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I, Cringely - The Survival of the Nerdiest with Robert X. Cringely
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Predictions
BOB Predictions TRIBE Predictions
Status: [CLOSED]

The tide wont change until wages become more normalized. It's still cheaper to offshore. Until it is not, expect no change. Globalized labor is a fact, and it won't go away.

jon | Jan 11, 2007 | 11:02AM

Offshoring is a trend, and like any trend, CEO's tried to expand it to too many different areas. Not all those areas worked according to plan. For example, Dell customer support has turned into a punchline of nearly Wal-Mart bad press proportions. Offshoring as a trend will contract overall because not all those outsourced/offshored situations proved to be valuable enough to justify the costs, whether they be financial or otherwise.

FilteringCraig | Jan 11, 2007 | 1:32PM

Although offshoring is cheaper, some companies are finding out that 1 out-sourced worker does not necessarily equal 1 in-house worker. The corporate culture in say India is very different than the American culture. While the education level may be the same, the work and managerial experience can be very different. We're seeing that many workers get hired and are trained to a proficient level (in a year or so), then they leave for a higher paying managerial job. Most out-sourced worker seem to just want a fortune 500 company on their resume. This creates much turnover which in turn reduces productivity. So, is offshoring really paying off?

acflippo | Jan 18, 2007 | 4:42PM

At some point, quality will be the main deteminant. As a programmer (NOT a developer), I can assure anyone reading this that code written by off-shore, without significant effort toward code review, cannot be maintained without being re-written. The paradigms that existed in the '80's, that developers were on some weird plateau, and support folks were some levels below, exists in the off-shore world. Those that can make a difference are derailed by the need to just get code into production. Rework increases 10 fold (at least). I've been subjected to this paradigm, and can tell anyone who cares to read this that it creates an environment that promotes sub-standard execution. That said, there is a caveat. We, the products of the '80's, are not very good at defining, explicitely, protocols for development. If the off-shore model can make that better, then I'm all for it. Unfortunately, my personal experiences have been that there is way too much lost in translation. Example: The off-shore resources are taught, stringently, in the current technologies. If they are asked to work with a modem connection, or even a simple TCP/IP connection through a socket, they become horribly confused and are unable to comprehend (or, more importantly to me, troubleshoot) a connection. This whole paradigm has made idiots like me, who are NOT EE's, the experts in communications protocols. That's probably not as scary as the fact that application level protocols are a complete mystery to the off-shore contingent. If it doesn't fit into a java library, they have no clue how to make it work. There's a lot more, but probably irrevelant at this point. Just a small example is the utter confusion for support tools, where a connection may not be the GB to the desktop (Web tools and java clients are fine until you have to use them over a 9600 baud modem connection (yes, they still exist)). I'm done. At some point, the PHB's will understand that quality is actually less expensive in the long run, than crap that has to be reworked over that same period. Get it right the first or second time, don't wait for problems that have no viable solution. Furious activity is no substitute for understanding (not mine, but it's been my email signature for 10 years).

IrritatedParticipant | Jan 19, 2007 | 12:49AM

My experience - offshore is a different culture. You lose a certain amount of business knowledge - i,e, What's a requisition? How does it turn into a purchase order? Can you have multiple Reqs on one purchase order? What happens to a split order? You also find the initiative that is rewarded here does not exist over there. They do what they're told. When they hit a wall, they stop and wait for instructions. Their bosses are threatened by anyone who undermines the boss's job, which is taking questions up the ladder and bring answers back down (not thinking, either). If you want to get code done, you have to spell out the requirements precisely. My experience was with departments whose fuzzy specs resulted in frequent amendments and cclarifications.

MD2000 | Jan 20, 2007 | 3:44PM

Bob, I wish I could have interviewed the people you got to sit down with in Triumph...It would be interesting to hear how their perspective has changed 10 years on - particularly Larry Ellison who really went out on a cyber limb. Anyway, on the subject of outsourcing. This is a topic of much known contempt. As a freelancer I have heard clients threaten to take their money and interest to India. Well, if anyone has ever done an entire web site design over the phone successfully than hats off. Couple that with a language and cultural barrier and you have yourself some trouble. There are those whose standards are not that high and so a template modification will do. This can be done by outsourced hands. But, if you want something that is custom built you need to hire a local talent. That's my two cents.

Steve Constable | Jan 23, 2007 | 1:52PM

That prediction won't come true in the near term because it would go against human nature. We have outsourcing because it's cheaper. The lowest price in a market gathers the most buyers. It's important to be the first to offer something for sale, but the quality of the product is not important in a society in which many goods are disposable because of our inability to repair them and buyers' inability to perceive and value quality. The price of labor is higher in North America and Europe than it is South Asia, East Asia, and South America. If a company can get the same kind of skills in those parts of the world and build the same software for less, its profits will be larger, and the beneficiaries will be that company's stockholders. The most glaring problem is that at least in the US most developers wouldn't be able to recognize a functional or design specification even if it fell on them. With that state of affairs, what is the probability that a company which outsources its programming will succeed? The answer is very low at the initial target price. Not having a functional or design specification is typical in most environments in which developers just start to write code. If they're really good, they'll scribble diagrams on a whiteboard and take photographs before erasing anything. However, most are not good enough to think about interfaces ahead of time; consequently, it's necessary to hold meetings to agree on the "glue" that will bind together different pieces. That's why software development through outsourcing is difficult. That kind of coding without specs culture is fostered by the ever present corporate goal to lower operations and research costs; thus, a missing functional or design specification results in savings because corporations suffer from incomplete cost accounting. The trouble is that today when there is a need to generate functional and design specifications there are very few people who know how to put them together. If more than one legal entity is involved in the process of outsourcing, the buyer's General Counsel will insist on defining what the company is buying if he understands software contracts. Years ago that was accomplished by attaching a functional specification to a contract. Today, it's probably much harder for lawyers to define those things without functional specs. Nevertheless, more money to augment or rewrite pieces of unsatisfactory code usually fixes a host of egregious problems; the less annoying problems probably get ignored. Even with cost overruns, the price for developing software systems overseas is lower. That's why it's popular. The bottom line one quarter into the future is the only goal that seems to matter. When the standard of living becomes uniform around the world, it won't be possible for companies to exploit the disparities of labor prices; until then, we'll have outsourcing. After that uniform standard of living is reached, quality may again become important because it will difficult to come up with a lower price if greed, which is the moral base of our economic system, remains uniform, but you will still have to be the first to offer a high quality product for sale.

Void V Pointer | Feb 01, 2007 | 12:54PM

How sad these so called new CEO pull off only an EGO! How far back in time and how many examples of failure to illustrate we in Silicon Valley cannot compete on prices basis in the world market. As many with experience in Silicon Valley will tell you, had we not started with offshoring back in 1985 we would have died off years ago. For full disclosure my background is in Finance since 1988 in various Semiconductor, Semi Equip Mfg, Software, Networking companies. For us to even come close to competing on a global market with our own national based employees will require our economy to go through 10 years of deflation like the one Japan had for 15 years. This would drive salaries and cost of living down. And yes! that nice $1M mansion in Los Gatos/Saratoga will decline by 65-75% in value. Not a bad deal!

Ace | Feb 03, 2007 | 10:35PM

How sad these so called new CEO pull off only an EGO! How far back in time and how many examples of failure to illustrate we in Silicon Valley cannot compete on prices basis in the world market. As many with experience in Silicon Valley will tell you, had we not started with offshoring back in 1985 we would have died off years ago. For full disclosure my background is in Finance since 1988 in various Semiconductor, Semi Equip Mfg, Software, Networking companies. For us to even come close to competing on a global market with our own national based employees will require our economy to go through 10 years of deflation like the one Japan had for 15 years. This would drive salaries and cost of living down. And yes! that nice $1M mansion in Los Gatos/Saratoga will decline by 65-75% in value. Not a bad deal!

Ace | Feb 03, 2007 | 10:35PM

I agree with Mr. Pointer. If greed kills, an army of CEO's would single handedly drive the U.S. into permanent bankruptcy if it meant saving 1 penny per pound of sweat produced x number of total employees. These corporate parasites see one thing and one thing only: profit. If there is enough profit in something, they will do it. Too bad they don't sell their own children into slavery to recoup the cost of their mansions, Ferraris & overly expensive business suits. We won't even get into their eating habits; i'm too kind to insult their lack of willpower.

Josh Gumbert | Feb 04, 2007 | 5:06AM

Outsourcing is a cyclical business - when businesses need to cut costs and drive "profitability" (bottom line focus), they outsource (everything from office supplies, to HR, to IT, to Advertising, to whatever). When businesses need to drive revenues (top line focus), they stop outsourcing and possibly bring things back in house. Smart CEOs (regardless of age) are constantly looking at when to advance and when to "dig in". What you find from an IT Services perspective is that Outsourcing/Outsourcers grow when there is a bottom line focus, Systems Integrators, Managed Services, etc. grow when there is top line focus.

Arnie McKinnis | Feb 07, 2007 | 10:09AM

Well take ipod for example, apple was not a codec company so it teamed up with a company that could do so and that company had offshore engineers. The brouhaha over offshoring was a media creation. and when it did not have any negative effect on the economy it disappeared.

g2g | Feb 15, 2007 | 9:42AM

I perfectly believe Outsourcing in Hightech's like Nanotech and computing will shift Money to Countries like India. Already you can see the Indian stock market performing well inspite of global slowdown, Just because of outsourcing. Indians get a edge in Outsourcing. They have opened up myriad of Engineering Shools. They have also migrated more number of People into USA. Outsourcing creates Money drain permanently. Except for call centers , i dont see any benefit for Industrial or other jobs outsourced, as a benefit to the country that does it.

John Nassbit | Feb 17, 2007 | 4:36AM

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Puneet Verma | Mar 09, 2007 | 9:20AM

Here's my adventure in "offshoring". I worked as a CM for a major bank that decided to offshore most of their development efforts in India. The Indian shop was "CMM Level 5". It was ISO 9000 compliant. It was Six Sigma certified. If there was a certification, this shop had it.

Forward a few years, and I suddenly got a call from a head hunter in Bagalore about this great job opportunity They would pay close to U.S. rates, but since living in India is so much less, I would be able to easily save over half of my money. We could afford a mansion with servants! We would live like royalty! If only, I would consider this position. He even had a ticket for me to fly there the next week.

I found it amusing that I would become an Indian equivalent of an H1b visa, and if I was younger, I would probably had jumped on the chance of this adventure. However, I had three kids with one in college, and picking up and moving to a foreign country seemed like more adventure than an old foggie like me should be taking on. I politely declined the invite.

But, this headhunter kept calling me back and telling me I would be perfect for the job. How my expertise would really help out. How closely my skills would match this company's needs. It was flattering but very strange. I am not such a leading light in my own local development community. How in the world did this guy half way around the world get my name and was so insistent that only I would be the one to fulfill this post?

It finally came out why I was such a perfect fit. This was the same Indian outfit where the work at my former employer was outsourced. Apparently things had not been going well since the outsourcing, and this company was now tracking down what they thought were the former key players who led the development effort in the U.S., and was trying to coax them to India as a way of getting things back on track.

If companies were really interested in saving money, they'd outsource the executive officers. I bet you there's millions of people in India who are just as capable of running a major corporation for a fraction of the cost of what an American CEO would demand. And since they are contractors, if they do a poor job, you wouldn't have to pay them tens of millions of dollars to resign either. Imagine the cost savings for the stock holders.

As a bonus, since all the corporate decision making and in fighting would now be taking place in India, it would be much easier for employees back in the U.S. to ignore them and concentrate on our jobs. Thus, really increasing productivity.

David | Mar 10, 2007 | 8:38PM

I am working a complete product developing in India and marketing in US and Europe. This product is world leader in that segment. This an Indian victory

Ann | Mar 14, 2007 | 5:45AM

fvck outsourcing !

matelot | Mar 14, 2007 | 5:18PM

The job done by mediocre developers can be outsourced. India and Russia do mediocre really well, and have the certifications to prove it. So the question for managers is, "Is mediocre adequate?" Sometimes the answer is "yes" and outsourcing works (with a lot of management involvement!) However, successful outsourcing requires top notch management skills! It's amazing how often these skills are lacking. The new CEOs are on target with their assessment of the old CEOs' skills. I wonder how many of them are able to evaluate their own management skills as accurately? [Please note that I'm not claiming that all Indian or Russian developers are mediocre -- merely that the good ones are just as hard to find in India and Russia as they are in the US. A body shop is a body shop in any language.]

Dale | Mar 21, 2007 | 11:59AM

I normally find myself agreeing with Bob, but I need to call him on this one. Outsourcing, regardless of the country or the outsourcee will work, or not work, depending on the diligence and upfront work of the outsourcer. Rather than having a big internal staff that spends a great deal of time on the bench during seasonal lows, I use some key internal staff to drive projects and contractors from both North America and India to fill development requirements with great success. However, particularly where India was concerned, I spent the time to find an good reputable firm with a strong staff, made personal contacts with the owner, and made sure to document my projects properly. No nation has cornered the market on superstars or duds. In a world with portable IT skills and tight margins, I'll dig out and utilize the best people I can get for the dollar, wherever I happen to find them.

Steve | Mar 23, 2007 | 9:42AM

For the reasons that Steve (above)noted. The $$ will dictate the value of outsourcing. Lets face it folks those outsourcer copmpanies have just begun their "customer support" journey. They will find that "problem ownership" is one of the underlying keys to a sucessful support operation. They can already "fix" all the technical problems. North Americans support centres are only too interested in 'stats' ,,e.g. number of closed calls/hour. Those 'stats' is what kills effectiveness and what killed North American effective support.

JimF | Mar 28, 2007 | 8:08AM

In my software company our outsourced R&D (not call centers) started in 1998-2000. Its just darn cheaper to hire in India and China. The Software Foundry started with Y2K/three bit programming for Asian Language. After that it only made sense to dole out the remaining task. India and China are giving out tax incentives and freebies that no one in California goverment can compete with. I dont know who these new type of CEOs are who think like this. Maybe they can bring back all the manufacturing job we lost over the years in Silicon Valley. All I know, once its gone, its all gone forever. There is no turning back.

Space | Apr 02, 2007 | 2:16AM

Periodically, governments, businesses and other calcified institutions undergo revolutions. We're long overdue for one in the American business world. Examples abound for the inefficacy of entrenched thinking: GM/FORD/CHRYSLER, for example (See: Movie entitled 'Who Killed the Electric Car?), or VIACOM for another (dont' get me started...) Outsourcing will likely continue for some businesses, but for others it is becoming increasingly 'brought home' that people are not willing to try to filter a Calcutta accent to find out how to re-enable their firewalls. I've had both good and ridiculously stupid experiences with offshore tech support, ranging from a brilliant technician who explored the guts of XP with me, enabling me to finally restore my wife's machine to functionality, to a clueless Indian 'tech support person,' who, unable to explain why a manufacturer had only provided a reflective foil strip set in the lid of a scanner as a way of providing transparency scanning (C.P.E. - Completely Pathetic Engineering, Ltd.) recommended I pack up the scanner and ship it back to the manufacturer...rendering my opinion of her to equate to the cluelessness of the original designers for the scanner. (transparency scanning requires a LIGHTSOURCE, folks...a strip of adhesive metal foil just don't CUT it...) Like everything else, outsourcing has proven itself to be a two-edged sword: yes, costs come down, but very often so does QUALITY. Net result - loss of confidence in the product/service...equalling loss of marketshare...thereby erasing all potential cost savings by reducing sales. Initially, products selling at Wal-Mart, for WAY less than those manufactured domestically, were great. Chinese products captured huge marketshare....and then, once they HAD the consumers, the bottom fell out of the quality. My wife and I will only go to Wal-Mart for one or two items, and THOSE ONLY, anymore. Everything else we used to buy from there has plummeted in quality - where's the savings when you have to buy new items two to three times as often as the domestically made ones you used to buy? The writing on the wall is NOT in Sanscrit or Chinese ideographs. Watch for more businesses to give up on the problems of relying on people thousands of miles away.

Tansley | Apr 02, 2007 | 1:04PM

"I use some key internal staff to drive projects and contractors from both North America and India to fill development requirements with great success." And I as a college student will pass on Computer Science or IT as a major so that eventually, you will "use some key internal staff to drive projects and contractors from India (at whatever rates they decide to charge me)."

Sam | Apr 02, 2007 | 4:16PM

I think you're dead wrong. :-) Perhaps you've forgotten one of those timeless core understandings of SW: Don't underestimate the stupidity of your users. The corollary is "Don't underestimate the inability of your management to misunderstand." An employee that is paid an average of $20k less than an American developer, brought up in a culture that still practices "old school" management tactics/discipline, and is essentially endentured by the H1B/Green Card path is a very, very attractive option. So much so, that only the most superficial nod is given to the intent of the H1B - to hire where there are no American alternatives. Instead, as an economist recently testified at a congressional hearing on the H1B quota matter, corporations are quite busy replacing their American software engineers with cheaper H1Bs as well as aggressively moving jobs offshore. A quick perusal of Gartner Group's assessment of this situation will verify that this trend continues unabated. The bottom line is that while the raw unemployment stats indicate respectable employment rates, an examination of the underemployment in the software development sector shows that the American SW Engineer should be placed on the endangered species list. What boggles my mind is that so many of us are unaware of what the unnecessarily high H1B quotas and lack of enforcement of H1B laws is doing to this industry and our ability to maintain a good standard of living.

Spurius Maximus | Apr 02, 2007 | 5:30PM

On average, the salary of my offshore teammates is 30% of mine, and their location helps us provide round-the-clock support of our systems. I have as high an opinion of my abilities as anyone, but I'm not 3 times as good as my offshore counterparts (although I am twice as old). How can any management resist such a salary differential, especially with the bonus of 24-hour support? In 5 years we've move over 1/3 of our IT staff outside the U.S. Obviously, some of us must remain in the U.S., but is that half? One third?

BrainE | Apr 03, 2007 | 5:25PM

Of course the new class of CEOs will say the old ones were idiots. They always do - they're always right, too. And so will the next class of CEOs, and they'll be right, too.

Rick | Apr 20, 2007 | 9:48AM

I been to Calculta. Filty dirty and backward. It sorta reminds me of Silicon Valley of early 1970s. Plenty of cheap labor cherry pickers from Mexico. All the Wall Street money changed that in 10 years.

Jack | Apr 22, 2007 | 2:25AM

This is a very controversial item for sure. It is very tough to keep the emotion out and simply accept what is happening. I have been working with folks all over the planet for some time now, and it has been a great experience. But none of it was really explicitly guaged from the glaring attempt to get something done cheaper. At least at my level it was simply that the best resources available for the task at hand were being utilized. Communications was never a problem and the quality and commitment of these people were always top notch. Recently, however I have been involved with some activities where it was apparant that the scope was not finding and utilizing the best resource available but rather the most cost effective one. In one case we spent weeks trying to find 2 people to fill the position of a single US resource who happened to be very strong. We could not find anyone to match even 1/2 of his job function. And that is simply because they kept presenting Junior people .. it seems the good ones were all booked! This experience was dismal as most of the canditates spoke with a heavy accent and I could only understand every other word they were saying. The other experience was on a team again where US resources were replaced by Indian ones. There were 2 problems. First of all the team had to spend a tremendous efforts to re-explain requirements and functions that the Indians simply would not understand, this was even with some very specific requirements and specifications documented. Secondly, the Indian resources were a moving target as the churn was very great as people were being offered better salaries elsewhere. I am not saying this outsourcing thing can't work, India has some great people, but the time difference and the cultural difference is significant. In the end, I guess we have to look beyond the greed that drives our economy, we have lost manufacturing, we are loosing services, whats left? I still think US manufactured products were really excellant. I also find something very much Unpatriotic about all of this, as if corporate America has not only betrayed us, but like IBM may be doing is they are doing it without any remorse or hesitation. As you can see the emotion is setting in. There is take about equalization of life styles, one has to remember US is on top and EVERY other country is lower then us NO EXCEPTION. So in the end we are actually not only exporting jobs but at the same time compromising our standard of living.

Vito | May 09, 2007 | 4:54PM

The whole mantra of saying the United States has to lower it living standard to that of the 3rd world is the dumbest thing I have ever heard. Liberals like the idea of peasants and them being social elites having A/C, big SUV's, big mansions, huge incomes. However when it comes to the middle class they are enraged that normal citizens have good jobs they WORKED for and earned these were not just handed to them. It is so backwards today with all of the politically correct non-sense. Go ahead live on less than a $1 a day and see how long you can last. Until people realize that when this country is totally dismantled (jobs eliminated) and economic ruin is sitting on the doorstep it is too late. The United States was built on Manufacturing, not 'services' what on earth are you going to service when these jobs are gone? Working at Burger World or Wal-Mart for $12,000 a year??? Americans need to wake up and see what is going on, these jobs will never return they are gone forever. Liberals will say you live too good, that is what amazes me CEO's sitting on CNBC finacial news making $20 million a year saying that Wal-Mart is an excellent place to work with no healthcare or full time pay. Yes, working for $7 an hour when a gallon of gas cost over $3 and a gallon of milk cost over $3 is really working out well. Over 40% + of the people who work at Wal-Mart receive Medicade benefits, including foodstamps, HUD, welfare and so on. This is what is going on and until this happens or you see what this does to the country they are living in a cloud of denial. It boils down to being CHEAP, nothing more, nothing less, the CEO does not care if the code is garbage it was CHEAP and he is making MILLIONS more. I could only imagine what the founding fathers of this country would think if they seen it today. It is really sad, how people will say this is great when the end result is economic ruin. Why do you think people in other countries are dying to come to America since the plan is to merge Mexico - United States - Canada together as one I guess Liberals will have their dreams come true. Offshore all the jobs, make America into another Mexico where everyday is just survival and you will see people crying then, but until that happens people will rush to Wal-Mart and buy the 'CHEAP' products thinking they are making a lot of money. Basically you are eliminating your own job, but convent the outsourcing so you will be politically correct and think about to feed a family when there are no jobs......

Adam Wilson | May 09, 2007 | 5:51PM

What I see in offshoring situations is that the US company is really unable to reduce staff. They have to have the same number of managers to review and manage the service level objective, and they have to have the same number of technicians to do code reviews and extra testing in addition to writing specifications so dumbed down that a chimp could code it. I have never seen a situation where the total cost of IT is less as the result of offshoring.

glo | May 10, 2007 | 10:21AM

I work in the semiconductor design industry. I predict a drop in same-company outsourcing. By that I mean companies will slow down or slightly reverse their outsourcing. Why? Because it was a cause celeb with lots of obvious benefits but unobvious drawbacks. I remember back in 1999 some talking head asked a CEO in some mundane market like gravel enemas "what is your internet strategy?" I was suckered in at first but when I thought about it more I asked "why does he need an internet strategy?" If you did not have one though, you were a dunce in the eyes of many. Fast forward a few years to the early 21st century and replace "internet" with "outsourcing". I've been to India a dozen times or more, have worked with US and Indian engineers, and been on projects that span the two countries. Here are a few observations. They don't mean Outsourcing does not work, but overall they mean there are hidden costs and I believe managers are just now realizing it: 1) Time Zone Hell There are 10 and a half time zones between Chicago and India. It is critical to understand the ramifications of this if you are on a project spanning the two. Say you come into the office at 8am, do some stuff and then at 9am realize you need something from your Indian counterpart. You send an email at what is 7:30pm Bangalore time. If he does not read it before going home, you have lost a full day. To compensate you get into the habit of carrying a Blackberry around and checking email at 11:00pm, which is when the Indian guys are getting into the office. This is not too bad, but conference calls are a killer. There is NO good time. One of you will be dialing in at 10PM. Bottom line: there is less engineer to engineer communication and very little white-board interaction. After all, one white-board drawing is worth a thousand emails. 2) Accent Salad Bowl Many Indian engineers have good english skills, but it's a mixed bag (of course it's better then my Kannada). The hardest part are the names. Some Indian's have names with more then 10 characters, not including the hyphens thrown in here and there. And they introduce themselves at the speed of light; you are immediately lost and give up remembering the name unless you work with the a lot. It have noticed that very young engineers have hard to pronounce names while 40+ managers tend to have American nicknames (e.g. "Rob") they go by. Bottom Line: More confusion and inefficiency. 3) The No Gray Hair Phonomena Walk through a company in the USA designing, say, microprocessors and you will see a full range of engineer and manager ages. Lots of folks in their 20's and 30's, a good amount in their 40's and some 50's (what happens to the other engineers in their 50's I don't know; must have gone into Sales.) Walk through a design company in India and you would think you are on a college campus: tons of people in their 20's and a few professor looking guys in their mid to upper 30's. There is a shortage of experienced managers in India. This can be great for a promising 33 year old ex-pat that can move back to India and become a Director managing 50 people, but in general it results in slipped schedules and missed goals. None of these problems is the Indian engineer's fault per se. But they are costs that you only fully appreciate after dealing with them for a few years. Then the execs start making a few refinements into their buy-make formulas.

Guy from Texas | May 11, 2007 | 10:21PM

Adam Wilson: Don't forget that it is only the REST of us that the libs want to lower our standard of living. Those pushing the hardest for this still live like kings, and I guarantee you won't lower THEIR standard of living one iota...

fedup | May 13, 2007 | 12:28PM

In software development, it isn't the cost of development that is the problem. Successful software is so profitable that the development expense is trivial. If you're making $100M per year, does it really matter if the software cost $2M or $5M to develop? What does matter is the probability that the development process will produce anything with economic value. A lot of development efforts fail to produce anything, some produce something that nobody wants to buy, and a few, generously, 10%, come up with something that people will actually pay money for. Saving a couple of million dollars each on your 9 losers gives your 100M winner a 20% boost. But if that savings has any impact on your success rate, you could owe money (oops, 10 losers). Getting your success rate from 10% to 20% and paying top dollar nearly doubles your top line. If it wasn't this way, all that Sand Hill venture money would be going straight to India and there wouldn't be any startups in the valley.

Scott Meyer | May 16, 2007 | 5:28PM

It is so true that face time is very productive and is missing in an outsource relationship. I also heard of cases where a manager in the US comes to work in the morning to find that half the Indian team that they outsourced to quit the night before, because they got a better offer. Usually it's the better half. Wage inflation in India is running at 15% / year and I suspect it's higher. Many people who outsource are doing it to sweep a problem under the rug. Sending legacy systems off shore may seem less expensive, but you are better off rewriting them.

Ari | May 30, 2007 | 12:34AM

The problem with offshoring and outsourcing is also the business model on the remote end. Why would any business owner invest in highly skilled workers that require much more pay than mediocre ones who can create something that is at least passable? I currently work in a company that has had a lot of stuff outsourced and the one ubiquitous perspective on it all is that "it's crap." No different than the American company outsourcing to save a buck, the companies to which the work is being outsourced are trying to maximize their bucks as well. As the person commented above, when the workers get better offers, it's usually the most skilled ones that go, leaving the American co. with half a shaky product and no skilled developers.

Jackson Gabbard | Jun 06, 2007 | 8:57AM

I can't decide if that last comment is a troll, or a good joke. It certainly sounds like far-east English.

Coda | Jun 12, 2007 | 7:47AM

All the companies I was working at in the UK in the last 10 years were involved with some offshoring, it was sickening to see what I feel to be the destruction of the already shaky economy that we had. In the end I decided to leave Britain (NOT 'Great' Britain anymore IMO) and migrate to an central-eastern European country, to work for a well known very big global IT company (I can't mention their name but you all known of them, they used to be in servers and desktops, but now only build servers ;-)), in their support dept which was offshored. It's been 5 years here, and still there are major quality of delivery issues. Customers have torn up contracts (or refused to re-sign), because the place is run by managers that couldn't manage a monkeys tea party (these aforementioned managers were the ones that were going to get the axe, so were given a choice). Staff turnover here is pretty high, not many people last two years, and most leave within 12 months. Because of this its virtually impossible to maintain any QOS. I can't imagine that this debacle is saving ANYONE money.

Coda | Jun 12, 2007 | 8:18AM

Where will outsourcing and offshoring lead? To cheaper outsourcing and offshoring. This means that from India we will go to China and the like. We will not bring the jobs home. Why? Simple economics. To bring the job home you would have to pay more for the product you produce. This gets passed on to the customer. The customer looks at the sticker and buys the cheaper one from your competitor. Enough of this happens and your out of business. No CEO is going to want to do that. In fact it gets even worse. Once someone outsources or offshores, everyone else that competes with them have to do the same, otherwise they lose business to the one that outsources and offshores. It is a death spiral for an economy of course since the ones that were buying the products can no longer buy the cheaper products since they are out of jobs. My prediction - More idiots doing really stupid things faster and faster.

James | Jun 21, 2007 | 2:13PM

When I started a QA contract at Symantec in Oregon, in '02, they had a floor full of Customer Service People. Within a year of that they outsourced to a company called ECE, again in Eugene, but a private firm. Symantec had nearly half of its 2nd floor in Springfield vacant at that point. ECE had the contract for about 2 years, then Symantec yanked the contract and sent it to India. That only lasted a year. The service and Symantec's reputation was so bad that they brought it all back indoors again. Matter of fact, they built a whole new building and hired more of them than they had before. So that is one counter example to the "Death Spiral" argument.

Lou Wilson | Jun 24, 2007 | 4:14AM

If Symantec were the economy, then it is a counter example. It is not the economy though. It is a good example of a company getting some common sense beat into them after 3 years of being beat up by the customers. Pity we can't go straight to the common sense. I am more worried about the big boys, like IBM and WalMart. For IBM you got this: http://news.yahoo.com/s/ap/20070624/ap_on_bi_ge/ibm_outsourcing_overhaul Which is a death spiral by the numbers. WalMart seems to be incapable of raising prices to sustain itself or pay its works anything close to poverty level income. Having one company correct its mistake does not turn around the economy, and there is high enough percentage of companies "doing the stupid" so that the whole economy will be brought down eventually.

James | Jun 25, 2007 | 10:24AM

i believe that outsourcing can get better via new tools(for example application simulation tools),new methodologies ,more experience in india and etc... since outsourcing has a strong incentive to improve (because in the foeseable future there would be a huge salary gap between india/china and the west) it is very likely that in the long term outsourcing would only increase.

john | Jun 27, 2007 | 7:43PM

This may not be the year that offshore outsourcing starts to get reined in, but this and the next year are the years that will determine whether or not America will have pro-American leadership and a viable economy. Check out the two following quotes and ask yourself whether Benedict Arnold would have gone so far. "I am delighted to be the Senator from Punjab as well as from New York." "I can certainly run for the Senate seat in Punjab and win easily." - Hillary Clinton, in two uncharacteristically candid moments.

Look Forward In Anger | Jun 28, 2007 | 4:16PM

Well CitiBank is globally offshoring to India. That means, say, in Japan, the number of Indian engineers has gone from 10% to 60% but they face drastic dismissals in the near future as their positions are replaced by even cheaper Indians back home hooking in via Virtual Desktop. Meanwhile, profits soar.

WBLOWER | Jul 02, 2007 | 4:04PM

Well CitiBank is globally offshoring to India. That means, say, in Japan, the number of Indian engineers has gone from 10% to 60% but they face drastic dismissals in the near future as their positions are replaced by even cheaper Indians back home hooking in via Virtual Desktop. Meanwhile, profits soar.

WBLOWER | Jul 02, 2007 | 4:05PM

Lest someone think that the post on Hilary was too partisan, I offer this gem - Elaine Chao quoted in Parade magazine: (from Parade magazine, July 1st, 2007) 'How Safe Is Your Job? You could lose your job to a foreign worker—not because he’s cheaper but because he has better workplace skills and discipline. That’s the message Labor Secretary Elaine Chao hears from U.S. executives who are worried about America’s competitive future. While losses are low thus far—one study estimates that only 280,000 jobs in the service industry out of 115 million are outsourced each year—that could change. Beyond the cheaper cost of labor, U.S. employers say that many workers abroad simply have a better attitude toward work. “American employees must be punctual, dress appropriately and have good personal hygiene,” says Chao. “They need anger-management and conflict-resolution skills, and they have to be able to accept direction. Too many young people bristle when a supervisor asks them to do something.” ' Hmm... no mention of competency, ethics, honesty, morals, diligence, industry, intelligence, literacy, numeracy, education, diction, skills, loyalty, interest in one's work, or pride in one's employment. I wonder if this is the idiocy of the executives whose input Chao is considering, or Chao's own idiocy at work here. However, failure of employers to consider these attributes is perfectly consonant with what we keep seeing. When Bank of America personnel in San Francisco were asked to train their own replacements, I am sure that the replacements had "better workplace skills and discipline" in spite of being so pig-ignorant about what it was they were supposed to be doing they had to be trained. The article continues: 'As for our job future, Chao notes that most of the fastest-growing jobs today are in industries requiring advanced knowledge and skills and are “very high or high wage.” But critics say we’re not doing enough for those without a higher education. “Today, only 30% of the workforce has four years of college,” says Jared Bernstein of the Economic Policy Institute. “Instead of factory slots, there are slots for security guards and food-prep workers.”' Notice the implications: 1) somehow the "fastest-growing jobs" are necessarily the most desired jobs, 2) that these jobs are necessarily being created in this country (laughable now that R & D is being outsourced), and 3) that the "advanced education" required for these jobs will render workers in them immune to rapid turnover or replacement (hey - college and graduate degrees don't protect the IT, CS, or financial industry people, do they?). Frankly I'm tired of this BS. At least once a month either in the news or my community commitments I have to listen to some grossly overpaid windbag whinge about how crappy American workers are. I hear about "sense of entitlement," "lack of language skills," "lack of English skills," "innumeracy," "lack of computer skills," "lack of public speaking skills," and worse. On the other hand, in graduate school I routinely saw international students with questionable skills in language and area competencies lie and cheat their way into success. The real message here is that the powers that be - including those in business, education, and elected government officials - are perfectly happy and willing to shaft Americans six ways from Sunday if they think it benefits them. As a result we're an international joke in spite of the fact that Americans of all races work more hours per year than the citizens of any other country, in spite of the fact that Americans are arguably one of the most extensively educated national populations, and in spite of the fact that just one small town in America contributed more to technological advancement over the last 130 years than much larger civilizations have for millenia.

Look Forward In Anger | Jul 05, 2007 | 2:54PM

Longer ago then I want to go into I was taking a business finance course. The tests were unusually hard. Hard that is unless you were in a frat and sorority. Then you aced the tests. The tenured professor had given the answers to the frats. The single unspoken lessen of the course was "It is not what you know, it is who you know." I dropped the course and took it later with a different instructor. Sad to say, it is the operating procedure of American business and government these days. In the end, we have done it to ourselves and unfortunately there is no end in sight.

James Hayes | Jul 06, 2007 | 1:15PM

We recently had a staff meeting at my company (I work for a major outsourcing and electronics company based in Silicon Valley - you do the math), when the question of raises and attracting personnel came up. The person giving the talk at the staff meeting was the latest talking head in the ever revolving door of middle management at the company, and someone on my staff asked a rather pointed question: how do we attract personnel when we're told by people we really want that we're not paying enough? It had happened several times on the East Coast (and in India, I might add), and the staff member asked when we were finally going to start giving out raises and attracting highly skilled personnel? The answer was rather telling. First, the talking head dredged up the salary review numbers that they say they generate from surveys of other companies, and we're supposedly in line with the companies they survey. Second, he doubted that it was really the money that kept the people from taking the jobs offered (even though we know in the case with India it was exactly the reason cited). Third, since costs are so much higher for us than our competitors, we will try to attract personnel instead at "lower cost centers" (read: India, Latin America, and China). What this told my entire staff was that there was nowhere to go in this company. No raises, movement towards offshoring work, and a company in denial of why they can't attract highly skilled personnel in the US.

Shaking Head | Jul 21, 2007 | 6:35PM

The only way offshoring will end is if the illegalities used to secure Visas are prosecuted and the companies penalized by loss of privalize. Offshoring only works because Americans train their replacements because they have no thought of self interest.

Tuttle | Jul 26, 2007 | 1:42PM

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Abhishek Verma | Aug 12, 2007 | 12:38AM

How can there be outsourcing? Its all the same planet. Before the end of the 18th century economists realised mercantalist ideas had held back the World economy for thousands of years. Mercantalists thought trade was a zero sum game. If you are good at everything then why trade? Not so. The undeniable reality of the benefits to all of comparative advantage is ignored at massive cost to the country. China has only emerged after 3,000 years by freeing trade. The tiny United kingdom created the greatest empire the World has ever seen, just on the basis of the free trade ideas of Adam Smith, a Scottish economist. As he said, its simple "trade freely or be damned". Thanks Waldo

Waldo Hitcher | Aug 27, 2007 | 12:40PM

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Waldo, Make sure you read Adam Smith before you invoke his arguments or his name. It's fascinating to realize that thousands of economists and business academics "quote" Adam Smith, but very few have actually read "The Wealth of Nations" and even fewer understand Smith's reasoning or arguments. As a consequence, "the invisible hand" is one of the most widely and fundamentally misunderstood conceits in economic thought. From "The Wealth of Nations" [IV, ii]- "As every individual therefore endeavors as much as he can both to EMPLOY HIS CAPITAL IN THE SUPPORT OF DOMESTIC INDUSTRY and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally indeed neither intends to promote the public interest, nor knows how much he is promoting it. BY PREFERRING THE SUPPORT OF DOMESTIC TO THAT OF FOREIGN INDUSTRY, HE INTENDS ONLY HIS OWN SECURITY; AND BY DIRECTING THAT INDUSTRY IN SUCH A MANNER AS ITS PRODUCE MAY BE OF THE GREATEST VALUE, HE INTENDS ONLY HIS OWN GAIN, AND HE IS IN THIS, AS IN MANY OTHER CASES, LED BY *AN INVISIBLE HAND* TO PROMOTE AN END WHICH WAS NO PART OF HIS INTENTION. We can see by this that although Adam Smith was a fervent believer in free MARKETS and COMPARATIVE ADVANTAGE, he was nonetheless a strong believer in LOCAL INVESTMENT IN DOMESTIC INDUSTRIES as the means of *defining, supporting and refining comparative advantage.* This contrasts greatly with the present situation in which investment capital flows freely across borders irrespectful of the nations, legal, political and ethical structures, and populations that gave rise to that capital in the first place. Furthermore, it does so at the expense of efficiency, not in its support. There is NO WAY in which, for example, offshore reporters on the other side of the globe can replace resident newspaper reporters in reporting local news - there simply is no comparative advantage argument that can be made in defense of such an idiotic practice.

Look Forward In Anger | Aug 30, 2007 | 6:15PM

Being a person with an economics degree, I thought I would weigh in: 1. Governments create the environment in which businesses do business, thereby directing the invisible hand, for good or ill. 2. Most businesses were localized when Adam Smith wrote "The Wealth of Nations". Globalization today has created fragile economic interdependencies that if upset, can have devastating repercussions. 3. There is no true "free trade" on the Earth today. The "Export Free Zones" used to create cheap goods today are barely more than slave labor camps. (See the book "No Logo" for more info.) The basic premise here is that the CEO's are using a gamed system to their advantage until that advantage is taken away. They will then try to find a replacement or create their own. Given this, there is no end to outsourcing and offshoring.

James | Sep 04, 2007 | 5:35PM

I hate the fact you call a bank and the call is in another country. Outsourcing is a good thing for some things but not call centres. Have you heard all the fraud coming from india?

Wedding Photographer Essex | Nov 11, 2007 | 8:55AM

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dibert dogbert | Dec 17, 2007 | 12:11AM

I think the recent problems with China's products are a reason why off-shoring production of any sort not just code is going to wind up being a failed economic experiment, its really a rehash of colony/imperialization on a corporate scale. I agree with James 4.sep.2007 and add these points of the invisible hand that "break" with outsourcing. 1) Collapse of Internal Corporate Governance due to International inbalance of legal enforcement a) honors, promotions, firing and internal censure do not work effectively anymore if anyone can be replaced at anytime b) internal regulations & audits are not able to be enforced equally across all nations therefore are irrelivant c) external audits are not to be trusted as they are not able to be enforced equally across all nations are irrelivant b) simple legal proceedings for poor quality, injury, death claims are unenforcable or paid by insurance. When was the last time you heard about a CEO who was indicted and served time? Now how about a High/Mid level manager in a foriegn country? 2) Collapse of Shareholder and consumer confidence due to #1 The Chinese lead painted toys and poisoned toothpaste is just the tip of the iceburg. 3) The flight of taxation inflow will cause local governments to shrivel while local demand for services increases in 1-2ish world nations causing a a danger to stall or shutdown the local government if they are in a "one company" city. a) the production center is no longer causing local taxes to flow in - its no longer there! b) any taxes go to the outsource location but they sold their hertiage for lentles via the rebates, tax exemptions offered to get the business b) the executive "centers" are not causing taxes to flow in - executives work to ensure rebates, exemptions, do all the politiking needed to get out of taxes and simply execs know how to shelter their incomes AND know how to demand more services out of the local government every year for their local area. 4) Erosion of the polity of peoples & nations to their own locality and increased corporate sucking-up as you can't influence the corporate leadership anymore by the well known and tested tactics of a) internal politics b) ascendency of good persons brought up within the company who will reform it c) external politics & legislation having any leverage over a company in the way it used to d) no company survives with the ranks full of yes-men who suck up to the corporate bosses out of fear to lose their jobs. 5) Since the corporate officers are no longer near the production centers the use of these are diminished a) strikes and slowdowns b) actual physical civil confrontation with them at the store, church, civic event, etc... c) "Their" children never interact with "our children" and thus never see the damage their parents as corporate leaders have wrought. Lastly I focus on the fact that many of the countries targeted as "the" places to colonize for outsource operations are ranked very high for bribery, graft, and corruption -- not such a great corporate policy -build the factory in the bad end of the world! http://en.wikipedia.org/wiki/Corruption_Perceptions_Index http://www.globalintegrity.org/?gclid=CI-U0-f2y5ACFSYTIgoduyQtXg

turtleshadow | Dec 28, 2007 | 4:47PM