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U.S. Programmers at Overseas Salaries
Businessweek ^
| 12/03/03
| David E. Gumpert
Posted on 12/03/2003 11:17:18 AM PST by Pikamax
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.
TOPICS: Business/Economy; Culture/Society; Foreign Affairs; News/Current Events
KEYWORDS: outsourcing; trade
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To: 1rudeboy
I guess we are saying the same thing then.
The real problem is the waste of quality talent in America. Management tends to bulk everyone into the same talent pool when clearly there are those that add far more value than the average schmoe. Corporations need to do a better job of identifying the "real talent" and paying them according to their value rather than taking a hatchet to entire organizations simply because they were mismanaged and therefore underperform.
To: Pikamax
But on the negative side, America's standard of living would inevitably decline. Uh. . .decline like the same programers making $0.00 per year?
62
posted on
12/03/2003 1:23:52 PM PST
by
William Terrell
(Individuals can exist without government but government can't exist without individuals.)
To: 1rudeboy
In the longer term, no. If no one studies medicine, then salaries will rise until the demand for physicians is met. You are talking about 20, 30 years. In the meantime the excellent medical schools and hospitals will be disbanded and you will never recover what was lost.
Such free market shock "therapy" applied to whole economy will bring America to the Third World level. And you do not have guaranty that there will a significant recovery. Argentina is an example. There is not God given promise that USA is immune from the permanent decline.
63
posted on
12/03/2003 1:24:25 PM PST
by
A. Pole
(pay no attention to the man behind the curtain , the hand of free market must be invisible)
To: Pikamax
Great article.
I bet ALL the positions would get filled by Americans, willing to work @ that salary. Specially if one has been out of work for awhile.
IT jobs outsourced to India are already being outsourced from India to China. The Dilbert cartoon from a couple of months ago may come true.
64
posted on
12/03/2003 1:24:51 PM PST
by
stylin19a
(is it vietnam yet ?)
To: optimistically_conservative
"This makes sense to me. CS majors, especially technical programmer types, enjoyed inflated salaries from the 90s "new economy" boom that went bust. There was little doubt there would be a correction. My concern was there would be an overcorrection as a result of "technician dumping" from temporary visa programs and "outsourcing."
And then there's the other sort of outsourcing, on the lower end of the scale...things like customer support. While there have been some bad stories about offshore tech support, there are also some decent stories as well. For the customer, the bottom line is getting the answers to solve the problem.
Frankly, tech and customer support was lousy when it wasn't offshore. I recently got tech support for a product, and it was excellent, despite an Indian accent on the other end of the phone.
OTOH, I think I read recently that Dell was bringing customer support back onshore, so maybe the trend will reverse.
Bottom line here is that companies who want to keep their development business local can adjust salaries down and still attract workers. So, that's what will happen.
65
posted on
12/03/2003 1:26:18 PM PST
by
MineralMan
(godless atheist)
To: 1rudeboy
You don't think that creates an incentive to hire/retain quality physicians?
No, I think it creates an incentive to get out of the business.
66
posted on
12/03/2003 1:26:59 PM PST
by
lelio
To: RockyMtnMan
"Management tends to bulk everyone into the same talent pool when clearly there are those that add far more value than the average schmoe. Corporations need to do a better job of identifying the "real talent" and paying them according to their value rather than taking a hatchet to entire organizations simply because they were mismanaged and therefore underperform."
Good corporate managers do just that. Trouble is...there aren't that many good corporate managers. All those MBAs and no brains.
67
posted on
12/03/2003 1:27:57 PM PST
by
MineralMan
(godless atheist)
To: 1rudeboy
My clients would whine about my prices every day. But they still bought your product, right?
To: Capitalist Eric
The ultimate winner, just as the theory says, is the consumer...And the ability of the consumer to purchase inexpensive goods is a terrible basis for a trade policy.
69
posted on
12/03/2003 1:29:28 PM PST
by
Cacophonous
(War is just a racket.)
To: superloser
In my last year on the job, approx. 13 million dollars' worth.
70
posted on
12/03/2003 1:31:48 PM PST
by
1rudeboy
To: MineralMan
They jumped at it because 45K is better than the zip amount they get unemployed. Can't wait to see this same idea applied to plumbers, doctors, other repair people.
71
posted on
12/03/2003 1:44:38 PM PST
by
RJS1950
To: RJS1950
"They jumped at it because 45K is better than the zip amount they get unemployed. Can't wait to see this same idea applied to plumbers, doctors, other repair people."
Yeah, but there's a shortage of skilled plumbers, auto repair folks, etc. Plenty of jobs out there for folks with those skills.
72
posted on
12/03/2003 1:47:37 PM PST
by
MineralMan
(godless atheist)
To: Cacophonous
And the ability of the consumer to purchase inexpensive goods is a terrible basis for a trade policy.
As long as it works for daddy's little boy and his trust fund...
73
posted on
12/03/2003 1:48:52 PM PST
by
ARCADIA
(Abuse of power comes as no surprise)
To: MineralMan
Yeah, but there's a shortage of skilled plumbers, auto repair folks, etc. Plenty of jobs out there for folks with those skills.
That is because those jobs are still protected. You have to work for 5 years at sub-minimum wage to qualify for your journeyman's exam, and then a few more years to pull your master's license.
74
posted on
12/03/2003 1:51:43 PM PST
by
ARCADIA
(Abuse of power comes as no surprise)
To: MineralMan
Bingo! Only folks with a job think that no job is better than one at a lower pay scale than was once prevalent. Shoot, we've got so many out-of-work programmers since the collapse of the sofware market that you'd have no problem getting applicants at 40K a year. Programming is like a lot of professions. Sure anyone can do it if they goto school etc, but they'll stick suck at it (ie inefficient crappy code and or slow) and stink up the place.
During the dot com bubble everybody and their brother started thinking they were "IT Professionals", when half these guys can't even fix their own computers. In my opinion IT and paticularly programming is something that you have to have the knack for in order to be any good. Either you got it or you don't. I have been writing software since I was in 6th grade, and I am 30 now, and I have worked with plenty of programmers who, frankly, just aren't any good. A college degree in CS means little. I have a High School diploma and I have worked all through this recessionette. The really good ones all still have jobs. Do you know why? Cause they make their employer's lots of $$$.
Always remember hardwork and dedication are no subsituted for talent and luck. ;-)
75
posted on
12/03/2003 2:06:49 PM PST
by
Smogger
To: MineralMan; phreebass
Bottom line was that the best four of the applicants I interviewed and tested were crappy programmers. None could type worth a darn and spent most of their time fixing typos in the code. None had any creativity in creating this simple test application. I examined the code each had produced and it was the sloppiest nonsense I had ever seen. This is what the IT bubble has wrought us. A gaggle of whiners with CS and Information System degrees that can't fix their own computer's, and can't program for shit. Now I gotta here everyday how there are millions of programmers out of work. Well I got news for you. Most of those guys sucked anyway, and they probably WOULD have been lawyers except they are greedy and thought IT was the way to make a "fast buck"
76
posted on
12/03/2003 2:13:04 PM PST
by
Smogger
To: ARCADIA
"That is because those jobs are still protected. You have to work for 5 years at sub-minimum wage to qualify for your journeyman's exam, and then a few more years to pull your master's license.
"
As opposed to spending 4-5 years as a Computer Science major, running up a big student loan debt? I fail to see the difference, frankly.
At least the apprentice trade worker is earning something while learning, and knows there's going to be work somewhere for a journeyman.
Even if building slows down in one area, you can move to another. Lots of construction trade folks moved to Vegas a few years ago. Lots of construction there.
Programmers don't have that option, these days. The jobs are just plain gone, partly due to offshore outsourcing and partly due to the collapse of the industry. You remember that...back in the late 90s?
77
posted on
12/03/2003 2:13:26 PM PST
by
MineralMan
(godless atheist)
To: MineralMan
"Management tends to bulk everyone into the same talent pool when clearly there are those that add far more value than the average schmoe. Corporations need to do a better job of identifying the "real talent" and paying them according to their value rather than taking a hatchet to entire organizations simply because they were mismanaged and therefore underperform."
That's why you work for a SMALL company. Big companies are full of evil MBA MORON'S. The President of my company is right down the hall. He knows myself, and the rest of our tiny IT staff of three makes him $$$ and he breaks us off accordingly: around six figures with salary and bonuses. I'll NEVER work for a large company. Ever. They treat people like dirt and their management can't identify the REAL TALENT. I'll just go to work for myself.
As for the big companies we compete and work with. All I can say is that the Peter Principle is alive and well.
78
posted on
12/03/2003 2:20:30 PM PST
by
Smogger
To: Smogger
"That's why you work for a SMALL company. "
Very good advice!
79
posted on
12/03/2003 2:22:21 PM PST
by
MineralMan
(godless atheist)
To: Smogger
"This is what the IT bubble has wrought us. A gaggle of whiners with CS and Information System degrees that can't fix their own computer's, and can't program for shit. "
You're right there. I've met a lot of "programmers" who couldn't figure out anything they hadn't already copied from someone else's code. A lot of these folks are the ones who are out of a job.
Programming is an art. You can either do it or you can't. If you can do it, then you can get better and better at it. If you can't think like a programmer, you'll never be worth a darn at it.
Frankly, I'd rather recruit someone who could write a really good letter and teach him/her programming than hire some beardless wonder right out of college who thinks he/she is hot stuff.
That said, there are some really good programmers coming out of college. You can tell which ones they are, by asking them to show you some stuff they've developed just for fun.
Any programmer who doesn't enjoy fooling around with code is not one I'd ever hire. When I had problems with some complex issue in an application I was writing, I used to quit and sit down and write something fun just to amuse me. Then I'd return to the money project, refreshed and ready to write.
I have little sympathy for the poor excuses of programmers who are out of work. The good programmers are still working, and making excellent money. The bad ones...well...never mind about them.
80
posted on
12/03/2003 2:29:21 PM PST
by
MineralMan
(godless atheist)
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