have to get our house in order in this country. And bring back integrity, principle, leadership to our business enterprises, to our markets. And try to do a lot better for the people who count. That is the middle class.
MOYERS: You begin with a stunning quote. I'll read it. Quote, "The 20th century has been characterized by three developments of great political importance: the growth of democracy, the growth of corporate power and the growth of corporate propaganda as a means of protecting corporate power against democracy."
DOBBS: Absolutely. Corporate America has at this time controls the national media. It controls nearly every avenue of an American citizen's access to information about the way he or she lives, about those forces that are influencing our lives.
And corporate America is protected in Washington by the dollars it spends. It is protected in the media by some virtue of ownership.
Re:Executive Summary (Score:2, Interesting)
It put a lot of un-talented folks out of work too! There were a lot of band-wagon IT people in the dot-com parade. I sure hope they stay out of IT so they never get a chance to program my pacemaker or anything else more important than some retarded half-baked if-we-do-X-on-the-internet-we'll-get rich scheme.
Purely theoretical (Score:2, Interesting)
The author's main point is that by saving money, supposedly it will free up money in sectors such as education, health care, and construction. What the author fails to realize is tha most of the outsourcing WAS in customized applications. It wasn't the big boys like Microsoft, IBM, etc. doing most of the layoffs, it was the smaller shops. In addition, I would call in to question the value of IT spending in each of these industries.
1) Education - need better teachers, not better software. I've taught before and that is the main problems. Computers won't keep Johnny from . Secondary schools are mainly just babysitting
2) Construction - ?? you hire a bunch of drunks to pound some nails in, what do you need computers for. This industry loves cheap labor, I don't see much opportunity here
3) Health services - IT could really shine in this area, but it is such a huge mess that it won't be fixed without government regulation, which means that few will profit from it. I remember this was what MicroStrategy tried to concentrate on back in the mid-late 90s, I suppose they just dropped it after they realized what a colossal mess it was. A bigger problem with health care is the cost of health insurance and the fact that people are living longer and needing more care, long after their productive years are over. Malpractice is another issue effecting this industry.
Really they only way you can make money in the IT sector anymore is you can show businesses that it will save them money. IT is mainly just a cost center nowadays. I don't see this happening for any of those industries.
Also, consider this: Are Windows/Office any cheaper now than it was 10 years ago, adjusted for inflation? I don't have the statistics on hand, but I'd be suprised if it were true. Though I suppose hardware is a bit cheaper.
Consider what happened during the 1980s - 1990s . I suppose you could say it was good for the U.S. "economy*" that all the decent wage manufacturing jobs left the U.S. Consumers got cheaper cars, but workers lost their jobs, and they NEVER came back. If you use the author's analagy and applied it to the manufacturiung sector, then as prices fell on consumer goods, demand should have increased since consumers now had more money which to purpose. Well I suppose that did happen, but the sector never responded, and things only got worse.
Some of them were able to retrain to IT jobs, quite a few were relegated to WalMart. A few years later they also lost their IT jobs. Its just not possible for a 45 year old with three kids and a mortgage to be constantly retraining like this. Quite a few familes have never recovered.
The author suggests that by outsourcing programmers you create more positions in design/interface, interacting with customers and management. But how is someone who has never programmed Only a few with can be a manager/CEO straight out of college. You need some time in the trenches. And if they layoff all these junior positions where are our next batch of managers going to come from? I suppose from whatever country you are outsourcing to.
In short, I don't see no light at the end of the tunnel for those in IT/Programming, which is part of the reason I'm getting out. Luckily I'm still young and have no family, I suppose with the way the U.S. works, from a purely economic standpoint it is uneconomical to have one.
* Interesting how these lassez-faire types hate collectivism yet often resort to a purely aggregate word such as economy, GNP, GDP, etc.
Mann is ignorant - never heard of Monster.com (Score:2, Interesting)
Clearly, the woman was unfamiliar with Monster.com, Dice.com, or the realities of the IT job search.
I think this was earlier this year, so clearly, she's had her head up her ass for the better part of a decade.
Her idea was that there might be "hidden" IT jobs in hospitals, and other places where an IT worker might not be smart enough to look.
If she knew what she was talking about, she'd know that you don't just look for jobs at IT companies, you look for jobs that require the skills you have. (Because there's not much point applying at a VB shop if what you know is Java.)
In IT job ads, you're likely to find ads from hospitals, insurance companies, banks, and local government, as well as "IT" companies. Slashdot readers know this.
Mann seems to have no concept of what an IT job search is like, yet she doesn't hesitate to consider herself an expert.
Re:Inevitable (Score:2, Interesting)
When the conditions in China improve, then we can start this conversation again.
Re:Indeed (Score:1, Interesting)
Nah, it'll go for gas and healthcare.
The gas and healthcare companies will offshore their inhouse IT work, and the companies they buy packaged software from will offshore their workers.
Big upside for the executives. Not so much for anyone else.
Good God She's Full Of Shit, Here's Why... (Score:3, Interesting)
Example #1:
Design and interface must be done together with the customer, but coding and maintenance do not require close proximity with customers and can be done by less costly programmers abroad. The higher-wage jobs, involving design and interface, must still be performed in the U.S.
Good try, but wrong. There are times when the designer and the coding monkey can be safely separated, but in general you're asking for trouble. Prepare to be IMing a lot. The offshore outfits are becoming better designers in any case, and soon the US designer's employer is going to be shipping his/her job out to be where the code is written.
Example #2:
The value to the U.S. economy of cheaper outsourced software and IT services is that it reduces the price of customized software. Econometric estimates are that, to an even greater degree than IT hardware, demand for software and services increases more than one-for-one with reductions in price. Therefore, as prices fall, demand for services and software rises more than one-for-one, diffusing IT into the lagging sectors and deepening the use of IT in the leading sectors, thus increasing demand for workers with IT skills in all sectors.
So with cheap custom software, more businesses will use it and the user employees become computer skilled. The first assumption I'll buy into, assuming that an easy and cheap local consultant is available at the start of the coding chain. If this plays out to the scale she thinks, therein lies the benefit to US IT workers. The second assumption is complete crap. Someone using a customized Access database front end is no more "computer literate" than someone using Word, all else being equal.
Example #3:
Meanwhile, U.S. IT jobs continue to move up the IT skills ladder. Demand increases for workers with the skills needed to design, customize, and utilize IT applications...
Nope. This assumes the US always holds the high ground. However, as more development and design occurs overseas, and the host countries become ever more developed and self-sufficient, this falls apart. They sell to us, and by and large don't need anything back... except our increasingly worthless dollars.
Correction... (Score:1, Interesting)
Re:Executive Summary (Score:2, Interesting)
Outsourcing Would Be Good If It Was Growth (Score:3, Interesting)
Yes its true the new job over there creates higher standard of living and wealth over there but at the cost of the standard of living and wealth over here you really haven't gained anything but CEOs with larger wallets.
Re:Maybe what she means to say is .. (Score:3, Interesting)
How do *we* the average person make that happen?
Re:CEOs (Score:2, Interesting)
Re:Hello Catharine. (Score:3, Interesting)
However, can you explain how outsourcing is an example of the broken window parable?
Re:Of Course, I Follow It... (Score:1, Interesting)
Outsourcing is bad for the person whose job goes elsewhere.
But the job goes elsewhere because someone else can do it cheaper.
It happens all the time. Sooner or later, all those guys in India will price themselves out of the market and lose their jobs to people in China or Africa.
I have sympathy for people who lose their jobs. I have no sympathy for people who want government to distort economics.
How about a metaphor...
AIDS is bad for the person who gets it.
But the person gets AIDS because he is exposed to the HIV virus.
It happens all the time....
I have sympathy for people with AIDS. I have no sympathy for people who want medicine to distort biology.
Your hidden assumption is that natural "economics" is a good thing. I would not agree with this assumption myself, as I find raw capitalism, based on the motto "Look out for yourself", to be cruel and short-sighted.
Re:Exactly (Score:4, Interesting)
This argument has been made for years (Score:1, Interesting)
The problem is that this is mostly an illusion. Production is hard and requires skills and capital. Refinement, management, and assembly can be done anywhere. They're moved to the US more for tax purposes and for "Made in the USA" stickers than for any concrete advantage. The only thing that's tough to move offshore is R&D, and the software side of the tech industry doesn't even have that going for it.
In short, this is what's really happening: The third world is becoming the producers (food, industrial, whatever). The first world is becoming consumers. The only thing that keeps the third world from becoming self-sufficient and raising prices on the first world is crippling debt and indemic corruption.
Yes I know the terms "first" and "third" worlds are passe. "Developed" and "developing" countries is worse, because it creates the impression that all countries can become all super-developed like the US (and if that's the case, who grows our food again?)
How is this good? (Score:2, Interesting)
Re:Perpetual Employment! (Score:5, Interesting)
Also, lets repeal that stupid gas tax. That's about as regressive as they come and our highways and byways are just fine the way they are.
Re:Numbers game. (Score:5, Interesting)
Take the tarriff on the steel indstry. It saves a dying industry, so that the workers do not need to try and find other jobs. But it makes cars more expensive, and hence makes domestic made automobiles less competitive, as well as forcing consumers to throw away extra money giving it to an industry which isn't able to produce enough value to cover it's cost.
People need to learn that having to change and adapt in order to survive is a fact of life.
Re:One more time (Score:2, Interesting)
Money that is redirected from the US's disproportionately rich economy helps ALL of those countries, not just a particular IT worker. That worker will spend his savings in his country and that will benefit the economy and therefore provide more jobs helping poverty etc etc etc. Basic economics really.
The reality (and also basic economics) is that all that wealth your country has didn't just come from nowhere. If it wasn't for 3rd world countries producing lots of cheap produce/gadgets/etc you would have none of it. The US government has become extremely adept at manipulating markets and so forth to benefit their own economy. Sometimes with far reaching and deterimental effects on poorer countries.
Not that their is not poverty in the US, of course, but this is mostly because the distribution of wealth in the US is so screwed up.
PS: This is not a troll, just an objective opinion - such as it is.
Re:Theory (and more theory) (Score:3, Interesting)
You can't offshore it? Maybe not. But you can still lose it. There are a slew of "undocumented workers" in most states (at least western and mid-western) who have those jobs: the blue-collar, low-income and unksilled labour jobs.
Proponents (not perhaps without some justification, I suppose) argue that since no Americans want to pick strawberries or mow lawns for a living, without the illegal/legal migrant workers, the work will never get done.
But how soon will it be before proponents of white collar outsourcing start saying that no American would want to do low level I/T Work - eg., Call Centers, 1st Line Tech Support, basic coding? I think it's already being said.
Those with the "have" are in a position to call the shots here. Or put another way, capitalism being tied to the private ownership of the means of production allows the private appropriation of surplus value. Companies outsource more for marginal benefits at best it seems, and yet nobody things to cut the salaries of the top executives?
If anyone thinks I'm taking this too far, then why are the CEOs and top executives of some of the companies responsible for the most outsourcing making millions of dollars? (Carly Fiona [aflcio.org] and Sam Palmisano [aflcio.org]).
Re:It IS good for us. (Score:1, Interesting)
This pattern of India, China, and the Philipines beying able to do US work on the cheap for US companies, frees capital up for investments in ever increasing sophisticated technologies of which, low end labor will have to provide the manual labor needed in these endeavors (until they are outsoured at a later date).
This is what enables innovation - this is why you are using a computer and discussing this subject via the internet. This cannot be planned. Valuation needs to be organic.
CEOs will be able to give themselves big bonuses by outsourcing your job but that will not last long - soon no CEO will be able to get a bonus for doing something everyone knows how to do.
Quit being such a control freak.
Yippee! Then WE win! (Score:1, Interesting)
USA! USA!
Sometimes it IS better to be lucky than good (or smart).
Re:bah (Score:2, Interesting)
From here [leadershipnow.com]:
In 1984, a questionnaire was sent to four ex-Finance Ministers, four Chairmen of multinational firms, four students at Oxford and four London Dustmen (referred to in the U.S. as Garbage men).
Ten years later the predictions were compared to the actual results and the British Garbage men outperformed the ex-Finance Ministers and the Oxford students while equaling the foresight of the multinational business executives on a number of key economic predictions. (The Economist, June 3, 1995)
Re:Outsourcing your own job. (Score:3, Interesting)
So how are there move jobs back in the US? Must be less competition for jobs because there is one less you. Makes perfect sense.
It's called knowledge transfer. You teach them your job, then you let them have it. Glad it's working out for you.
Re:One more time (Score:2, Interesting)
People that say outsourcing doesn't work don't have a good process in place to take advantage of it.
Fair Tax (Score:2, Interesting)
A better tax idea would be the Fair Tax plan. The idea is to abolish all forms of taxes except one, the retail sales tax. And by all taxes, I do mean all. No income taxes, no business to business taxes, none. Just a sales tax on items you purchase.
This allows our businesses to thrive and removes the "rich vs. poor" in taxation that the political hacks use to promote class discriminations.
You can find out more about this here. www.fairtax.org [fairtax.org] Good reading
Re:Chewbacca Economic Theory (Score:3, Interesting)
There's an analogy you can use to describe this to people who just don't get it.
It's like taking a ladder, and cutting off all the bottom rungs. I mean, how useful is a rung that's only a foot off the ground anyway?
Re:Upcoming Indo-Pakistani War will correct this (Score:3, Interesting)
Any muslims care to enlighten me - I know I've probably made a complete has of explaining, but is there any milage in the general idea?
Re:Chewbacca Economic Theory (Score:3, Interesting)
Not everyone wants to be a sales person or a manager. If there are no "low-grade" (read: entry level and junior) jobs, no one gets the experience to become a manager.
A lot of the urge to outsource comes from the unnaturally high price of software anyway. If 42% of a firms IT spend wasn't on software licenses... great things could happen. Monpolies suck - and there's no shortage of monopolies in the software business real and artificial.
WalMart Economics (Score:2, Interesting)
1) Everything would cost less.
2) Everything would come from a third-world country.
3) The largest employment sector would be in the transport of goods whether that be truck driving, warehousing, or stocking the shelves.
4) The second largest employment sector would be in business management.
5) Programming, IT and other high paid skill positions would likely be in third-world countries to keep down costs.
6) Everything would have to come from a third-world country because the largest employment sector would have low wages that prevent them from being able to afford anything else.
Of course this is hypothetical, but it seems to me that this is the goal of our economy.
I can't wait to hear the uproar when middle-management positions start getting outsourced to third-world countries to further lower costs.
Maybe truck driving wouldn't be a bad career after all...
This really annoys me... (Score:2, Interesting)
If you are to check the quality of code produced offshore (back in the West say), you have to do some form of code walkthrough, never mind re-testing. Testing and performance checks alone are not sufficient to determine code quality (what if a bug occurs and the code is obscure?). If all the code checks, design checks, testing cycles and documentation is outsourced, what are you left with, apart from some (relatively) simple management tasks such as project tracking?
But how are even these management tasks to be properly carried out if you don't understand the software development cycle (as your PM has little contact with software people)?
I read somewhere recently that 160,000 IT jobs had been created in the US last year - but there was no net increase in US software expertise because an equivalent number of jobs had been outsourced. The same is beginning to happen in the UK (although not quite as bad as the US, despite our govt's efforts otherwise). The number of students taking IT exams in the UK has dropped significantly, which is usually a pointer to where the money now is (ie,not in software).
As software people age, they tend to drop out of direct involvement with software (some become managers) whilst the new intake is shrinking. In other words, the apprenticehip is moving offshore. In 20 years, there will be very little expertise left in the West, the corporates will have moved the bulk of their operations to where the expertise lives. And I venture to judge that software will still not be automatically generated. We'll be left flipping burgers for the new class of Asian tourist (of which I see a lot more in London these days), who've come 'to see history'.
Re:I trump your bullshit with another bullshit (Score:2, Interesting)
Look at history; how much further have we advanced in the last 100 years than we did in the previous 10000. That wasn't due to greed, it was increasing the opportunities of those who normally would've died by the time they were 40. The massive economic, technological and social success was built on secure jobs and social justice, not laissez-faire capitalism. Throwing it all away just to increase the Dow Jones will be catastrophic.
Another look at Offshore Outsourcing (Score:2, Interesting)
Try out this article from Reason Magazine in July.
Ten Truths About Trade [reason.com]
It goes into the concepts more than the numbers. Could make it easier to explain to others.