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Why Outsource When Workers are Willing to Telecommute?
An anonymous reader asks: "Corporations and management resisted telecommuting for years, now jobs flow to distant nations. Did telecommuting become acceptable because of the greater distance? Because some form of on-site management persists? Because labor laws are favorable? Because a well paid middle class is a political threat? Is it really as simple as money? I'll work cheaper if I can choose where I live and work. Must I leave my country to do so?"
There are two obvious factors that favor foreign outsourcing to domestic telecommuters:
1) The outsourcer is still likely to be much cheaper.
2) The outsourcer is (presumably) an organized unit with a high degree of standardized processes, etc. that are difficult to implement across a telecommuting workforce.
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I'll work cheaper if I can choose where I live and work. Must I leave my country to do so?
Yep. And you must also accept a salary of around $5,900 a year, assuming you're relocating to India. You said you would be willing to work cheaper, but I doubt you'll want a job at that salary.
I'm generally "Interesting," "Insightful," and even "Funny" here. What the hell happens to me at parties?
Is it really as simple as money?
short answer is yes.
And don't forget benefits such as healthcare and retirement.
I'll work cheaper if I can choose where I live and work.
Not as cheap as someone oversees. What is considered good money in India wouldn't be a living wage in Silicon Valley, or in most of the United States.
Indeed. Especially considering that even $100k is not really even a living wage in Silicon Valley and that same $100k costs the employer approx $155k including benefits. That same job in many cases can be found in India for $5k or less. The issues to be overcome are language barriers, project management and innovation (or lack thereof with remotely managed projects).
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The average Indian programmer costs $20/hr in wages and benefits while the average American programmer costs $65/hr.* Therefore you would need to take a 69% paycut in order to be competitive. You would be better off moving to your favorite part of the country and waiting tables.
*Source: Arizona Republic, July 14 2003
With outsourcing the employer is contracting
with another company, and the employer
has more legal remedies if the contractor does
not deliver (and deeper pockets to attack).
With the telecommuter, the emploer's remedies are
much more limited.
The other difference is that the outsourcer is
presumably employing professional mamangent to
oversee the remote workers. With the telecommuter
the employer has to rely more on trust.
Finally, I'm not sure the submitter of this item
really meant outsourcing versus exporting
jobs to a foreign subsidiary of the company. If
the latter, then my legal remedy argument doesn't
hold, but the oversee and trust argument does.
>>Are you willing to live in Bangalore, Pune or Delhi for $12-14k/yr?
Forget it. India has laws barring non-Indians from working there.
Yet the US is cool with H1-B's. Weird.
Huh?
It sounds stupid to say this, but these guys just aren't as good as the seasoned tech people we have in the US. They can't see the big picture
In many cases, they can't see the big picture because they are only given small amounts of code to create or port rather than being given a larger perspective. One simply has to look and the many hundreds of programmers for IE to see this.
They lack the comprehensive technical immersion that we in the US have.
This may be changing faster than you might expect. The Indian government has made tech education a central component of their economic plans and judging from the quality of some of the programmers I've run into here in the US, we should be worried.
Most off-shore engineers were in non-technical jobs before they managed to go to college and learn how to program.
Oh? What is your evidence here? There are a great many folks that are getting targeted education in tech in India and elsewhere that brings them straight into their programming courses.
In 20, 50, 100 years I'm sure this technology gap will fade and perhaps even vanish, but certainly not in the short term.
I'm thinking 2, 5, 10 years.
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"Forget it. India has laws barring non-Indians from working there."
They do issue temporary work visas valid for 1 year. My former company had several guys from the U.K. down there working and at least two of them that I know of had their visa's extended beyond 1 year as well.
Whenever the offence inspires less horror than the punishment, the rigour of penal law is obliged to give way...
The problem with workers telecommuting is that they need to be managed individually; the lure of Indian outsourcing is that someone else is managing them. In short, if the relationship with the Indian shop is set up correctly (specs go one way, code goes the other), the management overhead goes down as well as the cost. The interface is (theoretically) cleaner. I've never heard of an Indian outsourcing arrangement where the coders were in India and their immediate supervisor was in the U.S.
The comparison with telecommuting is shallow, and not very good.
Anyone who loves or hates any language, platform, or manufacturer, doesn't know what they're talking about.
And the cost of living in Troy, NY is about 10% of that elsewhere in the States.
No, really. My last apartment's rent was $200/mnth, including all utilities... Troy is relatively arctic, and heat isn't cheap.
--
lds
Not as cheap as someone oversees. What is considered good money in India wouldn't be a living wage in Silicon Valley, or in most of the United States.
Too true... while workers in the US might work cheaper while telecommuting instead of going to the office, they will need a salary that allows them to live, wich means a salary that let's them live paying US cost-of-living. For example, here in Chile a computer engineer (computer engineering in this country (at least in the Universidad de Chile) is more or less like a MsC in Computer Science, six years of studying everything from advanced calculus to economics to algorithms to AI to BD to Software Engineering to OS to...) goes out, fresh out of school, to earn about US$12k or 14k a year. Sounds like peanuts in the USA, but here it allows you to rent a place, pay your bills, buy your food, and car payments. Low cost of living where you are hiring means your workers will be satisfied for less. In no way you are ripping them off. I know *I* would be too happy with a US$24k/year job :)
You can split the pay of one US worker and use it to hire more people, wich are capable of doing the work of that one US worker and more. It's only a matter of sending someone here to do face-to-face interviews so they can pick the ones who REALLY speak english.
No it doesnt. There are a bunch of Americans working in Bangalore (ok, in management roles) in US based companies. I am not an expert in Indian immigration/visa laws, but you could get help from the Indian embassy or in your local Indian consulate.
There are even international schools in Bangalore so your kids can study stuff they do in US.. plus Bangalore has a lot of great pubs!
My job was replaced by someone in India..
Hint: A lot of Microsoft Support is done in India now..
Let me just say that, as far as my experience was concerned, telecommuting wasn't that great. I was offered to telecommute one day out of the week, and after a couple weeks of that, I actually found myself going into the office on my telecommute days... to sum up:
1. Technical issues. The VPN was butt slow. Even over DSL the whole process of logging in and getting simple stuff to happen was a pain in the ass. They gave me a laptop that was nowhere near as fast as my work computer, plus, because of the VPN and paranoia, I had to do all work on the laptop, not my home box. Then, some days I couldn't log in for hours. I would actually prefer working on the work box since everything would get done twice as fast.
Totally distracting. Had the TV going, music playing, couldn't resist the urge to do household chores, etc. I'm honest when I say my productivity was likely reduced by 25% just from stupid distractions and the basic "hey, the boss ain't here, I'll post on slashdot again..." etc.
Lonely. I was surprised, but it sucked not being around other co-workers, even just for one day. If you want a quick answer on something you can't just walk to their cube. Have to call them up, inevitably leave a voice mail, or email, etc. The back and forth probably wasted an hour every day I telecommuted.
Team gets fragmented. Our telecomute schedule was like a rotation, so every day of the week one or two people would be out of the office. It made it harder to schedule meetings, also, I seriously think workflow would be slowed, because someone would be "working from home" and people would figure, well, I'll just ask this question tomorrow when I can speak to them face to face (procrastination).
So, on the surface telecommuting sounds like a sweet deal, but I found it problematic. And if I were to take a pay cut for telecommuting? No way. I'd go to the office anyday. Your mileage may vary but I urge anyone to actually TRY telecommuting for a while before assuming "working from home" is such a holy grail.
There are probably 40 million people (if not more) in the US who enjoy the same standard of living as you do in Norway. That's why those calculations are problematic - they ignore the size of the population as a whole. Of course, distribution of wealth is the key.
like West Virginia. Yikes!
The poverty line in the US is still waaaaay over the poverty lines as defined in most other countries in the world. "Poor amercians" have it pretty darn good compared to the rest of the planet.
Imagine earning the equivalent of US$160 every month. Can you folks in America live with such a wage? That's how much money I'm making right now, and while it's not exactly a lot, it's enough for me to pay the rent and utilities, buy enough food to for me and my girlfriend to eat well every day, and allow us to have a little more fun besides romping around on the bed. :) (it's not enough for us to consider getting married and having children though) What do I do that earns me such a pittance? I deploy and design enterprise Linux systems, and write custom Linux software as well. The fact that I work for a new and impoverished startup company skews things a bit, but the facts remain. Even as much as US$500 a month is considered a very good wage where I come from. Would you folks in America even consider such pathetic wages?
I can buy a pack of cigarettes here for the equivalent of less than 50 US cents. A home-cooked meal of chicken or other meat costs around 75 US cents per person. My daily commute to work is slightly less than one US dollar. Water and electric bills amount to roughly US$8-$10 per month. Rent, US$60 per month. That's what life's like in the Third World, folks. Come by and visit sometime.
Qu'on me donne six lignes écrites de la main du plus honnête homme, j'y trouverai de quoi le faire pendre.
English *is* the language of tech
Okay...
and *most * Indian developers speak it fluently.
If by "Indian," you mean "Native Americans," then I suppose that might be accurate. If by "Indian" you mean individuals that live in India, then I can say with great certainty that your definition of "fluently" is much, much different than the rest of the populous.
First, working at home or off-site as a 1099 contractor has big advantages to the employer. In order for you to get paid, you need to be accountable for your work. If you work for 40 hours, but your manager can't get you on the phone, your work is behind schedule and you leave a trail of posts at all times of day and night on slashdot, you're not accountable and won't keep the job long. In fact, your manager will begin to scrutinize your time sheets, ask for revisions, ask for better logging, ask for more documentation. The upside for the employer is if you develop a sense of trsut, the company only pays you for the exact number of hours you are productive.
On the flip side, in an office environment, as a salaried or hourly employee, your bathroom, snack, smoke, and other breaks are typically overlooked and you're paid for them. Try writing down every thing you do in a day when you do it. Write the start time, the end time and calculate from the first moment you work to the last moment you work how much work you are actually doing and how much of it is break time. For the most part, the employer is getting a raw deal.
Second, as a 1099 contractor, my employer doesn't even have the opportunity to help with my insurance. I live across the country and our provider doesn't help. That's a savings in addition to your salary.
Third, no paid vacation time, no paid sick time. It's very nice for the employer.
Why don't they do this with home workers or single off-site workers? Time and time again, employers have watched their experiements with telecomuters go badly. Performance and quality drops, but the employee expects the same or similar salary.
The industry, the way it is today, isn't because employers are inately bad, but because employees will, on and off site, spend as much time not working as possible, while still receiving their paycheck.
My previous relationship with this company was a strict 9-5 job. If you were in seconds after nine or left seconds before 5, you knew for whom the bell tolled. Our lunch hours and our breaks were scrutinized. Since I moved off site, I actually put in 35 - 40 hours a week consistantly, not including a single second of breaks. Billable hours are hours that produce results for the company, period.
The last problem, which is less obvious, is that by moving off site, your manager needs to have an infrastructure with which to communicate, meet with and monitor you. You think a phone call will replace meeting face to face? Email? Teleconfrencing? Monthly flights to the office? You're dreaming. If you don't have a high degree of value to your company or trsut from your manager, you need to be very carefully managed by someone who he trusts and produces quality results.
The very same thing could happen for off-site or at home workers state side. However, a group of off site programmers with on site management that is successful in the states means money. Hard working, dedicated employees that will pull of the kind of work a boss thinks he's getting by micromanaging you will be expensive, rare or both.
Yes, Japan is even worse.
The point was that the average incomes in some countries is such that
two dollars an hour sounds like good money. Exchange rates can help
here too. If you hire someone in the Cameroun, you can pay him
500 francs an hour, because that's only about a dollar. But 500
francs an hour times 40 hours is twenty thousand francs a week,
which is an above-average wage there. You've got a combination of
two factors in your advantage here: the exchange rate is such that
20000 francs will buy more there than 40 bucks will buy here, and
additionally it seems like even more because they all have friends
and neighbors who make less than that amount.
Consequently, if you want to telecommute and work for the kinds of
wages those people make, you'll need to live outside the US. You
can't support a family on 40 bucks a week here. Even just supporting
yourself on that amount here would be a very very serious strain,
and could only be done if you already owned your home outright
(in a location where heating is not needed in the winter), had no
need of a vehicle, and had very inexpensive tastes in food (think
in terms of gardening and buying rice in bulk...) and clothing.
(Think: Goodwill.) Even at that, with no significant other
expenses, you'd have VERY little discretionary money. The
company would have to pay your internet bill, and I'm not sure
you'd be able to afford the electric bill. It'd be very tight,
if you could even do it at all.
As you point out, the US is _not_, contrary to popular opinion, the
richest country per capita. It's (quite easily) the country with the
single largest total amount of wealth, but that's a combination of
not only affluence but also size. (There are larger countries, but
not very many.) There are a number of somewhat smaller countries
that are also quite wealthy per capita.
Nevertheless, there are quite a few countries that are a lot LESS
wealthy per capita than the US. If you pick a country in that
category that also happens to have the right kind of exchange rate,
the result (from the perspective of a US country) is cheap labor.
Cut that out, or I will ship you to Norilsk in a box.
I'm living rather comfortably on a take-home wage of $11.38 an hour... though this is east tennessee, a 2 bedroom apartment can be as little as $470 a month, the average power bill is $30, i.e. we rank as one of the cheapest places in the U.S. to live comfortably; i.e. on $24k a year gross I have a brand new $18K car that's fully insured, a spiffy place to live, cellphone, cable modem and the good channels (sho, hbo, tmc, etc)health, dental, and vision benefits, and a nice amount of spending cash.
If a company were willing to pay me $15 an hour to work from home, HELL'S BELLS I'M IN!
I just modded you up. While yeah, it's *always* about money to an extent - I think you're right on the mark pointing out the "control" factor (which most managers won't readily admit to, either).
Even when you finally manage to prove to your boss that you can do excellent work outside the walls of the company, he/she often still clings to outdated ideas of time management and employee tracking.
(EG. The guy I work for right now has me work on all sorts of projects for him, including producing and editing a computer training video he wants to use in-house. I do all of the work on this video at home, and keep track of my hours. When I get back in to work though, he forces me to religiously punch in and out on a time clock! So basically, I end up with a time card full of handwritten notes about hours I worked outside the office, plus all the time-stamps on it when I came in. Ridiculous - but another case of a boss who can't quite adjust to giving employees control.)
BTW, dido is in the Philippines (not mentioned in the post).
-=-=-=-=-=-=-=-=-=-=-=-=-= John Reinert Nash -=-=-=-=-=-=-=-=-=-=-=-=-=
The "mythical man month" comes to mind here...
I've had two experiences with Indian outsourcing...
In the first, I've recently been bidding (as an indie consultant) against a company in India that works for "$12 US per hour".
Yet, when I assess the actual deliverables, I'm delivering every feature for about the same price as their bid, at $65 per hour! I'm pretty confident that I'll get the project.
In the second, an Indian company was hired to perform a core deliverable for a venture company. I got in around halfway through, and to be frank, was not involved directly in this project.
But the things I heard coming out of that development effort were simply hideous
- URLs in the web parts that were absolute, instead of relative, requiring a recoding of every page in the site to take from Dev -> Live,
- Filling out a page with information from a database, by issuing a seperate SQL query for each *field* on the page thru a function call, making for upwards of 100 database queries to fill out what a single DB query/Join could have achieved
- Numerous serious security flaws - such as using the public IP address of a database server for DB connections rather than a local socket file, and hardcoding that address in, requiring *another* recoding effort to go from dev -> live.
Just remember, it's only cheaper if it works...
I have no problem with your religion until you decide it's reason to deprive others of the truth.
I worked for a US credit card company (a Dean Whitter subsidiary) that did just that -- they shut down heir offices on the coasts and built two new Ops Centers, one in Northeast Tennessee, and one in South Dakota. Then they replaced all their $50k/yr+bennies city dwellers with $7/hr college students working part-time.
I heard a couple years ago that they shut down the center in Tennessee where I'd worked and outsourced those jobs to a firm in India... Don't know if the one in Sioux Falls is still going or not.
Wonder where they'll ship the jobs when it's time for the Indians to get screwed like we did, and the New Yorkers before us?
Il n'y a pas de Planet B.
"Obviously a lot of companies have decided that having an american physically in the office isn't worth a savings of $45 an hour, but once you've decided to hire telecomuters, isn't a $20 an hour American programmer with who management will probably have a lot less communication difficulties a better buy than a $20 an hour programmer from India?"
Don't compare outsourcing to telecommuting. There's more involved than the costs, and each option has different advantages and drawbacks.
Telecommuting saves on office costs, travel expenses, and employees might be willing to work for less. Then again, there's (still) no good substitute for face-to-face meetings, and I generally find that programmers benefit from talking to their co-workers, about work or other things. People perform better in good teams. As an alternative to letting people work from home, some companies work with satellite offices, but this ties employees again to an office, and might end up combining the drawbacks of working in an office and working from home.
Outsourcing has the same savings (office costs and labor costs), but the advantage is that the employees will be working from the same office, and in proper teams. The drawback is having to remotely manage or oversee projects, and the language barrier. I've seen projects being partly outsourced to India, and it was no picknick.
You also have to realise how the PHB thinks:
- "Outsourcing = Good. It'll save money now anbd make my bottom line look good, and everyone is doing it these days so I will not get fired for doing this even if it fails badly" (the old 'no one ever got fired for buying IBM' rule).
- "Telecommuting = Bad. Come on, we all know the resources will just loaf around the house all day in their underpants. When projects start to fail (and one will fail eventually), I'll be the scapegoat for making this decision".
I've tried 'selling' telecommuting for 1-2 days a week, and found that many (but not all) managers on all levels are opposed to this: CEO's, Division managers, and project managers.
If construction was anything like programming, an incorrectly fitted lock would bring down the entire building...
And taxes. In the USA, employers have to pay more taxes for each employee than the taxes which the employee pays. (This year, I think Tax Freedom Day was in June -- you're working almost half the year to support the government)