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."

Comments

Nike shoes

[mrchaotica]

So IT workers in India are wearing shoes made in Indonesia. How is this good for the US economy, again?

Mankiw is such a hypocrite

[Anonymous Coward]

He basically wrote all these economic books and once he was hired by the Bush administration, he contradicts his writings.

De-skilling

[KontinMonet]

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?

Easy answer

[MemoryDragon]

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.

hmm..

[manavendra]

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.

Globalization only works...

[little1973]

...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.