Once Again, Offshoring Not As Big A Deal As Many Believe

from the and-again dept

Tue, Feb 12th 2008 9:44am — Mike Masnick

For many years, we've contended that offshoring wasn't such a big deal. We did make it clear that it probably didn't work as well as some supporters claimed, and that many companies that offshored work would later regret it. However, that didn't mean that companies should be barred from offshoring, or that offshoring was necessarily bad. Yet, whenever we post about it, people show up to complain that all American tech jobs are being outsourced and there are no jobs left for techies in America. We've already seen that that's untrue, and these days, it's actually quite difficult to hire strong techies in many companies. Last year, we saw a report that noted that most tech companies did very little offshoring -- and now there's a new report coming out looking at all different kinds of American companies (not just tech ones) and discovering that most CIOs aren't huge fans of offshoring either. They've discovered what we predicted back in 2003: sending jobs overseas because they're cheaper is often less efficient, because of the difficulty in managing people from so far away in a different time zone. So, can we finally put to bed the myth that offshoring is killing off the American tech job?

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Filed Under: offshoring, us companies

33 Comments

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Etch, 12 Feb 2008 @ 10:08am

Offshoring very overrated
I agree. I've seen the negatives of offshoring first hand in several companies I've worked at over the past 7 years and in almost every case, its proven to be more problematic than useful! The problem has to do not only with difficulties in managing groups overseas, but most importantly with the quality of work you get when you offshore!

To get good quality work done on projects that were offshored, you will need to spend almost as much as you do to do it locally!(well maybe a little less, but for the few extra bills you can have a full team working locally under your nose) After all, it IS cheaper for a reason, and with the world's quality of life starting to average out amongst continents, especially in Asia and Africa who are becoming more and more developed and are experiencing an economic boom, the Salaries of good experienced workers has also risen in proportion.

The fact still remains that to get a good return on your investment, you have to spend money, whether its locally or internationally. And being in the IT field myself, I can say with almost full certainty that there still is a HUGE demand for IT jobs here in North America, more than there ever was in the past 7 years, and offshoring hasn't affected that.
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Joel Coehoorn, 12 Feb 2008 @ 10:52am

It's not killing the number of jobs available, but it is putting the squeeze on wages somewhat.
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Dave Barnes, 12 Feb 2008 @ 10:54am

Beaten to the Punch
http://www.pbs.org/cringely/predictions/bob/2007/prediction_bob_20070106_001454.html
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Flip, 12 Feb 2008 @ 11:25am

Not so fast.
I see no data to support either side; one way or the other. But, key players are still offshoring. Try getting a progammer job at Cisco or GE and you'll not find many. In fact, CiscoWorks programming IS done in India. I know this for a fact. I'm waiting for an update even as we speak. How long? Only since October 2007. Also, the Time Warner OCAP tuners (Scientific Atlanta) are now owned by Cisco and guess what? They are "Java Powered." The highly touted "Navigator" menu system is extremely bad. Calls to Time Warner customer service are right through the roof. Faster, better, cheaper. You only get to pick two in this world and these companies have opted to leave out the "better."

On the other hand, more and more companies ARE outsourcing the low hanging fruit like network monitoring offshore.
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angry dude, 12 Feb 2008 @ 11:37am

Mikey strikes out again and again and again...
hey, Mikey , who do you work for ?

Are you a journalist or a paid PR hack ?

There is a site for tech jobs called dice.com
just go there and read some recent testimonies on discussion board

If you are a techie (which you are not, of course) it might get you really really depressed...

Do you know that you can hire a very expericnced (5-6 years) senior Java developer in some contries in the Eastern Europe (not India) for less than 500 bucks a month?

Now the question in basic economics:
How can anybody in US compete with this salary ?
I guess if you live on the street and eat in McDonads (well, no , Mac is out of question, more like using soup kithenn for homeless) then you can. Otherwise there is no f****** way

America DOES NOT need more programmers, engineers and scientists
American korporations need more and more cheaper slaves

Watch Lou Dobbs
it 's just an organized attack on the middle class
And NO, there is no f****** way those offshored jobs are coming back to US...
same happened to textile industry and to many other industries - they are just not coming back. period.
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Ed, 12 Feb 2008 @ 11:39am

Well, the outsourcing to other countries doesn't look as lucrative as it seemed as few years back. I think the bubble is not too far

http://technology.millionface.com/2007/12/15/bursting-call-center-economy-of-india/
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Ed, 12 Feb 2008 @ 11:39am

Well, the outsourcing to other countries doesn't look as lucrative as it seemed as few years back. I think the bubble is not too far

http://technology.millionface.com/2007/12/15/bursting-call-center-economy-of-india/
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angry dude, 12 Feb 2008 @ 11:48am

Re: Offshoring very overrated
"And being in the IT field myself, I can say with almost full certainty that there still is a HUGE demand for IT jobs here in North America, more than there ever was in the past 7 years, and offshoring hasn't affected that."

This is plain BS

Just quit your IT job and try to find another one...
In 3 months you'll sing a different song

But better stay put, dude... 2008 is going to be a tough year, especially for IT
IT spending is being cut all over the place
banks are hurting from mortgage crisis and laying off IT staff by the thousands

http://seeker.dice.com/olc/index.jspa
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Kevin, 12 Feb 2008 @ 12:14pm

Offshoring what?
I think that the term "offshoring" means different things to different people. Some people think of it in terms of ouffshoring call centers to India like most of the major PC manufacturers (especially Dell) did. I think in a lot of those cases it backfired several years ago, to the point where Dell started bringing those jobs back. I had to call IBM server support the other day and got a message that said I was being transferred to the call center in Atlanta, and sure enough the guy who answered had a southern accent. I thought that was nice.

But there's other kinds of offshoring too, and the place where I see the most complaint is in the programming area, especially with Java. I don't know why, but for some reason Indian universities latched onto Java as the technology of the future, and now those universities turn out Java developers by the millions. So if you're a developer, especially a Java developer, it is very likely that your job will be offshored. Some companies did it by contracting out. Other companies I have worked for actually bought Indian software companies and then started transferring workload to the new division. I suspect that that is the sort of offshoring (but not outsourcing) that is becoming more prevalent. By keeping the work in-house but off-shore they have a lot more control over the project, and they can still take advantage of some of the cost savings and massive workforce with coding skills.

But there are some areas where it really doesn't work well to off-shore, and usually that is in customer-facing areas.
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known coward, 12 Feb 2008 @ 12:23pm

article is incorrect.
when i was a IP provisioning cog for AT&T, many of the support jobs were off shored to the Philippines. I would tend to agree that the managers were disappointed with the results of that process, lots of PO’ed customers, but that did not bring the jobs back.

My colleagues experience is still that it is harder to get an IT job now than it was 15 years ago. whether that is due to other economic factor's or offshoring is of course impossible to tell. But from an american tech workers prospective, offshoring is not a good thing.
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MillionFace, 12 Feb 2008 @ 12:28pm

IT Offshoring.
There are always reasons to say this or that. It's all about what suits you. Here's my article: IT Outsourcing has started to Sour thanks
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Ashwin Mudigonda, 12 Feb 2008 @ 12:44pm

H1B is the Achille's Heel
Techdirt, please point your extremely analytical analysis to the H1B quota. That will decide the fate of the tech sector in this country. There is an alarming trend going on. There are many contractors/consultants who ostensibly make business happen between students fresh out of colleges from India and big firms here that do not want to hire someone full time. The very fact that the H1B quota is lapped up in a day last year is an ominous prediction of the future. With the majority of the H1B vacancies taken up by these full time H1B visa filers so as to enable husbands and wives the H1b, many students graduating from American universities with an undergrad are fighting this deluge. This system is so inefficient that many students who graduated, spent 5 years in the states, will have to return home without a job here because they cannot obtain a H1B.

There was a difference made between the ordinary person and a person having a MS or PhD applying for H1B. I think this needs to also include undergrad students graduating, because these students have a huge loan to payback and they need the job in the country.
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angry dude, 12 Feb 2008 @ 12:50pm

Re: IT Offshoring.
Drop dead punk
you have no clue

oursourcing, H1Bs, constant changes in technogy landscape, wages going down etc. etc. etc.

IT is dead in America

Amen
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angry dude, 12 Feb 2008 @ 12:57pm

Re: H1B is the Achille's Heel
techdirt doesn't know what H1B stands for..
Neither they know that a lot of those H1Bs are cramped into 1-bedroom appartments especially in the SF Bay area, literally taking their turns to sleep..
How can you compete with them on price ?
IT used to be a profession affording middle-class standard of living in America
Not anymore
Amen
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CHL Instructor, 12 Feb 2008 @ 12:59pm

"it's actually quite difficult to hire strong techies in many companies."

Bullshit. You want strong techies? Offer a decent salary, and you will be overwhelmed with applications.

Oh, the decent salary is the sticking point, right?
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Herman Anonymous, 12 Feb 2008 @ 1:20pm

Think Offshoring is not big deal ? Then read this
I am a former employee of a medical imaging company in California. This company employs nothing but H1B Visa personnel for imaging "scientists", I was relegated to GUI, and DICOM network even though I have years of experience in image processing. I was then let go, so that they could bring in a consultant from India NEST, where they have hundreds of software engineers in cubicles writing code, associated with DICOM, medical imaging, and networking. Never will I think that offshoring is no big deal, I will always vote for the candidate whose first priority is the environment, and jobs for americans here in the USA. I used to also think the offshoring would never affect me in the medical imaging industry, boy was I wrong !!!!
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angry dude, 12 Feb 2008 @ 1:30pm

Re: Think Offshoring is not big deal ? Then read t
"I will always vote for the candidate whose first priority is the environment, and jobs for americans here in the USA"

tough luck dude

all of the pres candidates are bought by korporate america
they don't care about your little pathetic jobless existence

Better do something simple like plumbing, carpentry or pet sitting
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IT Admin in Michigan, 12 Feb 2008 @ 2:01pm

Re: Offshoring very overrated
My personal experience with offshore programming has been over the past 2 years. Our company got BSed into thinking that a team of consultants here in the States could have a computer programming project implemented within months using overseas programmers.

Not only did the project never get completed, but we lost over 1 Million Dollars and basically have no one to hold responsible. Ever hear the term "You can't squeeze blood from a turnip"? Well that is what we are facing with the consulting firm.

The biggest hurdle I saw was not the quality of the code, but the communication gap between the consultants here in the states and the overseas programmers. Because they worked in totally different time zones, it resulted in a bunch of missed deadlines. The project went from a promised couple months to 2 years and was never completed. Thank Goodness I was not in charge of that project :)
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Danny, 12 Feb 2008 @ 3:10pm

Mike's points are generally true
I ran a series of CIO focus groups about two years ago that dealt with IT jobs and skills. Some of the issues in Mike's post surfaced in those discussions.

1. CIOs were outsourcing for several reasons, among them:
a. They were under intense pressure in the 02-05 time frame to significantly reduce costs NOW. Outsourcing was a way to show short tern bottom line gains, even if the CIO knew the model would not hold long term.
b. CEOs became enamored with the idea of offshore outsourcing and pushed it on many CIOs. The CIOs realized in many cases that management/quality would be an issue, but were pushed by CEOs and/or Boards to give it a try.
c. CIOs were more willing to offshore ancillary IT than core or strategic IT -- so offshore experiments made sense in some of these cases.

2. Regarding US jobs; both sides are correct. It is very tough for some IT professionals to get jobs; and there are key IT skills that are scarce.
a. There are systemic reasons for this. Many very good IT people simply possess skills that are outdated (not currently in demand). There is a mismatch of skills supplied and skills demanded.
b. Some of these IT people are retraining, some are not. It is very hard to retrain as you need to figure out what to retrain in, sometimes you need to acquire base concepts before becoming cutting edge. And even if you do all that, you are competing for jobs against 23 year olds who've been developing these cutting edge skills in school - and are happy to work for much less than a 45 (or 55) year old is will to work for.
c. Some of the cutting edge skills are held by American youth and my foreign youth. Companies are looking to import that foreign youth to meet skill demand.
d. In a growing number of situations, companies are looking for "soft" skills to complement "hard" skills. Of course, this isn't all jobs--but I was very surprised in our focus groups to hear of often this is true. Some (not all) of the older, experienced IT guys are weak on the soft skills (Angry Dude above is a perfect example of that) :-)
Angry Dude may have cutting edge IT skills, but no doubt the personal presentation he makes here comes though in his job interviews; his lack of soft skills likely disqualify him from many jobs.
e. The reason for this soft skill demand ties to the types of systems being built and how IT is being managed. CIOs report they --more often today than a generation ago-- need to put their IT guys into the same room (physical or virtual) as their customers. Therefore, they want IT guys they trust being in the same room as their customers. Also, more projects have outsourced components (onshore or offshore) and they need IT guys who can effectively navigate multi-org projects. These are soft communication and teaming skills.
3. The irony in all of this is that outsourcing (on and off shore) means that companies are less likely than a generation ago to invest in long term growth for their employees. They see coders as something they hire in for a project (insource, so to speak), not someone who makes a career with their firm.
a. Therefore, they've cut hard skills training budgets to keep people current.
b. Therefore, they've cut management development, MBA, and related support to help their IT employees develop soft skills.

So, to an extent, US industry is responsible for creating their own skill mismatch and resultant shortage of what they need - while at the same time lots of IT guys are out there with ill-fitting skillsets.
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Etch, 12 Feb 2008 @ 3:26pm

Re: Re: Offshoring very overrated
I'm not saying 2008 isn't going to be a tough year. It definitely will be!! The US is in a Recession!
I'm saying 2007 was an excellent year, and for all the hype and talk about how IT is losing jobs to overseas companies, it turns out it really wasn't that significant, at least not at this point in time!

And Offshoring works both ways by the way! I've dealt with companies in Dubai who "offshore" to the US all the time, due to the established Quality of work they get back!

So its really a 2 way street.
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Etch, 12 Feb 2008 @ 3:30pm

Re: Re: Offshoring very overrated
That's EXACTLY what happened to my old company! (albeit the losses were a lot less than in your story)
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Anonymous Coward, 12 Feb 2008 @ 3:32pm

THIS IS CAPITALISM!
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angry dude, 12 Feb 2008 @ 7:11pm

Re: Mike's points are generally true
What kind of bullshit are you preaching here dude ?

Skillz, skill sets, soft skillz, cutting edge skillz....

BULLSHIT!!!

Any competent Unix programmer from 20 years ago can pick up your shitty "cutting edge" skillz very quckly
and otherwise beat the crap out of fresh college grads whos first class is in Java
Gotta learn microprocessors, assembly language, operating systems, data structures etc. etc.
Skillz hm...
GFY dude
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angry dude, 12 Feb 2008 @ 7:16pm

Re: Mike's points are generally true
Gee, this comment is really annoying for any tech person

Post it to http://www.dice.com discussion board

They will kick your non-tech management ass

Skilllllzzzzzzzzzzzzzzzzzzz
Just GFY
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Anonymous Coward, 13 Feb 2008 @ 4:04am

Not True: I work for a major telco - They have outsourced more than HALF our Center and LAID off 100s of Local workers - OUTSOURCING IS TAKING AMERICAN JOBS! And I do hope they regret it!
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Sitting in my HOME office, 13 Feb 2008 @ 7:46am

And - That is why we all have time to be on here c
Cause we are seeing those jobs disappear...

* Call Centers - I don't care, never liked to deal with them anyways
* Manufacturing Process - Don't care, they get good educations and work for sh1t money, hell I would do it

* IT and technical jobs - THAT JUST SUX, I have yet to have a good interaction when a faulty piece of sofware gets here, and I DON'T HAVE MY D@MNED LOCAL REP to call on, cause he has NO CLUE since it was all design overseas.

AHHHHHHHHH

Although .. I will say that I like Etch comment .. that it is a two way street... I have heard of some of these projects coming to the US... just would like to see them hit my desk, They may pay terrible to their associates there, but there contracts are gold
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me, 13 Feb 2008 @ 8:55am

Re:
CAPITALISM, YOU ARE OBVIOUS A MORON
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Jeff Schwandt, 13 Feb 2008 @ 12:29pm

Skills mismatch
Part of the skills mismatch is due to the "Years of Experience Myth" (http://www.codinghorror.com/blog/archives/001054.html). In a nutshell, this myth produces this type of job req: "must have x years of experience in [skill]". The best mismatch is when skill is only x-1 years old.
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angry dude, 13 Feb 2008 @ 2:20pm

Re: Skills mismatch
And that's why a lot of very intelligent and extremely qualified people are leaving IT...

All this BS form hiring managers:

X years in AJhvkjHEbk version 11.i
y years in ASJhvbkjbvhe version 5.8
z years in awjhgvjkWBVHe VERSION 12124124124124124
..........................................
..................................... ....

You have only two choices: either lie on your resume or quit IT
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karma, 13 Feb 2008 @ 7:34pm

What goes around comes around.
I remember as a young child having a premonition that the rich countries of the world would become poor one day and the poor countries would become rich. Perhaps that is starting to happening now. A 'paradigm shift' as they say.
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Danny, 14 Feb 2008 @ 1:55pm

Re: Re: Mike's points are generally true
"Skilllllzzzzzzzzzzzzzzzzzzz
Just GFY"

This is evidence for my point exactly.

There are some people out there who have a set of technical skills, but lack human communication skills and/or self awareness skills (think emotional intelligence).

They can't get tech jobs. And at the same time, there are lots of tech jobs out there to be filled.

And they are clueless as to what is happening.

It is kind of sad when you think about it.
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angry dude, 15 Feb 2008 @ 7:28am

Re: Re: Re: Mike's points are generally true
Dude,

it is YOU who are clueless

tech job market is VERY BAD right now and is getting worse by the day...

Now GFY
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Spike, 18 Feb 2008 @ 4:27pm

A Lack of Understanding
There's some real misunderstanding about what is going on these days.

First of all, pay for software engineers is at parity between the US and India. Companies are outsourcing to India because there's an availability of resources there that is totally lacking here.

Second, the latter point is driving another phenomenon, which is the massive transfer of software projects to internal departments located in India. Oracle, Microsoft, Google, and quite a few others have facilities in major Indian tech cities like Hyderabad and Bangalore. It's not outsourcing, it's within the company, but the lack of resources here is driving development there.

I'm in the industry, and I don't know anyone who thinks there are enough resources here in the US for the amount of work required. The US educational system is failing to produce the number of qualified developers needed, and of course it is going to go overseas.

Finally, Indians don't want to come here on H1Bs. There are plenty of jobs at home, and the standard of living on software developer pay is much, much higher. It's not necessarily a wonderful thing, since they are living high off the poverty of the lowest working classes, but it's the way it is.

It's unfortunate that so many people with absolutely no first-hand knowledge of what is happening have such strong opinions based on nothing but feelings. It isn't going to help the situation to spout without any knowledge.
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