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?"

Comments

Outsource because...

[Anonymous Coward]

Workers in India are cheaper.

Re:Outsource because...

[Daetrin]

Workers in India are cheaper.

Which part of "I'll work cheaper if I can choose where I live and work." did you not understand?

From the CNN article that got posted here a few days back, "The average computer programmer in India costs $20 per hour in wages and benefits, compared to $65 per hour for an American with a comparable degree and experience, according to consulting firm Cap Gemini Ernst & Young." First of all, as an average American programmer i'm apparently geting gyped by about 70k a year :) Second of all, there are probably quite a number of programmers in America who would be willing to work for $20 an hour if they could telecomute from the backwoods of Maine so as to minimize their living expenses.

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?

Re:Outsource because...

[enomar]

I don't think programmers in India are getting paid $20 an hour. I think it's more likely that $20 an hour is the total cost of employment including wages, benifits, office space, utilities, communication costs and so on. If you want to telecommute for $20 an hour and pay for your own benifits, utilities, and bandwidth then I'm sure any company would hire you.

Re:Outsource because...

[derfel]

The $65 an hour for a programmer in the US and $20 for one elsewhere both include infrastructure, benefits, and management. I doubt that, even though you're working at home, our corporate culture would be willing to cut down on the management part. Unfortunately, this is a good example of the whacked out way our executives figure things. They figure in their salary into the cost of their domestic employees, but not into the cost of overseas employees. This biases things in favor of those overseas.

It really is that simple.

[wayward_son]

Is it really as simple as money?

short answer is yes.

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.

Re:It really is that simple.

[Anonymous Coward]

Oh come on its not at all about money, but control. I've worked at comapanies where they still expect back-room developers to wear a tie even though there is absolutely NO chance that a client will ever see them. That dangly piece of material serves absolutely no functional purpose other than to demonstrate total mindless conformity.

Unfortunately most companies won't ever consider telecommuting because managers don't trust their employees enough. They want to have their staff where they can see how and what they are doing on company time.

The old-fashioned management style won't change until hell freezes over, no matter how much money a company actually loses because of it. Most managers don't actually care about saving the comapny money because its not their money. Also the old-school managers will just refuse to believe it works because they don't want it in the first place.

Re:It really is that simple.

[SpaceCadetTrav]

If everyone took jobs for $28k, who is going to pay for universal healthcare?

Re:It really is that simple.

[El]

would universal healthcare here in the US be a potential job saver since employers would no longer be compelled to foot the cost of health insurance?

Huh? The money to pay for that health care has to come out of somewhere. If employers aren't footing the bill directly, then employers and employees are footing the bill through taxes. Either way, your standard of living doesn't improve just because they're taking the money out of your left pocket instead of your right pocket.

Re:It really is that simple.

[Tackhead]

> If everyone took jobs for $28k, who is going to pay for universal healthcare?

If everyone got rid of universal healthcare, universal education, universal pyramid scheme retirement plans, universal basket-weaving classes, maybe more of us would be able to live on jobs that only paid $28K :)

Government is really good at only one thing, and that is to break your leg, then hand you a crutch and say, 'Look, if it weren't for the government you wouldn't be able to walk,'

- Harry Browne, Bigtime Libertarian Nutbar, but a Bigtime Libertarian Nutbar Who Had A Pretty Damn Good Point

Re:It really is that simple.

[SpaceCadetTrav]

Who's going to go through all that schooling to become a doctor if they don't get paid very much? Who's going to pay for their education? Doesn't matter, as long as it's someone else, right?

Re:It really is that simple.

[GlassHeart]

even $100k is not really even a living wage in Silicon Valley

A reality check is in order. $100,000 is roughly $66,000 after taxes, or about $5,500 a month. Housing will take a big chunk of that, where two decent bedrooms might run you $1,500 to $2,500. A car payment for a subcompact might be $500. Eating out for two meals each day ($25 a meal) would cost you another $1,500. Finally, add cable TV ($50), phone ($30), broadband ISP ($50), and you should still be able to save a bit.

How is this not a living wage? Sure, you can live far beyond what I described, but that's not what a "living wage" means.

Re:It really is that simple.

[XorNand]

A major problem is that this knee-jerk, xenophobic reaction makes sense to a lot of well-intended people. I would really recommend that you educated yourself in the field of macroeconomics before you hold such a strong sentiment

Markets evolve. Slashdotter's are pretty quick to point out that changing times are eventually going to put the RIAA out of business, yet they scream bloody murder when those same forces are changing an industry that's a bit closer to their personal botttom line. Sorry folks... ya ain't stopping technological evolution. Maintain (and improve) your value by constantly adapting and learning new things; please don't ask the government to get involved.

Re:It really is that simple.

[arkanes]

Theoretically, the government is supposed to care about the citizens. The argument for pupping corporations at the expense of the average citizen is that the extra profit for the corp is better for the economy.

Now, if the corp is outsourcing everything, and then all those arguments go out the window - there's no reason for that company to be an American company then. It can incorporate in India and pay it's import taxes like everyone else. Fostering this behavior is dereliction of duty by our elected officials - getting involved here is what governments are for.

Now, there is a larger question here of whether its a good idea to prop up a local industry, blah blah blah, but fuck, econonicists(whatever :P) don't really do so hot and predicting things anyway.

Re:It's simple: money

[Anonymous Coward]

Not only that, but even if you cut your rate to $10/hr, there will be a third-world person who will do it for less.

You will never be able to be cheaper than a third world person, because a third-world person pays third-world prices for rent and food.

Outsourcing generally results in inferior product

[curtlewis]

I don't know what your experience is, but I've worked at several companies that relied on off-shore resources for some engineering. Sometimes it was collaborating on a project and in some cases entire mini projects were assigned to the off-shore engineers.

In every case, massive re-engineering needed to be done.

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. They lack the comprehensive technical immersion that we in the US have. This immersion gives us a greater understanding of technology, how it works, how to architect it, etc. Most off-shore engineers were in non-technical jobs before they managed to go to college and learn how to program. They just don't have the background that we do. In 20, 50, 100 years I'm sure this technology gap will fade and perhaps even vanish, but certainly not in the short term.

Whatever happend

[Ogrez]

To buying products made in the USA?? I can remember just a few short years ago when that made in the usa tag meant you got a better value for your dollar. The product might have still been made in a sweatshop, but it was a sweatshop in the USA!!.

I think that the way to convince middle and upper management to stop going overseas for tech workers is to convince them that although it might cost more to employ workers in the US, you get more value for your dollar if you stay at home, you get better code, better communication, and better management of the project.

Its time to stop whining about the jobs leaving, and find reasons to keep them here... and show IT managers why they should do things the RIGHT way, teach them about value, not just about bottom dollar.

But thats just my 2 cents...

Apples and Oranges

[Waffle Iron]

Bosses don't think of outsourcing as telecommuting because the outsourced employees aren't working from home. They are usually in an office being supervised by someone. Bosses can relate to that; they can't stand the thought of somebody sitting at home working in their underware.

To the boss, the fact that the fully clothed workers' hourly wage is 1/4 that of the unshaven half-naked ones is another big factor.

I think people misunderstand.

[mindstrm]

I get the feeling that most slashdotters, when they hear "outsourcing to India" picture some run down building with old computers and starving Indians in cheap work clothes who are happy to program for $2 an hour or less, working in sweatshop conditions.

This isn't necessarily the case. India does have almost 1 billion people; not all of them are poor, or uneducated, and not all of them work for nothing.

The fact is, a software house in india may produce work just as good as one in the US, at a fraction of the price, simply because the overall cost of living is so much less.
Educated, intelligent programmers who appreciate their jobs, which are good by their local standards, and these sofwtare firms are competing on a global scale with every other firm out there. And winning.

This isn't the garment industry.

Re:I think people misunderstand.

[thesolo]

The fact is, a software house in india may produce work just as good as one in the US, at a fraction of the price, simply because the overall cost of living is so much less.

And then, as their economy picks up, and the standard of living increases, companies looking to spend the least on salaries will shut down their companies in India, and move them to a place where they can find cheaper work. Then Indian employees will feel the same pinch that many Americans are feeling right now. It's a cyclical pattern; by and large, companies will do whatever they can to get the work done for less. If that means moving jobs to a place with a lower livable wage, so be it.

I bet for some rather unscrupulous companies, they would go to slave labor if they could.

Racist Bias

[jbottero]

I don't believe you because as has been pointed out here at Slash many times, English *is* the language of tech, and *most * Indian developers speak it fluently. It is not a problem that they are Indian, it is a problem that because of their economy, they work cheaper. I think this discussion can do without the ubiquitous bad jokes, if the services where sub-par, we would not be out-sourcing there. Give it up, Indians are excellent coders. Problem is, the work for cheap.

Money is more than salary

[Lumpish Scholar]

Your salary is only about half of the expense you represent to your employer. You might be willing to work for half salary; would you be willing to work for half salary and pay for all your health care benefits? If you're not a telecommuter, your employer pays for the space you work in; are you willing to work in half a cubical? You need to have some administrative staff support; do you think the people who do those jobs are willing to cut their salaries in half? And work without benefits? (Yes, I know their jobs are at risk, too.)

I'm not saying outsourcing is a good idea. I'm saying, if you want to understand it well enough to deal with it, you should understand it well.

P.S.: Even if your employer cuts back, and makes you pay a bigger share, health care costs to employers in the U.S. are outrageously high. If you hear a story about a pharmaceutical company reporting record profits, and then a story about a company outsourcing its software development because programmers in the U.S. are too expensive ... well, it might not be a coincidence.

Agreed.

[YllabianBitPipe]

Telecommuting from my experience, is when one employee basically works from home. Outsourcing is quite different, in the sense that US countries are not hiring a bunch of individual Indians to work at their homes remotely. They have their own offices in India, employees commute to work just like everyone else, and there's surely a management team there overseeing the office.

So to make the original analogy more appropriate, commpare this to when Intel has a sattellite office in another state. Now, instead of Oregon, the satellite office is overseas. And it has everything to do with money.

still gotta pay benefits (if you're in the US)

[e40]

but if you outsource to India you don't have to pay benefits. Remember that big settlement that MS had to pay, which gave contractors benefits? It was because current law (IANAL) says that you can't just hire contractors to get out of paying benefits.

This all means that even if your area has 1/2 the salaries of The Valley, you'll still be paid significantly more than someone in India.

Re:True

[b-baggins]

That's because your salary is only a fraction of your total cost of employment.

There's your payroll taxes (your company pays half your obligation).

There's workman's comp, which is all gray in the area of corporate liability should you electrocute yourself trying to telecommute from your laptop in the bathtub.

There's OSHA regulations and costs (see my point above about laptops and bathtubs).

etc.

Companies don't outsource to individuals in India. They outsource to COMPANIES in India.

Go ahead and form your own 1099 company and bid for some of those outsourcing contacts as your own company.

Quality doesnt matter as much as you think.

[YllabianBitPipe]

For example, you go to old navy and buy a ten dollar t-shirt that was sewn up in China. I can vouch for the fact that the quality is crappy and this shirt will get a hole, tear, break within a year or two. But who cares? It was ten bucks, and these things still sell like hotcakes. Heck they are so cheap when the shirt tears, you throw it in the trash and buy another one, and you're still spending less money than if you bought some cashmere T-shirt from Versace.

You may think this comparison is apples and oranges, and I kinda do to, but I bet the CEOs and execs outsoursing the tech jobs don't.

Wrong Answer

[Dr. Bent]

Telecommuting will not save your job.
Working longer hours will not save your job.
Working for less money will not save your job.

If you think it will, then you're looking at this problem in the wrong way. You will never be able to beat the cost of offshore labor. Even if you could, you wouldn't want to. There's a reason it's so cheap...everything here costs 10 times more (rent, food, clothing, etc...) than it does in India and China.

It's like trying to beat Tiger Woods at golf. Maybe...maybe...if you train really hard, sacrifice your family and friends, and everything you ever knew or loved, you might be able to beat him in a round of golf if you were having a good day and he was having his worst one ever.

But a much simpler way to be him would just be to school his ass at Tiger Woods PGA Tour 2003' for the PS2. The game is a lot easier if you change the rules a bit ;-).

The weakest point of outsourcing is the lack of communication. Developers in India can't communicate with customers here because:

1) English is not their native language
2) There's no face to face communication
3) They're 12 hours ahead

And if you can't talk to the customers, you can't solve new problems. Old problems are easy to solve. Those are the kinds of things that can be effectively outsourced. Building yet another e-business website with a shopping cart and inventory control; Creating one more payroll processing system based on an SQL database; It's the well understood problems, where the customers know exactly what they want, that can be outsourced. Everything else seems to fail.

And that is the IT Industry's saving grace. Using new technology to solve new problems that are not well understood will always have to be done here, because solving those problems requires constant and effective communication with the "customer" (the users of the sofware).

Software is slowly and painfully learning the lesson that manufacturing learned a long time ago: "Build where you sell". If engineers can't talk to the people who will be using thier products, they won't know what to build. Most problems in software are not well understood enough to be completely spec'd out by an intermediary party and passed onto the engineers for implementation. That is why lots of outsourcing ventures fail, and that is why the innovators here in the States will always have a job.

Re:We need H1-Bs

[Angstroem]

> We need more H1-Bs so that we can train them here.

Slight misconception, what a H1B is used for...

Companies don't go through the hassle of sponsoring a H1B to get trainees. Any B-type visa / visa waiver would be good for that as long as they don't get payed more than a moderate daily expense and leave after 60 days.

At the company I work for, they only apply for H1B if they spot a promising foreign PhD who might fit into and benefit to the company research profile.

Re:A well-paid middle class is a political threat?

[Lemmy Caution]

There's a number of ways to categorize what makes someone in the "working" class and what doesn't.

One is to observe that even someone on welfare in the US has a higher standard of living than many people who work 70 hours a week in much of the Third World - and that this is a consequence of the incredible difference in purchasing power and wage power between, say, the US and Indonesia. After all, we buy their labor to produce shoes and clothes that we buy at a tiny fraction of our own labor costs - that differential is a "privilege"/advantage that anyone in the US enjoys. Meanwhile, the cost for first-world-produced goods and services remains extremely high for much of the 3rd world (a Uruguayan friend of mine laments how a single GameCube game costs half the entire monthly salary of his wife, a biologist at a Uruguayan university.)

However, another way to look at it is alienation of labor - do you own the fruits of your own work? By this more classic Marxist description, even some 6-figure earning people are "working" class. Other metrics like this are whether one owns one's home, or how many paychecks away from homelessness one is. The capital-gains model is one of these ideas: when one's wealth and power comes from "ownership of the means of production," then one can be thought of as in the ruling/upper classes.

And another way is more cultural, dealing with type of work: a plumber making over 100K a year is considered by some more working-class than a low/mid-level manager making 60K a year in a small company, and both are considered "lower" than a college professor making 45K a year. There's an idea called "cultural capital" that expresses the idea that certain types of work have a cachet that isn't reflected in the amount of money they earn.

Re:Outsourcing generally results in inferior produ

[OldAndSlow]

I agree with your opinion on outsourcing results, but not your conclusions. You get back crap from overseas, but if the Indians outsourced a project to the US, they would get crap back.

The problem is that you can't build a good system without access to the customer. I've been in software development going on 30 years, and I've never seen a spec that didn't have holes. And I've never seen a design that didn't have holes. If the coders are 12 time zones away from the designers/analysts/customers, then they are going to make things up to fill in the holes. Which means that 99 times in 100 the result is crap.

Alistair Cockburn has a very good book Agile Software Development that is about methodology, mostly. He says that he has never seen a methodology that works for outsourcing part of a project, like coding. He says that what will work is outsourcing whole projects, including architecture on down. This sheds some light on IBM's recent announcement that they will be moving high level jobs offshore in the coming years.

Three reasons: Money, Money, and Money

[RalphSlate]

Here's a quote from the an article previously referenced on SlashDot:

IDC warns that Bangalore, India's primary IT hub, may no longer offer the world's best IT outsourcing value; that the infrastructure there is saturated; and wages for skilled workers are being bid up, with many new grads demanding annual salaries of $4,000 (USD) or more -- not only in Bangalore but all over India.

Oh my God. The nerve of those Indian developers demanding more than $4k/year. No wonder companies are turning to Romania and China. They're obviously less greedy in those countries.

Can you cut your salary demands from $75k to $4k, probably with no health, pension/401k benefits? If you can't, then the argument for telecommuting is moot because someone else will do your job for a hell of a lot less than you will.

I know a lot of Slashdot readers are in favor of globalism, but I don't think they're prepared for the effects of it. Unless you're a plumber or electrician, you better get used to a wildly lower salary and standard of living, because if your job can be sent overseas, it will be, due to this type of astromonical savings.

Not just IT -- engineers, benefits administrators, architects, analysts, animators, call centers, they're even shipping radiologist work overseas because someone in India can read X-rays just as well as someone in NYC.

We won't see the alleged benefits of globalism for decades, so there is probably a long stretch of very rough waters in our future, where entire industries will be eliminated almost overnight by offshoring, and the economic balance of many regions of the US will be ripped to shreds.

The problem is that the change is just too fast to react to. IT is still a relatively new field; when I attended RPI 10-12 years ago there were really no IT courses being taught, it was all CompSci -- data structures, etc. The IT industry as a career has ramped up and burned out in a span of about 10-15 years. That's about 1/5 the length of a person's working years.

How can someone completely retrain themselves every 10 years, when retraining means starting from the ground floor both salarywise and knowledgewise? I'm not talking about evolving, like moving from mainframes to PC's. I'm talking about moving from being a programmer to being a lawyer or an accountant.

How can anyone prepare for a career when there's a significant chance that the career could be totally obliterated in as short a period as 5 years.

Ralph

Cheap Labor Conservatives

[spun]

I saw this phrase on a website the other day. It really explains a lot. Right-wing ideology is based on getting people to work for less. Cut social programs so they have no safety net. Lower minimum wage. Get rid of worker safety laws, trash environmental laws, anything to get cheaper labor. Right wingers are anti-prosperity: prosperity for all would remove their source of power.

Here is a reprint of the main part of the post I read:

Right-Wing Ideology in a Nutshell

When you cut right through it, right-wing ideology is just "dime-store economics" - intended to dress their ideology up and make it look respectable. You don't really need to know much about economics to understand it. They certainly don't. It all gets down to two simple words.

"Cheap labor". That's their whole philosophy in a nutshell - which gives you a short and pithy "catch phrase" that describes them perfectly. You've heard of "big-government liberals". Well they're "cheap-labor conservatives".

"Cheap-labor conservative" is a moniker they will never shake, and never live down. Because it's exactly what they are. You see, cheap-labor conservatives are defenders of corporate America - whose fortunes depend on labor. The larger the labor supply, the cheaper it is. The more desperately you need a job, the cheaper you'll work, and the more power those "corporate lords" have over you. If you are a wealthy elite - or a "wannabe" like most dittoheads - your wealth, power and privilege is enhanced by a labor pool, forced to work cheap.

Don't believe me? Well, let's apply this principle, and see how many right-wing positions become instantly understandable.

Cheap-labor conservatives don't like social spending or our "safety net". Why? Because when you're unemployed and desperate, corporations can pay you whatever they feel like - which is inevitably next to nothing. You see, they want you "over a barrel" and in a position to "work cheap or starve".

Cheap-labor conservatives don't like the minimum wage, or other improvements in wages and working conditions. Why? These reforms undo all of their efforts to keep you "over a barrel".

Cheap-labor conservatives like "free trade", NAFTA, GATT, etc. Why? Because there is a huge supply of desperately poor people in the third world, who are "over a barrel", and will work cheap.

Cheap-labor conservatives oppose a woman's right to choose. Why? Unwanted children are an economic burden that put poor women "over a barrel", forcing them to work cheap.

Cheap-labor conservatives don't like unions. Why? Because when labor "sticks together", wages go up. That's why workers unionize. Seems workers don't like being "over a barrel".

Cheap-labor conservatives constantly bray about "morality", "virtue", "respect for authority", "hard work" and other "values". Why? So they can blame your being "over a barrel" on your own "immorality", lack of "values" and "poor choices".

Cheap-labor conservatives encourage racism, misogyny, homophobia and other forms of bigotry. Why? Bigotry among wage earners distracts them, and keeps them from recognizing their common interests as wage earners.

Re:Your Alaskan friend was valuable

[Ian Bicking]

No, all that was true before he moved to Alaska. What he really proved was that he was willing to walk away. That's what gave him the leverage in negotiations.

Re:Silicon Valley on the cheap. I did it, so can y

[Tackhead]

> I make close to $200K. I parked the Navigator and Viper and started taking Caltrain. I save $200 a month on gasoline, and I get work done on the train instead of sitting on hwys 17-85-101 on my way to work. Instead of the $10 I spent on two lattes per day, I now brew my own coffee in the morning and carry a thermos. Thats another $250 per month. Movies every weekend? Fuck that; NETFLIX rocks, and I can make a dozen hotdogs for what one costs at the Mountain view cinema. $50 per month.
>
>Going to Nola's or Baha Fresh everyday for lunch? Not anymore dude. thats $300+ a month reduced to $100 by bringing my lunch from home. Now that I ride the train, I dont stop at Fry's twice a week to "just look around" like I used to tell my wife. An easy $150 a month saved just by staying out of the book/CD/game aisles. If I need something now, Ebay has it. Drinks after work with my team? Once a week instead of 3-4 times. Thats another $100 saved.

After-tax, he's saving $200+250+50+200+150+100 = $950/month.

Now dig this. With combined California + Federal taxes on $200K at around 43%, that after-tax savings is equivalent to a pre-tax salary raise of $20000 - about 10%.

> If you can give up some of the ego stuff, you can live just fine in the Valley.

Preach on, brother. You just got yourself a 10% raise, with zero change in your standard of living. (Well, apart from no longer "just looking around" at Fry's, but hey, we all gotta make sacrifices. I'd spend less time "just looking around" at Fry's too, if someone was giving me a $20000 raise for it :-)

Suggested summer read: The Millionaire Next Door: Surprising Secrets of America's Wealthy.

haha

[geekoid]

I don't want to hear from somebody who makes 200K a year. Boo hoo, don't care.

try cutting back on 60K a year, thats a whole new ball game.

Its unbeleiveable that some who makes 200K a year doesn't understand that, and lies to his wife.

Last month I bought 1 latte, and felt guilty for it.

By ego stuff I assume you mean food, day card insurance and housing, cause buddy, thats all some of us have these days.

Re:If you want an idea of how cheap...

[agilliland]

Of course the only difference is in cost of living. All you have said is that you can have a similar lifestyle to an engineer here in the US, but at a fraction of the cost.

As much as I hate to see US companies abandoning their own country, I think this is exactly what needs to happen. Economics demand that companies find ways to produce with minimal costs, and thats what they are trying to do.

However, the problem I have is that these same companies are not giving their US employess a chance to compete in that market. I am a huge fan of traveling and seeing other countries, and I would love to live in some other places, but the reality of making that happen is not so simple. If I was given a chance to work in another country, but at a small fraction of my current salary, I would definitely think about it. As long as I was capable of making a good living wherever I was.

I would totally sign up to work at an office for my company in another country where they could pay me less. We can just move my whole building and team down there for all I care.

Shit ... I'll move down next to you and eat what I consider better food than we have in the states for only 75 cents ... then we can go out and have some beers together.

The point being ... companies are sending jobs overseas without giving US employees an adequate chance to compete for those jobs.

Telecommuting can save big bucks if done right

[rollingcalf]

The savings from telecommuting could rival savings from offshore outsourcing, if the telecommuting is done en masse.

If they made the almost the entire IT department telecommute, they could reduce their real estate and other physical overhead costs drastically. They would just need a room for the servers, a few floating terminals lined up side by side like an Internet cafe (ie no space-hogging cubicles) for when people do come in to the office, and a set of meeting rooms so teams can meet once or twice a week.

It would also need a different approach to management and more strict rules regarding being at your home desk during office hours -- there is no good reason for not answering your phone for an hour, because you're not going to be away at somebody else's cubicle discussing anything.

Combine the reduced real estate costs with the reduced salaries that they can pay because people would accept less money in order to telecommute, and US employees wouldn't cost much more than Indian programmers when taking total costs into consideration. (Remember that although Indian salaries are only 10-20% of US salaries, their physical overheads are often the same or more than in the US - for example look at the office real estate costs in Bombay compared to Boston http://www.forbes.com/global/2002/0527/066sidebar1 _2.html. The result is that Indian programmers are 1/3 - 1/2 as expensive as an in-house US employee when counting total direct costs, not as low as 1/10 - 1/5.)

Then after you add in the undocumented and indirect costs associated with outsourcing that result from differences in language, time zone, and culture, and other factors like the relative lack of company-specific business knowledge, you're probably saving MORE by telecommuting than by outsourcing.

But outsourcing is popular now not because they are really interested in saving money; it is happening because it is the latest fad. If they were really interested in saving money, this big outsourcing wave should have been happening 5 years ago when American programmers were hard to find and expensive to keep, and Indian programmers were much less expensive than they are now. But no, the fad back then was to throw megabucks at anything that touched the Internet, and pay six figures for any semi-talented web programmer. They jumped on the dotcom bandwagon in pursuit of dubious profits ... and we know what happened with that. Now they are jumping on the offshore bandwagon in pursuit of dubious savings.