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Outsourcing Growing Beyond India 374

Posted by kdawson
from the ho-ho-ho-chi-minh dept.
PreacherTom writes "One of the most controversial aspects of the global economy has been the newfound enthusiasm of companies, freed from the constraints of physical location, to outsource jobs. No country had embraced tech outsourcing with more passion than India. Of late, problems are beginning to arise in Indian outsourcing: engineers will start a project, get a few months' experience, and then bolt for greener pastures. The level of attrition can cause the turnover of a project's entire staff within the course of a year. Combine this with salaries in Bangalore that are rising at 12% to 14% per year and it is no surprise that companies are looking beyond India to a slew of emerging hotspots for IT, such as Brazil, China, and Vietnam. Will Ho Chi Minh City be the new Bangalore?" From the article: "India remains an IT outsourcing powerhouse, with $17.7 billion in software and IT services exports in 2005, compared with $3.6 billion for China and $1 billion for Russia... India's outsourcing industry is still growing at a faster pace than that of... other wannabe Bangalores... By the third year of an outsourcing deal, after all the costs have been squeezed out, companies get antsy to find a new locale with an even lower overhead."
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Outsourcing Growing Beyond India

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  • by dctoastman (995251) on Monday December 11, 2006 @05:15PM (#17199830) Homepage
    When people find out what they are worth, they start demanding it. Pretty soon, the entire world's IT population will be high-salaried, no matter where you go.
    • by mi (197448)

      Don't know about the mysterious "they" (as in "what did they expect"), but I expected exactly this. Free market at work. Supply and demand, etc.

    • by spun (1352) <loverevolutionar ... m ['o.c' in gap]> on Monday December 11, 2006 @06:21PM (#17200716) Journal
      As long as money, products, and information are free to traverse national borders but people aren't, tehn as soon as one region wises up and starts demanding what they are worth, the megacorps will simply move on to the next desperate region. They will let the uppity region become poor again before moving back in.
      • Re: (Score:3, Insightful)

        by sanman2 (928866)
        No, the guys asking for more money will have to keep moving upmarket, providing more value-added services in order to survive, if they're not willing to reduce costs.

        Anyhow, the more people get working, the more demand there is, which means more sales.

        If you were to suddenly wave a magic wand to make half the US population disappear, then would that suddenly mean a flood of job openings due to all the people suddenly not showing up for work? No, that's stupid -- there wouldn't be a flood of job openings, si
      • by Afty0r (263037) on Monday December 11, 2006 @08:41PM (#17202364) Homepage
        As long as money, products, and information are free to traverse national borders but people aren't, tehn as soon as one region wises up and starts demanding what they are worth, the megacorps will simply move on to the next desperate region. They will let the uppity region become poor again before moving back in.

        It's not a zero-sum game.
        "Desperate" is a very relative measure, and as India, China and other countries in the Asian sub continent improve their wages, education and quality of life to make greater wage demands, where will the multinationals go? And do you think those that have gained skills and wealth will suddenly drop back into subsistence farming, or maintain at least some quality of life? You know, after SE Asia is raised above the poverty levels it currently has, there isn't a great deal of the worlds populace left to exploit for 10 cents a day... and most of it is in Africa.

        Keep the work moving, keep employing new people in new countries, and we might, JUST MIGHT even out the worlds wealth distribution a little.
        • by Travoltus (110240) on Monday December 11, 2006 @11:50PM (#17203682) Journal
          At least for America's workers, whose wages will never recover from the downward pressure of globalism.

          America's booming IT industry is a thing of the past, as the entry level jobs needed to train people for higher end jobs no longer exist in America. Our IT industry will continue to shrink until it's completely gone, and all that is left in America are people jobs. The low paying cashier and medical clinic crap, with a smattering of middle class nursing jobs and doctors being crushed by malpractice premiums in malpractice award-capped states.

          For globalism to succeed, successful nations must be impoverished.

          Now where, you ask, is all the growth coming from? Simple. America is drowning in utterly unmaintainable consumer and national debt. Eventually that all has to be repaid.

          Pray ye diligently that ARMs stop rising and that home prices stop falling in the superhot markets of today, or you may find yourself eating the words you're thinking of responding to me with - because that's all you'll have to eat when the shakedown comes.
    • by SeaFox (739806)
      Yes, that entirely explains the level of wages in the retail sector. If the group you have starts demanding higher wages, most companies look for a different group with lower expectations. Hence the workforce will begin to be made up of less skilled individuals, those with poor attendance/performance ethics, and people in areas where the job is more likely to attract a larger base of applicants (like overseas) due to local economic factors.
    • by karmachild (1036700) on Tuesday December 12, 2006 @12:14AM (#17203830)

      For the past two years, I have been an independent contractor for Oracle Egypt, Xceed (the largest call center in the middle east) and some other firms.

      Yes, these "professionals" *think* that they are worth what their contemporaries in the U.$ are getting, but the plain truth is that they are not.

      They are not productive. By that I mean they lack consistency, attention to detail, and follow-through. This includes employees at all levels, from administration to management.

      Process, an abused word in the American work-place is a "newer" term in many countries.

      Many of us underestimate the cultural expectation of service and professionalism in the U.$. that we are assimilated into long before we begin professional work.

      This attitude and perspective is MISSING in the "professional approach" among professional in developing markets. Most of them think that their technical skills/development merit their position and pay, which I have explained and demonstrated to them will not be enough to KEEP the job.

      Sadly, 9 out of 10 professionals at Oracle Egypt want to be told what to do. They resent having to explain themselves, sell their solutions to customers (explain what they hell they propose and why the customer should implement their solution), and especially lack the communication skills to build customer rapport.

      The unstructured and self-managed work environment is a challenge to them, and they wind-up in a corner asking each other what to do, and their managers form India offer/set no better examples and are usually in the corner with them.

      I keep thinking, one day -a divorced, childless pre-menopausal white woman is gonna ride-down on y'alls asses.

      European customers of Oracle are HAVING FITS about the level of service professionalism that they are receiving.

      They complain about the "non-technical" work expectations, the (life-long) continuous learning expectations and especially having to do such on their own time.

      Microsoft call centers are popping-up all over developing markets because it is a tool used by Microsoft to stem the use of non-Microsoft "solutions" in developing markets.

      For example, here in Egypt Microsoft is the preferred vendor to the Egyptian government, Xceed (contact center) is owned by Telecom Egypt and the Egyptian Ministry of Information and Telecommunications. The work environment is what I can only imagine what a working in prison to be.

      Egypt is a low-risk environment, and most of these professionals refuse to even learn about open source tools and technologies. For now, there is no threat of an Egyptian solution-provider in this market competing AGAINST Orace, M$, etc.

      From what I have observed, all this 'outsourcing' is doing is helping to build a middle-class in developing markets so that there are customers with the income to consume western goods/services.

      It's working, too. These markets have bodies, but not necessarily brains.

      Oracle Egypt has pretty much aggregated all of the professionals in the region who are not working for their business partners and customers and is WAREHOUSING them to keep them form Microsoft -who incidentally was only doing product activation for Europe and is now recruiting for DB professionals -most of whom already work for Oracle.

      Now, M$ is poaching and driving the cost of "labor" up. These "professionals" will jump ship for more undeserved money, IMNSHO.

      BTW: Oracle-Egypt's pay scale as far as I can be nebby enough to find out ranges from $500 p/mo for "Customer Care" to $1000-$2,000 p/mo. for Oracle Analysts. Xceed pays from $150-200 p/mo. for "call center" employees. Administrative staff make from $300-500 p/mo.

      Until they start using the magic word -"FIRRREEEE-DUH," no change is gonna come. They just don't have to.
  • Outsourcing is bad (Score:5, Insightful)

    by Marxist Hacker 42 (638312) * <seebert42@gmail.com> on Monday December 11, 2006 @05:15PM (#17199832) Homepage Journal
    But turnover is the real project killer. But what did they expect? Worker Loyalty after they proved that they had no loyalty? The strange part though is how this infects EVERYTHING- I moved to government for stability, but my sub-sub-department of application developers has a 26% annual turnover rate; for the simple reason that in America we've destroyed the loyalty of the workforce! Now we're doing the same in India. If you treat people like widgets, expect them to act like widgets- and move to the most ecconomically efficient place for them to be.
    • Re: (Score:2, Insightful)

      I maintain a development team in Bangalore. If a candidate has been with his or her previous employer for less than a year, they better have a good reason or I'll pass. If they've jumped to a couple jobs are more in the last year, forget it. I won't waste my time.
  • by khasim (1285) <brandioch.conner@gmail.com> on Monday December 11, 2006 @05:16PM (#17199834)
    So you see high staff turn-over in India. The "solution"? Move the project to a different country.

    But why would that country's people be any different?

    The fact is, once the outsourcing staff has the knowledge and experience that was previously YOUR expertise, there is no reason for them to keep working for you. Eventually, they start their own companies in your market and replace you.

    Don't focus on short term profits at the expense of long term survivability.
    • by theshowmecanuck (703852) on Monday December 11, 2006 @05:22PM (#17199930) Journal
      This will keep happening until companies stop paying huge bonuses to senior executives for short term profits.
      • by khasim (1285) <brandioch.conner@gmail.com> on Monday December 11, 2006 @05:43PM (#17200204)
        How can you structure a CEO's (or other CxO's) salary/bonus plan so that their incentive is to keep the company productive and viable instead of "shedding" all the "unprofitable" sections (such as IT) and outsourcing them to raise short term revenues, cash in the bonus and leave for another company?

        It is far more profitable for a CEO to wreck and sell the company than it is for him/her to actually spend time running the company.
        • by theshowmecanuck (703852) on Monday December 11, 2006 @06:16PM (#17200640) Journal

          Simple, do the same as they do for the IT staff already: Pay them what they are worth in a salary, and if they do a good job, they get to keep working there. Others have some good suggestions too on this. If you don't do something about this though don't expect stupid actions that generate short term profits but long term mediocrity to end.

          To put it in slashdot parlance:

          1) The senior executives come in, make their short term profit for the company and collect their bonuses,
          2) Things go to shit (since their short term plans don't work for the long term... they don't care anyway, their eye is on the bonus) and they get fired,
          3) Take a huge severance and... profit!! (well except for the shareholders)
        • by vertinox (846076)
          How can you structure a CEO's (or other CxO's) salary/bonus plan so that their incentive is to keep the company productive and viable instead of "shedding" all the "unprofitable" sections (such as IT) and outsourcing them to raise short term revenues, cash in the bonus and leave for another company?

          Tie the CEO's yearly salary/bonus plan to a stock option plan they can't sell until 10 years from that date. Make it pretty lethal and impossible to sell or get any benefits until then.

          Perhaps, make it worth thei
        • by mutterc (828335) on Monday December 11, 2006 @06:24PM (#17200766)

          A former manager of mine had an insightful take on this:

          Back in The Good Old Days(tm), employees (including top execs) would work for a single company for many years, then retire, drawing a pension. Because of that, there was built-in incentive to make sure the company had long-term stability.

          Nowadays, executives are disposable employees like you and me. Therefore, they have no reason to care whether the company is long-term profitable. They know they'll be elsewhere in a few years, so why not plunder the company in the meantime?

      • by Kohath (38547)
        This will keep happening until companies stop paying huge bonuses to senior executives for short term profits.

        So people in the poorest countries will keep getting better and higher paying jobs so they can feed their families and eventually move beyond subsistence to some relative level of prosperity?

        I hope those senior executives keep getting those huge bonuses then.
        • You think those bonuses have anything to do with philanthropy? You think senior executives care about anyone least of all someone living in a mud hut? RTFA. They care about short term profits that fit in their own pockets. I once heard someone say that they believed that senior executives, and especially these modern bonus taking CEOs are mostly if not all, sociopaths. I tend to agree with that.

    • Re: (Score:3, Interesting)

      by partenon (749418)
      Not true. The real value for a software isn't the code itself. It's the business logic behind the code. And companies only outsources tech jobs, not their business knowledge. As a brazilian who speaks a bit of english, I work (and worked in past jobs) for american companies as outsourced programmer and I can tell you: we have *no* business knowledge nor people w/ this kind of knowledge here in outsourced jobs (but, of course, we have our own IT marked).

    • Yeah. CEOs need to learn that the employees are the company, not the executives at the top. If you have good employees making excellent products and services you have a good company. You try to rip the employees off then the employees leave and its someone else that has a good company.

      Used to be good employees that are loyal were extremely valuable to a company. Now they've decided that Intellectual Property is all thats needed and employees are disposable. I hope this philosophy fails miserably.
  • by theshowmecanuck (703852) on Monday December 11, 2006 @05:19PM (#17199890) Journal
    Logic says the same thing is going to happen in every place that is outsourced to. Maybe that is the point to make to the CIOs. Just keep projects where you can control it in the first place, and it will save money in the long run. Lack of control on a project and high personnel turn over can be more expensive and deleterious to a project than keeping things close to home and paying a reasonable salary to begin with.
    • Logic says the same thing is going to happen in every place that is outsourced to. Maybe that is the point to make to the CIOs.

      The group to teach this to is not so much the management (who operate on short time scales and dance to their investors' tune) but the Venture Capitalists (who are in it for a long-enough haul to cash out, and write the tune).

      A few years ago I was working with some people who were trying a startup. They couldn't get funding without having an "outsourcing strategy". Over 95% of the
  • by zappepcs (820751) on Monday December 11, 2006 @05:20PM (#17199914) Journal
    While its true that it helps to 'flatten the world' into a large community, it harms our own communities when we outsource. Sure there is that short term bottom line issue of money, but you don't have to go much beyond 'short term' to see that the cost of wages is hardly the big cost in outsourcing. Before this story came out there were many others telling us how good outsourcing is and those that told how bad it is. The indicators have been there all along as to why it is bad.

    Big indicators have been the outsourcing of work from India to China! The fact that customer service companies in India cannot communicate with the average person in western English speaking countries on a level that is equitable. The high turnover rates have always been there as a problem that was politely ignored in favor of lower initial labor costs.

    Any project manager can tell you that trying to lead a project of software engineers that is not only geographically separate, but separated by as much as 12 hours from the part of the company that needs the software.

    All of that is not news, or shouldn't be. What is news is that more and more companies are finally realizing this. There will be companies that continually hunt to find short term savings, like gold rush miners, but in the end, customer service and ease of development will drive down the desire to outsource work.

    Yes, I know that Bill et al have proclaimed that there is a shortage of IT workers in the US, and apparently there is a glut of degreed IT workers in India. The trouble with such claims is that those Indian IT workers (no matter how many degrees they have) do not have any kind of realistic understanding of the western world's business environment, and often I swear that they really have no idea about software either, but I suppose that is borne from not understanding the business culture as well.

    This story is really about how outsourcing work to foreign countries is coming back to bite the people that thought outsourcing was a good idea to start with.

    Those who won't learn from history .... and all those nice cliche's

    • by danpsmith (922127)

      Big indicators have been the outsourcing of work from India to China! The fact that customer service companies in India cannot communicate with the average person in western English speaking countries on a level that is equitable. The high turnover rates have always been there as a problem that was politely ignored in favor of lower initial labor costs.

      When I bought my last computer, I was offered a service package and the package contained in no uncertain terms, explicitly "non-outsourced customer support

    • I disagree (Score:4, Insightful)

      by 2nd Post! (213333) <gundbear@NoSpam.pacbell.net> on Monday December 11, 2006 @05:59PM (#17200418) Homepage
      I disagree that outsourcing is bad. Generically that is like saying hiring a babysitter or a neighbor or anyone other than yourself is bad. So what are the indicators that outsourcing is bad? Just saying there are indicators is not the same as showing that the indicators are bad.

      1) If you hire your son to mow your lawn, there is nothing stopping him from hiring his friend in turn... ala Tom Sawyer. If the job is unacceptable, make the terms part of the contract.
      2) Customer service is not a function of outsourcing, it is a function of cost. You can have equally horrible customer service inside the US itself.
      3) High turnover is also not a function of outsourcing, it is a function of management. If an employee has no training and advancement path then it is up to the employee to figure out their own. This is true of any company in any country.

      All these problems would exist if the companies in question practiced homesourcing, where a company like IBM hired a temp agency in Alabama to support their developers in San Jose.

      Again, why give work to a neighbor or a friend when you can do it yourself?
      Answer: Because division of labor and speciality encourages increased productivity when both parties can do separate things more effectively than both parties replicating work.

      In this case the flaw with outsourcing is that there was not a good reason or a good implementation for the division of labor.
      • by drinkypoo (153816)

        Global outsourcing harms everyone except those to whom the work was outsourced. When I move the work to another country, I help that country and its inhabitants, but I harm my own. I make those other people more competent by paying them to learn - since you can't really help but learn as you work. I'm not paying people in MY country to learn. In addition, the money is leaving the country, so it cannot be used here any more until it is used to buy more goods/services. Because we are helping train the worker

        • by 2nd Post! (213333)
          Again I bring in the neighbor/Tom Sawyer analogy.

          If I pay my son to mow the lawn but he hires his friend, at half price, to do it for him, who is building physical stamina? Who is learning how to cut grass? Who is learning how to use a lawn mower? How to maintain and fix it?

          So my son is now harming his own family and helping his friend's because he is paying them to learn and money is leaving your household and will not be available again until it is used to buy something, as well as decreasing the likeliho
          • by drinkypoo (153816)

            Do you not think of humans as, I don't know, fellows? Is it a zero sum game for you?

            I don't believe that India doesn't have a right to grow, or even that it doesn't enrich us all. It does. However, if change occurs too quickly it has a destabilizing effect. India is feeling this effect now, but more importantly in the day-to-day lives of Americans, we're feeling it more.

            You can't stop progress but allowing it to progress unchecked is not a good idea either.

            • by 2nd Post! (213333)
              I don't think there is any central organization that can control/limit/stabilize this kind of effect. It is all decentralized, insofar as companies experiment with outsourcing, find it works, or find that it doesn't, and grows or shrinks depending on market forces.

              In that respect the best you can expect to do is live life carefully in your own sphere: Don't buy cheap/disposable when you can buy quality/durability, don't overconsume because it requires too many trade offs in price/quality, and live like it m
    • While its true that it helps to 'flatten the world' into a large community, it harms our own communities when we outsource.

      Err, and why is your community so sacred? You're probably very well off in the general scheme of things. When jobs get outsourced, that helps to create more wealth. As people get wealthier, they can afford more interesting things, like stuff YOU make, like clean air and water, like stuff that hasn't been invented yet.

  • by creimer (824291) on Monday December 11, 2006 @05:23PM (#17199942) Homepage
    Will Ho Chi Minh City be the new Bangalore?

    After those workers start demanding higher wages, an alien slave trader will set up a trading post to provide cheap labor and the Men in Black (MiB) will be put out of business after the industry lobbies the government not enforced the alien immigration laws.
  • We all know that the CIO responses to this will be to spend a billion dollars in an even more backwards country, hire thousands of people who are even cheaper, figuring that even if turnover is 200% they can break even on the lower headcount cost. Pretty soon we'll be building data centers in Angola & Bangladesh paying those people half of what we pay them in India and in 3 years we'll be wandering aroung dazed at the absolute sucknocitude of everything. I don't who we'll get to work at that point, mayb
    • by NDPTAL85 (260093)
      Classholes? Are you for real?

      Like seriously?

      Alternatively do you think people in the US are willing to pay more for software in the US in order to employ US workers?
    • Re: (Score:3, Insightful)

      by tsotha (720379)

      There are so many flaws in this thinking I don't know where to start.

      First of all, CEOs don't reap what they sow. They'll only be CEO for a few years, they'll make a shitload of money, and when they leave they'll get an even bigger shitload of money as a golden parachute. You can't blame someone for taking that kind of work, and the long term implications of what they do won't affect them. Somebody will reap what they sow, but it won't be the CEOs.

      Secondly, when did they "kill the industry" in the US?

  • by isdale (40622) on Monday December 11, 2006 @05:29PM (#17200032) Homepage
    Sea-Code [sea-code.com] has a former cruise ship they plan to station off the coast of So. Cal (San Diego) and staff with programmers, etc. The idea is to make the staff closer to US based clients, who wont have to travel days for meetings. Having staff stuck on a ship might also keep them from 'jumping ship'?
  • by loony (37622) on Monday December 11, 2006 @05:33PM (#17200092)
    So, now that management has run out of ways to prove that their plans work they will find a new, even cheaper place... good luck with that.

    So far I have not come across many Fortune 500s where outsourcing actually worked in the end - that means not just a lower rate but comparable quality. There are plenty of CxOs that announce how much money they saved and all, but if you talk to the techs they almost consistently have another story to tell. For each 100 hours of outsourced work I estimate the average will be about 40 hours of US time to review and fix the programs... And those 40 hours will eat up all the cost savings you had in the original 100 hours. Its sad - but in the end for a million line codebase that has a certain quality, it doesn't really matter where you do it - the cost will be the same... The only ones that have a big advantage there is the russians. No idea why but their quality is usually better than you find anywhere else and the prices are reasonable too.

    Before outsourcing, look beyond the hourly rate and consider skills. Then analyze your savings after the project has been in production for a while - and check if your expectations actually came true.

    Peter.
    • "The only ones that have a big advantage there is the russians. No idea why but their quality is usually better than you find anywhere else and the prices are reasonable too." The Soviets provided free secondary education to anyone who could pass an entrance exam. 20% of russians aged 30-60 have 6 year degrees, twice the amount than in the United States. The education system also has a very strong emphasis on technology and science.
  • by Anonymous Coward on Monday December 11, 2006 @05:34PM (#17200110)
    I'll happily work for $3-4 US per hour, as I'm sure many other Canadians will.

    As a university graduate with 15 years professional experience and zero current domestic employment prospects, no unemployment insurance or welfare, a few dollars an hour that the tax man does not know about is most welcome.

    I can make enough to survive on for rates similar to impoverished Indians. Its all in your standard of living.

    The benefit to my clients is mainly fluency in English (UK spelling) and ease of communication.
    They get superior service at rates comparable to outsourcing to the east. And I get to eat, and buy the odd package of cigarettes.
    • by RajivSLK (398494)
      Umm, where in Canada do you live? I have been hiring in Victoria BC and it is very hard to find good prospects.
    • by joe 155 (937621)
      You should come to England, here you'll earn £5.10 an hour (going up soon), about $9something off the top of my head, for any job you take. If you have a degree you'd easily get a job paying more than that. But it sounds like you could have a better standard of living working in Tesco than you have there... It would probably even be pretty easy for you to get permission to work
  • by Daishiman (698845) on Monday December 11, 2006 @05:43PM (#17200208)

    But I frankly don't see any reversal of the outsourcing trend

    As foreign workers acquire more and more skills, the gap between them and the first-worlders being replaced diminshes. Already we are seeing this: instead of outsourcing to places like India or China, many companies are turning to not-so-poor but cheap places like Easter Europe, Brazil, or Argentina. Countries where technically skilled people exist but were in low demand, but most importantly where the culture is extremely compatible with their clients'.

    (Brazilians or Argentines DO have a language barrier, but their culture is much more similar to that of the US than other people in the globe, which makes their skill acquisition faster).

    The problem clients have with outsourcing isn't about foreigners or incompetence. It's about managing a herd of cats through virtual teams and bonding with people with the same accent and interests as yours. I know that personally I've had much more success with my customers due to my American accent than my less linguistically skilled co-workers.

    sig: Cosas de un sysadmin argentino: http://aosinski.phpnet.us/ [phpnet.us]

    • by Dasein (6110)
      I think that the amount of software to be developed is positively correlated to the computer-using population. As that population increases, there will be far more work for smart developers of any nationality than we can handle.

      Relax.

      The major cause for the big outsourcing boom was that some countries (like India) had large, highly educated workforces that couldn't get at the work due to high transaction costs.

      The internet drastically lowered the transaction costs and we say these workers flood into the ma
    • "But I frankly don't see any reversal of the outsourcing trend"

      I do. I'm having my most profitable year ever. It seems as if a lot of work has come back to the UK.

      Hiring outsiders from half way around the World just doesn't work. If it does, why are companies not boasting about the latest successful product that cost 75% less to make than in previous years? Why are the PR spin machines strangely silent?

      All we hear is that some company decided to offshore and hopes to make tens of millions of dolla

  • by Bright Apollo (988736) on Monday December 11, 2006 @05:43PM (#17200216) Journal
    ...for which I offer no apology.

    Outsourcing is neither good nor evil, but the motivation behind outsourcing tends to be overwhelmingly merciless and short-term. Taking a knowledge activity and attempting to turn it into a commodity or near-assembly line function is, I suppose, a managerial Holy Grail worth undertaking in different guises each decade.

    Consider H1B visas. Is there a shortage of IT workers in the US, or a shortage of *cheap* IT workers in the US? Most major media publications are overwhelmingly guilty of dropping the telling adjective, and the quotes they gather all support a lack of IT talent, no qualifiers added.

    We who work in this space, live in the space, can confirm some of this. It *is* hard to find a superior talent for an IT position above entry level. However, it's not impossible if you have a salary and excellent position to offer.

    So, when I read about outsourcing arbitrage and the chase for ever-cheaper talent, I just wait it out. Eventually, all of the talent, cheap or not, will come to fore and then the real shoot-out over quality and reliability can begin. Does anyone truly believe there's a hidden cachet of Polish supercoders who haven't been discovered because they lack the Internet connectivity? Does anyone see the inherent flaw in that premise, and by extension, any argument like it?

    I'm not overly impressed with a single outsourced individual or group in my eleven pro years of IT, and that includes old Anderson Consulting of 1995 up to Patel Consulting of 2006. The prestige of the firm should only get them an interview: talent and not cost is what you'll need to survive.

    As a final note, what, if anything, will the US do if it successfully outsources all of its IT functions? Does anyone expect anyone to major in CS in this country, knowing that electricians make far more and took less formal schooling? I think not. You can't outsource a physical service.

    -BA

    • Or have you been missing the massive numbers of illegal immigrants (AKA undocumented workers for the politically correct crowd) who have come to America lately? America for the most part has been completely settled from coast to coast since the dawn of the 20th century and like any other nation on earth, has a limit to the amount of natural resources that the nation can provide. China quite aptly realized that their nation was at risk of imploding because of having more people than their environment can sup
    • Re: (Score:3, Insightful)

      by TheSync (5291) *
      what, if anything, will the US do if it successfully outsources all of its IT functions?

      The US hasn't even been able to outsource all of its manufacturing jobs.

      What will happen (what is happening) is that there will continue to be a need for some level of IT functions in the US, especially of the "rapid response" variety, but perhaps at a slightly lower employment level or pay level (look at automobile manufacturing in the US, where even foreign companies are building new plants here, but they don't have u
  • Wow...irony (Score:5, Informative)

    by Shoten (260439) on Monday December 11, 2006 @05:46PM (#17200246)
    I'm in China at the moment, actually, about to go to a second site here. My purpose? I'm looking at the security of two vendors who are competing for a financial BPO (Business Process Outsourcing) contract with a major corporation. This is my first look at outsourcing up close, and I can see why companies examine the option. Yesterday I looked at a BS 17799 and SAS 70-certified facility, with smart people who cost far less than their counterparts. Also, there was discussion about turnover in India.

    Outsourcing is definitely here to stay, but from what I have seen, cost is not the only factor that gets considered these days. (At least, not by the client I'm working for.) They're looking at the whole package, but the biggest thing that has mattered so far are the tools and functionality that the outsourcing provider can bring to bear. At the end of the day, it'll be functionality that matters the most, especially as labor costs in markets like India and China grow. But don't make the mistake of thinking that in such countries lower cost is all they have to offer, because that's not necessarily the case; the provider I visited yesterday had a hell of a great system for handling the complex financial functions that are a main pain point for my client.
  • by mpapet (761907) on Monday December 11, 2006 @06:06PM (#17200508) Homepage
    Is suspect 98% of the time.

    1. Workers who lost really well-paying jobs to outsourcing:
    I'm sorry no one informed you, but one of the economic reasons you were paid so well was that your job was coming to an end. It was always a temporary state. Consider the extra wages a "retraining allowance" paid in advance.

    2. Shareholder Demands:
    Clearly outsourcing is a cost-reducing effort. As long as those costs are measured in dollars and cents your job is on the chopping block on a quarterly basis. Unless every business owner/shareholder in every country in the world becomes simultaneously enlightened, this is the benchmark.

    The new american worker rules are:
    There is no such thing as job stability.
    Get paid for today's work because there is no promise tomorrow. e.g. retirement and vesting options are mostly vaporware.
    If you are lucky enough to be near the top of your wage curve, live at or about the middle of the wage range for your industry if at all possible. This gives you a nice F.U. fund if there's a sudden change in your employment circumstances.
    • by tsotha (720379)

      The new American rules are no different than the old American rules - There never was any such thing as job stability. When I graduated from college in the late '80s with an EE degree companies were laying off engineers by the thousands. This was long before outsourcing. Stability is a temporary condition during economic good times which persists because labor is in tight supply. As soon as the economy becomes "normal" again (or bad), that stability dissappears.

      People for whom stability is a primary co

      • Employment Stats:
        Number of years in the workforce 47 +/-
        Number of employers: 2 +/-
        Longest Stint: 40 years.

        Promises companies (and governments) make aren't really binding
        My father would say this is the difference between his generation and mine. In his day, people's word actually meant something. Even if those people worked for a corporation there was a sense of personal responsibility in your daily dealings.
        • by tsotha (720379)

          My father would say this is the difference between his generation and mine. In his day, people's word actually meant something. Even if those people worked for a corporation there was a sense of personal responsibility in your daily dealings.

          But that's my point. From 1945 through the mid '70s companies could afford to act that way because the economy was growing at a pretty good clip. But when you have a recession, companies cut payrolls - it's just a fact of life. How many jobs did his father have? Co

    • Re: (Score:3, Insightful)

      by Russ Nelson (33911)
      It's not so much shareholder demands as it is customer demands. Companies wouldn't be under so much pressure to charge less if customers weren't so stingy with their dollars.
  • by why-is-it (318134) on Monday December 11, 2006 @06:07PM (#17200524) Homepage Journal
    By the third year of an outsourcing deal, after all the costs have been squeezed out, companies get antsy to find a new locale with an even lower overhead

    This is the biggest problem I have with globalization: we have removed all constraints from capital and freed it from all other considerations. It is truly a race to the bottom - who has the lowest labour costs, who has the fewest environmental restrictions "wins" some starvation wage jobs until we can find someone else who can be exploited even more.

    The fear used to be that jobs were being sent south to Mexico. But when Mexicans workers start demanding fair wages, we sent the work to Viet Nam, where people earn $2 per day. But even that looks pretty expensive when there are people in China willing to work for $.50 a day.

    It's exploitation plain and simple, and we don't care because we are insulated from the uglier aspects of it. Of course, we are getting screwed too - those over-priced sneakers are now manufactured for a fraction of what they used to cost, but we still pay roughly the same price at retail. At least the shareholders are happy, but if they could find someone who would work for $.25 a day, they would be even happier.

    Whenever someone argues in favour of a living wage, we are told it is too expensive. What a shame that poverty has become an official requirement of our economic system.

    If we found ourselves working in the sweatshops for less than a buck a day, I wonder if we would be grateful...

    • Re: (Score:2, Interesting)

      by maxume (22995)
      Yes, paying people money for work they are willing to do is clearly evil. Exploitation is a problem, but isolating a country is not going to improve the situation, and there are a lot of people who would rather be exploited than hungry. Look at China and N. Korea; China decided to open up their economy, and kaboom, here they come, while N. Korea is stuck in the past.

      If you are upset about your shoes, buy American. New Balance 'tries real hard' to make their shoes here, but that's just a bonus that comes wit
    • "until we can find someone else who can be exploited even more."

      I don't understand how offering someone a voluntary job is "exploitation." If the workers in question had better alternatives, wouldn't they be taking them? Isn't that just another way of saying that the company in question is offering the workers a better alternative than any other?

      "Of course, we are getting screwed too - those over-priced sneakers are now manufactured for a fraction of what they used to cost, but we still pay roughly the same
      • by Qzukk (229616)
        We would if the alternative was starving.

        How low does it go before the going rate for labor is unable to save the laborers from starving? What then?
    • by TheSync (5291) *
      Yes, it is a race to the bottom...of poverty. Eventually, there won't be any more cheap labor left, and global poverty will be abolished. Sounds just horrible! :)

      Between 1990 and 2002 more than 174 million people escaped poverty in China, about 1.2 million per month.
  • by Anonymous Coward
    just a nod to this insightful look at the Economics of Offshore Outsourcing [led-digest.com] I found recently via Reddit or somewhere. Bottom line for me is that there are levels of quality in all things, and this is no exception. Do your due diligence and expect to pay more for quality work. Just like anything else outsourcing work is demanding more moo-lah.

    bonus in the article cited above - a discussion on coding and the communications barrier. And i quote:

    I spent a year in China teaching C++ to college students. Al

  • Salary growth will have to slow in India.

    At the lower end, 12% salary grows by 10 times in 12.6 years and 20 times in 16.4 years.
    At the higher end, 14% salary grows by 10 times in 6.8 years and 20 times in 8.9 years.

    Given mostly stagnant salaries in the United States and other higher wage countries, India's salary growth is going to be rapidly constrained.

  • Big surprise (Score:3, Insightful)

    by hey! (33014) on Monday December 11, 2006 @07:34PM (#17201668) Homepage Journal
    News flash: India is not a bottomless well of instantly tappable programming talent.

    What folks are complaining about is simply signs that there's a sellers market for programming skill in India these days. This will raise Indian salaries to the point where Indian salaries plus transaction costs are the same as US salaries. Another thing I've seen is that the average skill level level of Indian programmers isn't as high as it once was. Which isn't the same as saying the Indians are losing skill -- it's the opposite. The time was when nearly every Indian programmer you met was probably brilliant. There are more great Indian programmers than ever, but there are also lots more mediocre ones than there ever were.

    I expect India's programming talent pool to continue increasaing, but you can't grow such a skill based industry overnight without compromising a little on quality and losing some price advantage.

    There will never be another outsourcing phenomenon like the India. India has had three great advantages: (1) a huge and highly educated middle class population; (2) widespread English fluency; (3) stable government and laws. There isn't any other place remotely like it.

    The next great outsourcing horizon will be ... India. However it won't look like the round we've been through. It will look something more like toe-to-toe competition.
  • This "problem" was always part of doing business with Indian subcontractors. The first time I encountered an Indian team was on a project around 1997 - back when it was just called subcontracting, and not 'out-sourcing'. We had a major problem of trying to get the guys up to speed, since they were just fresh out of university, and very green - and just when you got them trained to a useful stage, they would be gone. None of the coders would be on the project for more than 3 months before they left (left
  • As an MSc Management student I am taught that companies seek Rule of Law. But as an independent thinker, I argue that companies seek Rule of Law for Themselves, and I theorise that they outsource to countries where officials can be bribed. Some businesses (all of them? hopefully not) are afraid of a transparent, just government and court system. Essentially, what some business owners want is to be able to chase criminals and competitors, but save their business by bribing officials when they are being ch
  • by Tracy Reed (3563) <treed@u[ ]aviolet.org ['ltr' in gap]> on Monday December 11, 2006 @11:50PM (#17203686) Homepage
    I spent 9 months in HCMC as the director of software development for a US based company last year. It wasn't my idea. The Vietnamese-American owner of the company who employed me to go thought it was the thing to do. I can tell you that it is NOT the place to outsource any IT tasks such as programming or web design to. Not unless you have some serious government contacts to get you access to the smartest kids out of the state schools (who will still have only minimal programming knowledge and only on Windows).

    I couldn't find anyone there who spoke decent english who knew anything about computers. The best I could find were straight out of two year trade school/junior college amature windows jockeys. Linux? Perl? Fat chance! It is still very much a third world country. Software is pirated wildly too. Don't expect employees to obey any sort of NDA. Also note that since people there do not have credit cards, car payments, mortgages, and are already heavily dependent on their families for most things they need they are usually free to leave your company at any time.

    At least they have cable modem in HCMC even though it can be a bit unreliable. Exepect a power outage once a month too. Expect theft. I have had motorbikes stolen, cell phones stolen, etc.

    And the corruption...oh my god. We paid off everyone and were solicited for payoffs by everyone. My coworker overstayed his visa by a day. They wouldn't let him out of the country! The soldier/immigrations officer/policeman (all the same there) took him into a side room and basically asked him how much money he had on him. $60 worth of the local currency (Vietnamese Dong) and he was free to go. We paid $400 in cash to the customs guy to get them to let our IP phones into the country when the official tax on them was supposed to have been much higher.

    And on top of it all they are still very much communist and most are quite brainwashed. It is in a similar vein to North Korea only not as extreme. Americans are lazy people who cheat on their wives and fuck in the streets and cannot be trusted. They do not know about nuclear weapons, don't know the cold war, don't really know anything about the world context in which the Vietnam War happened. Everyone treated me very nicely of course. No anti-Americanism at all as long as someone stood to gain money from me and I was paying in cash. They are always very friendly to tourists and smiling and respectful. Just don't try to date anyone there or talk politics with anyone as you will surely offend. If you hear someone say something about history which you know is patently false just smile and nod.

    Suffice it to say the project did not go well. Doomed from the start. At least I had the good sense to bail months before the shit really hit the fan and the whole operation collapsed.

    Vietnam is a fun place to visit and I recommend it. I will be going back there again in a couple of weeks for Christmas. I just won't be doing business there again until the business culture changes dramatically.

It is impossible to travel faster than light, and certainly not desirable, as one's hat keeps blowing off. -- Woody Allen

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