Why Moving to India Won't Really Help IT

I, Cringely ^ | August 7, 2003 | Robert X. Cringely

[narby]

Our company is a good example of this. We started with a 130 person company designing and producing imbedded guidance computers for agriculture.

We've since been pared down to about 30 people, loosing the chaff along the way. The hardware/software design team is only about 6 people, is highly skilled, and quite old, that has the ability to do almost anything.

There have been efforts to hire "cheap" people in a branch office in Canada to take over some of the technical work from us expensive americans. But the results have been a disaster, with a one month project stretched to two years, with the results finally having to be brought back to the US for one of the expensive americans to bail it out. But they still haven't learned, and the "cheap" technical person is still working, and still not producing anything of value.

In the mean time, the company can't get rid of any of us, lest they be completly lost (although, don't put it past them to do it anyway).

[dirtboy]

I'm an extreme example of this - our company runs a web-based CRM system that I developed for them using one (1) employee, namely me. When things are needed, I build them. When something needs to be fixed, I fix it. And I did the whole thing from scratch. It took about a year to fully get into operation (but benefits were started around three months into that).

I developed an MCIF system for a large bank, working for their vendor. It was me and occassional a couple of othe programmers. When the bank later took it in-house, it took 20 people.

[tm22721]

The only defense aganst the rush to offshoring is to get into 'defense' work.

In the defense world, not even subcontractors can be offshore entities due to security concerns.

BUMP

[stylin19a]

Ironically, there lies here an enormous opportunity for someone. An organization of talented people that can get its collective head around this problem and begin to see its industry, its work, and its goals in a different way will have a terrific advantage. IBM and companies like it are vulnerable.

Not sure what you agree with in this statement as it says nothing.

I am part of an ESOP IT Consulting company. The 5 of us decided early that one of our goals was to protect the business we were servicing. The Indians cannot do this today...tho they may be able to in the future. We decided we needed a blend of product and services. We have accomplished this goal...weighing toward the product side.

We have NO overhead, no debt and are privately owned with now 70 employees. We are light, fast, mobile, responsive and not greedy. We have a mix of expertise from mainframe to PC to Web. We have a mix of technical and business expertise. We generally charge rates not seen since the 80's.

No matter how much value we provide (you will usually be getting more than you asked/contracted for)..CFO's see the short-term dollar savings using Indians. It's too bad, cause when the announcement "cleanup in aisle 8" is made...if we choose to take on the assignment, the rate will be substantially more than one from the 80's

[kevkrom]

The communication hit you take offshoring is not nearly as small as the current bean-counters are estimating.

Exactly. And the #1 reason software projects fail is poor communication. Good gravy, has no one in management ever read "The Mythical Man-Month" by Frederick Brooks?

[SteveH]

If a U.S. employer said out loud, "Gosh, we have a lot of 50-something engineers who are going to kill us with their retirement benefits so we'd better get rid of a few thousand," they would be violating a long list of labor and civil rights laws.

Those laws were passed in a bygone age in which it would be unthinkable for American companies to "outsource" jobs overseas.

The current regulation is heavily lopsided and the odds are stacked against the aging American professional, IMHO, by a combination of high technology, outsourcing policy, and selective regulation.

Because of the selectivity of the regulation, the effect of free trade policy is to degrade the American work environment. What good are domestic employment regulations (eg workplace safety, environmental protection, retirement benefits) if one's job can be outsourced offshore on a moment's notice?

[Snuffington]

Not sure what you agree with in this statement as it says nothing.

It probably depends on your perspective. To someone working for a company in the school-girl crush phase of offshoring, it's an important and relevant statement.

[Iris7]

This is the part I liked.

"There is somewhere in almost every company a spreadsheet showing a cost-benefit analysis for every worker. It all comes down to a single lifetime number that is the difference between the expected earnings to the corporation that are made possible by the direct labor of that employee, and the total cost of that employee to the company in current wages and future benefits. Nobody admits the existence of this spreadsheet, which is probably illegal, but it is there. And at some point, it indicates in many cases that a worker has reached a condition where they are likely to cost the company more in future benefits than they will earn the company through future labor. At that moment, that employee becomes expendable. Forget that the business situation could change, altering the numbers. Forget that the employee, if he knew his job was in peril, might take action to improve his productivity.

Forget that the negative number could easily be the result of a management error or misstep, and have nothing to do with the employee's effort. Forget that the calculation could be just plain wrong. No matter what happened to get the company and the worker to that place, it is in the interest of the company to get rid of the employee as soon as possible."

Too true. As Stevenson pointed out, "Fifteen men on a dead man's chest, yo ho ho and a bottle of rum."

[dennisw]

ping

[harpseal]

Ping

On or off this list let me know.

[harpseal]

Regarding this articles point IMHO if we make the business envirornment better in the USA and the full actual costs of teh offshoring policies clear then the management may actually make a correct decision. Of course one must never uderestimate the power of stupidity in management decisions.

So in an erfort to try to get a sane trade policy perhaps we can get enough people to send the following plan to the polidiots and we can start to get on track againg.


In no particular order of importance.

1. Get rid of government subsidies for offshore investment of US companies. OPIC is the first such program which should go but support of World Bank programs that subsidize the outflow of Capital would be another.

2. Use tariffs on those nations which are engaged in unfair trade practices such as currency manipulation (China and India for example), those nations which refuse to open their markets to US products (China for example with its 50% tariffs on US consumer goods and non tariff barriers), those nations that subsidize competition to American Industry (airbus for example) and those nations which have slave conditions for their workers.

3. Use tariffs and other means to prevent the relocation of jobs offshore that are essential to the national defense. If necessary take control of the company seeking to export vital technology or industry by means of eminent domain (No I do not like this last option and I will only defend its use as an absolute last resort like say in the case of rare earth magnets essential to smart bomb technology). Provide a hardened, widely distributed infrastructure to supply all that is needed for our military units and civil defense that can be continued to be deployed in the event of any military attack.

4. An immediate end to guest worker programs. If people wish to come to the USA to work and make a life let them immigrate according to the rules.

5 Provide economic development zones where the corporate income tax is zero for operations within these zones. In order to operate in this zone a company must agree to only purchase American components if available and employ only American citizens or legal immigrants in these operations. These economic development zones shall be eventually be expanded to include every bit of every state once the benefits are shown I would like them to be totally implemented immediately but I realize4 that may be overreaching.

6. Scale back unnecessary regulation including the tort system. Institute a cap on punitive damages, limits on class action suits, and limits on liability to the actual percentage of liability with no plaintiff able to collect if said plaintiff was involved in the commission of a felony at the time of the alleged tort or was more than 49% negligent in the alleged tort. Note that the loser in a frivolous lawsuit shall pay the attorney fees of the winner. There are many other regulatory structures that also need to be included that need to be included such as repealing the Family leave mandate, getting rid of OSHA etc.

7. Increase the domestic content in purchases by the Department of defense and give absolute preference in non-domestic content to proven allies of the USA over say the French or Germans. The only reason any content for DOD purchase may come from non US allies is that content is not available elsewhere and is essential.

8. Do not allow expense involved in moving operations overseas to be included in business expenses under the IRS code.

9. Prosecute for perjury anyone who has made a false statement in order to employ an H1B or L1 visa worker. I will be lenient on the actual perjurer if he/she was ordered to make this false statement and he/she provides testimony to aid in the conviction of the person ordering the perjury. Just because a person is a CEO does not give them a pass on criminal behavior.

10. Prosecute anyone who orders the transfer of vital defense technology or funds a R&D project that could be of use to our military overseas except to strong allies of the USA. Make the necessary enhancements to our espionage laws so that continued support or funding of any R&D in a nation whose government has threatened the USA is guilty of espionage. The UK and Australia come to mind as meeting these criteria for being eligible for transfer of technology first. There will be other nations and a gradation of what can be transferred to which specific nation. Under no circumstances may technology be transferred to any nation whose government has threatened the USA within five years without a complete change of government or specific exemption from Congress and the administration.

11. Deport all illegal aliens immediately and take measures that prevent the entry of any more illegal aliens. Fine all companies knowingly employing illegal aliens Criminal sanctions should be imposed on anyone helping an illegal alien stay in the USA in violation of our laws.

12. Decrease the punishing levels of taxation on companies and eliminate the double taxation on corporate dividends. See effects of item 5 for how minimal this will be if item 5 covers the entire USA. Eliminate all IRS provisions that inhibit free use of independent contractors by businesses for example section 1706.

13. Eliminate the minimum wage so that the worker can be paid based on productivity. Overtime compensation will remain the same but instead of 150% of the "wage" the worker would receive 150% of the production pay. If one through 13 are enacted # 14 becomes an irrelevancy as no one will be working for that low a wage.

Now since I started posting this plan another idea has come up that in my opinion is a very good policy that stands on its own. Now I give credit to Jim Gibson and Freeper Ed_in_NJ for coming up with the idea, separately to the best of my knowledge. However I can be corrected on that. The tariff phrasing is from Jim Gibson.

“I suggest that the US Customs Department charge a $1,000-per-container inspection fee on every container entering the United States. This fee would be used to completely fund the cost of inspections. If we assumed that a four-man team could fully inspect two containers a day or about 500 per year, it would require 48,000 inspectors. Allowing for at least 2,000 support personnel, we would need at least 50,000 workers. Because these workers would require high intelligence and skill levels they should earn at least $30 per hour. At 40-hour weeks plus benefits, I estimate the cost per worker to be over $75,000 per year, all paid by the foreign manufacturers. Even so, this would still leave over $2.25 billion to cover all other costs. Any revenue not used would be used to compensate American workers displaced by foreign imports. “

I urge and encourage everyone who agrees with this plan and or the terror tariff idea to communicate this to every politician you can think of.

[the gillman@blacklagoon.com]

...At the same time, the need for large numbers of these people has vastly increased...

Then why have they all been fired?

[riri]

There is somewhere in almost every company a spreadsheet showing a cost-benefit analysis for every worker

He doesn't really believe this does he?

[harpseal]

Because of the selectivity of the regulation, the effect of free trade policy is to degrade the American work environment.

Now just what is Free Trade about India's 2nd highest tariffs in the world?

What good are domestic employment regulations (eg workplace safety, environmental protection, retirement benefits) if one's job can be outsourced offshore on a moment's notice?

See the attached plan for getting a better investment climate in the USA and ending the insanity. let us go for a sane trade policy instead of the current unfree, unfar, and unamercan trade policy mistakenly referred to as Free Trade.

[FreedomPoster]

Managers pushing offshoring should be forced to read The Mythical Man-Month, and to think about the fact that the communications paths that are the basis of that book are operating at about 30% efficiency when the two nodes are separated by 10 time zones and a culture and language difficulties.

[FreedomPoster]

Hadn't seen your post when I made mine just above. Great minds and all that.

[EdReform]

read later...

[LibertyAndJusticeForAll]

from the article:
[You see, "offshoring" is another word for age discrimination.]

The Mythical Man-Month predates the employees still working. They probably never heard of it.

The last I heard, the class action suit against Sun for age discrimination failed, although it seemed like a straight-forward case.

[Paul Ross]

If DaVinci or Gallileo were alive today, they'd look at the tools we have at our fingertips and say "Why aren't you all rich?"

By 16th-century European standards, all Americans are extremely rich. Even the ones on welfare.

[Marauder]

when design is moved along with programming

I can almost see sending programming tasks offshore once the design is done, with exceedingly tight controls and excellent, clear documentation. I have, in fact, written several tasks from such documentation.

But he who sends both functions to India might as well jump into a woodchipper. Just my opinion, of course.