IT Workers Burned by Exported Labor

After reading eWEEK's May 13 report on offshore outsourcing-"Fair Trade on Jobs?"--readers sounded off on the potential security threats raised by using foreign IT labor, issues of U.S. vs. foreign productivity, the role U.S. universities

Reader response to Lisa Vaas May 13, 2002 article, "Fair Trade on Jobs?"

Your article came at an appropriate time since my development team at a global investment bank found out yesterday that we were being outsourced. However your article should have addressed the following issues:

First, while traditional manufacturing has been exposed to global competition for years, why are there still autoworkers in Detroit? Corn growers in Kansas? Textile workers in South Carolina? As for IT, why are there still programmers in Silicon Valley when Iowa is much cheaper?

You fail to mention the role of productivity, and consequently miss the fact that American workers are much more productive than their competitors. Overall, American workers are 20 percent more productive than their closest competitors, the Germans and Japanese. While it may make sense to send large projects having relatively straightforward coding requirements to India, what about projects where creativity is required? How well does offshore handle last-minute changes to the specs?

There is no doubt that the IT industry is changing. However you missed an opportunity to explore the larger issues that are out there for the industry, and stating that "The world is your competition" simply belabors the obvious.

James Kirwin

Even though I believe that what many companies are doing in this area is reprehensible (for example, companies that lay off developers with no severance and move their work offshore), I do want to be careful not to shoot the messenger. I did take exception to one set of facts that you presented: the comparison of Indian rates of $25-$40 to U.S. rates of $150-$200. Youre not getting even close to the same skill set within those ranges. A U.S. rate of $70-$100 would be more accurate, would still support your premise and would be less inflammatory.

The only way that I could imagine corporations paying the higher rates for comparable skills would be if they contracted them from a Big 5 (4?) company, in which case the phrase "a fool and his money are soon parted" comes to mind.

Mike McGonagle
Exchange Solutions

I read your article with great interest. But my question remains: Isnt anyone concerned about security and espionage? If they are only paid a fraction of the wage of programmers over here, wont they be more easily persuaded to make an extra buck on the side by selling the source code or its vulnerabilities? Are there extra security measures required/involved with (oversea) outsourcing? Everything comes with a price. Its unwise to pay too much, but its worse to pay too little.

And yes, I hoped companies would see beyond the fast buck and support their own economy, because it is those people who buy your product or service.

Sven Thirion
Web engineer
Smith Consulting Group Ltd.
Tinley Park, Ill.

Excellent article; however, Id like to comment on the potentially destructive, long-term effects of off-shoring, particularly in the politically charged global environment where United States interests are at stake. While certainly a seemingly cost-effective near-term solution to shore up the corporate balance sheets, ultimately our economy as a whole will suffer with the loss of these (relatively) high-paying jobs.

Companies like AT&T had outsourced their Consumer area to Computer Science Corporation (CSC), which in turn has offshored the majority of Consumer systems with the exception of their Residential Account Maintenance Database. This resulted in the layoffs of American CSC (former AT&T) employees since last August, and the trend is accelerating. Other notable American companies are indeed accelerating their offshore work. This will lead to continued higher unemployment, and not all of these people will be able to switch to project management, even if the PM ranks would support such an increase.

In New Jersey weve seen the considerable erosion of jobs in the telecommunications industry with the majority of those people unable to find employment, let alone comparable employment. Since the salary range reflected is within the $60,000 to $120,000 area, this in turn will eventually reflect a downturn in other areas of our local and national economy.

At a time when America needs to protect its citizens, and the integrity of its data, offshoring is not a viable strategy when we look to the future security of the United States.

Michael Dessoye
Advanced Enterprise IM Solutions Inc.

Citing Gartner statistics only serves to perpetuate the myth that a company can always get it done more cheaply overseas. Thats just not the case. Check the site for a thread within the past week on managing overseas development efforts for some real-world examples of this gone awry.

Just as an FYI, some of us over here in the good old U.S. of A, even in high-cost-of-living areas like Seattle, have hourly rates closer to the high end of Indias "bargain" $25-$40/hour than the Gartner-cited $150-$200/hour, because we have adjusted our rates downward to what companies are willing to pay in the current market.

For example, Im a coder with 15 years of operating system and applications-level experience on GNU Linux/UNIX and Windows (Perl, C, C++, Visual Basic, SQL and nearly everything else), who holds Sun and Microsoft certifications, and 20 hours a week of my time is currently being billed at $40/hour. Its half of what I was getting in the dot-com years, but given the choice of 20 hours per week "on the bench" waiting for a $75/hour gig, and working at a discount that keeps me billable during that half of the week, I prefer staying busy at the lower rate.

If U.S. companies dont like paying the big bucks, they just need to get off their lazy take-what-the-usurious-body-shops-offer duffs and actually spend time tracking down contractors with reasonable hourly rates (heres a hint: where you find one, you usually find more than one, as most experienced contractors have a small network of known and trusted colleagues with whom they share leads and larger jobs).

We are DEFINITELY out here in 2002, even if we were pretty hard to find a couple years ago. Time and cost-savers including a minimal (if any) time zone difference that makes meetings and phone interaction easier; ease and lower cost of travel for in-person meetings; and no language or cultural barriers; more than make up for a couple extra dollars of hourly rate.

I could almost buy the idea of outsourcing back in the dot-com era. And today, its still appropriate for many activities that can be handled AUTONOMOUSLY by offshore groups, without much need for interaction with folks in the United States. But as for splitting development among a few architects in the United States and a few dozen programmers overseas, I just dont think the cost savings is what its claimed to be. (Plus, Im tired of all the Indian contract house spam hitting our corporate mailboxes. Who on earth is actually hiring these spammers and rewarding them for unsolicited bulk commercial email????? HELLO! Ask your geeks, if you havent fired them all already. Such tactics in the name of advertising are not socially acceptable on the Net and should not be tolerated.)

(Name withheld)

The article "Fair Trade on Jobs" begs a full discussion of the root causes of international IT competition. How many of these foreign workers were educated and trained by U.S. universities? I can think of one major state university in the Southeast where over 90 percent of the graduate students and 100 percent of the PhD students in one engineering department were foreign nationals, most intent on returning to their home countries, upon graduation. Most, I suspect, are now working for companies that are competing with U.S. firms.

The universities alone should not be blamed. The financial incentives for the universities to recruit foreign students who pay full fare--rather than needing scholarships, tuition assistance, teaching assistantships or industrial sponsorship--are overwhelming. Equally at fault are the state and Federal government programs that actively recruit students, grant student visas and provide financial assistance to foreign students.

In short, one of the many causes of our IT job crisis is not just the cost but the quality of offshore employees whom we have helped educate in our taxpayer-supported university systems. Much as I hate to admit it, maybe the labor unions had it right all along: Buy American.

Jeffrey D. Wise
Apogee Systems Inc.

In this climate of cost cutting, how do we stem the impact of offshore firms taking our jobs and having an impact on our salaries?

When I last looked at your poll: "Are you concerned that more IT jobs are being outsourced offshore?" I believe the response was overwhelming: Almost 80 percent said yes!!

Is that not significantly high enough that many, many more people should focus on this as a super-hot issue??!! No one seems to be responding, and far too many are turning a deaf ear to it! Why is that?

David E.

I speak as an unemployed IT resource. I guess that the U.S. consumer demand for lower prices will finally affect all aspects of business. Ultimately, well either work in service, retail or distribution. If you buy offshore cars, clothes, electronics, etc., you are actually supporting the offshore paradigm. We are told that we cant be nationalistic. I guess that means we cant expect to have "good" jobs at the expense of anyone else in the world. Statistically, thats going to hurt. There are many more Indians and Chinese than there are U.S. residents. If they work for less so that we can buy for less, they will have most/all of the jobs. The obvious problem is when they have the jobs/income and we can no longer be consumers. I wonder what will happen then.

I assert that the country will have lost its tax base, therefore, there will be government layoffs, and well become lesser consumers and and and.... The problem is that this is not theoretical. Its an absolute. We know in the United States that 10 percent unemployment is almost catastrophic. I believe that ultimately, the rate will be at least 40 percent. Look out, bottom … here we come.

Mike Fletcher

Great article! Its about time that someone in the IT media spoke the truth. The IT media is usually a shill for the corporate point of view. It was refreshing to read an article that looked at the facts of the matter and didnt just rehash a corporate press release about how they "cant find the right skill sets in American workers".

You wrote:

"For those tech-focused IT professionals who so far havent been motivated to acquire strong business knowledge, the message is clear: Like agriculture, textiles and auto manufacturing before it, IT has become industrialized."

That bit about IT becoming industrialized is absolutely true and a really insightful observation. But I would suggest to you that even a strong business knowledge will not save IT jobs in the United States. The economics are just too powerful.

You also wrote:

"The world is your competition."

Again, very true and truly insightful. Are you a citizen of the U.S.A.? I am, and from that point of view I am distressed that my political leadership has allowed this situation to develop. (Some would say that they have encouraged it to develop.)

I watched with approval when President Clinton and Vice-President Gore said that we must train our children for the high skill jobs in computers and information technology. But they did nothing to prevent those jobs from being exported. Nor has George W. Bush. And it will do no good to train children for jobs that do not exist in this country.

Your statement that "The world is your competition" is not true for other countries. Most other countries have some level of control on use of foreign labor. I read that China requires any company that wishes to sell products in China to put some of their product technology development facilities in China. As a result, Microsoft and other major U.S. companies are funding massive R&D centers in communist China. And China is an enemy (or at least a potential enemy) of the U.S.A.

I would like to suggest that you investigate this situation further.

It would be very interesting to see an article with a side-by-side comparison of the labor policies of the various countries with major IT infrastructure. I am sure that such an article would be of great interest to the vast majority of IT workers (including managers. After all, if there are no U.S. workers, there will be no U.S. managers).

You might want to further investigate this trend since it might even affect your job. After all, if the IT work and IT jobs are all in China and India, it would make sense to hire a Chinese or Indian person as a journalist to write on IT since they would be closer to the IT work and could speak the language of the IT workers.

Again, thanks for an interesting article.

Lane Feldman

I would like to know your opinion whether the security of the United States is jeopardized when the non-citizen (or people outside of this country ) have access to internal information data of the U.S. and/or its people. The reason I am raising this issue is that I heard that non-citizens can use (or sell) the information to terrorists for use against U.S. citizens. It can create chaos in the U.S. economy (we know that if we didnt let 9/11 terrorists learn to fly planes we would be better off.)

I understand that some may think that I sound like a paranoid person, but I leave in New York City and therefore any kind of terror—including the stealing of computer data which was outsourced to 3rd-world countries--could be used against me. I am just contemplating this idea because a 9/11-like attack could be prevented if we use better judgment and are more alert about it.

Alec (20 years in IT industry)

Since your magazine seems so bent on promoting the benefits of offshore outsourcing to the detriment of the American worker I challenge you to investigate the hiring practices of these offshore companies to see if they intentionally discriminate in their hiring on the basis of age.

Ive included a Web site link for an Indian offshore outsourcing company, Larsen & Toubro Limited, Indias largest engineering and construction company, doing business with a subsidiary (Johns Manville) of Berkshire Hathaway, that specifically mentions on their recruiting Web page that they will only consider those candidates under 30 years of age!

I guess if they can get away with only hiring people under 30 years of age that would explain why they can undercut the salaries paid to American workers.

Now I dont know how widespread this practice is but I think it would be a good investigative task for reporters like yourself.

Check out the web link below and thanks in advance for checking into this.

Mike Brennan

Good article and thanks for the heads-up, I think :)

So whats the bottom line here: Do you think the U.S. IT job market will still be good for the next 5 to 10 years or so? In other words, if your kid was trying to pick a college major, would you still advise them that a career developing software applications here in the good old U.S. of A would be a good choice?

Dave Fladebo
(Father of two who will need food and shelter for at least the next 12 years or so and Software Developer)

As you can imagine (and perhaps already realize), this is a very, very hot potato!!

It would be helpful if you or perhaps other writers could focus in on this, because of its serious nature and the issues being brought about due to Americans being fired or laid off so that someone cheaper can be brought in to replace them!

I believe Americans understand the reasons for cost-cutting, but it also breeds a tremendous amount of anger. While many of our countrymen are losing their jobs, the Indian and Phillipino firms are laughing all the way to the bank!

David Esko

Our CEO was born in India and it is natural for us to explore Indian development, given the very low cost.

We had an Indian team build a prototype for a new software product that we were considering. It took five people six months to deliver the prototype. We wanted to preview the prototype at a trade show at the end of May.

One of my senior developers and I had to spend the two weeks (including evenings and weekends) before the show rewriting about 80 percent of the code to get the prototype to function correctly. We would expect to have to rewrite the whole thing if we were going to take the product to production.

Sometimes, you get what you pay for.

In our case, the decision makers may take this into account, but they do not have an accurate picture since we salaried folks spent all that extra time at no real cost (for the nights and weekends) to the company. That mode of operation is not sustainable over the long run.

I dont think that there is any effort to measure the true cost. In our case, India really cant seem to innovate. We cant just give them requirements. We must specify down to the last dotted I and crossed T and sometimes even then they cant get the job done. We have someone from our team (Indian born) on the ground in India now and we still cant seem to get them to "click" in terms of innovation and well-structured object-oriented code. We still plan to try to use them to augment our team, but the only real generation of new ideas is coming from our two United States-based teams.

Also, how distracted are they right now due to the threat of war? They also have frequent power problems and Internet connection problems. One more strange thing: Our guy on the ground cant take his notebook computer to the office. The office park where the company we are affiliated with makes their home has been set up as a special import/export area by the Indian government. As such, equipment cannot enter or leave the office park without going through a large amount of government paper work each time. That has been a problem as work must be sent home via e-mail. This is one of the many interesting aspects of working with India. I wonder if the other offshore facilities have similar problems.

(Name withheld)

In the quest to make money, quality will go by the boards. I found the following job requirements for a position in one of the offshore companies. The old adage: You get what you pay for.

These are the skills of the individuals who will be coding for the money-hungry corporations in the United States. As you can see, a large amount of experience and know-how are not required. Also, if this was posted in the United States, it would constitute age discrimination:

We invite candidates with strong technical aptitude, with a bend for Systems programming assignments to join us.

1 year of hands-on experience on mainframe essential.

Experience in mainframe operations, Systems administration, or Database administration involving following mainframe products will be desirable
Any other third party mainframe products like CA-7, CA-11, Omegamon etc.
Professionals with exposure to other mainframe environments can also apply.

AGE: Below 30 years.

Ensuring availability of S/390 systems as per SLA with Customer.

It covers:
Problem management – To Provide Level 1/2/3 Technical support
Systems management – To Install, Administer, and Support 3rd Party Products
Change management – To manage maintenance to OS390 and its subsystems (CICS, IMS, DB2, etc.)

Additional responsibilities include:
Installation and customization of software on the mainframe
Capacity Planning
Service level management
LOCATION: Navi Mumbai/Mumbai

Joe Tigeleiro

I just had to respond to some of Jeffrey D. Wises misconceptions about foreign nationals who attend U.S. universities IT programs. For one thing, foreign nationals do not receive government aid in any shape or fashion. In fact, foreign nationals pay way more than double the tuition of locals at state colleges and universities, not to mention the additional fees that are mandatory, and this makes a person take this investment more seriously than others who practically get it for free. It is a proven fact that foreign nationals perform better as IT professionals and the only factor that is driving U.S. IT jobs overseas is the quality of work.

(Name withheld)

I would advise anyone in college today to enter a field that cant be exported. I would have said healthcare, but, with current developments in telemedicine, Im not even sure that cant be moved overseas. Now it looks like fast food and retail sales are all that will be left.

When my daughter was 4 she said she wanted to be the "lady who smiles at people when they go to Wal-Mart." Cute--but Im afraid shell get her wish.

Scott Gates
Information Services
Our Lady of Bellefonte Hospital

I am also one of those high-tech/IT laid-off workers. What companies are doing is they are shooting themselves in the foot. By being very picky and having unrealistic expectations in terms of expertise and lowering the wages, they are alienating current and future IT workers. A lot of them are already thinking about leaving the field or not entering it at all. This will result in a shortage of IT workers and will get us back to the days of high demand and high salaries for IT people. Is it possible to take the extremes out of this game and be reasonable?

Manon Baratt