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The IT Market: Cyclical Downturn or New World Order?
An anonymous reader wrote: "CNN.com is running an interesting story on the heels of a Forrester
Research report concerning the
shift of high tech jobs from the U.S. to places like China, India, and Russia for cheaper labor and got me thinking about the nature
of the current downtrend in programmer demand in the U.S (as opposed to the "morality" of such a shift). While I'm sure the causes for this downtrend are variable, the more important
question in my mind is this -- Is software guru Bruce Eckel correct in
saying that the current downturn represents a temporary blip in the business cycle as jobs are shifted from large and medium companies to smaller companies,
or are Andy Hunt and Dave Thomas correct in recognizing this as
a new reality. Personally I tend to agree with Hunt and Thomas's view (which is not completely opposed to Bruce's opinion, btw) and
I also agree with their viewpoint that protectionist policies like H1B quotas and tariffs won't work to change anything for the better. So what do you think? Is this
just another business cycle or is this a New World Order in IT?"
We never thought it could happen to us: globalization was just supposed to make stuff cheaper to buy. But the race to the bottom can happen at all levels of employment, for all tasks that don't need to be performed on site. This includes us, the white collar IT workers.
This is not "the sound of inevitability", it's the sound of years of government/corporate policy to make the world our cheap labor playground. It can be reversed with rational policies that foster local investment at the expense of unchecked corporate profits. What happens when you have corporations that are invested in a locality? They don't ship the jobs overseas just to save a buck.
Read "The Economics of Empire" in the May Harper's. Excellent piece.
It happened to textile workers long ago. It's happening to us now.
I'm much funnier now that I'm a subscriber.
In the last 20 years we've gone from the idea of working at one company for your entire career, to working at several companies in your career, to having multiple careers. This just seems like another logical step.
It will certainly take some getting used to, and not everyone will compete, but I think that the average white collar American is finally learning what globalization means. Highly skilled folks in the rest of the world have been dealing with this for years -- they all learned English to compete. Now it's our turn.
I think this outsourcing trend is the new face of technology in this country. We all have to adapt. We are not going to be able to change the system, because the system is run by the corporations that employ, which have the politicians in their pockets. Take a look at how systematically, the clothing industry, the manufacturing industry, the auto industry has all moved their jobs overseas, to asia, mexico, wherever. At each point, people who lost their jobs in the US made a stink, but nothing was done. I hate to say it but I don't see it any different today, even though our programming jobs are supposedly "white collar" ... BFD.
I think we are just going to have to get used to it. We are either going to have to learn to get by on way lower salaries, or get into another career. Technology just isn't the type of job that's going to last for a whole lifetime. I'm already planning an exit strategy.
remember back in the day of 1999 ... when people said the tech boom was going to change everything? Introduce a whole new way of doing business? Well, that promise is being fullfilled. It wasn't exactly the positive change we were hoping for. But one lesson should be kept from those days. Remember ... be adaptable? Get used to change? If you don't change from your old business ways you'll die? All those messages were being yelled at the management, when it should have been yelled at us netslaves, the ones who supposedly "get it". What we need to get is, be adaptable. Tech is simply too volatile to base your whole life's career on. And those who don't adapt and change, will die a slow, horrible death.
I run the site listbid.com and can tell you with certainty that most of the people signing up and bidding on jobs are from eastern block countries. I don't have a huge Asian group, only around 30 or 40 but the majority are from Russia and the Ukraine. And these guys will do large jobs for cheap.
They actually, are the primary reason I added in a IP-To-Country part of the site, you can view where people "say" they come from VS. where their IP block is located geographically.
I will be adding some charts soon on the site to show the statistical breakdowns.
anime+manga together at last.. in real time.
and got me thinking about the nature of the current downtrend in programmer demand in the U.S
I hate this statement. Just what exactly do you consider a "programmer"? Is a MSCE a "programmer".
I look all around me and I see MSCE, 6 week crash course community college trained Java programmers, and guys who think they should be administrating 100 UNIX boxes because they were successful at installing Linux on the fourth try all over the place pissing and moaning on how bad things are.
On the other side of the spectrum I see C/C++ programmers and DBA's with job offers all over the place.
Until "programming" is a certified profession, such as engineers, doctors, even accountants, you can make the numbers do whatever you wish.
In the 90's businesses were pretty stupid. They thought that since you knew things around computers that they need you. Today, they are a little smarter and will ask more indepth questions, and ask to see that $50K+ piece of paper.
-- Knowing too much can get you killed, but knowing who knows too much can make you rich.
Add to this the low barriers to commerce as a result of WTO membership and extensive fiber networks and the result is that we are about to enter a period of hypercompetition that will result in massive profit deflations for many American firms. Consider that the big three automakers are now demanding that their suppliers match the price for potential parts that could be produced at Chinese wages. They are essentially telling suppliers in advance to beat the potential Chinese price or the Chinese price will become a reality.
The end result of this will be the continued growth of Asian economies as China will most likely continue to surpass the US for foreign investment as it did for the first time in 2002.
Maybe in biotech and entertainment the US will keep a lead, but everything else is up for grabs and the lowest price will win.
It is the sad reality that companies are willing to trade any sense of locality for the quick buck. Problems with shipping high tech jobs overseas are hard to quantify, and therefore do not show up on investor reports. The main problem today is that companies are working for the easiest way possible to get a little jump on some chart or graph rather than establish long term paths to success. These shortcuts will come back to haunt them though, and eventually things will even out, in my opinion.
~ now you know
It is amazing where you can share your subjective experience and be modded as flamebait.
With the exception of two or so Indian H1B visa most of them I met and worked with produced average to poor quality code.
I am curious about the overseas outsourcing of call centers. When does it become more of a burden to tell your customers that they have to speak to someone that speaks their language as a second or third language than it does to provide quality service and support? I bear no grudge against people that have accents, as a matter of fact I find accents quite interesting personally. But customers rarely want to deal with this. When they call for help or with a complaint they want to speak to someone that not only understands them and their concern, but that they can understand as well. When this does not occur another customer is lost to some other company that does it well.
Just my $.02US (which probably isn't worth much right now, but wait for deflation to hit and watch out)
If Darwin was right, you'd be dead by now.
A certain high tech company in Canada was experimenting with this about a decade ago.
They realised a few things quickly - and that was that you spent more time and money writing specs, that turned out to make the projects far less flexible. Also, because of cultural differences, for example, when finding a major bug after the project goes gold, some cultures have a "duck the head, don't say anything" mentality, which resulted, in one occasion of note, in a very expensive recall of MANY CDs that had been pressed and sent to customers.
The biggest reason for cost overrun in IT is NOT the salary of the engineer in question, but boneheaded decisions made at levels higher - yes, it may look good in the short term to hire cheaper people, but that doesn't necessarily translate into cheaper projects. Especially when you take the 3am long distance bills into consideration.
I believe Canada swung back after these experiments because it was costing them more than they anticipated, with too much attendant risk. (Company goes out of business? Sells the code on the open market?)
Of course, they wouldn't let us telecommute because they needed us RIGHT THEN AND THERE IN THE OFFICE FOR EMERGENCY MEETINGS, etc. But outsourcing the work halfway across the planet? A mere logistical hurdle to be hurdled.
--- Jump!! Fire!! Bullet time!! - Lego version of the Matrix
I work for a big corporate america company that everyone has heard of. I could confirm that the demands of the current business stradegy is to off load programming to india or any other off USA soil site.
In the past development of new products was always developed here with local people and then once a product became "steady state" or in a maintaince mode it was then sent off shore to have them maintian any code or product.
This new development of working with offshore sites to develop new products has been a bit of a hastle. The business loves it because it appears to save money immediately being cheaper per line of code or per hour, BUT there are huge gaps when trying to deploy or release this product into production.
One of the major problems is offshore people can hardly speak english. We've found ourselves needing to rely on local foreigners to either translate or attempt to speak better english. This makes implimentation time and working with the system administrators a much more drawn out process.
The H1B program is not an example of anti-protectionism. Without any trade barriers at all, the employment situation in the US would be like that within the EU boundaries: a programmer from Portugal can get a job in Germany with the same rights as a German worker. Under H1B, an Indian programmer does not have the same rights as a US programmer; he is basically an indentured servant, who must accept any conditions his employer imposes or face immediate deportation.
The argument for H1B is the claim that there is a shortage of skilled technology workers in the US. At present, there is not a shortage, except in very limited cases. However, many companies prefer H1B workers to citizen or permanent resident workers, because they can drive them harder and pay them less, holding the threat of being sent back to India or China in reserve.
So it's a double-screwing, exporting tech jobs and importing tech workers.
I knew I should have took up nursing. The only sure-fire growth industry these days...
This is most likely a new world order. although I wouldn't call it a 'new world order', it certainly will change things. Here's why:
Programming is a skill used by people to generate applications/programs that companies use, and that companies sell. It costs money to employ someone as a programmer to produce these programs. Up until this point, it did not make economic sense to hire people in places other than where you were selling the product. Usually because there were not enough skilled people available outside of the US and europe who could program.
Now there are many other places where people exist who know how to program and who will do it for less than people here in the US. The fact that the programmer is not geographically close to the company does not matter anymore with the advent of the internet. I think this trend will continue because it is so similar to how other industries were lost in the US.
The only two reasons a company in the US will hire someone in the US a) the company cannot get the product cheaper with an employee working in another country b) there are no workers with the necessary skills outside the US
Textiles, auto manufacturing, and steel mills were successful in the US until it became cheap enough to ship the products from another country to the US. This became reality when US companies could find cheaper labor overseas. The worker and the company no longer needed to be near each other, because the link between them (shipping, communication) was cheaper than hiring someone locally.
This same thing is happening with software. It is now affordable to hire someone who doesn't live near the company. And there is an abundant supply of skilled workers who will work for less than americans.
This scenario is not much different than what happened with US manufacturing jobs starting in the 1980s. I predict the IT world will have a similar outcome.
http://github.com/gbook/nidb
I'm floored, you actually posted something that isn't a troll or flamebait. Even more absurd, I agree with you 100%. The boom created an artificial number of "programmers" who were anything but. Reality is that if you didn't study comp sci in college, you probably shouldn't expect to get another job in IT. The "gold rush" is over, only those that have in depth skills and stay on top of those skills should have an expectation of remaining in this biz. If you don't work in IT for the sheer love of it first and a paycheck second, your days are numbered.
Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws-Plato
It's difficult to predict anything, particularly if it involves the future, but I'll give it a go. My experience with the expansion of higher education in the UK to the great unwashed is that it hasn't changed the top end of the curve--the added programming labor has been rather clueless. Then my experience with foreign students taking a software engineering MSc has been that they fit in with that group, probably because the resources aren't yet available to teach them adequately at the BSc level. I've also heard from colleagues in the USA that sending programming tasks offshore is even worse than sending them across the country--don't have anything life-critical or mission-essential done in a place where you can't check up on the help. So if you're good, you'll keep your job or even get a raise if you can manage a bit. If you're not so good, it won't be so much fun.
Three points:
1: Copyright, patent, and tradmark laws are not uniformly followed in the various off-shore programming destinations. You'd be unlikely to see "Intellectual Property" (their term, not mine -- don't flame me) concious companys sending serious development work offshore for fear of it being hijacked.
2: Companies that have sent work offshore will have very mixed results -- just as they have had with American workers, but much worse. With American workers many 'failed implementations' could rightly be blamed on scope creep, slipping schedules, and unrealistic expectations. The offshore work will suffer all of these, but throw in a communication (language) barrier. This will eventually be worked through, but in the meantime a lot of companies will get burned by systems that don't work, detailed design specs that the foreign programmers don't understand, etc.
3: As companies in general move more towards open source and Free software, corporate programmer jobs will split into two broad categories: Things that no one wants to work on without pay and that are difficult to outsource (e.g.: business applications); And integrating various components to make a system that adds business value (some Free, some open source, some commercial, some built offshore).
"But actually trying to use m4 as a general-purpose langage would be deeply perverse" --ESR
even in the boom people were worried about tech outsourcing. so why is this suddenly back up on the radar? my guess is that with a down economy it's more likely that this 'news' will shock people into reading/watching/consuming.
for some reason (ethnocentricity) i doubt that tech jobs will ever be significantly outsourced overseas. yes, gone may be the days of low-hanging fruit in the tech sector, and our growth rate certainly could not be sustained - but if you think it makes sense for the average small or even medium sized company to outsource, you're nuts.
not to mention integration and consultation are the two biggest gems yet to be mined for tech professionals. And they're entirely localized problems. You can't outsource the kind of tech that walks over to your user's desk to help them understand how to get the most from their system - the kind of tech that integrates -your- phone switch with -your- mail server, in -your- office to promote -your- core business practices.
and its not only cost management, it's risk management in a down economy. If you have $10m to invest in a project, and it's kinda risky - hiring local leaves you with full-time employees, employees whose loss -will- affect the morale of everyone else at the company, who -will- be drawing medical coverage, (who probably will get severence or at least holiday pay), and who -will- require infrastructure to support.
if you're not sure a new development is going to bring you new business - it makes sense to outsource. if it fails and you outsourced, you cut your losses and move on. that easy. and while you're outsourcing, what's the difference between the shop down the road and the shop down the pacific?
oh, and that slideshow by Hunt and Thomas was crap. basically it was: reinvest in yourself to keep your job, don't lock your dev experience to a particular vendor/language/industry (duh). but we can't all be 'recognized experts' or lecturers or project managers now can we? it's more a treatise on how the gray hairs can fend off the tide of young coders than how coders can defend themselves from being restructured or outsourced.
// "Can't clowns and pirates just -try- to get along?"
This, from:
http://www.bayarea.com/mld/mercurynews/5918 824.htm
Foreign engineers will change our economic world; prepare yourself
By Sanford Forte
WE'RE hearing a lot these days about economic distress. What we're not hearing enough about are global economic and business changes that hit our manufacturing, technology and financial sectors -- and lead to job displacement. These changes will not abate; if anything, they will accelerate.
It's more complex than just ``globalization.'' It's a series of technology and capital transfers that have fundamentally changed our industrial and technological playing field. The rest of the world is close to fielding robust post-industrial infrastructure, and learning to outplay the best of us.
The National Science Foundation reports that China graduated nearly 200,000 engineers in 1999 from good universities that get better by the year. By comparison, American Universities graduate a mere 60,000 undergraduate engineers annually.
Combined, India and China produced nearly 26 percent of the world's newly minted engineers in 1999. Excluding Japan (where engineering wages are higher), Asian economies graduated 320,000 engineers in 1999 alone.
Wages for Chinese engineers range from roughly $4 to $8 per hour. Engineers from many other Asian nations (excepting Japan) command little more than that. These well-trained engineers are all perfectly capable of working ``on the wire'' for engineering firms all over the world -- and they are doing just that.
China has some 18 million people migrating from the interior to the coastal manufacturing provinces every year. This represents a virtually limitless source of low-cost labor for the next 10 or 20 years. It will feed China's surging consumer demand. Don't believe for a minute that China's (or the Pacific Rim's) economic development will be mostly fueled by American-made products and technology. It won't.
China is already the largest manufacturer of consumer electronics products in the world, and within three years will be the world's largest automotive manufacturer.
Manufacturing is migrating from Pacific Rim economies (Malaysia, Japan, Korea, Taiwan, India) to China, leaving large workforces and technology infrastructures behind. Those displaced workers are migrating to the technology service sector, and already posing a competitive threat to high-tech service sectors in the developed West.
India already has Six Sigma (a universal measure of quality that strives for near perfection) technology and consulting firms equal to our very best, offering superb technology solutions at cut-rate prices.
Roughly 47 percent of Americans are directly or indirectly dependent on technology for their livelihood; keep this number in mind when considering how the ``Law of Lowest Wages and Costs'' has already -- and will increasingly -- impact our economy and lifestyle.
Bottom line: We in Silicon Valley -- and America -- are in for a long, somewhat painful ride. We will be challenged like never before. Americans will, after a time of readjustment and pain, finally have to ask what ``enough'' is . . . and that's a good thing.
It's a good thing because the seemingly never-ending upward spiral of promised prosperity that Americans have recently taken as their birthright has come at real cost: disintegration of families, environmental degradation, unhealthy xenophobia borne of the fear of ``losing advantages'' that we so dearly enjoy.
After the looming crisis fully takes hold, after the scapegoating of politicians, foreign nations and immigrants has run its course, Americans will search inward for values and ways of life that don't depend on maintaining material hegemony that is in excess of ``enough.''
We can be prosperous without obsessing about prosperity, that is, sacrificing our very lives and identities to some abstract definition of ``success.'' I predict a resurgence of interest in things spiritual, a more relaxed defi
For all of the IT jobs that can be moved easily (read programming) it has come down to the lowest common denominator for most low quality projects.
The lowest common denominator applies to other fields as well. Take Dell's foray into technical support - they are ramping some of their call volume into the Phillipines (I believe) and the quality is horse shit. I spent over an hour on the phone trying to get a freaking standard service call in that would have taken IBM or Compaq less than 5 minutes.
After I brought this to management's attention, we've subsequently dumped Dell for another vendor. Hopefully, *someone* will keep smart people on the other end of the horn and end up with good business.
If you don't believe me, call 800-822-8965 option 3 and you'll get a foreign guy trained to speak with a western accent. They all sound nearly the same (with the same static-laden, high-compression VoIP connection noise in the background)...
Life is the leading cause of death in America.
So now we have programmers who are used to getting $80 per hour for highly skilled work demanding the same thing for work that your average self taught hacker can do. Of course it makes sense for business to farm it over seas to have it done at a fraction of the cost. It's pretty straight economics if you can remove your emotions from it.
All the best,
--Bob
I don't think computer work is cyclical at all. I think it's going to follow the same pattern as labor, and while I don't know exactly where it's headed, I don't think it repeats (no cycles, hence it is not "cyclic").
:)
Work is outsourced to wherever it's cheapest to do, and it looks like it's already at the cheapest point already. There might be one more step left (Africa) and then we'll have gone through the whole world, and prices are going up worldwide as standards of living improve - making this shifting of the jobs less worthwhile as time goes on.
When will it be cheaper to have an automated chip fab/car plant/whatever here than to build a fully manned one elsewhere? When will foreign IT cost more than the communication barriers and planning make worthwhile? Those are the points where the work comes back home to stay. There's definitely a process of shifting and settling going on, but it doesn't look very cyclical, it just looks like different industries are at different steps in the process (and going through it at different rates). That can give the illusion of cycles.
(This theory probably has an official name or something, which would have saved me a lot of explaining, but I'm not a professional economist, so I had to go the long way around
Most people think that software development will go offshore and stay offshore, just as most textile manufacturing jobs did earlier in the century, and that it will be painful and inevitable.
Before you think that too, ask yourself -- how much do you think software engineering is like making a pair of pants?
I'd cite a different event, or non-event, in history -- the U.S. has yet to outsource (expensive!) jobs like doctors, lawyers, architects, executives, etc.
Is software development more like this? evolving into a new highly specialized, skilled profession?
In that case a certain, large amount of dev work will never be outsourced.
Alternatively, think of it this way... if outsourced development is actually as useful as some people think, it will eventually become more expensive. As soon as it is anywhere near the cost of on-shore resources, it ceases to be useful.
Over time, the solution is not cheaper people but fewer, skilled people -- with smarter tools instead of an army of bodies to do grunt work. I think companies that think this way will ultimately do a lot better technology-wise and just overwhelm the outsourcers of the world in the end with superior products.
One of the factors for the U.S. gaining the advantage for a few decades, aside from the havoc in Europe from WWII, has been the ease with which the best students and researchers from the whole world can work onsite with their peers. Visa problems and other undesireable side affects caused by P.A.T.R.I.O.T. and other anti-U.S. legislation makes can help move IT centers out of the U.S. Outsourcing drives this by providing funding and further incentive.
DMCA-like legislation and software patents also stifle innovation. Although there will not necessarily be mass emmigration from those lands, they will over time suffocate innovation, In contrast, lands where development can build on previous develoments and on investigation and publication, can move forward.
So, in short, the U.S. had for wa while a great environment for IT develoment and growth. The U.S. or some other economy which can produce or maintain such an environment is going to get the growth in the future. Whether it's Asia, East Asia, North America, or Europe (or Australio-Pacific) depends largely on which ones take themselves out of competition by enacting weird P.A.T.R.I.O.T.-DMCA-SofwarePatent laws
Beta is broken and the link to classic doesn't work. Stop wasting our time or there won't be anybody left here.
I'd like to chip in my opinion as a developer who's worked in China and out. Like the posts above, I've seen some really terrible coders and some really terrific coders in China. I'm not too worried about losing my job in the US though. Do you know why?
The trump card is locale. Many of the coders I've worked with in China have packed up and moved to the US as soon as they can - and only the best coders are able to do so. They want to live in the US because of the perceived higher freedoms and quality of life. In fact, this is a huge problem for US companies invested in China since employee turnover is so high. They get hired out of college, trained in the US, and never come back.
Oh, don't worry about re-investing in growth. Since Bush as pushed through the dividend tax cut, companies are saving up their money and will shell it out to their investors in 2004 (when the 0% tax on dividends goes into effect).
If a company isn't willing to spend it's money investing in itself, why should I?
--You will rephrase your request for me to go to hell. Goto statements are not acceptable programming constructs
That's why I mentioned "the world in general" - I don't think the first world should be purchasing products from environmentally unsound countries - to do so makes their own environmental laws totally pointless. I didn't want to mention it, because my original comment was aimed at the mainstream patriotic American, and including environmentalism in my post would make it sound like I'm a tree-huggin' granola-type.
Think of it this way - if your country complies with the Kyoto accord and it makes your cars really expensive, but you buy from country X that does not, then your screwing your own economy for no reason at all - the same amount of cars are being made, screwing the environment just as bad, the only thing is the responsible nation is getting screwed economically. Ergo, don't buy from non-compliant nations or else nothing gets solved.
being a programmer in the future will be like being a writer.
writers are very talented, but they are a dime a dozen.
Awk. Bull. Talented writers are very rare on the ground. And that's a large part of the reason for the current slump in the US economy. The tech "bubble" wasn't based on programmers or sysadmins becoming suddenly brilliant. It was based on writers - the original Wired crew for instance - giving the general public a vision of a new future worth moving to that just happened to require giving a lot of work to programmers and sysadmins for awhile.
Then this general enthusiasm got coopted by other writers who were more interested in hyping economic rather than cultural plenty - still, some were very talented as writers. With the crash of the illusion of instant economic plenty, we've also lost the vision of tech-based cultural plenty. Programmers will be lacking work just as long as it takes to restore that vision. That restoration can be helped by a few real-world examples of neat new stuff from programmers and engineers, but finally is only sold to the wider world through excellent writers (who, what with public speaking fees plus their book royalties make a pretty dime indeed when riding a wave).
If we had more good, insightful writers, programmers wouldn't be out of work.
"with their freedom lost all virtue lose" - Milton
Hmm, average programmer costs annualized..
10 cans of Mountain Dew or Coke per day.. $1174.50.
Travel.. $0. (They never move)
Lights.. $150. (They tend to stay late a lot, although they tend to prefer the dark when they do)
Software licencing.. $0. (Good programmers use Linux or have brought in their pirated software from home)
PC.. $1500. (If they upgrade each year)
Network + net.. $1000. (This is being generous)
Electricity.. $400. (Again, generous)
Training.. $0. (Good programmers don't need it)
Furniture.. $500. (Again, generous)
Property space.. $2000 (Again, generous)
Free pretzels.. $50.
Health plan.. $2400.
Okay, that's $9174.50 per year of expenses for a reasonably well treated programmer. Let's add another arbitrary $20k to that, making $30k. Deduct from $60 per hour (annualized to $130k).. that's still $100k average.