Slashdot Mirror
Outsourcing Evolving
Shree writes "An article at NYTimes suggests that the outsourcing mantra is shifting to reasons of hiring global talent, tapping new potential minds and amassing top global human resources. Its not just software companies trying to save a buck by outsourcing; now its about Berkely trying to hookup with Tsinghua University and institutes in India, and companies like IBM and Microsoft looking to setup R&D labs in Asia."
If nothing else, this should serve as a short, sharp shock to Western governments. Why are we having to outsource these kinds of technical jobs? Most people don't quite seem to appreciate the crisis that the UK is going through in maths, science and engineering. I'm guessing the situation is similar abroad?
...it's all about the money.
In Australia we have always been short of technical talent. The company I work for has been trying to recruit 200 engineers for the last couple of years, fortunately the recent collapse of engineering in Europe and to a lesser extent the USA means we'll be filling those jobs pretty quickly.
Personally I'm pretty annoyed that we can't recruit locally, but basically our graduate recruitment program cuts fairly deeply into the available pool of graduates (ie we recruit more thickies than I'd want to). The truth is, you have to be bright and motivated to do well in an engineering course, and when you leave, there are far more superficially attractive options than working for people like me.
Everyone tends to agree that Americans/Westerns have a hard time competing with outsourcing, due to the huge differences in labor costs between the first and third world. Fine.
But what I'm beginning to see is that the real problem is the cost of housing in the West.
Yes, everyone bitches about high gas prices, health costs, etc (which all seem tend to be trumpeted by politicians with alterior motives), but these won't bankrupt you. Housing can destroy you financially if you aren't careful.
If housing was cheaper, I would be okay making a lot less than I do now. However, I'd personally be screwed if I made much less than $100K (rent is over $2000/month in my very plain, old neighborhood in California). I don't really spend much on anything else.
I'm approaching middle-age, and this is the number-one factor that I face trying to safely raise a family. Frankly, health costs pale in comparison as to how much I have to pay even to rent a halfway safe home.
I think the financial industry has pulled a fast one on us, and are milking average folks dry. The environmentalists don't help either, with their 'smart growth' policies (i.e. 'no growth').
Your hybrid is not saving the environment. Its purpose is to make you feel good about buying something.
Look, big business interests are tired of waiting for politicians and public to slog through the debate morass about education reform, privatization, vouchers, "no child left behind", blahblahblah.
While Western politicians and activists babble about all that, big business is just going to cut to the chase and hire from whichever countries have actually managed to come up with educational systems that churn out needed skills, rather than waiting for this reform business to work itself out.
So dear politicians and activists, please by all means continue to wrangle in endless debate over the issues, because meanwhile your societies are the ones who may be left behind wholesale, while the fluid business interests bypass you altogether.
Slashdot at its weekend best.
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Let the slashdot readers go back to blasting the Indians and the asians. How pathetic and incompetent they are, if it was not about the prize they would not get anything to do, we are so great they are so bad, blah blah blah
The real reason for outsourcing is macro economic efficiency. In true free trade its the last denominator that companies can do nothing about internally as its an external factor.
Like it or not its the reason why china should not float their currency and the reason why countries like Singapore have managed to survive in a very competitive technical sector. In countries Like the US,UK and Australia you may pay an engineer more but the engineers themselves don't benefit due to the high living cost. The high living cost is attributed to the high proportion of non-productive sectors in an economy compared to productive sectors. Productive sectors would include the likes of Engineering,manufacturing, mining,agriculture while non productive sectors are largely the finance sector and bureaucratic sectors. In essence productive sectors support the non productive sectors(eg you cant eat money if there are no farms).
I will give you an example of what has happened in Australia recently. In the last 10 years the cost of house ownership(and thus rent) has gone up hugely. Incomes have gone up to match, but once the cost of paying for a house is taken into consideration, what is left over in the income has not gone up, often down. Take two people bidding for a house. In order to get the desired house each bidder goes to the bank to secure the loan. Thus due to bidding competition each will try to obtain the highest possible loan possible but from the same bank. Thus the bank increases the price of housing by giving larger loans and increases its profits due to interest on the loans. In the end the productive sectors of the economy must provide high pay jobs to support the high value loan to provide the bank with a profit.
So why should a company pay for bank/financial sector profits when in a country with a lower cost of living they could pay the same amount and the engineer would benefit much more as they would actually retain the wealth. Otherwise if the company does pay the engineer less the engineer would still attain an equivalent living as one on a much higher income in a high living cost country.
Take a country like Singapore for example. Here the government heavily controls housing. Singapore doesn't have much choice if you look at the population density however they have benefited greatly due to maintaining a low living cost. Essentially the government here controls 90% of the housing as government housing. In order to get his housing you get a government loan which is not designed to make the government profit. They call it subsided housing, but its not really subsided. The prices of houses cover the construction cost, they just don't provide profits to the financial sector through high interest loans that artificially inflate house prices through competitive bidding.
The result is you can hire an engineer for a lot less in Singapore than you can in the US and the engineer still has an equivalent life.
The second example is China. As a developing country china has a very low cost of living. In much of the country no one expects to gain a high level of profit from housing. As a result in these areas you can set up a manufacturing company and by default be competitive due to low living costs. Should the Chinese government float their currency, from the point of view of foreign-non Chinese currency, the cost of living will rise dramatically. Through this rise, locals would suffer from an increase in relative living cost due to the lost competitiveness. They only institutions set to gain are the financial ones as they will make massive profits of the rise in the Chinese currency. That profit has to come from somewhere and thats the productive sectors of the world economy. i.e. engineering.
Thus when you see outsourcing, don't blame the engineering companies- they are in a loose loose scenario. If they don't, they loose due to foreign competition, if they do they will fail due to a faltering local economy.
Blame the non productive financial
India is a nice place for such companies because they can be coding while you are sleeping.
Wow! What a huge advantage! I mean, since ALL Americans HAVE to go to sleep between 6 PM to 6 AM this rules! Seriously, theres this thing called "shifts" that can do the same thing. And if you ever had to deal with India in software outsourcing you would know the horrors of working 12 hour days so you can reach one of the sleeping bastards by phone for a phone conference.
Result: Projects get finished in about half the time.
Not true. Anyone who has done software projects knows that they are usually given unrealistic schedules and changing requirements (scope creep). I once, to great humor, watched a local project with serious issues go overseas. The outsourcing company supposedly threw swarms of software engineers at it and were still unable to complete the project. No matter how many people you have its impossible to reach a goal if the goal is undefined.
Besides, there is also the financial benefits of cheap labour that outsourcing brings.
Trye. Cheap labor means company makes more profit and the stock goes up. Executives, who usually recieve stock in the company as "rewards", make more money. This means executive can buy fancier boats, cars, and houses. A win-win situation for them.
Some might say that outsourcing isn't nice to those working at home base
Everyone around is effected by outsourcing, not just software engineers. You see home based software engineers pay taxes, eat at restuarants, buy items from stores or the internet, etc. etc. That money goes in to the community which in turn pays for other peoples living and general area welfare (like fixing roads with tax money). Now to be honest, software engineers are not that numerious to make a serious dent. But India, and China for that matter, are moving to outsourcing other types of jobs. Indians generally target the higher paying jobs. Go to a hospital in a larger city and figure out how many doctors on call don't hail from the U.S. Theres not a shortage of doctors, its just that hospitals are businesses too and cheap labor makes the executives happy. The complaint that there is this "shortage of talented labor" by companies can be correctly translated as "shortage of cheap labor with sufficient degrees".
The same applies to international workers. The question to ask is "What is the buying power of the salary provided". If a senior level engineer in India is making the same salary as a junior level engineer in the US, you might think they're getting paid less. From a payroll perspective they are. But the buying power of that quantity of money in India is substantially greater - in fact, the overall quality of living for someone collecting 65k per year in India is going to be much higher than someone collecting twice that in the US.
Outsourcing shouldn't be defined based on salary. Whether or not a job is outsourced should be defined on this simple question - Is the job in the other country a new job, or was it a position that previously existed elsewhere that was relocated without the prior occupant? In other words, did someone in the US lose their jobs so that jobs in India could open? If not, then its simply global expansion. Take for instance Microsoft - Microsoft has been hiring like crazy in India, China and Ireland. No one in the US is losing their job for these positions though, so no job is being outsourced. An international company is simply growing in international locations. IBM on the other hand laid off a substantial number of engineers in the US, and hired a large number of Indian programmers to fill the positions priorly held by Americans. Those jobs were outsourced.