In Lisa Vaas column, Perils of Going Offshore, she details the conundrum of the tech industry: loss of little over a half-a-million tech jobs, more companies outsourcing their tech departments and the inability of many people to find jobs in the field.
The notion that government must “protect” the industry is a dangerous one. This will foster a system where weak performers are protected. Who wants that? Strong performers know that their tech skills must be continuously honed and developed, through formal classes, self-teaching and on-the-job training. They also know that certs alone mean little. Strong performers know that spamming companies with resumes (a la Bernard Shifman), responding to classified ads, or using one of the “job sites” is a lose-lose proposition. Strong performers know that they get a job when they can prove to an employer that they can provide value to that employers business.
The heyday of the late 90s caused many people who were not serious about growing their skills and remaining competitive to enter the market. Why not? You take one of those guaranteed-passing-score classes, sit for the MCSE, and then make $50k per year. Fortunately, those days are over, and good riddance, too. People with a paper and no experience who expect the world to lay riches at their feet are hopefully going to go find some other industry to play in. IT workers who dont continuously update their skills and remain highly flexible when it comes to employment and compensation are going to be in for a rude shock when their positions are outsourced to a foreign company that can provide the same value for a fraction of the price.
The bottom line is that people provide value, organizations hire people who can provide value, and a paper cert alone does not provide value.
On the other hand, companies that still refuse to see tech as a strategic asset and instead look at IT as “cost center” are aging dinosaurs ripe for losing serious market share to more flexible companies that understand the value of technology. A company that uses tech to streamline the supply chain can handle many more orders for much less cost than a lumbering, inefficient and traditional operation. This brings us back to the protection issue again. If the government “protects” industry by preventing the companies that outsource a core strategic asset like tech, then those companies will not fail as fast as the market would have them.
Our system is one of capitalism, yet there are those who would destroy the system by introducing additional corporate welfarism. Let those who have the skills and knowledge thrive; dont give those who cant or wont do what it takes to make it in todays environment a “fair shake” because they cant be bothered to run their business as if it must make a profit.
I must say that all the arguments in your article against going offshore not only sound defensive but also naïve.
For example, one of your arguments was the “frustration of remote project management.” I have no idea whether this is just your opinion or a researched argument. At the outset its just that—an opinion. Nowhere have I seen that “remote project management” is different from or [more] difficult than “home” project management. In fact the distinction itself is ridiculous. Any project in which work is done at two physically separate facilities has elements of “remote project management.” In such cases, 99 percent of all projects (irrespective of whether they are IT) are “remote projects” requiring “remote project management.” If conducting a videoconference sounds “frustrating” then you must have a very frustrating job.
The second argument about “security” is again nothing but an attempt to play into the current paranoia prevailing in this country. “Credit card” thefts have occurred nowhere except in the United States. Moreover, your straight argument about all offshore projects having a potential security problem betrays your lack of knowledge of how offshore software projects are handled. Most of these projects which involve “credit cards” and “medical data” are developed using “dummy data.” Never are actual consumer data exposed. In fact this is not only the case in offshore projects but also inshore projects. You may want to attend a software development seminar to see this for yourself.
The third argument and which is the real intent of all these motivated articles is of course the “jobs” issue. I must say that it does hurt when suddenly jobs disappear to faraway countries. But maam, this is globalization that is relentlessly preached by your representatives in the U.S. Congress and practiced by your administration. Your trade representative Mr. [Robert B.] Zoellick recently browbeat the rest of the world into accepting another round of trade negotiations when agreements from previous rounds have not been implemented. And guess whos the culprit? The United States and Europe. Both have stalled on “pharmaceuticals” and “agriculture” which bring untold misery and loss of “livelihood” (and not just jobs) to developing countries citizens. In fact the United States to this very date continues protecting its inefficient textile industry with quotas and qualitative restrictions. Because of the loss of traditional competitiveness of our economies and its disastrous effects, we have to learn your way of the “game.” And now that we are beating you at it you start crying hoarse, just like a loser.
So next time some “6-ft tall U.S. grad” comes crying to you for a job, you may want to ask him to “look beyond the horizon” for a job in India or China. They are more tolerant of “aliens” than you are.
I would like to respond the response from Mainak Mandal
Mainak accuses you of being naive on this subject, when in fact he is the naive one.
I work for a major financial corporation as a project manager and work first hand with outsourced offshore resources. These resources are doing functions that were previously handled by onshore (employees and contractors) two years ago, including both software maintenance and software developing.
Mainaks first argument of remote project management being no different from home management is completely false to me for the following reasons:
1) 12 hour time difference. Home project management means project managers are available during “working” hours to provide leadership, in both technical and business situations. Too many times I have seen code being developed based on assumptions and then being scrapped when 8 hours later the correct business decisions is made by the onshore project manager. Eight hours of wasted code writing seems small, but when you have a team of 40 offshore resources doing this, thats 320 hours wasted. In some cases where time is of the essence, the code is released as is, thus creating a source library of inefficient and high maintenance code.
2) Cultural differences. It is rare that you find an offshore resource in India who will answer “no” to the following question, “Do you understand?”. In India, a “no” answer is a sign of weakness. This makes managing the offshore resources even more difficult because you have to truly read between the lines and with out face to face contact this makes it even more difficult. Writing down the tasks in a detailed format costs just has much as having onshore resources do it, so there is no cost benefit there.
3) Local economic impacts. Its a known fact that IT jobs are being moved from the US to India. The results is a 20% unemployment rate for IT jobs in the US and a IT boom in India. This creates a high turnover rate of offshore resources so that you never know resource availability and also resource experience. Over the past year Ive noticed a decrease in the experience level of the offshore resources I deal with. This is mostly because they are just new out of college as the more experienced resources have gone to other companies that pay more. An example of this is a recent project involved doing CICS work I managed. The offshore resources had little experience with CICS programming. After sending CICS training material, code templates and examples to the specific offshore resources, they were able to get the tasks completed involving CICS programming. However once completed, the offshore resources that worked on this project promptly left the outsource company for a another that offered more money for CICS programmers.
Mainaks second argument regarding “security” is also completely false to me. The corporation I work for has the entire software maintenance outsourced to offshore companies. This means production problems are handled offshore and in order to fix the problem in most cases, full access is required to the production data to zap the bad records or full access is required to the source code to apply a emergency source change. Other functions with the offshore resources is performing on request reports, which again requires the offshore resources to have full access to production data. The production data contains everything involving clients and business partners. Another security issue is the sending of “secure” data via unsecured email. Ive seen many email chains going to and from various offshore outsourcing companies with production client information attached to it. The scary part is, that I wish I could say this is just my corporation that is doing this, but I know it is not. There are no controls on what and what can not be sent to the offshore companies.
Mainaks third argument is just plain strange to me. The fact that he is saying he is beating the US at its own “game”, I find very disturbing. This is some one who obviously does not like the United States, yet works in the IT industry in the United States.
Your probably getting a lot of emails regarding this, but I do have more comments on offshore outsourcing. Ill send out more comments as I get time.
Thanks for your support in this issue and please keep up the work.
Just a note to say thanks for putting the whole offshore sourcing issue into perspective. As the media relations manager at a high-tech PR firm, I know first-hand its not just the technologists who are affected. Its also all of the support jobs that the IT industry creates, such as marketing, sales, HR, that admin clerk down the hall whos a single mother, etc. They too are feeling the pain in a very deep and personal way, just as that former Air Force pilot did. Yes, priorities such as perks got skewed in the 90s, but now the pendulum has swung way too far to the other end. Somethings got to give.
Media Relations Manager
Tech Image Ltd.
Yes, the reason we are not hearing the fussing is the ever-increasing offshore flow (3 million in 10 years??) and the 500,000 “temps” remaining, coupled with the nearly 20 percent tech unemployment. In NoCal, consultant/contract tech jobs are almost nonexistent. The pay rates for these jobs are running at about 40 percent of 96-97 rates (not the dot com boom rates)—at $35/hr 1099 (tax status), no bennies. This is for highly experienced, senior folks. A friend of mine, a very good, 40ish senior programmer, finally found a job after six months: $5,500/month 1099 no bennies—about a six-month job. He started 1/1/03 and has yet to be paid.
That “crying American” is not at all an exaggeration nor an exception. He is probably expecting bankruptcy, foreclosure and the disintegration of his family. I spoke with a friend recently who, in the 97-01 period, had a booming tech temp business (job shop). He told me business is way down: He has very few jobs (not one he could tell me of), and those jobs are being placed out of our area (NoCal). So we are truly in a bizarre sector depression here, with home equity extracted from unsustainably high home prices propping us up.
And our CEOs still rake in tens of millions and the politicians do the same.
It would be interesting to know how many of Mr. Janjuas employees are H-1B.
Did you ask him?
In N. Cal, there is 20 percent unemployment in tech. And yet H-1Bs, the laughably named “temporary” workers, remain.
How many bankrupt, tearful Americans will it take to get Washington to send these H-1Bs home?
Lisa Vaas responds:
Integnology Corp. has in fact employed workers on H-1B visas on a “necessity basis,” done back when the market was at a point when hiring was difficult, Janjua said. His rationale, in his words: “If you look at the percentage of people in our company on H-1bs, its a small percentage. Theyre extremely capable, wonderful people making contributions. Theyre paying their taxes here. Half their income goes to taxes and the other half is spent here. That doesnt hurt our economy. But if you send money overseas, that hurts.”
Thanks for your continuing and wonderfully cogent columns (eWEEK) on the sorry and horrendously growing global outsourcing travesty.
Obviously I, like far too many others, have been sadly affected by this and look forward to a dismal future unless Im among the fortunate few who find some miracle.
Please continue on with your noble work and God bless!
A useful and pertinent article “Perils of Going Offshore”. Thanks. The problem is there are no real perils—only benefits—at least in the short term. The value proposition of going offshore is just too attractive. And actually the quality of the work has improved dramatically.
The dangers are longer term. Five to 10 years from now at the rate things are moving the software industry will have been hollowed out with much of the expertise and intellectual capital located offshore. The Iraqi war has shown powerfully what a commanding lead the U.S. military has in large part because of the underlying software technologies behind the weapons of war. (Its also highlighted that the friends of 20 years ago can become the enemies of tomorrow—this time intellectual assets are being transferred offshore.)
The commanding software lead may not exist in the future.
Interestingly there is now a move in the UK for unions to become involved in this issue. I suspect for the first time a lot of IT workers in the United States are beginning to have at least a passing interest in joining a union. Like most IT workers Ive not been a great union supporter, but I guess tough situations change viewpoints.
Having been around in this business since the early 1970s, Ive been through a few bouts of unemployment. Texas collapsed in 1986-87 (combination of oil and real estate and the S&L crisis). In this time frame one company here advertising for a dBase programmer got 300 resumes.
Offshore hiring works if you have a big-iron project, like what you might see in an insurance company. There are so many costs (language and cultural issues, travel, long-distance phone charges, etc.) that a project, or a company, below a certain size cant use it.
Then there are other issues: do Indians understand American accounting and business practices, do Chinese and Philippinos understand English, and who deploys the project at the user site? This is kind of like buying a Japanese robot for an American car manufacturer. In this case you replace three people on a production line sticking body panels on a car with an industrial engineer being paid three times as much. At the end of all this someone has to make it work where its used.
We dont even need to get into the defense industry, which requires American citizenship, etc. Then we have all the state and local governments, including school districts, that wont really go offshore, even when it can be justified.
All of this is the small potatoes. The bigger question is: does the United States, in total, consume more IT services than it produces? In short, if jobs are repatriated until the American workforce is fully engaged, then there are still people doing work offshore? This is not a trivial question.
The reason it isnt is that India and China have expanding middle classes (the middle class in India is 20 percent of their population, or 200 million people). Middle class consumers drive cars, use telephones, check into hospitals for surgery, send their kids to secondary school and college, buy life insurance, use credit cards, and travel. All these things require vast amounts of computing. At what point do either or both of these countries have to import IT services? When that happens, where will such services come from?
If the United States attempts to raise trade barriers on IT services, the real damage will come from choking off a process that is creating vast markets for all kinds of American goods and services. These will be high-tech products, including literally rocket science, concentrated mainly in medical technology, government services (air traffic control systems and environmental remediation, as two examples) and design tools (CAD, software development, FEA, etc.). What we wont be writing here is more banking and insurance apps: projects that require lots of bodies because of the heterogeneous nature.
The new grad is going to have to start at a tech level, fixing PCs, installing networks, developing websites, and other stuff that is a bit beneath the 4-year Bachelors degree-holder. If their writing and communication skills are less than highly polished, these need to be improved. A lot of people got into computing related jobs through other avenues; some started out as engineers, others accountants, and some were just practical people that ending up having to master computers because they couldnt find anyone to take care of them.
Since when was a degree a license? There is still plenty of work out there; it just isnt ideal.
First, Id like to thank you for the very neat commentary on Eweek titled Perils of going offshore. I guess we need a lot of this kind of commentary delivered at the door step of each member of the Congress.
Outsourcing is fast becoming a household name in Corporate IT these days. From the Chairman of the Board to CEO to COO to CFO to CIO and all of oohhhhs out there in corporate ladder are being convinced about the need to explore these frontier. A lot of them are still looking for ways to recover their huge IT investment because of the fact that what theyve bought are poorly conceived (i guess because of marketing hype) or simply doesnt work on their environment.
While I agree that theres a need to maximize IT investment or keep the cost down (whichever you want it) and outsourcing would play a key role in this area. I do believe however, that with current economy (in general perspective), offshore outsourcing would not fit at this moment. Why? Ok, lets look down past for at least a decade. We all know that Information Technology have played a huge role in keeping US economy afloat. Creating huge demands for highly skill people that US cant supply so it has opened its door to foreign people who can provide the necessary knowledge to keep the job done. Now, as the bubble burst and demand stumble, we now have a glut of the same people taken out of corporate payroll because the money are not there anymore. And a lot of these titans though still needs the services but they cant simply commit their meager financial resources due to the fact that they want their bottom line look attractive to investors.
Enter offshore outsourcing. People believed that its the best option that Corporate IT has in order keep the ball rolling while keeping the checkbook at bay. But in reality check, your simply robbing the local IT people the job that belongs to them because you want to save money. But try to sum up everything and youll find that its the whole US economy thats being battered. Weve seen what happened in more than a decade and now everybody is trying to figure out how give life to this ailing economy.
So which one do you want to accomplish first, keep your checkbook as you outsource the job offshore or bring life to this huge economy that spills to global kitchen table. Should we start in our own backyard or clean up the mess of our next door neighbor.