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ziggy (25)

ziggy
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Journal of ziggy (25)

Tuesday December 23, 2003
02:21 PM

Outsourcing IT

[ #16477 ]
The whole sending-development-projects-to-cheap-offshore-programmers meme is getting rather thick these days.

There are two very important economic truths to remember here. First, the high-wage "developed world" does not have a monopoly on brilliant people; there are some stunningly smart people living where the cost of living is much less than it is in high rent districts like Sillycon Valley, NYC and London. (Ziggy's Corrollary to Joy's Law: most of the smart people live somewhere else, too.)

Second, the kinds of jobs that are subject to wage arbitrage are commodity jobs -- not the kind of rewarding, high wage jobs that really need someone talented, but the kind of jobs that need a warm body with a pulse to wrestle with the computer until something works. These jobs used to be here, and they were crappy jobs here. When I worked in NYC, these were the kinds of jobs where immigrants would toil away for less-than-market-rates doing busy work because, well, no one capable would do them. (The only prospect for advancement here was for the "manager" who was responsible for ever-larger teams of "programmers" and billed the client for ever-larger sums.)

Here's some food for thought

What's getting outsourced? The IT equivalent of coal mining jobs. My undergraduate degree is in metallurgical engineering and I've spent some time in mines. Its dirty, but high paying work that doesn't require much formal education. People love it. But its also subject to lots of ups and downs and over the years had steadily declined.

My prediction is that while hundreds of thousands of IT jobs will go off-shore in the next decade, we'll gain more than we lose as we move up the hierarchy. We do a poor job of meeting demands at the top of the hierarchy and there's plenty of work to do. When you think about the real problems that IT should be solving, its amazing how little attention we pay to them.

-- Phil Windley on IT's Coal Mining Jobs

And this:

The project “uses natural-language understanding” which, last time I checked, more or less amounts to being able to pass the Turing test, which a bunch of the smartest people in the world at MIT and Stanford and so on have notably failed to do, and it seems just a little unlikely that this bright shining goal can be offshored to wherever the cheap programmers are this year.

-- Tim Bray on Offshore BS

If I had a googlable copy of Future Shock handy, I'd point out the passage where Alvin and Heidi Toffler talked about the bogeyman of mechanization in the 1950s and 1960s. They both used to work on an aircraft assembly line, one of the first kinds of jobs that got mechanized. The Tofflers reminded us that no one should shed a tear over these jobs, because these are the kinds of jobs that nobody actively wants in the first place.

It's one thing to tighten bolts for a living because the the nation is at war. It's a completely different thing to expect a long career for the rest of your life as a "bolt tightener" because that was the skill you learned during WWII.

Right now, the IT sector is in the process of weeding out the "bolt tighteners". The challenge for us now, as Phil points out, is to find and solve the problems that need to be solved.

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  • The effect of mobile capital is twofold:

        1. Move production to cheaper places
        2. Reduce the price of commodities

    This is entirely predictable, and exactly what we have seen happen. The
    standard justification given for free trade in intro Econ classes (production
    moves to where it's most efficient, and everyone wins -- "comparative
    advantage") works only under the assumption that capital does not move between
    the areas under consideration. Which might have been a reasonable assum
    • As for whether this process hurts or helps US workers, I think it's a toss-up (sure, you lost your manufacturing job, but look how cheap all the stuff is at Wal-Mart!). Sometimes, there are very clearly disastrous social effects of radical capital shifts: think US Rust Belt (Gary, Indiana), or the equivalent area in northern England.

      Yes, as a large-scale trend, loss of US jobs offshore is a very devistating issue that no one is really trying to fix in the US. I find it utterly depressing that Wal-Mart

  • not quite... (Score:3, Insightful)

    by mir (51) <xmltwig@gmail.com> on 2003.12.23 15:16 (#26803) Homepage Journal

    I think you are wrong on two counts here:

    First the kinds of jobs that can validly be outsourced are jobs that I want to do. I know because I telecommute from another continent, albeit one with a cost of living that's similar to the US. If I can do it from afar, so can someone equally smart from a cheaper country. And I like my job and I don't think it's a crappy one. It's just that it can be effectively done by anyone with a telephone and a good internet connection

    And even if you were right, if only crappy jobs could be validly outsourced, haven't you worked in corporations before? Once the trend has started, they will outsource everything, even it doesn't make sense. Sure it will be non-optimal, but by the time enough PHBs realize it, you, I and many others might have been out of a job for long enough that we wouldn't be in this industry any more. A policy doesn't have to make sense to be applied. And I don't buy the usual "but in this case you shouldn't work for this company anyway": I have worked, and enjoyed working, for companies that made really questionable decisions in some areas, but which still provided me with a very good job.

    The archetypal job that I do not see being outsourced is salesman, because you need the face to face interaction. Would you rather be a salesman, selling software developed in a cheaper country, than the guy writing that software?

    --
    mirod
    • I think you're confusing outsourcing with the everything-is-moving-offshore hysteria.

      Sure, there's going to be lots of outsourcing all over the map. It's not just the blue collar cleaning jobs, but also programming type jobs as well. It's been happening for years, and will continue. The difference is that most of the outsourced jobs in IT are going to IT contractors and consulting firms that concentrate in something, like hosting, development, network administration, whatever.

      Those jobs aren't going

      • I think you're confusing outsourcing with the everything-is-moving-offshore hysteria.

        Yes I was confusing the 2. My main point though is that no matter how effective outsourcing or offshoring really is, if it becomes trendy to do it, then companies will _have_ to do it, otherwise they stock will suffer. And anyway the managers will go to seminars, or listen to HPCs (Highly Paid Consultants) that will tell them that that's what they should be doing, and eventually they will.

        I believe the 2 are very similar

        --
        mirod
  • You may not be able to google it, but you can search it at Amazon [amazon.com]
  • Can you give me a few examples of IT jobs that cannot be moved to another country, and why?

    Exclude the ones where physical and cultural proximity is important -- requirements, sales, UI design, customer hand-holding.
    • Can you give me a few examples of IT jobs that cannot be moved to another country, and why?

      Exclude the ones where physical and cultural proximity is important -- requirements, sales, UI design, customer hand-holding.

      A good portion of government and defense related IT jobs cannot be moved offshore. Some of that work is done by offshore subcontractors, but certainly not all of it. And there is a limit to how much can be sent offshore due to political, legal, security, or privacy issues. With added r

      • Hang on a minute. I thought the gist of your post was that offshorable IT == lower-skill IT. So I asked for examples of IT jobs that were so high skill they could not be exported.

        Now your objections are more about the whole outsourcing concept, which applies within as well as outside the USA. (Hawaii is quite a few timezones away.)

        Did I misunderstand your original post? Otherwise I'm still waiting for examples.
        • Hang on a minute. I thought the gist of your post was that offshorable IT == lower-skill IT.

          Not quite. I started out by saying, «the high-wage "developed world" does not have a monopoly on brilliant people...». Martin Fowler recently wrote [martinfowler.com] about ThoughtWorks, and their experiences with development centers in Bangalore and Melbourne. For example, he concludes (in part):

          As I write this, offshore development is very fashionable, but it's still too early to really understand its true stre

        • So I asked for examples of IT jobs that were so high skill they could not be exported.

          Actually, I was arguing the inverse -- it's not that high-skill jobs will not be sent offshore, but rather the jobs that will be sent offshore in pursuit of lower labor costs are low skill IT jobs.

          For example, accounting systems are a very well-understood domain for IT. Yet each large company's accounting system has unique wrinkles. At the very large end of the spectrum, it's not a problem amenable to a generalize

          • I think I see what you were saying now. So the limits to outsourcing have to do with the separability of IT from domain knowledge. Since the domain knowledge resides in the USA, the more interesting jobs will reside in the USA.

            That may be true for the short term, but I'm not sure about the long term.

            • one day soon if not already, important customers/markets will not be American.
            • even for American customers, domain knowledge isn't all that tied to the USA. American companies consult around the world too.
            • So the limits to outsourcing have to do with the separability of IT from domain knowledge. Since the domain knowledge resides in the USA, the more interesting jobs will reside in the USA.

              That's a good chunk of it. Some work will remain here (or in Canada, or Switzerland, or ...) because there's a critical mass of learning and people available to crack a problem. There's no reason why India or China can't become the leading center of computational astrophysics, but NASA Goddard will probably remain on

      • A good portion of government and defense related IT jobs cannot be moved offshore.

        Nearly all our Goverment and defense related IT here in Denmark is done by a US company - OK most og the workers are danish, but the owners and the management is american.

        It bothers me quite a bit, but it doesn't seem to bother the goverment, who happily sold our CPR (Central Person register, cnf. the US Census and the registry of births and deaths rolled into one - it contains your current address social status and so on

        • OK, it's not outsourcing the IT jobs, it outsourcing the management, but I think that it's even worse.

          Right, this is neither outsourcing nor offshoring IT. There are similar situations all over Europe, where foreign companies (usually American) are employing locals to do work for the local market. The jobs are staying in-country, not moving to Elbonia because IT costs are cheaper there.

          The same thing is happening in the US: instead of direct employment, lots of jobs run by contracting organizations