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An Independent Study on Offshoring IT?
vsprintf writes "What are the real effects of offshoring on the U.S. technology sector? Pick your economist on the subject. The Bush administration's Gregory Mankiw says it's all good, and exporting jobs is just a new way to do trade. In Congressional testimony, Ralph Gomory says a little bit is okay, but too much is bad, while Herman Daly says it's just plain bad. The ITAA's paid mouthpiece, Harris Miller, says it must be good because IT workers in India wear Nike tennis shoes. At last, it appears the IEEE-USA has persuaded Congress to pay for an independent study to determine how offshoring really affects U.S. IT."
So IT workers in India are wearing shoes made in Indonesia. How is this good for the US economy, again?
"[Regarding the 'cloud,'] ownership was what made America different than Russia." -- Woz
He basically wrote all these economic books and once he was hired by the Bush administration, he contradicts his writings.
There's been discussion before on this subject which affects us here in the UK too.
I maintain the major problem is gradual de-skilling. If potential software engineers simply see that their future jobs are likely to go offshore, they will not go into the profession. Software is still a somewhat apprentice based profession in that you usually require some coding skills before becoming team leaders or designers and then development managers and CIOs or CTOs.
If you are pulling away base support in the profession, then de-skilling will gradually move up the ladder. More jobs,more high-powered jobs will move offshore until wage parity ensues. By then, it's too late, corporates will have followed the skill base. An industry responsible for (a rough guess) 15% of Western economies will have moved elsewhere.
And you can't compare the software industry to manufacturing. Software is not manufactured and, so far as I can see, will not be manufactured for at last 25-30 years. But guess which countries will reap the benefit of writing the code manufacturing software?
Did he inhale?
I dont live in the US, but the effects are clearly visible (in Europe less, because the outsourcing is since May within the EU, so basically there is not too much outsourcing)
a moderate outsourcing is good for everyone, it opens new markets because it helps to develop. Massively outsourcing, produces huge trade deficits and basically only shifts money.
What currently happens is following development, currently everybody thinks that companies can produce cheaply and sell expensive here. That only works as long as people have money. The long term trend goes towards crash of the monetary system in the west, or at least in the US, with trade deficits which are enourmous. The classical example of this was Argentina in the nineties, basically a classical example of a country which did not produce anything inshore but imported everything. The crash was imminent, and came around 2000-2001.
What currently happens is that some people thing a patent system which basically acts as a highway robbers tool might help. This might delay things but only for a certain period of time. Once the production is gone entirely, the research also will follow and with it the so called IP holders (which shift overtime, since patents run out), unless the current patent system crumbels under its own weight, because of the massive abuse which is currently happening before.
So what would be the solution. Simple, try to keep certain core industries and research in the country, and do moderate outsourcing which opens the doors for the wealth of everybody. But for heavens sake, keep some industries and research in the country or at least in the monetary zone.
One common thread to anything done by the U.S. government is that big business is preferable over small business is preferable over independent contractors.
After all, how often does the federal government do anything to protect small businesses or individuals from being destroyed by large businesses?
They are more likely to protect the big businesses from being mistreated by small businesses.
For example, the whole patent system is nothing but protection of big business from small businesses and individuals.
When it comes time for important contracts, who gets the contracts, the big business or the small business? From what I see, it doesn't matter at all if the small business has much greater expertise in the matter.
So if the big business can make money by moving some activities overseas, everything is just fine with Congress.
As long as the big corporations and those corporations with friends in Congress make tons of money, nothing else matters.
Of course, there is a bigger issue that everyone ignores.
When we export jobs, we are exporting vital expertise. After those who used to do the work are no longer up to date, we lose the ability to do the work ourselves. We're not there with software development and it will take a while, but it is forseeable that at some point we won't have the expertise we need to handle emergencies.
So what happens when China declares war against us 40 or 50 years from now? What do we do after they cut off our access to the exepertise we will need to win the war?
Include all the manufacturing that we no longer have the capability of doing without a long lead-time, and we're going to be in serious trouble.
Our chances of prevailing against China will be about like Poland's chances against Germany in the early days of World War II.
It looks to me like we're well on our way to losing the next WOrld War.
Call me naive, but surely there's no such thing as an independent study? After all, someone's paying for it and usually the someone who's paying for it has already got an opinion. I've yet to see an "independent study" which didn't favour the organisation paying for it.
I just think there is an ever-growing paranoia in the developed countries about software job offshoring. Hasn't such offshoring of other jobs happened in the past, like say, manufacturing? Aren't most cars and other white goods manufactured in Japan and China? What happened to the workers in that industry some of who would obviously have lost jobs?
More to the issue, I'm not sure what decides the level of outsourcing - "some", "moderate" or "massive". Even when offshoring wasn't happening, a lot of companies prefered "outsourcing" - subcontracting their IT needs and business to specialist companies who had the skills and knowledge to fulfill them, leaving the parent organization free from the usual worries of delivery, quality, acceptance etc. So if the same happens now, it's bad? Because there is growing fear of losing jobs? Surely, the involved professionals would be smart enough to know that economics drives a business, not preferences!
Further, if the products of US-based companies are used/consumed by people elsewhere, from the (less) money earned from US companies, surely the profits are going back to USA. So the article gave an example of Nike. I'm sure more parallels can be drawn without stretching the imagination too far!
Finally, if the cost of building a product, be it software, is relatively less (and so is the cost of maintaining it), then the cost of direct users/consumers would be much lesser. Say, if the Air-traffic control systems cost less to build and operate, it would lead to less fees towards airlines, which means they can cut costs further and offer cheaper tickets.
And contrary to what another poster mentioned, yes, the corporates may follow the skills, but why would they distance themselves from consumers? They have nothing to gain there, if there is a growing resentment against their products/services. And if they decide to not pursue offshoring, they stand to lose considerable market share simply due to the cost-benefits offered by the competitors. So, from their perspective, its a downward spiral.
Outsourcing is happening. Live with it. Some jobs are going elsewhere. Sure. Are those the best jobs? Surely, it gives the professionals in the developed world better jobs (creative as compared to monotonous, boring, trivial).
Maybe this brouhaha is there because IT professionals have a bigger mouthpiece, and a cheaper and far easier means of voicing their concerns.
http://efil.blogspot.com/
It's good because it is symptomatic of the real underlying issue which is that jobs of any sort are no longer necessary in the most advanced economies.
Think about it, on balance the really enormous social result of the various industrial revolutions that took place in and around the nineteenth century was the end of slavery. Slavery ended because it could, not because it should. This is true with so many things that are attributed to good will and heroic characters. That's all mythology.
This struck me the other day when someone was talking in a wide-eyed manner about all the things that would have to be done manually without industrial and agriculural machinery. The person kept using the pronoun "you" saying "you would have to do this by hand and you would have to do that by hand." I spoke up and said, no actually a slave would most likely have done most of the things you're referring to before the age of machinery.
So, if machinery and centralized power ended slavery, then IT probably will end work as we know it and this offshoring issue is really symptomatic of a huge evolution in society that is just beginning. And, of course, in the beginning the resistance will be enormous and it will still be here hundreds of years from now. In evidence I would introduce, among others, the confederate flag issue in the American South.
...if the three points below are realized.
1. Free trade of goods. Almost done. Shipping goods from country A to country B is cheap (even if some tariffs are applied).
2. Free movement of workforce. Countries all over the world have a limitation on this. You just can't go to work in an other country. Even in the EU it is not easy (lot of paperwork) to do so. Also, language and cultural differences make a person reluctant to move.
3. Free trade of knowledge. Patents and copyrights restrict the sharing of knowlegde. They should be eliminated entirely.
Big businesses want point 1 to be realized, but do not want point 2 and 3. Until point 2 and 3 become true, outsourcing is most probably bad for everyone.
Government cannot make man richer, but it can make him poorer. - Ludwig von Mises