Study Finds Cost Major Factor In Outsourcing Positions 367
theodp writes "Debunking claims to the contrary, a new study from Duke University asserts that it is purely cost savings, and not the education of Indian and Chinese workers, or a shortage of American engineers that has caused offshore outsourcing. 'The key advantage of hiring Chinese entry-level engineers was cost savings, whereas a few respondents cited strong education or training and a willingness to work long hours. Similarly, cost savings were cited as a major advantage of hiring Indian entry-level engineers, whereas other advantages were technical knowledge, English language skills, strong education or training, ability to learn quickly, and a strong work ethic.' The article goes on to point out that despite this, outsourcing will continue to be a problem for US workers in coming decades; new elements of traditional corporations like R&D may in fact be next on the outsourcing chopping block."
Summary of the Corporate Attitudes (Score:3, Insightful)
Allow me summarize: "It's too expensive to be competitive, and we don't have a vision for being competitive anyway. So we're going to make our shareholders happy and shoot ourselves in the foot. Twice. Just to be certain. But hey, think of all the money we'll be saving!"
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Re:Summary of the Corporate Attitudes (Score:5, Interesting)
Thus the basic issue is that you're giving up your best and your brightest who are ALREADY familiar with your business and the local marketplace, and you're replacing them with cheap "yes-men" who have no concept of your business, cultural barriers, aren't even in the same time zone, run effectively unchecked by the corporation, and have little chance of being India or China's "best and brightest". (As you say, those people are making their money elsewhere.)
For a good feel for what's happening with outsourcing, check out these horror stories:
http://img.worsethanfailure.com/Comments/Discount
http://worsethanfailure.com/Articles/Of_Course_We
While not every company sees results this bad, I've heard very few positive reports. And more of those were before the outsourcing "craze", when it was easier to find the competent developers overseas.
Shades of the tech bubble? Yeah. I'm glad we learned so much from that debacle.
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It is one thing to outsourced certain operations like elementary customer help phonecenter overseas that probably will save the money in the long haul even with some lost customers, it is quite another to send yo
Cultural differences create misunderstandings (Score:5, Insightful)
The Indians I know like to say that you can't generalize about India, a country with a billion people and something like forty distinct cultures. There's a great deal of truth in this. But at the same time, you can't help but notice that they have a lot of things in common with each other. Just being engineers they have certain things in common with most engineers, such as a desire to be valued for their skills and knowledge.
Uniformly the Indian engineers I've worked with are hard working, ambitious, and eager to please. I sometimes think the eager to please part is something of a problem. Often unpleasing information is extremely valuable. Not wanting to bear bad news is by no means a trait that is unique to Indian culture, but I can't help but think growing up in an educational system with intense competition to tell the teacher what he wants to hear shapes people's work styles. I've found the best Indian engineers I've worked with have an intense, fiery streak in them that is sometimes hard to contain but is good to do creative work with. I've sometimes had cultural misunderstandings with Indians who work for me because I have assumed that, despite my place on the org chart above them, that we were equal in status, while they assumed that any time I had an opinion, no matter how casual, offhand, or just plain dumb, that that was Law. From my culturally biased perspective I saw this as frustrating passivity.
I'm the kind of manager who thinks that if some wet behind the ears intern thinks he has read something useful in a textbook somewhere, he should speak up and if its not relevant I'll thank him and tell him so. A lot of Indian guys working for me weren't comfortable with this at first, until they found out that I didn't try to pin blame for mistakes to them. A few never adjusted, and were always insecure and unhappy until I learned how to act like an old fashioned boss.
One thing that seems very common: the Indian engineers I've worked with try really really hard to put their best face forward. I don't think this is being a "yes man", its just a difference you have to factor in so you scale what you think you are seeing appropriately. Nowhere is this more evident than in the way Indian engineers seem to collect advanced degrees. Every guy I worked with had an masters, a few had PhDs. I have nothing against advanced degrees, but it seems to me that if you are going for an advanced degree, you ought to have some kind of specialized research interest, but it seems to be almost de rigeur. A lot of 'em went straight from BS to MS with no work experience. To tell you the truth I don't think they got a lot out of graduate education, other than to prove to the world they could.
This may be why the study found that there were quality problems with Indian BSCS grads. Anybody who's got anything on the ball gets a MSCS or PhD.
In any case, India is an incredibly dynamic place. It's got a billion people, and it has its fair percentage share of really, really smart people. It probably has more than its share of people with entrepreneurial hustle. But anybody playing the outsourcing game has to be prepared to lose a few rounds to the fact that things aren't always as they appear to the outsider's eye. I've never been to India, but I have no doubt it has not reached its full creative potential by any means; nor is this something it will be able to do overnight. So I don't think all of technology will simply slosh over there leaving the US a technology backwater in a few years. When India reaches its full potential, that will be a good thing. We'll be getting jobs here working with Indian technologies; it sounds to some like a nightmare, but I don't see it that way because technology is a plus-sum game. It's only a nightmare if we've given up on creating new technologies here.
Re:Cultural differences create misunderstandings (Score:5, Insightful)
I'm a westerner living in India, and my opinion of the place & the people pretty much exactly matches what you've written. I've had to spend a lot of time building a really good team, but now that team is at least as good as any team I've worked with at home, twice as hard-working, and, yes, hugely cheaper.
And no, India hasn't reached its full potential yet. The two main issues that are likely to prevent it are the politicization of the education system as commented on in TFA (Karnataka, the state Bangalore is in has moved to prevent English being the primary language taught in schools in order to win votes with the the rural majority who have been opposed to the enormous growth in the cities as it has stretched even further the gap between rich & poor), and the hyperinflation of salaries. There's a good chance that India will become too expensive to operate in before it reaches that potential.
ant.
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Re:Summary of the Corporate Attitudes (Score:5, Insightful)
Indeed they are. A Duke University study released in (I think 2005) concluded that over the previous decade, about half of the startup companies in Silicon Valley were founded or co-founded by folks from China and/or India.
The story is right on about cost savings as the driving factor. The perception that people in China or India are "smarter" than people in the U.S. stems largely from the fact that we are typically being exposed to the very best people coming from a pool of billions. With that many people, the absolute number that are 2 std. deviations on the right side of the bell curve is still massive.
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Re:Summary of the Corporate Attitudes (Score:5, Insightful)
The amount of wealth in the world is NOT like a tank of water which, when the valves are opened, empties out and distributes the water all around. It's more like a large set of fountains fed by a small set of pumps. And corporate America isn't opening valves to let the water (money?) flow all around. They're taking sledgehammers to the pumps because they stupidly believe that by doing so, they'll get more than their fair share of the water. For the first few hits, they get doused pretty well, and they think "look at all this water! Hit it again!" But then the pumps shut down and that's the end of that.
Wealth is actively created by some groups of people and consumed by others. The United States is so wealthy because for most of this century we were CREATING much more wealth than anyone else in the world. We were able to do this due to a number of cultural and structural factors that aren't replicated anywhere else. For example, among all the people in the world, we are easily the most independent minded, the least bound by dogma and tradition (at least when it comes to science and technology). Our inventors have a "what the hell, let's give it a shot" mindset you won't find in many other places.
And before you start screaming "No, your innovators call came from Europe" let me state the obvious: WE ALL CAME FROM EUROPE. Americans are Europeans who decided to live somewhere else. We didn't just magically appear here; we colonized this place. Europeans may not want to hear this considering the unfortunate current state of the U.S. government, but we and they are the SAME PEOPLE, with the SAME CULTURE and SAME INTELLIGENCE LEVEL. The only discernible difference between Americans and Europeans is that Europeans try to behave more calmly than we do. We're a bit nuttier than they are. EXCEPT at soccer matches, of course.
If you want a perfect analogy for what's going to happen when corporations finally kill off technological innovation in the first-world countries, or at least strip people of the desire to do technical work for them (I don't think you can really kill off our ability to innovate, you'll always have inventors) just read this article:
http://en.wikipedia.org/wiki/The_Goose_that_Laid_
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And before you start screaming "No, your innovators call came from Europe" let me state the obvious: WE ALL CAME FROM EUROPE. Americans are Europeans who decided to live somewhere else. We didn't just magically appear here; we colonized this place. Europeans may not want to hear this considering the unfortunate current state of the U.S. government, but we and they are the SAME PEOPLE, with the SAME CULTURE and SAME INTELLIGENCE LEVEL.
Ummm... I'm sorry, my memory's a bit foggy. Can you remind me which European country Subrahmanyan Chandrasekhar, recipient of the 1983 Nobel Prize in Physics, is from? What about Dr. David Ho, the first person to report the "healthy carrier state" of HIV infection? What about Steven Chu, 1997 Nobel laureate in Physics for his research in cooling and trapping atoms using laser light? And Daniel Tsui, 1998 Nobel laureate in Physics for his research on the fractional Quantum Hall effect? Chien-Shiung Wu?
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Furthermore, you have to accept the fact that there is something special about Western culture that results naturally in innovati
Re:Summary of the Corporate Attitudes (Score:4, Insightful)
Go back BEFORE we had access to modern forms of energy. We managed to INVENT these forms of energy starting with NOTHING. Think about the steam engine. Where do you think that came from in the first place? Someone invented it. And steel has been in use since the Roman Empire, so don't use that as an example. All you need to make steel is iron ore, a form of carbon to work into it, a hammer to work the metal, and a forge to heat it in. It's VERY ancient technology that predates the use of coal or steam.
By focusing entirely on energy you've managed to miss ALL of the action. Where do these things COME from? How does a culture create them in the FIRST place? They don't just appear, poof, like Moses' stone tables. Aliens didn't drop them off on their way to Tau Ceti.
We CREATED them. Before we had the energy sources you're obsessed with. Your energy line of reasoning is overly simplistic and misses what's really going on. While the rest of the world wasn't changing their way of doing things, Europeans and later Americans went from a totally ordinary agrarian culture to a world-spanning industrial, high tech culture capable of spaceflight in a matter of centuries. You cannot explain that with your energy theorem.
Nor can you explain (for example) the Persian Gulf's failure to accomplish the same thing even though they're sitting on enormous energy reserves. You can't explain India's or China's failure to accomplish the same thing even though they have vastly more manpower and untapped energy resources of their own (and they even had a couple of thousand year head start, which makes it even MORE significant a failure).
Your theoretical framework fails to explain the situation and you must adopt a new one.
Now, back to my point.
The suits, having as they do a very poor understanding of where innovation comes from and how they may support the intellectual structures that made this country great, are doing their level best to ruin everything that gave them their wealth in the first place. And, clearly I believe that they're trying to "kill the goose that laid the golden eggs".
To expand on this point, let me add that not only are they ruining lives by outsourcing the American middle class, in their zealous desire to protect their "intellectual property" legally with patents and trademarks, they are making it impossible for independent people to invent and release new and interesting ideas to the world. This impoverishes the entire planet, not just the American middle class, because an idea, once lost, may not be reinvented for decades, if ever. And even if an idea IS invented, if some corporation sits on it, stowing it away in their patent arsenal because they don't believe it's profitable, it's not going to help anyone.
An interesting point, though, is that Americans will still continue to invent because it is in our nature to invent. And we will share our inventions with each other, only it'll be on a face to face basis, crazy hobbyists sharing ideas with other crazy hobbyists. Some of this might flow around the world if we encounter a like mind over in Japan, say, or the Netherlands. But it'll all be underground because nobody wants to get sued by some giant, lumbering corporation.
Think of the result of all this. Just think about what I'm saying. Consider how it's going to retard human progress. Or, if you're interested, consider how it's going to affect the American and European economy (we're in the same boat, after all). First, the middle class shrinks and people spend much less money, then the first world nations lose their lead in innovation because it's all being done at the grassroots level and none of that is finding its way up to the mainstream... Then nobody's buying all those gadgets being constructed en masse in China, and as a result there's no demand for IT systems built by Indian companies... The world economy could collapse like the house of cards it's always been.
Back to square one! Tra, la la. Maybe next t
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See what I was trying to get at? It's not
Labeling laws and taxes (Score:2)
Next consider policy based taxes. If country X is competing on wages well perhaps that's okay as long as he playing fiel
No Shit Cost is a (the) Factor (Score:3, Funny)
Re:Summary of the Corporate Attitudes (Score:4, Interesting)
Who told you they're shooting themselves in the foot? I'm a sysadmin working in South America for two American accounts that have been outsourced and customer satisfaction has actually increased because we have more formal processes and more motivated people. Mind you, this isn't entry-level tech support, so we're talking about much more experienced people with excellent English and know-how in the profession, but just because you spend most of the time hearing about the misfortunes of corporations that don't know how to outsource doesn't mean that it's all gloom and doom for everyone else.
Core Security, for example, has a significant amount of penetration testers and white hats working here and they're just as competitive as their first-world counterparts.
Perhaps if IT is such a difficult carreer path in the US you should simply stop beating the dead horse. I have yet to see any proof that our American counterparts are so much more (if at all) competent than us that they deserve their massive, $80000 dollar a year salary. I mean, these supposed "professionals" put in root filesystems of 50 megabytes on AIX boxes and installed oracle in the root volume group.
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Allow me summarize: "It's too expensive to be competitive, and we don't have a vision for being competitive anyway. So we're going to make our shareholders happy and shoot ourselves in the foot. Twice. Just to be certain. But hey, think of all the money we'll be saving!"
Actually, what they are saying that it is too expensive for them to remain competitive the US. They in fact do have a vision for remaining competitive, and that involves moving R&D to China, where the costs are lower.
Whether you like it or not, the outsourcing of R&D occurring now is no different from the outsourcing of manufacturing that occurred the 1970s and 80s. The internet has made communication across vast distances cheap and affordable, much like advances in technology in the 1970s made
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Bullshit.
More bullshit.
I've been in this industry for well over a decade now, and I've seen some pretty interesting attempts at outsourcing. You know what? Nearly all of them fail. It doesn't matter if we're talking about local outsourcing inside the U.S. or foreign outsourcing of cheaper "talent". 95% of the time, outsourcing companies are leaches that slurp u
Other jobs? Not happening anymore, bub (Score:4, Insightful)
The flaw in your logic is that you assume becaus previous industries left or evolved away into newer industries, that this will happen repeatedly. As in, from the horse and cart design to the SUV sales/repair, and from telephone switch operators to internet jobs.
That is not the case any more.
There are no new job booms beyond tech now, because of offshoring. Biotech is already going overseas. Nanotech will result in a major net loss of jobs. What's left to grow now is the service sector - the cashiers and what not - and even that is slowly being automated.
The new job types coming out now are small fry at best, and are going to be oversaturated or out dated in 5 years. That means whatever you're in college for right now, will be worth dramatically less in wages in 5 years, or few people will be hiring for someone with that degree. Say hello to just-in-time employment.
There is nothing big that will ever come up any more as far as jobs are concerned. We've reached the end game, and I openly invite you to show me what's coming up that open up the jobs spigot again in America.
Now, watch out for the fallout from this subprime boom. People have not been spending more because of rising wages, people have been spending more because of massive amounts of refinancing. The subprime correction is spreading into the rest of the market because of the number of homes increasing due to foreclosures. That means you who have a fixed rate re-fi will still inevitably see your house drop in value. You'll be upside-down on that bugger in 2 years. Mark my words on that.
What this means is, with the explosion in low paying service sector jobs, the collapse of refinancing-supported consumer activity will not be reversed by a boom in higher personal job-based incomes. Also, people will dig into their IRA's and investments to make ends meet as the water level rises; I work in the financial sector and I am watching the slow rise in that activity right now. And people working at Wal Mart don't get IRAs or stock options unless they're managers, but they'll be selling that, too, to make ends meet as Wal Mart slashes wages to go along with their always low prices pledge.
You have the triple threat of early divestments to make ends meet, downward wage pressures exerted by offshoring, and an imminent dead halt in refinance-based purchases, all about to descent upon this economy.
Offshoring fanatics, feel free to keep your head in the sand about this... just like all the housing investors did when they said the current housing boom would never end.
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Re:Summary of the Corporate Attitudes (Score:5, Insightful)
Software developers put stipulations on resellers that they can't sell to certain countries.
Video games and DVDs are region coded to make foreign-purchases difficult to use
Buying medicine out of the country can get me sent to prison
They have their cake, and eat it too. Then kick us in the balls for good measure.
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Republicans?
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You can. But when they go to make a purchase, most people make price the priority--just like companies. Boycotting will never get the momentum necessary to change corporate behavior. It didn't with the "buy American" campaign as it pertained to cars and it won't work now.
I honestly don't know what can be done but I'm willing to entertain the idea of the government taking a hand in this.
Re:Summary of the Corporate Attitudes (Score:4, Interesting)
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Err... scratch t
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I got a laugh out of that one. The funniest part is that Accenture could practically do that because of how screwed up, inefficient and wasteful their clients are. Personally, I work in the logistics industry and you can pretty much look at anyone's shipping data and with a minimum of effort, point out hundreds of thousands of dollars (at least!) that is just flying out a wi
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What's this "practically"? I worked side by side with Accenture consultants at a previous job. (We embedded employees inside their organization. It was the only way to get the job done after management screwed up by hiring them in the first place.) The employees are good kids and all, but they are just people hired off the street. They learn most of what they do on the job. While they try very hard to get it done, they don't have the first clue wh
Re:Summary of the Corporate Attitudes (Score:4, Insightful)
$10,000 vs $140,000 for the same heart operation.
$1,000 vs $6,000 for the same hair transplate.
$2.19 vs $20.00 for the same movie or album.
$.10 vs $5.85 for the same blood pressure medicine.
Companies make products for 50 cents and sell them there for 55 cents and here for $5.50.
And they get laws passed making it illegal to import those 55 cent products and sell them here for 60 cents (which would be real capitalism and would quickly undercut the $5.50 price.
I would not mind my salary dropping from $80,000 to $40,000 if the price of things were dropping from $20.00 to $2.19 and $5.58 to $.10 because I would be relatively better off.
And that's ignoring things like the 1/3 of the price of cars for safety features that are not required there and another 1/6 for legal costs that they don't bear because of our runaway legal system (and another 1/6 for some crazy pensions that are being dumped on my tax dollars soon) .
Duh. (Score:2)
If you are that smart, then start a company! (Score:2)
Wasting money proving the obvious (Score:4, Insightful)
The sad part is it took an actual university study to reveal the lie.
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And really, even if that were the case, doesn't capitalism demand that you pay those employees what the demand is worth rather than stabbing them in the back and going elsewhere or importing tens of thousands?
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"There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible. " - Henry Ford.
However, blind greed is much more in style nowadays.
Re:Wasting money proving the obvious (Score:4, Insightful)
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It's the lie that's right up there with "I'm resigning to spend more time with my family" not "...because I got caught with my pecker in the snack machine."
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Cost of living (Score:5, Interesting)
Maybe it's me being paranoid but how in the world are jobs leaving this country they way they are and yet the cost of living goes up every single year? Housing prices are seemingly out of reach to everyone yet they keep selling. A recent report on the news here in CA was that fewer than 9% of the CA population can afford to buy a house in CA.
Until we can make it affordable to live here we'll never be able to hold on to the jobs.
Cost of living will freeze soon (Score:3, Insightful)
Despite the comment ab
Re:Cost of living (Score:4, Insightful)
Actually more and more companies are looking not to outsourced Indian developers and support staff, but to outsourced and even satellite office US developers and supports staff. The problem is not that housing and cost of living is too high in the US. The problem is the housing and cost of living is too high in expensive areas of California and that is what most Slashdot readers pay attention to.
This is interesting because I was in a meeting this morning with our director of engineering where this exact issue was discussed. Some places in San Francisco a medium sized house costs you 5 million and 60K in taxes a year. My medium sized house in a normal part of the US cost about 120K and I pay a few grand in taxes on it a year. There are places in the midwest where amidst the corn fields you'll come upon an island formed by a university, a small town, and support facilities for a dozen major international corporations.
My advice to you, if you live in CA, move somewhere affordable. If you are looking to hire talent, look to a satellite office somewhere that is not crazily expensive. If you're looking to outsource development or support, there are cost competitive American companies with a lot smaller risk and cheaper travel expenses that Indian companies.
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If people with no credit are given 700,000 to buy a house- then that house goes to 700,000 even if it realistically should be 400,000.
That's a hard correction that's coming.
Next- what you allude to. Prevailing wages. As our wages drop, prices should drop.
Finally scarcity. Sorry but california is very pretty/popular so the people who do have money are going to bid the place up.
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I find that.. (Score:3, Informative)
So.... (Score:2)
http://politics.slashdot.org/article.pl?sid=05/04
Couldn't be?
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where's the "Duh!" tag? (Score:2)
Sad. (Score:2)
Have I been living in a cave? (Score:4, Interesting)
Was I too busy working?
Re:Have I been living in a cave? (Score:4, Insightful)
In business, it's always about money. This study was debunking the fact that some businesses were claiming it was not about lower salaries, which is somewhat different. In truth, I've worked on a few projects that involved outsourcing both in the US and overseas and while it was always about money, relative salaries was a pretty small concern. We outsourced because we had trouble finding enough local talent and because we had short term needs that required expertise we did not have in house, but which would have cost a lot unnecessarily to do ourselves.
In contrast, I know of several cases where companies outsourced core parts of their business, resulting in a short term benefit on paper, but a long term loss. Once an outsourced company has expertise in what you do (on your dime) they will raise prices or they will stop working for you and start competing with you. Of course by then the executive who made the decision already took his big bonus home and moved on to another company to repeat the process.
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Was I too busy working?
Yes, apparently you were. You missed various people trying to make various arguments about what "outsourcing" was really about. Often, the arguments were from someone with an agenda, and sometimes arguing, essentially, that there just weren't enough Americans who needed jobs.
The obligatory car analogy (Score:2, Interesting)
Here it is. Sometimes you'll see some really cheap "car mods" on ebay that advertise they could give you an additional 20hp while only costing you $5.00. Let's be real here - we all know that's a load of crap, and that you get what you pay for 99.9% of the time.
Recently, we had one of our customers outsource the implementation of our SDK to another company (this happened to be outsourced to an Indian company, though we've seen this same type of thing happen with domestic companies as well, of course).
Cost would be my guess (Score:5, Insightful)
That said, I would think R&D would be the LAST thing we would want to outsource, simply because if we do that the next generation of companies will develop not in the US but everywhere else. We cannot become a nation of businessmen/women and lawyers, because the world will quickly wake up to the fact that they already have all the smarts and physical resources to make whatever they need and can provide their own businessfolk and legal team. If the US makes too much trouble, we can be safely ignored because we won't be producing anything any more except hot air.
When it comes down to bare knuckles, US labor costs too much. Period. We don't have some "magical" quality that makes us better, we just happen to have a large number of well educated people in the US at the moment. The rest of the world can also be educated, and for cheaper than it costs to hire US labor. Businesses are finding that out - train the folks overseas, and guess what - they can do it too! Today, that lines the pocketbooks of those with control of the companies. What they aren't thinking about or don't care about is that tomorrow those folks will be making their own companies and coming right back at us, and we will no longer have the technological chops to keep up because the only money to be had in the US was by going into business or law.
Hopefully, we will retain our education and knowledge edge. We need to keep investing in education and keep ahead of the pack, however - the game is getting rougher and it will mean either a lower standard of living or harder work for us. There is no magic here, and in the end all competitive edges not based on natural resource advantage are short term.
Outsourcing is great for empire building (Score:3, Insightful)
For example, instead of paying one programmer $80k, they have:
2 programmers offshore - $20k each
system architect - $130k
technical writer - $60k
project manager - $70k
team manager - $100k
Instead of spending $80k/year, they are spending $400k/year. However, they claim a savings of $120k using management-math by multiplying the number of programmers they have times the salary of one programmer if hired locally, minus the actual cost of the offshore programmers. You can claim a 75% cost savings on the programmers, even though you're spending 500% of what you need to. It's a great way to fluff out budgets and org charts.
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This strategy is stupid, eventuallyEVERYONE LOSES. (Score:5, Informative)
2 basic economic equations are in play here:
gdp = C+I+G+NX = (income - savings)+I+G+NX
profits = costs - revenue = (wages + other costs) - (wages + other income such as capital gains)
when you kill wages/income, you kill your own profits as well as us gdp.
there is a time lag involved in this, but it comes back to bite you pretty quickly.
this is reflected whenever Reagan style policies (not exclusive to the republican party) are put into effect... there is always a recession a short time later, which is alleviated once the policies are countered/rolled back.
right now congress is STILL operating on the myth that there are short supplies of labor in "X" sector, which is bull, what there is is a shortage of cheap labor who dont care about long term benefits or retirement in sector "X"
plenty of on the ground info on this here [dice.com]
DOH! (miswrote an equation!) (Score:2)
it's profit = revenue - costs!
DOH!
That's wrong. (Score:2, Insightful)
If a company reduces the amount of money paid in wages, one of three things (or a combination) happens:
1) The make a larger profit, and the people who earn that profit spend it on other things.
2) They invest that saved money in more production or more production efficiency (buy technology, spend on research, build another factory)
3
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you ignore the concept of moral hazard, which gives rise to option 4.
4) greedy ceo'
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Until the people in India make their own companies which out compete the US in quality and cost (lower costs of management, etc.) Then the US economy ceases to exist, the dollar is dropped by the world's banks and thus tanks, and there isn't anyone left in the US who has the now needed skills. Aka "how to go from first to thi
Re:This strategy is stupid, eventuallyEVERYONE LOS (Score:2)
So long run at the micro level, brand quality and profits can be affected. I'm fairly sure if you did an in-depth cost benefit analysis projected over time of
More, from Booz-Allen and Duke News (Score:4, Informative)
What I never understood (Score:4, Insightful)
Granted this has to do more with call centers and the like. But I would much rather talk to Bubba Anne than Apu
So where can I... (Score:3, Insightful)
Anecdotal evidence (Score:4, Interesting)
My anecdotal evidence suggests that offshoring adds alot of costs that don't really show up without further analysis. In other words, it looks like you are saving money, but you are not. Luckily, we haven't tried to offshore our R&D (which includes software development), but based on our experiences with offshoring production, I don't think we would try.
From what I have seen, offshoring does save alot of money that shows up directly on the bottom line. You are paying much less for employees and benefits, so your overhead costs look much lower. However, we have seen quality suffer. The costs from that don't get reported as labor costs, and often don't show up until some time later, so it is hard to see a real correlation between these costs and offshore labor. So upper management, who are often somewhat removed from what actually occurs within the company do not notice the problem.
One of the biggest problems with offshoring is communication. When all the people in charge speak english, and the people doing the work can only speak marginal engrish, problems occur. Specs are not relayed properly or take much more time to communicate than they normally would. The problem is that even seemingly trivial specs are important, and they can mean a costly product return. We have seen one product return that costs as much as the employee saving for an entire year.
There are also overhead costs involved in setting up the offshore operation. I'd imaginge even moreso with engineering or R&D. Files and data must be able to relayed quickly and securely. With an oufit overseas you have little control over, this is can be very difficult. And if something goes wrong and important information doesn't make it, or doesn't make it in time, that can also mean costly losses.
The whole point is that while offshoring saves on employee costs, those savings can be quickly erased by communications or quality errors. In my experience, the cost savings just aren't all they are cracked up to be, although you wouldn't notice by looking at the accounting reports.
It's all cost of course (Score:2)
Surely "strong education or training" really means "stronger education or training th
My experiences (Score:2)
One of my co-workers is Indian and in India. But, he does nothing because of legal restrictions. He is hardly ever around because he gets so many vacations, holidays, and training days. He can only work a 40 hour week and can not work on the weekends, which is when he is actually needed.
He gets paid a salary to do nothing, my team is down a member, and we thre
Labor in the US (Score:3, Interesting)
Outsourcing will continue because it is at least on the surface cost effective. It will displace higher paid American labor in favor of lower paid labor elsewhere. It does not seem reasonable to assume that at some point all foreign labor will become as expensive as American labor is today. At least not for a long, long time.
Many people in the US are under some kind of illusion that we can be a country of "knowledge workers" where everyone is above average and college educated. We can simply export work or import labor for anything that is not covered by this. There is a false assumption here that everyone in the US is capable of being trained as a "knowledge worker". We are reforming the economy such that there are no jobs in the US which someone of more modest intelligence and capabilities can perform. This is a mistake on several levels.
Obviously, we can move work offshore to cheaper labor but we will then be dependent on a longer supply chain and whatever occurs in these foreign locations. This means that an earthquake in India can wipe out a company in the US. Does not sound like a good plan.
It also means that it is possible to seriously damage the US ability to compete in the world by attacking non-US facilities. If a majority of consumer electronics devices are made in Indonesia, burning down a factory there may prevent a US competitor from entering the market and preserve the market dominance of other countries.
Certainly when all our military equipment is made overseas, as will soon be the case, it will be nearly impossible to use the military against foreign enemies in league with producing countries. We can also expect complex military hardware to be dependent on foreign powers continued good will to keep it operating. Logic bombs in such equipment can be expected.
For SPECIFIC tasks (Score:2)
If You Code For "Free", Why Do You Care? (Score:2)
If you code for free....it really doesn't matter what the overseas programmers/engineers are getting DOES IT.
Why don't corporations just drop the BS? (Score:2)
So okay, it's time to get out of IT, I can live with that. What I hate is the Bullsh!t: "offshoring will actuall
I used to work for a major avionics company (Score:2)
Part of the problem... (Score:2)
But of course... (Score:3)
Our company outsourced a bunch of work to India. In a private conversation, I asked the V.P. why he did it...he was to-the-point, and said "It costs us $7 per hour out the door." Finding employees in the US with the skills would have cost more in salary alone, then factor in unemployment, health benefits, setting up a workstation for them... it's a huge difference.
Now, our company is the single largest player in our market. We're the 800-pound gorilla. We drove several competitors completely out of business. There's money there, we're not hurting. But when the guys in charge think "We could hire Indians instead, and split an extra $200,000 this year between ourselves...", then you know what the decision is going to be.
If I made the laws... (Score:5, Insightful)
I would still allow outsourcing, but just subject it to the following condition:
Before you can outsource any other job, you must first
1. Outsource the CEO.
2. Outsource the CFO.
3. Outsource the CTO.
4. Outsource the company president.
5. Outsource all vice presidents.
Because these tend to be the most overpaid people, this law would have the advantage of creating maximum value for share holders.
If you can't beat them... (Score:3, Interesting)
I'm kind of conflicted about this. Good on them for finding a way to be competitive but it's just more downward pressure on rates.
As a side note they're also ramping up to produce wind power and biodiesel (Canola - the thought of any of these four driving a tractor scares me). First stop self-sufficiency and then on to selling the surplus.
Cooperative living may be the only way to beat Corporate goons.
Re:work ethic my eye (Score:5, Insightful)
I'm sorry but "work work work" isn't what I would call a great existence. If you want it fine, but don't call me lazy for actually wanting to live a life I only get once chance to live.
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"work work work" and unemployment.
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The next goal(dream) for every Indian developer is to get h1b visa into usa.
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First, I moved the hours for this India office to be banker's hours, 9-5. I'm the one who stays up until midnight making sure they have work for the day. Asking professionals to work 3pm to midnight is disrespectful and counter-productive.
Second, I'm a F/OSS evangelist. Part of that philosophy is the belief that on the global scale, there is several magnitudes more work than there are engineers. Once the technological economy comes back in
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I've always wondered why no one ever tried this in the numerous examples of slavery in history. I mean, it's not like the plantation owner was holding a gun to your head demanding heirs. At what point did it occur that the kid was going to end up enthralled just like you for the rest of his life?
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Bad news for Americans who won't lower their salary to compete.
Lower your salary enough and people will think you're incompetant, when asked why your willing to work for so little all you can really say is that you need the experience, because to get a job you really have to be twice as qualified as you should be. So, if you have an AAS and want a job you're qualified for, you need to have 2yrs experience too, because the guy (B.S.) that you're competing with just lost his job to some guy (B.S.) recently graduating in India.
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And this surprised your company's management? After all, the Chinese aren't dumb. How much of a jump is it from seeing the American part out-source everything but upper management to China to the Chinese part deciding to in-source upper management and lose that huge drag on their profitability that resides on the eastern side of the Pacific?