Study Finds Cost Major Factor In Outsourcing Positions

theodp writes "Debunking claims to the contrary, a new study from Duke University asserts that it is purely cost savings, and not the education of Indian and Chinese workers, or a shortage of American engineers that has caused offshore outsourcing. 'The key advantage of hiring Chinese entry-level engineers was cost savings, whereas a few respondents cited strong education or training and a willingness to work long hours. Similarly, cost savings were cited as a major advantage of hiring Indian entry-level engineers, whereas other advantages were technical knowledge, English language skills, strong education or training, ability to learn quickly, and a strong work ethic.' The article goes on to point out that despite this, outsourcing will continue to be a problem for US workers in coming decades; new elements of traditional corporations like R&D may in fact be next on the outsourcing chopping block."

Comments

Summary of the Corporate Attitudes

[AKAImBatman]

new elements of traditional corporations like R&D may in fact be next on the outsourcing chopping block.

Allow me summarize: "It's too expensive to be competitive, and we don't have a vision for being competitive anyway. So we're going to make our shareholders happy and shoot ourselves in the foot. Twice. Just to be certain. But hey, think of all the money we'll be saving!"

Re:Summary of the Corporate Attitudes

[ccarson]

Outsourcing R&D is a horrible idea. It's our strong suit not to mention our last line of defense against cheap foreign labor.

Re:Summary of the Corporate Attitudes

[yams69]

If the Chinese and Indians are smart enough to deliver the quality of R&D American companies are expecting, they're also probably smart enough to set up their own companies and keep the profits for themselves. This could be a good thing, though, since it would lead to the extinction of the American executive dinosaurs who plan to outsource every job but their own.

Re:Summary of the Corporate Attitudes

[voice_of_all_reason]

If corporations can outsource labor, why can't I outsource purchase?

Software developers put stipulations on resellers that they can't sell to certain countries.
Video games and DVDs are region coded to make foreign-purchases difficult to use
Buying medicine out of the country can get me sent to prison

They have their cake, and eat it too. Then kick us in the balls for good measure.

Re:Summary of the Corporate Attitudes

[Proudrooster]

You are correct! We are also going to shoot our country in the foot and one day wake up to the realization that a country of mere consumers can not survive without decent jobs. Our government is corporately owned and operated so the options for change are most likely 1) revolution or 2) foreign invasion (Mexico, China). It's all too sad to think about.

Re:Summary of the Corporate Attitudes

[qwijibo]

Why do they have to reconcile the difference? It's a race to the bottom and worst case scenario for the CEO's is retiring early. What's the worst that can happen for them? More people are willing to work locally for peanuts?

Re:Summary of the Corporate Attitudes

[OakLEE]

Allow me summarize: "It's too expensive to be competitive, and we don't have a vision for being competitive anyway. So we're going to make our shareholders happy and shoot ourselves in the foot. Twice. Just to be certain. But hey, think of all the money we'll be saving!" Actually, what they are saying that it is too expensive for them to remain competitive the US. They in fact do have a vision for remaining competitive, and that involves moving R&D to China, where the costs are lower.

Whether you like it or not, the outsourcing of R&D occurring now is no different from the outsourcing of manufacturing that occurred the 1970s and 80s. The internet has made communication across vast distances cheap and affordable, much like advances in technology in the 1970s made the transportation of manufactured goods over long distances cheap and affordable. While the Structural Unemployment, caused by this sucks, the internet's existence comes with many benefits (email, wikipedia, pr0n), just like the advances in shipping technology did (overnight mail, mail-order businesses, Japanese Electronics). In the long run, we even benefited directly from the outsourcing of manufacturing in the form of cheaper goods.

Outsourcing, like it or not, is just a cost of progress, and much like the Luddites, we can either accept this fact and find other jobs, or start destroying trans-Pacific fiber runs in a vain attempt to save our current ones.

Re:Summary of the Corporate Attitudes

[SadGeekHermit]

You're missing something.

The amount of wealth in the world is NOT like a tank of water which, when the valves are opened, empties out and distributes the water all around. It's more like a large set of fountains fed by a small set of pumps. And corporate America isn't opening valves to let the water (money?) flow all around. They're taking sledgehammers to the pumps because they stupidly believe that by doing so, they'll get more than their fair share of the water. For the first few hits, they get doused pretty well, and they think "look at all this water! Hit it again!" But then the pumps shut down and that's the end of that.

Wealth is actively created by some groups of people and consumed by others. The United States is so wealthy because for most of this century we were CREATING much more wealth than anyone else in the world. We were able to do this due to a number of cultural and structural factors that aren't replicated anywhere else. For example, among all the people in the world, we are easily the most independent minded, the least bound by dogma and tradition (at least when it comes to science and technology). Our inventors have a "what the hell, let's give it a shot" mindset you won't find in many other places.

And before you start screaming "No, your innovators call came from Europe" let me state the obvious: WE ALL CAME FROM EUROPE. Americans are Europeans who decided to live somewhere else. We didn't just magically appear here; we colonized this place. Europeans may not want to hear this considering the unfortunate current state of the U.S. government, but we and they are the SAME PEOPLE, with the SAME CULTURE and SAME INTELLIGENCE LEVEL. The only discernible difference between Americans and Europeans is that Europeans try to behave more calmly than we do. We're a bit nuttier than they are. EXCEPT at soccer matches, of course.

If you want a perfect analogy for what's going to happen when corporations finally kill off technological innovation in the first-world countries, or at least strip people of the desire to do technical work for them (I don't think you can really kill off our ability to innovate, you'll always have inventors) just read this article:

http://en.wikipedia.org/wiki/The_Goose_that_Laid_t he_Golden_Eggs

Re:Summary of the Corporate Attitudes

[rolfwind]

The other problem is that by outsourcing your R&D, you are effectively building up your own competition, who, once they break away from you (in terms of employment) will leave you depleted of that knowledge (since it was outsourced) while competing with you with the latest know-how and for less.

It is one thing to outsourced certain operations like elementary customer help phonecenter overseas that probably will save the money in the long haul even with some lost customers, it is quite another to send your golden goose overseas just because they can "polish" it for less in the short term.

This has happened again and again in business. After World War II, Japan and Germany were greatly built up again first by being the outsourced manufacturer to American businesses (however they both long had industrial revolutions in the 18th Century) because they were relatively cheap, then they became competitors with their own exports.

However, there isn't much to indicate that there economies were built up at the loss of our middle class - to the contrary, but fears were widespread at the time with other concerns on attacks upon the lower/middle class job like automation - the 1960/70s in particular feared "robots" taking over all the work.

This time around though, it seems not the factory worker jobs at risk (since most of those are gone anyway) but almost any educated job is at risk - the only ones safe are low income menial jobs or bureacratic jobs (as it always has been). I would have said the service economy is safe but.... that may not be true either - I have read that some contract lawyer and doctor operations have been outsourced (doctors who analyze Cat scans and that type of thing).

Where does that leave America when our educated technical workforce becomes depleted and we are left with only a service economy while our competitors are built up with the latest know-how and the brightest workforce? Do we wait until we become a cheap economy again where things can be outsourced to us in a couple generations?

BTW, I don't believe in the viability of the purely service economy.

Re:Summary of the Corporate Attitudes

[AKAImBatman]

Actually, what they are saying that it is too expensive for them to remain competitive the US.

Bullshit.

They in fact do have a vision for remaining competitive

More bullshit.

I've been in this industry for well over a decade now, and I've seen some pretty interesting attempts at outsourcing. You know what? Nearly all of them fail. It doesn't matter if we're talking about local outsourcing inside the U.S. or foreign outsourcing of cheaper "talent". 95% of the time, outsourcing companies are leaches that slurp up many times the funds that companies could use to hire competent talent. All they do is hire warm bodies on a company's behalf, then charge 10x what those bodies are worth. The majority of them are fresh out of college (if even), have no real experience to draw on, and have no experienced leadership to direct them.

For a similar set of leaches, see Technology Recruiters.

The truly competitive companies have one thing in common: They eschew the idea of outsourcing/consulting in favor of direct-hiring a good mix of experienced talent and promising talent. Combined with good management (which is usually required to get the talent in the first place), these companies are able to produce far more than their competitors on far less capital.

Re:Summary of the Corporate Attitudes

[moeinvt]

"If the Chinese and Indians are smart enough to deliver the quality of R&D American companies are expecting, they're also probably smart enough to set up their own companies"

Indeed they are. A Duke University study released in (I think 2005) concluded that over the previous decade, about half of the startup companies in Silicon Valley were founded or co-founded by folks from China and/or India.

The story is right on about cost savings as the driving factor. The perception that people in China or India are "smarter" than people in the U.S. stems largely from the fact that we are typically being exposed to the very best people coming from a pool of billions. With that many people, the absolute number that are 2 std. deviations on the right side of the bell curve is still massive.

Re:Summary of the Corporate Attitudes

[Maxo-Texas]

I wouldn't. I'd be happy if I could buy things for the same prices they pay.

$10,000 vs $140,000 for the same heart operation.
$1,000 vs $6,000 for the same hair transplate.
$2.19 vs $20.00 for the same movie or album.
$.10 vs $5.85 for the same blood pressure medicine.

Companies make products for 50 cents and sell them there for 55 cents and here for $5.50.

And they get laws passed making it illegal to import those 55 cent products and sell them here for 60 cents (which would be real capitalism and would quickly undercut the $5.50 price.

I would not mind my salary dropping from $80,000 to $40,000 if the price of things were dropping from $20.00 to $2.19 and $5.58 to $.10 because I would be relatively better off.

And that's ignoring things like the 1/3 of the price of cars for safety features that are not required there and another 1/6 for legal costs that they don't bear because of our runaway legal system (and another 1/6 for some crazy pensions that are being dumped on my tax dollars soon) .

Re:Summary of the Corporate Attitudes

[SadGeekHermit]

You're still missing it.

Go back BEFORE we had access to modern forms of energy. We managed to INVENT these forms of energy starting with NOTHING. Think about the steam engine. Where do you think that came from in the first place? Someone invented it. And steel has been in use since the Roman Empire, so don't use that as an example. All you need to make steel is iron ore, a form of carbon to work into it, a hammer to work the metal, and a forge to heat it in. It's VERY ancient technology that predates the use of coal or steam.

By focusing entirely on energy you've managed to miss ALL of the action. Where do these things COME from? How does a culture create them in the FIRST place? They don't just appear, poof, like Moses' stone tables. Aliens didn't drop them off on their way to Tau Ceti.

We CREATED them. Before we had the energy sources you're obsessed with. Your energy line of reasoning is overly simplistic and misses what's really going on. While the rest of the world wasn't changing their way of doing things, Europeans and later Americans went from a totally ordinary agrarian culture to a world-spanning industrial, high tech culture capable of spaceflight in a matter of centuries. You cannot explain that with your energy theorem.

Nor can you explain (for example) the Persian Gulf's failure to accomplish the same thing even though they're sitting on enormous energy reserves. You can't explain India's or China's failure to accomplish the same thing even though they have vastly more manpower and untapped energy resources of their own (and they even had a couple of thousand year head start, which makes it even MORE significant a failure).

Your theoretical framework fails to explain the situation and you must adopt a new one.

Now, back to my point.

The suits, having as they do a very poor understanding of where innovation comes from and how they may support the intellectual structures that made this country great, are doing their level best to ruin everything that gave them their wealth in the first place. And, clearly I believe that they're trying to "kill the goose that laid the golden eggs".

To expand on this point, let me add that not only are they ruining lives by outsourcing the American middle class, in their zealous desire to protect their "intellectual property" legally with patents and trademarks, they are making it impossible for independent people to invent and release new and interesting ideas to the world. This impoverishes the entire planet, not just the American middle class, because an idea, once lost, may not be reinvented for decades, if ever. And even if an idea IS invented, if some corporation sits on it, stowing it away in their patent arsenal because they don't believe it's profitable, it's not going to help anyone.

An interesting point, though, is that Americans will still continue to invent because it is in our nature to invent. And we will share our inventions with each other, only it'll be on a face to face basis, crazy hobbyists sharing ideas with other crazy hobbyists. Some of this might flow around the world if we encounter a like mind over in Japan, say, or the Netherlands. But it'll all be underground because nobody wants to get sued by some giant, lumbering corporation.

Think of the result of all this. Just think about what I'm saying. Consider how it's going to retard human progress. Or, if you're interested, consider how it's going to affect the American and European economy (we're in the same boat, after all). First, the middle class shrinks and people spend much less money, then the first world nations lose their lead in innovation because it's all being done at the grassroots level and none of that is finding its way up to the mainstream... Then nobody's buying all those gadgets being constructed en masse in China, and as a result there's no demand for IT systems built by Indian companies... The world economy could collapse like the house of cards it's always been.

Back to square one! Tra, la la. Maybe next t

Re:Summary of the Corporate Attitudes

[SadGeekHermit]

All of your examples are extremely recent, long after American and European colleges began admitting students from these other countries. We taught THEM physics, and now they're contributing. Reminding the world that we invented the stuff doesn't diminish the value of their current contributions. But do realize that if it weren't for Western culture, none of this would even EXIST.

Furthermore, you have to accept the fact that there is something special about Western culture that results naturally in innovation and rapid progress. Of all the cultures in the world, OURS is the culture that split the atom. OURS is the culture that put a man on the moon. OURS is the culture that determined the root causes of illness and learned how to treat it -- not with magic, but with science.

I'm not saying that it is impossible for other cultures to be innovative. However, I am saying that it is in our culture's NATURE to be innovative and I don't believe any other culture will be able to fill our shoes once our idiot leaders have poisoned the well (if they even succeed -- Americans tend to be pretty stubborn folk, who take their hobbies underground if they can't be paid to enjoy them).

Note that I am talking culture, not race. I live in New York, and MY culture is comprised not only of Europeans, but of people from every race on the planet. HOWEVER, everyone living here is living within a European-derived culture. Everyone whose family has been here for more than a generation or two has fully absorbed it and is effectively native to it.

You've got to look at the big picture.

I understand this is a matter of pride with you, but I'm actually correct.

Re:Summary of the Corporate Attitudes

[SadGeekHermit]

No, I don't mean the U.S. is guarding the pumps. I mean that Americans and Europeans ARE the pumps, or at least have been up until now. Other countries are trying to set up pumps of their own, but this takes a lot of time -- you don't create the equivalent of 500 years of Western culture overnight! Meanwhile, idiot corporate types are running around smashing all the pumps we currently have on the assumption that the new pumps will be ready in time to handle the load.

See what I was trying to get at? It's not that Americans are the only source of innovation; that would be ridiculous. It's that we're particularly good at it, and we're useful to the world, and these corporate half-wits are trying to cut us out of the mix. It's not a good idea; this may sound pushy, but the world still needs us and will for a long while. And why shouldn't it? We're useful. "We" being the American PEOPLE, and our relatively unrestrained way of doing things -- NOT the government, or the military; these are a separate issue entirely, and most of us Americans don't like 'em anyway.

It's too bad the corporate crowd doesn't get it.

ABOUT THE CURRENT GOVERNMENT BEING PRETTY ANTI-PROGRESS:

Yes, obviously you're correct about that. Stem Cells, Kyoto, naturally, I'm with you. Many Americans are. Our government doesn't listen to us any more than our corporations do. This is part of the problem I'm complaining about.

Think of it this way, going back to my "Golden Goose" analogy. The goose that lays the golden eggs represents American and European technologists and scientists. The golden egg is the progress we share with the rest of the world. It's considerable! A nice gold egg. And it's made a ton of money for a lot of unpleasant rich people who would probably be doing something rather more awful if they weren't distracted by all that cash.

One day, the farmer and his wife (representing the rich corporation owners) decide that it costs too much to feed the goose, and after all, they can probably just cut it open and take out all the eggs at once. So they do, they cut open the goose and kill it. Too bad, the goose is just an ordinary goose. No golden eggs. Now the farmer and his wife are shit out of luck. It's a typical European fable meant to teach the lesson "don't be so greedy".

Now, to take account of the president, stem cells, and kyoto, we've got to really abuse poor Aesop's fable, but let's have some fun with it. Maybe it'll show you how I view the whole thing.

The President is the person who owns the land the farmer and his wife rent. Kyoto is represented by crop rotation and proper irrigation, which really is all about thinking ahead. But the President doesn't like that. It costs money, it inconveniences him, blah blah blah. So, no crop rotation or irrigation for you! Of course, the crops are going to get worse and worse and eventually the land will be barren, but he figures he'll have collected enough rent by then, he'll retire, pass the screwed up farm down to his kids and move somewhere else.

Now, stem cells are a tough one... Hmm... Ok. Let's say that one of the farmer's kids has an idea for cross-pollenating two types of corn that will result in better crops with less fertilizer and so on. He knows a thing or two about botany, so he gets ready to begin his experiments. But the President's neighbor is on some kind of religious "WHEAT PURITY" kick and he finds out about the cross-pollenation. It's a sin! It cannot be permitted! And if he sees the kid doing any cross pollenating, he's going to beat him up and burn his grain. The President agrees with him, but he doesn't want to start a ruckus because the farmer pays him rent, the wife is friends with his wife, and so on, so he just refuses to let the kid do any of his work on his land. He makes all kinds of excuses.

Meanwhile, down the road is another farm run by a Chinese family. They're interested in the idea the kid had with the wheat, so they're going to let him give it a try. He goes over there and does it. The wheat bl

Wasting money proving the obvious

[Marxist Hacker 42]

Gee, American corporations put profit above every other consideration- call the evening news.

The sad part is it took an actual university study to reveal the lie.

Re:Wasting money proving the obvious

[Seumas]

For the longest time, we were all force fed the myth that money had nothing to do with outsourcing and that it was simply due to some non-existent lack of skilled American employees.

And really, even if that were the case, doesn't capitalism demand that you pay those employees what the demand is worth rather than stabbing them in the back and going elsewhere or importing tens of thousands?

Re:Wasting money proving the obvious

[qwijibo]

Capitalism demands that the employer try to screw the employee by giving them as little as possible. What an employee is worth is set as an agreement between the employer and employee. If an employer isn't willing to pay what an employee wants, one side has to give in. Finding an employee somewhere with dirt floors who will take less is pretty easy in a global economy.

Re:Wasting money proving the obvious

[qwijibo]

Sure, that's a business model that might work if you want to have long term, loyal customers and employees who work for you until they retire, keeping the cost of training new people down. However, Henry would not make it past middle management in any decent sized company these days without being about to demonstrate how his plans will save money this quarter, while increasing productivity and cutting costs next quarter. The current theme is infinite production at zero cost, and if you don't have a story that leads to that goal, you're going nowhere. Us technical people have it the worst, blathering some nonsense (from an MBA's perspective) of that being impossible.

Re:Wasting money proving the obvious

[Marxist Hacker 42]

Henry Ford was considered an evil communist by his fellow indusrialists- after all, he paid $5 a day (5x the going wage!) for his factory workers in 1921.

Re:Wasting money proving the obvious

[Marxist Hacker 42]

That's not news. That's what we've been doing, slowly, for 40 years now.

Re:work ethic my eye

[geek]

And as a result we're over worked, under paid and have a greater than 50% divorce rate while our kids are left with a TV screen as a babysitter and our family structure is collapsing in favor of a nation of single people too self absorbed to take time off to form some basic social connections.

I'm sorry but "work work work" isn't what I would call a great existence. If you want it fine, but don't call me lazy for actually wanting to live a life I only get once chance to live.

Cost of living will freeze soon

[ObiWonKanblomi]

I was hearing a report on the parent's topic yesterday on NPR. It turns out homes are not selling as much as before due to a couple factors. First is the number of people who were purchasing via insane ARMs are drying up. This is why we now see a number of lenders filing for bankruptcy. Secondly, there is still a large insane population of people who are selling their homes but will not lower the prices, hoping they will be able to sell at a price that would have worked a year ago.

Despite the comment about 9% qualifying for home ownership, a number of people have applied in the past few years for insane ARMs to buy a home and purchase that dream SUV. However, it's because they truly can't afford a home the number foreclosures are starting to drastically increase. It's only a matter of time before all those homes are sold at much lower prices.

On the way to work today, I was hearing another NPR report (yeah I listen to it a lot) stating that the apartment market is about to boom....

Cost would be my guess

[starseeker]

Cost is the direct driver for most businesses, because it always yields a short term benefit. Most companies do not have either the resources, interest, or patience to work for long term benefits.

That said, I would think R&D would be the LAST thing we would want to outsource, simply because if we do that the next generation of companies will develop not in the US but everywhere else. We cannot become a nation of businessmen/women and lawyers, because the world will quickly wake up to the fact that they already have all the smarts and physical resources to make whatever they need and can provide their own businessfolk and legal team. If the US makes too much trouble, we can be safely ignored because we won't be producing anything any more except hot air.

When it comes down to bare knuckles, US labor costs too much. Period. We don't have some "magical" quality that makes us better, we just happen to have a large number of well educated people in the US at the moment. The rest of the world can also be educated, and for cheaper than it costs to hire US labor. Businesses are finding that out - train the folks overseas, and guess what - they can do it too! Today, that lines the pocketbooks of those with control of the companies. What they aren't thinking about or don't care about is that tomorrow those folks will be making their own companies and coming right back at us, and we will no longer have the technological chops to keep up because the only money to be had in the US was by going into business or law.

Hopefully, we will retain our education and knowledge edge. We need to keep investing in education and keep ahead of the pack, however - the game is getting rougher and it will mean either a lower standard of living or harder work for us. There is no magic here, and in the end all competitive edges not based on natural resource advantage are short term.

Outsourcing is great for empire building

[qwijibo]

This has always been the lure of outsourcing. Costs are increased, which increases the size of the manager's empire, while being able to point to someone and show how much money is being saved.

For example, instead of paying one programmer $80k, they have:
2 programmers offshore - $20k each
system architect - $130k
technical writer - $60k
project manager - $70k
team manager - $100k

Instead of spending $80k/year, they are spending $400k/year. However, they claim a savings of $120k using management-math by multiplying the number of programmers they have times the salary of one programmer if hired locally, minus the actual cost of the offshore programmers. You can claim a 75% cost savings on the programmers, even though you're spending 500% of what you need to. It's a great way to fluff out budgets and org charts.

Re:Cost of living

[99BottlesOfBeerInMyF]

Until we reduce the cost of living in this country companies will continue to outsource. It's all about money.

Actually more and more companies are looking not to outsourced Indian developers and support staff, but to outsourced and even satellite office US developers and supports staff. The problem is not that housing and cost of living is too high in the US. The problem is the housing and cost of living is too high in expensive areas of California and that is what most Slashdot readers pay attention to.

This is interesting because I was in a meeting this morning with our director of engineering where this exact issue was discussed. Some places in San Francisco a medium sized house costs you 5 million and 60K in taxes a year. My medium sized house in a normal part of the US cost about 120K and I pay a few grand in taxes on it a year. There are places in the midwest where amidst the corn fields you'll come upon an island formed by a university, a small town, and support facilities for a dozen major international corporations.

My advice to you, if you live in CA, move somewhere affordable. If you are looking to hire talent, look to a satellite office somewhere that is not crazily expensive. If you're looking to outsource development or support, there are cost competitive American companies with a lot smaller risk and cheaper travel expenses that Indian companies.

Re:Additionally...

[cyphercell]

Bad news for Americans who won't lower their salary to compete.

Lower your salary enough and people will think you're incompetant, when asked why your willing to work for so little all you can really say is that you need the experience, because to get a job you really have to be twice as qualified as you should be. So, if you have an AAS and want a job you're qualified for, you need to have 2yrs experience too, because the guy (B.S.) that you're competing with just lost his job to some guy (B.S.) recently graduating in India.

Re:Have I been living in a cave?

[99BottlesOfBeerInMyF]

Um... The only reason I've ever heard given for outsourcing was money. When the hell did they invent this other bullshit, spread it and have people buy into it, and then do a study debunking it?

In business, it's always about money. This study was debunking the fact that some businesses were claiming it was not about lower salaries, which is somewhat different. In truth, I've worked on a few projects that involved outsourcing both in the US and overseas and while it was always about money, relative salaries was a pretty small concern. We outsourced because we had trouble finding enough local talent and because we had short term needs that required expertise we did not have in house, but which would have cost a lot unnecessarily to do ourselves.

In contrast, I know of several cases where companies outsourced core parts of their business, resulting in a short term benefit on paper, but a long term loss. Once an outsourced company has expertise in what you do (on your dime) they will raise prices or they will stop working for you and start competing with you. Of course by then the executive who made the decision already took his big bonus home and moved on to another company to repeat the process.

That's wrong.

[raehl]

Your first problem is your focusing on the number of dollars spent. The number of dollars spent is only partially relevant. The other part is HOW MUCH CAN YOU BUY WITH A DOLLAR.

If a company reduces the amount of money paid in wages, one of three things (or a combination) happens:

1) The make a larger profit, and the people who earn that profit spend it on other things.
2) They invest that saved money in more production or more production efficiency (buy technology, spend on research, build another factory)
3) They lower the price of the product, so the consumer then spends their money on something else.

The important thing here is that previously idle people in India or China are now no longer idle. They're making things. And when they make things, *WE* in the US get a cut of it.

Outsourcing turns a guy in India who wasn't doing shit into a guy in India who makes, say, $100 worth of stuff, and keeps $80 of it and we get $20 'for free'. That's good for him and good for us.

That does eliminate a job in the US that may have paid $200 for the same stuff. But that's OK, because the stuff costs $100 less, and the person who would have had that job can now work on something else.

Also keep in mind that depressed wages are the only way that the free market can move around workers. Just because we all want high paid jobs in a certain field doesn't mean the economy can support allocating workers that way.

But in the end, we want to export as many jobs as we can and replace as many workers as possible with machines. If we do this to perfection, none of us will have to work anymore, because machines and people in India will be doing all our work for us, and we'll still have the same amount of stuff.

Or at least, we'll have freed up enough of our labor force to provide the universal healthcare everyone seems to want.

What I never understood

[night_flyer]

why go overseas? middle america has THOUSANDS of unemployed people that would gladly do the work and a wage that is far less that the coasts thanks to the cost of living.

Granted this has to do more with call centers and the like. But I would much rather talk to Bubba Anne than Apu

So where can I...

[jbarr]

...get a job that does nothing more than publish studies that point out the obvious? I really can't believe money was spent to determine this.

Re:If you are that smart, then start a company!

[Anonymous Coward]

Sure, you can start a company. You can also work it every waking minute, including weekends, never get a vacation (you're indispensible to your own company) and just generally be a slave to it. Then, asssuming you do make some bucks, your kids can start spending them at age 22 because that's how old they'll be when you die from your overwork, and they inherit.

Oh, wait - you don't _have_ any kids, 'cuz U either never had time to get married, or you did and she left after feeling abandoned while you worked 'til 10 PM every night, trying to keep ahead of that team of Indians down the road that are doing the same thing, for 2/3rds your salary.

Owning your own company is just about the equivalent of economic slavery. Don't even think about it if you want to have any sort of life.

Other jobs? Not happening anymore, bub

[Travoltus]

The permanent structural unemployment and underemployment that is resulting from offshoring, will eventually bring the US economy to a halt.

The flaw in your logic is that you assume becaus previous industries left or evolved away into newer industries, that this will happen repeatedly. As in, from the horse and cart design to the SUV sales/repair, and from telephone switch operators to internet jobs.

That is not the case any more.

There are no new job booms beyond tech now, because of offshoring. Biotech is already going overseas. Nanotech will result in a major net loss of jobs. What's left to grow now is the service sector - the cashiers and what not - and even that is slowly being automated.

The new job types coming out now are small fry at best, and are going to be oversaturated or out dated in 5 years. That means whatever you're in college for right now, will be worth dramatically less in wages in 5 years, or few people will be hiring for someone with that degree. Say hello to just-in-time employment.

There is nothing big that will ever come up any more as far as jobs are concerned. We've reached the end game, and I openly invite you to show me what's coming up that open up the jobs spigot again in America.

Now, watch out for the fallout from this subprime boom. People have not been spending more because of rising wages, people have been spending more because of massive amounts of refinancing. The subprime correction is spreading into the rest of the market because of the number of homes increasing due to foreclosures. That means you who have a fixed rate re-fi will still inevitably see your house drop in value. You'll be upside-down on that bugger in 2 years. Mark my words on that.

What this means is, with the explosion in low paying service sector jobs, the collapse of refinancing-supported consumer activity will not be reversed by a boom in higher personal job-based incomes. Also, people will dig into their IRA's and investments to make ends meet as the water level rises; I work in the financial sector and I am watching the slow rise in that activity right now. And people working at Wal Mart don't get IRAs or stock options unless they're managers, but they'll be selling that, too, to make ends meet as Wal Mart slashes wages to go along with their always low prices pledge.

You have the triple threat of early divestments to make ends meet, downward wage pressures exerted by offshoring, and an imminent dead halt in refinance-based purchases, all about to descent upon this economy.

Offshoring fanatics, feel free to keep your head in the sand about this... just like all the housing investors did when they said the current housing boom would never end.

Re:Other jobs? Not happening anymore, bub

[Cafe Alpha]

In the Bay Area (San Fran, down to silicon valley) people have been trying to adapt by working longer and longer hours.

I tried to escape the treadmill by starting an appliance repair business. Not sure if that will succeed since I was underfunded... anyway I ask all of my clients about their jobs in order to get a handle on the local market, and NO one works less than 60 hour a week anymore. A surprising number of middle class clients in professional jobs work 100 hours per week or more.

Lots of people in this area have become consultants just so that they have the ability to take a vacation or have some say over their hours. It's not a step up in pay overall I would guess, but just trading risk for not being a slave.

But overall no one has a solution! There's never going to be unions in the forseeable future. The only hope that an American has to have a life is to move to one of the cheapest spots in the country or move out of the US entirely. Our corporate culture is entirely expoitive, our job market forces a race to the bottom because you can't be the only person demanding good treatment and still have a job, and our social culture allows no cooperation or class consciousness so we are simply doomed.

Working for the government may, in the short run let people work 40 hours like actual humans, but that won't last. The government has noticed that it's the only good employer left in the country and started to outsource.

We're completely doomed. And the public is so stupid that they're signing up for Donald Trump wealth-building courses in desperation. That's all we have as a solution, hucksters.

Oh and MOD PARENT UP!

If I made the laws...

[J.R. Random]

I would still allow outsourcing, but just subject it to the following condition:

Before you can outsource any other job, you must first

1. Outsource the CEO.

2. Outsource the CFO.

3. Outsource the CTO.

4. Outsource the company president.

5. Outsource all vice presidents.

Because these tend to be the most overpaid people, this law would have the advantage of creating maximum value for share holders.

Re:Well, a lot of companies are already regretting

[Todd Knarr]

And this surprised your company's management? After all, the Chinese aren't dumb. How much of a jump is it from seeing the American part out-source everything but upper management to China to the Chinese part deciding to in-source upper management and lose that huge drag on their profitability that resides on the eastern side of the Pacific?

Cultural differences create misunderstandings

[hey!]

I used to work with a company that hired a lot of Indian H1Bs. I've worked with a number of Indian engineers; some were good, some were bad; a few were really good, a few were really bad.

The Indians I know like to say that you can't generalize about India, a country with a billion people and something like forty distinct cultures. There's a great deal of truth in this. But at the same time, you can't help but notice that they have a lot of things in common with each other. Just being engineers they have certain things in common with most engineers, such as a desire to be valued for their skills and knowledge.

Uniformly the Indian engineers I've worked with are hard working, ambitious, and eager to please. I sometimes think the eager to please part is something of a problem. Often unpleasing information is extremely valuable. Not wanting to bear bad news is by no means a trait that is unique to Indian culture, but I can't help but think growing up in an educational system with intense competition to tell the teacher what he wants to hear shapes people's work styles. I've found the best Indian engineers I've worked with have an intense, fiery streak in them that is sometimes hard to contain but is good to do creative work with. I've sometimes had cultural misunderstandings with Indians who work for me because I have assumed that, despite my place on the org chart above them, that we were equal in status, while they assumed that any time I had an opinion, no matter how casual, offhand, or just plain dumb, that that was Law. From my culturally biased perspective I saw this as frustrating passivity.

I'm the kind of manager who thinks that if some wet behind the ears intern thinks he has read something useful in a textbook somewhere, he should speak up and if its not relevant I'll thank him and tell him so. A lot of Indian guys working for me weren't comfortable with this at first, until they found out that I didn't try to pin blame for mistakes to them. A few never adjusted, and were always insecure and unhappy until I learned how to act like an old fashioned boss.

One thing that seems very common: the Indian engineers I've worked with try really really hard to put their best face forward. I don't think this is being a "yes man", its just a difference you have to factor in so you scale what you think you are seeing appropriately. Nowhere is this more evident than in the way Indian engineers seem to collect advanced degrees. Every guy I worked with had an masters, a few had PhDs. I have nothing against advanced degrees, but it seems to me that if you are going for an advanced degree, you ought to have some kind of specialized research interest, but it seems to be almost de rigeur. A lot of 'em went straight from BS to MS with no work experience. To tell you the truth I don't think they got a lot out of graduate education, other than to prove to the world they could.

This may be why the study found that there were quality problems with Indian BSCS grads. Anybody who's got anything on the ball gets a MSCS or PhD.

In any case, India is an incredibly dynamic place. It's got a billion people, and it has its fair percentage share of really, really smart people. It probably has more than its share of people with entrepreneurial hustle. But anybody playing the outsourcing game has to be prepared to lose a few rounds to the fact that things aren't always as they appear to the outsider's eye. I've never been to India, but I have no doubt it has not reached its full creative potential by any means; nor is this something it will be able to do overnight. So I don't think all of technology will simply slosh over there leaving the US a technology backwater in a few years. When India reaches its full potential, that will be a good thing. We'll be getting jobs here working with Indian technologies; it sounds to some like a nightmare, but I don't see it that way because technology is a plus-sum game. It's only a nightmare if we've given up on creating new technologies here.

Re:Cultural differences create misunderstandings

[antonyb]

An intelligent comment in a Slashdot discussion on outsourcing? Now I've seen everything :)

I'm a westerner living in India, and my opinion of the place & the people pretty much exactly matches what you've written. I've had to spend a lot of time building a really good team, but now that team is at least as good as any team I've worked with at home, twice as hard-working, and, yes, hugely cheaper.

And no, India hasn't reached its full potential yet. The two main issues that are likely to prevent it are the politicization of the education system as commented on in TFA (Karnataka, the state Bangalore is in has moved to prevent English being the primary language taught in schools in order to win votes with the the rural majority who have been opposed to the enormous growth in the cities as it has stretched even further the gap between rich & poor), and the hyperinflation of salaries. There's a good chance that India will become too expensive to operate in before it reaches that potential.

ant.