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Long Term Effects of Outsourcing
simulate writes "There have been several postings about outsourcing and offshoring in the past
few weeks. Is outsourcing just a fad? In Outsourcing
Programmers is Bad Strategy for Software Companies
author Michael Bean compares offshoring to the enthusiasm for Internet startups
in the Nineties.
He claims
that
outsourcing programmers is bad for companies not because
of the programmer layoffs, but because technology companies lose their
capacity
to innovate.
Offshoring is a mistake
when technology companies confuse operational
effectiveness and strategy." I don't think the comparasion to Dot Bombs is entirely accurate - the trend to globalization overall has been going on for decades. Still interesting piece.
f you're building an innovative software company, you need to retain your best and brightest programmers internally. Software companies entirely based in India can successfully innovate over the long-term, as can US companies or companies based anywhere else. It's this recent trend of US software companies outsourcing all their development that's bad strategy.
Long Term Effect? I don't have a job.
oh, gee, is outsourcing just a fad? .. i dunno .. is money grubbing on the part of corporations just a fad?
:p
idiot
As long as the companies keep their creative, winning, trend-making management teams, they'll manage to stay innovative! Won't they?
Those guys have MBAs. They must be smart.
While I don't think it's what you're referring to precisely, there has been a considerable move to outsourcing customer service call-centres in recent years. I think that in some cases this has led to a much higher level of customer service from the companies concerned. That's outsourcing taken care of. Offshoring, or moving the business outside of the UK (in these cases) has been considered lately as well. This seems to be having the opposite effect, as the new centres in foreign parts are staffed with inexperience workers without the requisite communication skills. It's going to continue as a trend though. Because it makes money. Cost rules all these days. No one cares about the service level, just about the profit margin. Right?
If I seem a little hostile about this particular trend, it may be because the jobs of a few people I know are under threat as a result of it.
Sign the FSF's Anti-DMCA petit
Has this guy ever worked for Accenture or PWC Tech Consulting? Those guys essentially have a few people do the design, write some high level code documents, and then hand it off to some code monkeys for assembly (oftentimes recent college graduates who didn't know squat about programming until their corporate training kicked in). So his argument isn't good - companies can still keep the design close to home and then outsource the assembly to India or China.
:) .
FYI - I worked for Andersen Consulting (now Accenture) so I know how those guys do business. I left after two months
smd4985
This would be similar to the people on eBay who just sell drop-shipped items.
If you ask me, India is on the way to the Shoe Event Horizon, and it will only take one piece of protectionist legislation in the US to tumble the whole house of cards.
Carefree highway, let me slip away on you.
Are we saying programmers in the US are more innovative than Indian, Russian or other off shore programmers?
Evolution or ID?
Business Week had a good article on this a while back. Problem solved. The water will seek its own level.
Life is the leading cause of death in America.
Jobs move where there is cheap labour. Even within the US, Call centers are found in cheaper places in Tennessee, Oklahoma, etc. This is the system the US has been forcing on the world for decades. When it bites them back, they whine and whine and whine.
The bottom line looks great, when you start digging around your new app, or code you find that the quality is generally missing.
Post: Sigged, for your pleasure.
The comparison of design/assembly splits between manufacturing and software development provided some useful insight, but it's not like companies don't realize this.
The hard part about realizing the gains from outsourcing is that most firms aren't up to managing such a long-term, strategic relationship in the manner that's required. When the work is done in-house, you can trust that the developers have your company's best interest in mind - when dealing with an outsourcer, their ultimate goal is to extract as much money from you as possible. If done right, it can be worth it, but as we've seen, many firms haven't been up to that challenge.
Stop by my site where I write about ERP systems & more
"Farming out development to legions of programmers overseas will not create a differentiation advantage. When a technology company outsources software development, that company loses its capacity to innovate and its competitive advantage."
the author seems to be under the impression that the success and innovation of a product is purely in the hands of a bunch of software developers. this is rubbish. innovation in the software industry is also about building a product to solve a particular problem - and well. if the functionality is well designed (say with some good interaction design) by a US-based company, the specifications can be written up in the US and sent to the Indian shop for authoring. in a well designed component-based framework, the "glue" can be built in the US whereas the components or specific objects can be farmed out at a lower cost.
The largest problem with outsourcing/off-shoring software development is SECURITY. Remember Y2K? Many major corporations outsourced their Y2K work to foreign countries because they didn't want to hire the extra programmers locally to do it. What several companies found when they got the code back was that trojan horses, backdoors, logic bombs, and other nasties in the code in addition to the Y2K fixes.
NOTE: I am *NOT* saying *ALL* people from other countries are dishonest. You can find dishonest people anywhere in the world.
What I am saying is that if you turn control of your software code over to someone else, you run the risk of them altering it to their advantage. This also applies to local hires as well, but it's MUCH easier to keep track of what your people are doing locally than half a world away.
Why do you think that the US Government/Military doesn't outsource? The same with most financial institutions: SECURITY. (Microsoft not included.)
If "disco" means "I learn" in Latin, does "discothèque" mean "I learn technology"?
Actually I liked Michael's article. It is my experience that while programmers from India and other countries are every bit as technically capable as American programmers they seem to fall down in the design area. Specifically, other cultures produce programmers who aren't quite as confrontational as Americans. What determines a good design for an American product is it's developers initiative at voicing their opinions of what the product should do.
Design in America is confrontational. It has to be. That's what makes American software products good. When a company takes it's core software and ships it overseas it looses that drive from employees to make the software better.
This is not to say that software developed elsewhere cannot be good but it does mean that software developed in India must use an Indian model for design and development if it is to be successful. For an American product competing on a slight technological advantage this is bad.
HP, as a sidebar, tends to outsource end of life stuff to India.
Beware the wood elf!!!
Why not outsource the CEO as well? Why not outsource the customers to countries with _higher_ wages? I think it's time these companies started thinking outside the box.
One good ancillary point made by this article is that writing software is inexpensive ...it's the -design- of software that costs so much.
We all generally take it as a given that software is expensive to develop, but that's really not true. Only the design/requirements phase is expensive. If you know exactly what it is that you need to write, in great detail, then the actual generation of documented, working code isn't that time consuming.
This is why open source software has been successful in recent years. The feature sets of operating systems, office suites, web servers, and database management systems have all stabilized to the point where we all now know exactly what each of these applications ought to look like. As a result, teams of enthusiasts and hobbyists can write credible, enterprise-applications at negligible expense. Open Source works well in precisely the same situations that offshoring works well. That's not to say that Open Source developers can't also be innovative, but I do claim that anything you can offshore successfully you'll probably be able to Open Source successfully as well, for exactly the same reason -- the expensive up-front design work has already been done.
Add to that the fact that the cost of reproducing software is nearly zero, then Open Source becomes an economic inevitability. Kudos to Stallman for starting the movement, but it would have happened eventually anyway I think, because eventually society gets wise to the fact that corporations are re-selling the same zero-cost product over and over again, and somebody somewhere will get the idea into their head that there is an obviously better way: write it once and for all and then just give it away.
I hope that after I die the one word people use to describe me is "resurrected."
Having just come from a company that was rabildly outsourcing, we saw a different backlash of the outsourcing problem. The execs were outsourcing everything they possibly could, even when it made no sense. However, the company was still not going to be positively improved financially by this happening. What everyone remaining on staff could see is that it would boost short-term profits just long enough for the execs to rape the company with fat bonuses just before bailing out. That's apparently another popular trend.
Be excellent to each other. And... PARTY ON, DUDES!
What we've found during the six month trial of hiring outside programming help this is what we've found:
o While Indian programmers (we used 8 different ones for 6 different projects) may be perfectly competent to produce software to spec, they usually ALWAYS built it to spec and NEVER brought up any issues they might have found in the process. Either they didn't see a flaw in the design or just figured it would be job security if they changed or fixed the ap later.
o We had no luck with Russian programmers (We had went thru 4 of them and none could complete the project they say they could have)
o American (We used 10 of them for 8 projects) outsourced programmers communicated MUCH better with their project managers and usually offered suggestions to how we might want to change the app to make it better or more efficient. The applications developed stateside required less QA and went to market faster.
Is this a good enough sized sample to make judgements? Maybe not. But good enough for us.
After the six months, it just didn't make sense to outsource, howerver if we do again, it will be domestic. The shortterm costs may look good but a 33% savings per hour usually gets lost in the longer development cycle.
Karma means nothing to me, so suck it...
... in the normal sense of the term. Outsourcing implies farming out the job to some other company. On the other hand the examples that the article gives about Hewlett-Packard and Oracle employing the programmers in India as in-house employees. So, the capacity to innovate still remains within the company, though it moves outside the US. So, I don't see how the argument works for most of the bigger companies like HP, Oracle, IBM, GE, TI etc. etc. who run their own operations in India, and do not outsource to other companies as much.
1 /043220 0&mode=thread&tid=187&tid=98&tid=9 9
For example of innovations in subsidarys outside US see
http://www.iht.com/articles/121488.htm
and the slashdot story
http://slashdot.org/article.pl?sid=03/12/2
This article qualifies as "content"---stuff that at first glance seems informative but isn't. It fails to site even one reason why offshore workers are worse at innovating than domestic workers.
---Technology will liberate us if it doesn't enslave us first.
The sooner IT "professionals" realize it, the better. 10 years ago, it was a luxury. 5 years ago, it was still somewhat a luxury. Now? Sorry guys - it's a commodity. The supply of IT workers is much higher than the demand, and that leads to dropping prices and an empahsis on cost and output. If you want to look at the king of commodity production, look at what the auto companies of Japan have done. Standardization, minimization of cost, outsourcing of all possible components to low cost suppliers. If you think the Information Technology industry is somehow special, or that it requires some exceptional level of expertise, try again. Thirty years ago, engineering was a luxury as well. Not any more.
It's not wasting time, I'm educating myself.
Where does Linus Torvalds come from? Do all major contributions to Linux come from the U.S.?? Remember Gupta, Magic and other good software that made it big some time ago before M$.
The percentage of development work that is truly innovative is relatively small, but the article is correct. Out sourcing the "innovative" parts of a company is very dangerous and will lead to more problems. From first hand experience, innovation comes from interaction between the developers. Very few individuals can cook up innovation in box all by him/herself. Can innovation happen in an outsourced model? Sure it's possible, but it's going to be considerably harder. This is why companies like Oracle, MS, Intel and others are expanding their divisions in India and china. They maintain tight control because it's not out sourced to another company. Companies can offshore their R&D, they just have to open a division in a foriegn country. For better or worse, that's reality.
Based on my trip, I don't think good programmers should worry. More importantly, if you have the skills, you are way ahead of your Indian counterparts right now (emphasis on right now). Keep improving your skills and becoming more and more expert and you will continue to be employed. Focus on fad languages and "me too" web designs and you're putting yourself in front of a train. I can't tell you how many people in India listed C# and Java as their primary languages...C'mon now, we all know that those are good for small things and prototyping, but they aren't languages you write OSs or such in.
Offshoring and outsourcing are not bad in their own right, but managers who think it is a panacea will be bitten for their lack of vision. The world is going to be global. Get used to it. Recognize that we AREN'T worth more than Doctors and other professionals.
Every profession, when it is in its infancy, has the potential to create very wealthy people relative to the norm. After a time, those new professions become common and the lucre standardizes lower than originally expected. Our incomes in the West will decrease somewhat. I think it sucks, too. That said, the cost-basis for India is growing geometrically now (from 4k to 7k to 18k in five years). Guess what? Those programmers in India who are good are unwilling to be without the amenities that you are I take for granted...good phones...broadband...etc. The infrastructure must grow and that costs money...so you have to pay them more...and costs grow.
Get over it, grow in your profession, become an expert and highly sought-after. It doesn't matter where you live...it matters what you know and can demonstrate.
Dave
"... but you can love completely without complete understanding." - Norman Maclean, "A River Runs Through It"
Here is also an interesting article about Wal-Mart and its influence on its suppliers... Globalization seems to be pushed forward by a few, for the benefits of a few....
The right to offend is far more important than the right not to be offended. (Rowan Atkinson)
Follow this train of logic: If more and more software jobs move overseas, then there will be less drive to join an industry where you are paid a mediocre wage for complex work. Thus there will be fewer students enrolling university programs in the industry, and thus universities will cut back on software departments. Ultimately the very infrastructure of the nation's software industry will be severly reduced. No follow similar logic in the country that was offshored too, and the reverse happens.
They call it "Anonymous Coward" for a reason, don't they....
You know exactly where you can insert your "much needed tourist and investment dollars".
Thank you and have a nice day!
I don't think the comparasion to Dot Bombs is entirely accurate - the trend to globalization overall has been going on for decades.
That's not what he's talking about; it doesn't matter where the programmers are. The point is that if the programmers aren't really part of the company, the company is less likely to have the capacity for long-term innovation.
Don't become a regular here, you will become retarded. -- Yoda the Retard
1. Is this really so bad idea?
We have American programmers, Indian (or Chinese, etc.) programmers, consumers and shareholders of software companies. Out of these 4 groups, only one loses, the rest benefits. I see it as a net gain. So this is rather a social problem (for unemployed), not economical.
2. Is there anything we can do about it?
If the same work can be done cheaper abroad, there is no way to stop it in the long run. Even if you do, the programmers abroad will not disapper and will still be competing. They may start to work on their own and sell you the final product.
3. "technology companies lose their capacity to innovate".
There is no vacuum in economy. If someone loses, someone can take advantage of it. Even if American companies stops to be innovative, the innovations can be done in other countries. Chineese are quite poor now. Isn't it fair to give them a chance to develop?
Save the bandwidth. Don't use sigs!
If done right, it can be worth it, but as we've seen, many firms haven't been up to that challenge.
That is exactly right. Indian companies themselves have this figured out pat down with their experience in the ofshore-model as they call it. For this very reason they are now directly bidding for US contract, competing and winnig against companies like IBM, who are still trying to really figure out the model, and so have higher costs. In fact IBM lists Indian company Wipro as one of its most formidable compititer in its core service business in future.
So, either US companies need to figure out the ousource/offshore model in a hurry, or they will start loosing the IT contracts in US and especially internationally to Indian companies.
The root of all evil is management. Amongst their other problems, they often can't tell a good developer from a mediocre or bad one.
Many developers suck. Most management can't tell which ones to keep. Thus, they toss them all out and try their luck at the foreign labor.
I'm no statistician, but maybe if you hire 3X as many foreign workers and let chaos do its thing, you'll come out ahead. Or maybe that's their hope.
.sigs are for post^Hers.
"So, what does an out of work programmer to do after his job got sent to india?">
Start your own company and create your own job.
--Slashdot: News for Turds. Stuff that Splatters.
I work for a large corporation that imports most of its IT staff directly from India. I'm not sure if it outsources any, but in all likelihood it does. At any rate, I work with lots of indians. In fact, I'm a vast minority.
My experience so far has been that it would be impossible for Indians to produce a quality product on their own. Sure they are well "Trained" but from the hundreds of conversations I've had with dozens of Indians, I can tell you that they did not grow up with computers. Half of them didn't even know what Linux was till I told them. They had very little knowledge of DOS systems or window systems prior to Windows 2000. In fact, most of them had experience with one, and only one, program: VB.
It seems they are trained only for what they are told to do. There is no innovation in them. I've yet to see one Indian make a decent suggestion (aside from the Indians that grew up here, or grew up with computers, of course). The just-off-the-boat indians do what they are told and that is it. You have to hold their hand through the entire process. They have very little conception of object modeling or GUI design standards. And I would be willing to bet that training costs almost outweigh any cost advantage, as they need training in any and all programs you ask them to use.
In addition I have found their code to be generally sub-standard. They forget to take things out of memory and often don't understand fundamental programming concepts. This is an example javascript code I've experienced several times from Indian workers:
variable = "Something " + "" + " something else";
When asked about this it takes me a while to explain the difference between client side and server side code. Having not grown up with computers, they had a huge problem understanding why concatenating server-side variables with client-side script is unnecessary.
I've also found them to be pretty rude, especially as managers. It is a cultural difference. Here, managers are expected to be friendly to their employees. In India, apparently, maybe its a sign of weakness to be nice to someone "under" you. Could be a throwback to the caste system, who knows.
I saw the proverbial crap hitting the fan and started looking for a job that is "impossible" to outsource. For example, I am an on-site Network Administrator/Engineer/Hardware Tech/Telephone Tech/Help Desk/All Around Nice Guy. No way in hell someone from India can do that job. Sure, they can tweak scripts or change passwords, but can they replace a CPU fan or install RAM? I do all that stuff, and I bring in candy. What more can a company ask for? Well, unless you are a Diabetic that is.
I hate sigs.
The company I work for is in the process of outsourcing support and QA for older codelines, and those developers are being moved into new development. That way the company saves millions, and they have also protected the area of their core competency ... creating software.
All you touch and all you see is all your life will ever be
How long until the pseudo companies in India decide to simple become full fledged name brands in themselves? Not only are we training them how to do our customer service, programming, back office, and research, but were also teaching them how to run fortune 500 class companies. They already have the expertise, how long can it be before we start seeing Indian versions of our established corporations.
They can skip the normal growing stages of setting up the megacorp, because they already have it. Offices, research, staff, software, it, they lack everything but the name - right now. Once some of these companies lose a contract with our corps, theirs nothing to keep them from setting up their own shop under their own name. This is the next trend in outsourcing - megacorps themselves.
There is NO compelling reason for these companies not to do this. They are making large profit from back of the house, it's inevitable they'll want the profit from the front of the house as well. The irony is that these large corporations are training the competition and replacements and most dont even see it coming. Is it arrogance that causes people to overlook this inevitability?
So, it really does depend on the situation -- generalizing to all "software companies" is a dangerous practice, for one approach (either outsourcing/offshoring or not) doesn't work for everyone.
Indian IT exports(total) = 10 billion$. That's just a small percentage of the US IT industry. Even with all this doom and gloom, the majority of software is still written in the US. There isn't a finite amount of programming work to go around. If some work is done in India, it doesn't mean the amount of work being done in the US goes down.
The problem is, in the 1990s there was still a pool of people for these orgs to use in re-insourcing. If large quantities of work move from the US to India, both current and future IT experts will move to other jobs and not be willing to return. Which could prevent a continuation of the IT insource/outsource cycle which realisitically has existed since the 50s.
sPh
See here
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...for reduced ability in India that many westerners don't realize.
India is a caste-based society. In recent times, the lower castes have been throwing their weight around in their legislature.
Of particular concern is that they have implemented a "graduated" admissions policy in their universities. An upper caste member might not be able to get into a school with a 90% score on the entrance exams, but a lower caste member may be assured admission with a 70% score.
Because of this type of (reverse)discrimination, many upper caste individuals of means leave the country to obtain education and work elsewhere. While India is a big country, the trend is concerning, and western outsourcers should be aware of it.
I think there is a step before "writing" software that is easily overlooked. And that is figuring out the Requirements of the system to be designed. This is where I believe the innovation lies. A lot of good code has already been wasted chasing bad problems - unless you believe that those "objects" have found reuse elsewhere in large quantities.
The people who identify the need and then figure out the "requirements" are better off in the US as they are close to the problems there. Many offshore programmers who have never seen a scanner at a checkout of a grocery store are ill-equipped to understand all that might be required of the checkout counter in the real world. But once someone identifies what is required, then it is possible to put together a solution. The solution can be academic and the solutions depend on who has framed the problem - but the solution then is not as hard. What is hard is understanding what the problem is. Understanding what the requirements are.
Coke and Pepsi do just that. They have bottlers all over the world - and they still have been able to maintain the "secrecy" of the recipe. The point in operational excellence is that you have to not only look at the process of improving the manufacture of the product, but also its delivery and logistics. At a certain stage of his business, it is conceivable that Jean-Marc's might be like Coke/Pepsi. Outsource the chocolate production to supply worldwide.
Wrong. Most of the cost of clothing is in the inventory and predicting the fashions. Have you seen how many shirts go unsold for every shirt that you buy ? I can bet that keeping the inventory, getting rid of old fashions, and other marketing battles cost much much more than the shirt itself. The cost is mainly in the movement of information about the shirt - what is required, where is it required, when is it required, how much is required, etc. All this outweighs the cost of manufacturing at the assembly line in influencing the margins eeked out from the clothing business.
Again, I believe the first step is understanding the Requirements. Then is the design. nhen is the coding. Then is the debugging. Then is the testing. Then is the recoding. Then is the etc. etc. A lot of these steps don't need "innovation" - they require competence.
The game is about requirements. One who can understand the requirements are, and can understand that the business benefits of implementing the solutions are more than the technical costs of implementing them - is going to win. That is the real innovation.
To see a world in a grain of sand, and then to step back and see the beach where the sand lies
because technology companies lose their capacity to innovate.
How des one measure this capacity to innovate ? If one goes by the number of patents - the above arguement may not be valid at all. See this article about patents from India
In fact the increased number of patents from some research labs located in India may be one of the reasons for the trend of several US/EU companies setting up research labs in India.
The Europeans used to think Americans were all dirty farmers. This myopic thinking was as harmful to them as this thinking is to us. If there is a motivation to innovate, Indians and Chinese will step up to the plate just as North Americans would. You are not special.
The cost to automate code generation must be more than hiring a bunch of indians at $.10/hr. Otherwise, someone would have developed an efficient symbol input system, or maybe the technology to develop such a thing has not yet appeared. In any event, technology should reduce the cost of capital, and the efficiency of designing and manufacturing, and reducing the theoretical min time-to-market (TTM) (time from idea to first deliverable). But, automation allows for greatly reduced flaws (since computers do exactly what they're told to do) and increased harmonization and flexibility. Also, having more people working on a project increases complexity and possibilities for confusion and errors by increasing the number of communication paths (N! paths if their are N people that can talk to each other).
The biggest trick the devil pulled was letting lawyers become politicians so they can write the laws.
I'm not concerned with software companies offshoring, I'm concerned with the bulk of the software related jobs being outsourced. The amount of IT support jobs vastly outweighs the number of job working for software companies. There's a million companies in other industries (government, bank, insurance) that need IT to run their operations. These companies don't do IT for a living, and don't need the same competative edge. For a bank, it makes more sense to outsource to a campany that handles other bank software because of the experience the 3rd party company has.
It is this large bulk of jobs going overseas as people become more and more effective at managing international projects that has me diversifying my income this year.
-no broken link
Outsourcing and off-shoring are two distinct concepts. Outsourcing your core competence is definitely not a great idea. For example, Coke should not outsource brand management, Intel shouldnt outsource chip design etc. But offshoring to a country with a larger skilled labour pool is not a bad idea. In a global economy, state and national boundaries are conceptually similar but are different only in magnitude. So the processes/systems needed to scale national boundaries have to be more robust and efficient than what are needed to scale state or provincial boundaries. There is, though, one problem with Offshoring core-competency that needs to addressed. The fact that demand or market drives innovation means that moving core areas to India/China may impact ability of companies to innovate to meet the demand in the western markets. Now this can possibly be addressed by two factors viz., demand growing in these markets (which is happening already) and setting up processes and systems that ensure complete communication of the market needs to product design or service design teams sitting in these remote places. Note that the latter, as mentioned earlier, while a challenge, is an extension of existing mechanisms to feeding back market inputs to existing local design teams. So what am I saying? I think over a period of time, companies will continue to out-source non-core aspects of their businesses and the companies that would get this business would be the ones with a lower cost base. Companies would also continue to off-shore (not outsource) their core areas to tap into larger skilled labour pool in some of these markets (india/china) and also to take innovation creation groups closer to these markets that are growing at a greater rate than the western economies. Western economies also would have to make structural changes to make larger pool of skilled labour available locally. This would also drive the cost of hiring skilled labour to more competitive levels. For this the cost of college education needs to come down especially in areas of engineering and technology. my two cents
You don't have to leave the country.
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Our median house value is $67,000.
http://www.epodunk.com/cgi-bin/housOverview.php
Joe Batt
Joe Batt Solid Design
...outsourcing now equals undercutting later. http://timesofindia.indiatimes.com/articleshow/402 253.cms
The latter is what worries me. I am all for free-markets... with limitations. A laisse-faire form turns into a system of economic darwinism that focuses too much on short-term gain. To cut costs now companies are "selling their foundations from under themselves." Although, many would argue that they do have a longer term goal of trying to access larger markets, what good is having a larger market if you are undercut by local competitors who you essentially gave your business knowledge?
Hopefully, wages in India will raise to levels where wages in developed countries are competitive and this outsourcing will stablize or even regress.
However, what about countries like China, where the government can essentially dictate what a worker's wages are? They could keep costs artifically low indefinitely (or at least until everyone else is out of business).
Things will get interesting...
The whole theory behind globalization was so that companies could create their own self supporting companies around the world. So for example, if Sun wanted to sell systems in oh say Korea. They could set up a Korean factory operated by Koreans, their coders would be Korean, etc. That way a company doesnt need to expend so many resources operating an overseas branch because "in theory" that branch would be self sufficient. But of course the lobotimized MBA's in this country had to bastardize it and took it to mean "cheap, slave labor for everyone".
It's nice to have an article discussing the theoretical reasons why outsourcing code is bad long-term - complete with quotes from Michael Porter (Competetive Strategy). However, what I really want to see are some case-studies demonstrating how outsourcing software development actually hurt a specific company (i.e. took them into a slump or resulted in lost marketshare).
Instead, the author can only present the statistics about HP and Oracle doubling their outsourcing legions. Not very encouraging...
IT is not a strategic asset if you are only using it for standard processes. But if you are using IT to create long-term advantages over your competitors, then it is a strategic asset. Remember that IT is not just the boxes sitting in the datacenter, it is the processes you use to move key business information around and act on that information (in other words IT means people too).
I question most of the studies that I've seen which suggest that IT doesn't make a difference in the bottom line. They usually point out that IT spending rose, but the bottom line didn't. What they forget is that their competitor's IT spending also rose. If a company chooses not to invest in IT, but their competitor does - they could end up losing market share. Good IT can lead to better execution and therefore a lower cost basis. If your cost basis goes down and your competitor's doesn't, you can have them for lunch.
What happened in the 90's is that everybody invested in IT, and therefore everyone's cost basis went down, and that led to lower prices for everyone, which is good for consumers, while neutral to the bottom line. Now you have people running around as a result saying that IT didn't help.
Trust me - if you don't invest in IT, and your competitors do - it will eventually come back to haunt you...
Quite a lot longer than that. Actually, the level of global economic integration is not much higher today than in 1913.
Those who fail to learn from the past are doomed to repeat it.
I'll readily admit it. I'm old. I've been in this business for nearly thirty years. I've seen a lot of changes, but I don't want to concentrate on IT history. Instead, I want to talk televisions.
Back in the day before most slashdotters were alive, there were American companies that designed and manufactured televisions. First, manufacturing went overseas, and it was managed from the US. Next, middle management was moved because it made more sense to manage the plants using local talent than trying to do it from the US. After all, time differences, cultural difference and just plain cost was enough to justify it. What this did was educate new competitors, and mentor them so that they didn't have to suffer the pain of starting low on the learning curve. Guess what, companies like Admiral and Motorola, who were leaders in home televisions are either gone, as in the case of Admiral, or dropped the product entirely, as is the case with Motorola.
This was not necessarily a bad thing, as it ended up benefiting the consumer, and helped spread wealth overseas. However, there is no one capable of designing a TV that could compete with the imports in the US today, except for those individuals working on HDTV, which was mandated by law.
My point is that the US lost not only its ability to compete in these areas, but companies themselves. If history does repeat itself, companies like Oracle will disappear altogether, similar to Admiral, and companies like HP and Dell will change their product concentration in order to survive, similar to Motorola. The consumer will probably benefit, as computers manufactured in India or China will be cheaper, thanks to cheaper local software available for these systems. But is this technology that propelled one of the greatest economic growths ever, something we want to loose?
Innovation isn't key anymore, it's pure market dominance that's the business goal any more. First you lock in your customers to make it difficult to switch vendors, and then you eliminate your competitors so that switching isn't even an option any more. Lock-in and market dominance make it impossible for any new competition to enter the market. Once you've established dominance, just start increasing prices, lowering quality and limiting chocies. Pretty soon you make the smallest number of products at the highest possible price and they HAVE to buy from you.
This is the new goal of business. It used to be "how can I come up with better new products and get them to market", now it's all about manipulating the market itself. I wouldn't be at all surprised it there was an MBA course entry somplace like this:
"Submissive Competition: Maintaining the impression of a competitive market by allowing small competitors. In today's intensely Government regulated business environment, market dominance is often seen as an illegal monopoly. This course will teach you how to control small competitors to keep them from threatening your dominance yet convincing regulators your market space has healthy competition and freeing your business from potentially damaging litigation and regulation."
Friend or foe? Call me neutral.
Most of the readers and contributers see Offshore Outsourcing to much lower waged coutries a threat.
The Indian programmers in India are too busy working to read and write to this thread.
I am almost neutral as my job in Ireland relies on globalisation from the United States, but is at risk from the globalisation to India and China.
Be Free: Free Software Tuition
I don't think the comparasion to Dot Bombs is entirely accurate
Then post a comment stating such, like the rest of us do. Your opinion doesn't belong attached to the story submission, even if you are Hemos.
And in the last article you put up, you saw fit to append your own insight too -- you said that Okokrim is the equivalent to the RIAA. This is simply factually untrue. The commenters who immediately corrected you got modded up -- but how come we couldn't mod your comment down?
If measuring the cost is more important than measuring the result, then offshoring looks better on paper. Many companies use brute-force hack-it-til-it-works because it does eventually get you what you want after several iterations.
Offshoring makes it easier for organically-grown hack-til-works companies to keep doing it the same way. Good planning and understanding the customer is harder to recognize, harder to meausre, etc. Accountants can't track that and companies tend to ignore what they can't track. In the end it seems such companies just end up paying the user more to keep them because they are the only ones who know how to work the resulting hackware.
It looks like a mess, but it seems to be the primary development model because way too many companies do it and survive somehow. The market seems to favor swamp guides over true engineers.
Table-ized A.I.
First let me say that yes I am biased, I am an american .
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I can be considered further biased because me and ALOT of
ppl I know have lost their jobs to it
So in the best objectivity I can muster here are some reasons
I think it is bad
1) Money sent outside the US for third world labor stays there,
thus money that used to pay ppl here, to pay taxes, to buy
food, to further employ americans in a trickle down effect is gone
2) If we were to pay US workers third world wages, and have
third world labor laws, we would be breaking US law
*** So are we gonna lower minimum wage to 50 cents/hour ???
3) If you did pay lower than minimum wage to workers, would
they all have to be sponsored by the government and go on welfare
and increase the already burgeoning working poor caste
4) The value of the dollar has been steadily falling, what are
the implications on real estate, US investments, trade ???
5) Huge layoffs create bankruptcies, repossesions, forfeitures,
and broken homes, and broken marriages . Money being one of
the top 3 reasons for divorce
6) Even with a increase recently in GDP not seen in 20 years,
little to no hiring is occuring
7) Companies that reveal their internal secrets overseas may
just find new foreign companies making their products for even
less, after the plans were just copied by former cheap labor
With no recourse thru US patent law, etc etc, they experience a
TOTAL loss of market share as the foreign government chooses to
support their own ppl
8) Unemployment figures do not count those that are no longer
eligible for checks , they are no longer considered unemployed
9) The US cannot compete equally on unequal ground, we have a
huge tax overhead, and cost of living here is too high to
compete with countries that have poor humanitarian labor laws
10) US companies are going overseas and thru negligence are
creating disasters like Bhopal in India . They act above the
law and thousands die from it
http://www.bhopal.org/
The so called race to the bottom has negative aspects that
I feel will create even more hate for the US, within and
without and there is already a sense of a Elitist class in
this country
The funny thing is they expect to be protected by some of the
poor they pay to serve in the military, but in recent polls
soldiers were ask if they would defend the rich against
an uprising of the poor, you can guess the answer
Peace,
Ex-MislTech
google "32 trillion offshore needs IRS attention"
The resources available have changed.
In the old days (I'm talking BBSes here), there was no Google, no "web", and no easily searchable archives of a decades worth of discussions. Most of the online projects had little or no documentation. The Telegard BBS software, for instance, was a pile of mostly obfuscated, uncommented (or incorrectly commented) code. There were no autoconf scripts for building on different platforms. Most of the interesting knowledge was in people's heads, which made the question/answer groups very valuable. There were few enough newbies that answering their questions was not overly taxing.
Now, we have Google, we have the web, we have discussion archives, README files, support "Knowledge Bases" and so forth. The user guides for many projects are still abysmal, but at least the more popular ones have gotten quite good. We also have an enormous amount of newbies. So, in short, the number of people asking questions has increased dramatically, and there is much less excuse for them.
As a list member, why should I expect to have my question answered without bothering to read a README, search the web, check the archives, etc? As a project maintainer, when I spend hours putting together and editting FAQs and documentation, why should I not be angry that the users do not bother to use them?
Sure, there are holes and ambiguities in documentation; there are advanced problems and unusual circumstances, but most of these questions are not about these things. Most, in fact, are not even looking for the information, but a solution: "Can you show me a script that solves exactly my problem?" Reading this kind of question, especially after referring them to appropriate tutorials, tells me that not only did they not do their homework this time, but that the really don't want to know how to do it next time either--- they just want their problem to go away at the expense of my effort. Rather rude, don't you think? It is just salt in the wound that the people asking these questions are the same people who are taking jobs here. These folks won't invest in their own skillset, but they will leach off of mine.
I think, to a large extent, this is where the "old spirit" has gone. In order for some of the politness and openness to come back, there has to be a measure of common courtesy on the other side.
I'm a professional developer and at first I was pretty hostile towards the idea of jobs like mine being outsourced. I've come to some conclusions though about outsourcing in general:
-If you have a rock solid spec, outsourcing is fine. You get the best price for labor, everyone is happy. Sadly a rock solid spec is a mythical creature in my experience.
-"Real" programmers over time will do just fine. During the IT boom, remember all those ads by IT training companies saying "switch careers to a lucrative IT job!". Well, alot of people went and were trained to be programmers and got positions in the industry who really aren't good programmers.
Those of us who are good at what we do and like what we're doing are well aware that a certain "type" of person makes a good programmer. Anyone who got into the business because of salaries or the promise of a cushy job really doesn't belong here. Programming is a mixture of art and science, it takes creativity, a desire to explore and expand your boundries, and a logical mind. It's definately not a 9-5 job, you need to have a passion for it!
Outsourcing is the latest thing, there's going to be some casualties of good programming talent until the market stabalizes and companies figure out what does and doesn't work. In the meantime, we will see less people entering the field who shouldn't be here, and also many less experienced (and less "suitable") people changing careers out of IT. Toss in the demographic loss of the baby boomers starting to hit retirement age and you have the formula for solid demand for good programmers.
Realistically, "outsourcing" just is the situation when software development is cheaper in India but their US-based management doesn't want to move there. The long term resolution to that is obviously not that software development comes back to the US, the long term resolution is that management also moves to India (or wherever).
It's really not that different from what happened in the electronics industry after all: initially, parts came from Japan, then whole devices, and now the companies themselves are Japanese. And it was the same with cars and computer hardware.
What should the US do? There is really only one choice: if it wants to retain its strong economic position, the US needs to start the next revolution in a different field. Maybe that's biotech, nanotechnology (whatever that is) or the commercialization of space. But anybody who wants to claim a leadership position can't lean back and say "we'd just like to lean back for a while and relax on the strength of the jobs we already created".