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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?"
(Cost of paying someone overseas + overhead costs of remote management + costs related to misunderstandings/errors + inconvenience) is still less than (Cost of paying you to sit in your underwear and "work" for 2 hours a day in between slashdot postings).
This may not pertain to *everywhere*, but it is a common problem. A lot of the reason it hasn't taken off is that the parent company assumes liability for what happens to you or your 'office' while you're working. In many jurisdictions, they also have to inspect your work area, etc. I imagine it is a support and legal nightmare.
It's ironic. For years, many businesses didn't like employees to telecommute because of communication problems, and the boss couldn't keep an eye on you to make sure you were working. In my mind, telecommuniting 1-2 times a week is great, as long as you get the work done.
And yet many of these same places have no problem outsourcing the same work half-way around the globe. Judging by the poor quality of some of the code I've seen from these outsourceing places (not all), there are a fair amount of communication issues, and then places aren't getting the work done properly.
Double standard?
"Can of worms? The can is open... the worms are everywhere."
Since the outsourcing companies are charging basically the same amount as if they had real employees, we should form companies that say they're outsourcing to India, but we're actually outsourcing to telecommuters in america.
Hey, I'm just your average shit and piss factory.
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?
Would you rather have one employee working from home or 10 employees in India? Who will be more productive?
Base on my experience with Indian development work?
One local person (regardless of ethnicity, country of origin, religion, etc.) who speaks fluent and clear English.
A computer once beat me at chess, but it was no match for me at kick boxing -- Emo Phillips
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.
... and I can assure you that this kind of goofing of is rarely a prob... oh -- wait a minute -- God I love the sound Squidward makes when he walks. Cracks me up every time. Hold on -- let me freshen up this martini and I'll be right back...
Roving Web-Teleoperated Robot
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.
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).
Visit Jonesblog and say hello.
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
I have a friend who used to live and work in Texas. He was spending 3 hours a day just commuting to and from work. Was not permitted to Telecommute.
He got the bug to get out of there. Decided to move to Alaska. Once the company knew he was leaving, he was able to strike a deal and telecommute from Alaska!
Makes absolutely no sense business wise, since now he is much too far from the office to come in even if he had too, but if American business always made the choices that made sense then Scott Adams would be out of work.
I'm an American. I love this country and the freedoms that we used to have.
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.
>>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?
Companies did embrace telecommuting before. It did go through a phase when it was hot, but things eventually cooled down. I remember reading about this on my "Social Analysis of Computerization" class. The reasons given were that:
- Teleworkers are harder to monitor.
- Apparently, telecommuting hit productivity hard.
- Workers aren't in office enough to get promotions.
- In the office, there aren't enough people to keep ideas going.
- Working at home can be distracting.
- Telecommuting breeds resentment among co-workers since they are anonymous to each other and also because non-telecommuters might dislike others getting such a "rosy" deal.
Ultimately, however, it came down to managers being distrustful of new ideas. They dislike having to put such a high level of trust on employees that they rarely see. They like things the way they are right now and wouldn't really like to see them change. Maybe after some time passes, when many current prospective telecommuters rise to managerial positions, we might see telecommuting establish a strong presence.
Posting messages for the betterment of humanity..
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.)
... well, it might not be a coincidence.
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
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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.
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.
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.
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.
You can tell a great deal about the character of a man by observing those who hate him.
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.
If everyone took jobs for $28k, who is going to pay for universal healthcare?
Life in Orange County
IT is going the way of the auto industry. Now that many big companies see that they can get a software product from other countries cheaper they do.
Telecommuting is vastly different. I don't like telecommuters. One or two days a week is okay, but any more becomes more of a hastle. Many peoplw will take advantage of this and work none standard hours or work to many hours to get stuff done, or work to few. I am working on a project now and 3 of the members work at home. One guy in the office created an object. At the same time one guy who was telecommuting created a similar object. Both do essentially the same thing. Had they both been in the office they probably would have talked about this and only one would have implemented it. Had management been more interactive they probably would have found out through a conference call. Problem is that managers in the US don't want to manage either, they want to make money and they don't care how it gets done. Most big companies don't give a rats a** about you working at home in your underware, or nude or even in your cube at the office, they want to make money, PERIOD. If they can get decent work out of someone overseas as compared to you for less which do you think they are going to pick?
If all you want is a hamburger are you going to go and buy the $6 hamburger every day or are you going to get 2 x $1 hamburgers that will work just as well? If both will fill your tummy, and both taste like burgers, most people will go for the 2 x $1 burgers, thinking 'they are getting a deal'. Well think of yourself as the $6 buger and outsourcing as the 2x$1 burger. Most people go for the 2x$1 dollar burgers and save themself $4 in the process. Sorry but thats the way it is!
The auto and manufacturing industries have gone the same way. Its okay to buy clothes that were made in Mexico by some child, cause it cost you less in the US. It doesn't really matter which car you bought, cause many of the parts are made OUTSIDE the US. Just go to auto makers web site and see how many companies are actually 1 company. A Ford pickup and Mazda pickup are the same truck, just with different labels on them, and there are MANY cars like that.
Only 'flamers' flame!
Does slashdot hate my posts?
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?
This Space Intentionally Left Blank
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
Take a look at this article in Fortune . With it's high taxes it's long been more extensive to do business in California than elsewhere, but Governor Gray Davis and the Democratic-controlled legislature have enacted so many costly new taxes and regulations that businesses have finally had enough.
A few tidbits from the article:
I have a programmer friend in California that was bemoaning this very negative business atmosphere last week in reference to this article. "In 2001, Abrahamson said, South Coast Building Services paid $500,000 to insure its workers for on-the-job injuries. A year later, the company's bill more than tripled to $1.7 million. This year, the tab nearly tripled again to $4.8 million, enough to erode the firm's profits on its $33 million in revenue."
Quoth my friend "I knew it was bad, but I had NO idea it was THAT bad. 1000 employees, and $4.8 million in workmans comp. Holy fuckin' cow! No *wonder* it's so damned hard to find a job!"
During the Internet boom, the Davis administration spent money like drunken sailors rather than laying the groundwork for sustainable growth. Now it looks like they may finally have suceeded in killing the golden goose.
Lawrence Person (lawrencepersonh@gmailh.com (remove all "h"s to mail)
http://www.lawrenceperson.com/
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.
In one year, I have saved enough to help me make down payments on two rental houses, with positive cash flow coming in, that goes straight to the bank until I have enough to buy another one.
If you can give up some of the ego stuff, you can live just fine in the Valley. Now, when I go out in my Viper on the weekends, I dont give a shit about how much the gas costs. I havent filled up in 3 weeks.
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.
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.
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.
I gave up Kobe beef, and am now just getting by on USDA prime. The horror!
>
>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.
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.
The Kruger Dunning explains most post on
We've found a Microsoft employee, may we burn him?
Only if he's made of wood.
"We returned the General to El Salvador, or maybe Guatemala, it's difficult to tell from 10,000 feet"
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.
Entrepreneur : (noun), French for "unemployed"
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.