U.S. Programmers at Overseas Salaries

BusinessWeek Online U.S. Programmers at Overseas Salaries Wednesday December 3, 8:27 am ET By David E. Gumpert

It's the great unanswered business-economic question of our day: How do we replace the hundreds of thousands of information-technology, call-center, paralegal, and other jobs rapidly exiting the U.S. for India, Russia, and other low-wage countries? The main answer that the so-called experts put forth, without a lot of conviction, is that we'll create new "high-value" jobs to replace those leaving the U.S. What are those jobs? No one seems to know. ADVERTISEMENT

In the meantime, the matter of overseas subcontracting appears to have become open-and-shut. If you're an executive with half a brain, you can come to only one conclusion when tallying the differences in costs between hiring computer programmers in the U.S., vs. India or Russia. These days, the jobs are going to Indians and Russians.

OFFSHORE BARGAINS. But what if there was another way to skin this particular cat. That's what Jon Carson wondered a few months back, when confronted with the need to complete a major programming project in a hurry, and at the lowest possible cost. Jon is a serial entrepreneur whose latest venture, cMarket, helps nonprofit organizations increase their revenues by putting fund-raising auctions online. I have known Jon for years, and -- full disclosure -- have invested in several of his ventures. I only learned about his computer-programming dilemma after the fact, though.

cMarket had been pursued, as many business owners are these days, by an intermediary who promised he could cut cMarket's programming costs significantly by outsourcing his needs to India. So last spring, when cMarket signed an agreement with the national Parent Teachers Assn. [PTA] to handle online auctions for its 20,000-plus local chapters and, simultaneously, began taking on charity auctions from Boston to Miami, Jon knew he had to rapidly expand cMarket's capabilities. He had his IT director call the intermediary and tell him that cMarket needed four programmers, pronto. Jon knew the numbers for experienced American programmers doing the specialty work he required: $80,000 a year, with benefits adding an additional $5,000 to $10,000 per programmer. The intermediary came back with the number for the services from India: $40,000 per programmer.

It seemed like a cut-and-dried decision, the kind U.S. executives are making every day without hesitating, but for some reason Jon hesitated. Much as he likes the idea of having projects completed at the lowest possible cost, and as responsible as he feels to investors, he didn't like the feeling of becoming someone who callously pushes jobs to other countries. "I'm in the entrepreneurial economy," where competition around both costs and revenues is very intense, he says. "But I was personally very uncomfortable. This situation brought me face-to-face with how easy global disintermediation is being made for folks, to the point where it is almost inevitable."

TOUGH CALL. As he thought more about his decision, Jon realized he had a valid business reason to hesitate: As the head of a startup that had been going for less than a year, he wasn't at all certain he should take the risk of having essential work done at a far-off location by people he didn't know, and with whom he could communicate only via e-mail and phone. Still, there was that matter of nearly $200,000 in annual savings. Each time he hesitated about making his decision, various confidantes reminded him about the big money at stake.

And then Jon had a brainstorm. What if he offered Americans the jobs at the same rate he would be paying for Indian programmers? It seemed like a long shot. But it also seemed worth the gamble. So Jon placed some ads in The Boston Globe, offering full-time contract programming work for $45,000 annually. [He had decided that it was worth adding a $5,000 premium to what he'd pay the Indian workers in exchange for having the programmers on site.]

The result? "We got flooded" with resumes, about 90 in total, many from highly qualified programmers having trouble finding work in the down economy, Jon says. His decision: "For $5,000 it was no contest." Jon went American. And the outcome? "I think I got the best of both worlds. I got local people who came in for 10% more [than Indians]. And I found really good ones."

HERE AND NOW. In the interim, Jon has promoted two of the programmers to full-time employees, at standard American programming salaries, rather than risk losing them to the marketplace. And he is convinced that having people working onsite gives him control over quality and timing that he wouldn't have enjoyed if he had subcontracted overseas.

While cMarket has solved its immediate challenge, the implications of Jon's approach are potentially mind-bending. What if other companies begin taking the same approach -- offering Indian-style wages to American workers? On the positive site, we could begin to solve our job-creation problems. But on the negative side, America's standard of living would inevitably decline. There's only one way to find out for sure how it all might shake out, and that is for other executives to replicate Jon's experiment. The results could be quite interesting.

Of course, I have already given you two ideal contemporary examples, of the harm that tariffs cause. I could mathematically prove them to you, but it won't change your uninformed opinion. You have, after all, made up your mind- facts be damned.

Sounds like another lame excuse from someone, who when challenged repeatedly to do so , can't back up his own assertions and rhetoric.

You should either provide the mathematical proof or admit you can't. -

Sounds like another lame excuse from someone, who when challenged repeatedly to do so , can't back up his own assertions and rhetoric.

Think what you like.

Your analysis of the Airbus example given by Crapitalist Eric is spot on.

Your conclusion demonstrates a fundamental lack of understanding- the same as harpseal. Neither you nor he follow the example of Airbus or Japan through to their logical conclusions. Not surprising- most people can't.

You have ye3t to cite facts you are simply anothere lying SOCIALIST. All socialists are pigs. All those who seek to destroy America are worse than pigs. Therefor, you are....

Now once more cite me one specific example of atariff causing a NET/B> harm to the American economy. Do not simply cite higher prices for consumers than they could get from untariffed imports there are as you have pointed out numerous instances where tariffs may be used to encourage industries. You seem to think that only nations other than the USA have the right to have thier industies encouraged.

You brought up airbus and I am so glad you did as it is a prime example of nations using subsidies to provide false competition that harms Americans.

As I said before, you're too stupid to consider seriously.

Okay you ignorant arrogant idiot sociailaist anti-American piece of offal. I have had enough of your personal attacks.

Further commentary, FReepmails, etc. will be studiously ignored.

Please do ignore. I do not liek trying to be reasonable as I have been by asking you to cite a specific case or more than one where an American tariff did net harm to the USA. I have given you a link to a 62 page quantitative analysis showing how tariffs are needed in specific cases. Yet all you seem to be able to do is provide links to economic papers that give theory but no substance and even then that theory may well be arguing for tariffs as much as against them. Mark Twain once opined that one should never argue with a pig a wastes your time and anonys the pig. Well I gather I ahve hereby annoyed the pig.

harpseal= ignorant putz.

Well sociailist eric if this is the best you can come up with I was being generous to state you did not have the intellect to pour P*ss out of your own boot with an instruction manual.

WE have a bunch of posters who seem to think the USA should kowtow to every foreign economic whim because some call it free trade. It is not Free Trade that is a major part of the problem. Free Trade implies access for American made products to foreign markets on an equal footing with foreign producers being able to sell in American markets. Unfortunately that is not what Clinton's trade representatives negotiated for the USA. What we have is a set of socialist rules that are falsely labeled Free Trade.

Tariffs are IMHO neither all good nor all bad. They are a tool for international negotiations to maintain the American economy. I find it amazing that to be in favor of Free Trade one must be for foreign tariffs on American goods because it helps industries in foreign countries for government subsidies to industries for export like Airbus and still call it a free market. They do not want the government interferingly in the market as long as we are only talking about the American government. They love every other government interfering in the American economy to the detriment of our economy.

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