Replies

In case you don't care to read the entire (long) article, here are some things to consider:

The implications are significant: cost savings continue to accrue the higher up on the skills ladder companies go with their offshore outsourcing. Another way of looking at this offshore advantage is to compare the absolute wage premium required to hire a college rather than a high-school graduate. The premium could run to from $5 to $15 an hour in the United States, compared with $2 to $4 an hour in the Philippines, so it is much more cost-effective to hire a college graduate there, even if the quality of education in the two countries isn't entirely equivalent.

many other skills are more abundant in Asia than in the United States. China, for example, produces 350,000 graduate engineers every year, compared with 90,000 for US engineering schools. And most leading Indian IT-outsourcing firms operate at level five—the highest degree of expertise—of the IT service capability maturity model, whereas most internal IT departments in the United States operate at levels two or three. (The service capability maturity model (SCMM) is a standardized way of measuring the sophistication of software-development skills and processes.)

After initially targeting low-end commodity products, the original-design manufacturers have steadily upgraded their technological capabilities and expanded their operations into more sophisticated computer product categories. They offer Western companies not just savings on labor but also faster cycle times, lower components costs, tighter inventory manage-ment, and more adaptive supply chains. Although original-design manufacturers still design products based on specifications supplied by OEMs, they increasingly design and sell their own products as well, capitalizing on growing investments in R&D.

Notice what's happening. We've substantially reduced opportunities for U.S. technical workers. Therefore we have fewer people opting for that type of education. The companies then do more offshoring until, eventually, we have no domestic capability in these high tech areas.

And now, point 1 - what do we do when electronics design capability is a lot greater in China than in the U.S.?

Point 2 - Do we really think that 350,000 engineers won't generate more new innovative ideas than will 90,000 engineers? And what does this imply for future technological leadership of the world?

Point 3 - What does the foregoing imply regarding economic, technological, and military power of China versus the US?

Bonus question: Was that cheap toaster at WalMart really worth giving China global dominance?

And which dialect should your children learn, Mandarin, or Cantonese?

Wait until there is a Chinese Mckinsey. Boy, will they be howling for protectionism then. In the end, Americans will have to decide if they want to be a nation or a outback in the Global system.

What is clownish is these "very smart" people at Mvkinsey (and they are quite bright, I have worked with them) cannot grasp what this will do to their and their children's own lives down the line. They think that they can survive outside the nation state, and, most peculiarly, Western Civilization. Brother, are they in for a rude shock. The problem is that they will sink us all before they realize what a blunder it all is. This all goes to show how cosseted and mired in their own abstractions our current business and political "leadership" truly are.

It is amazing that all of a sudden they expect Americans to take this sitting down, to compete with the third world wages in their own nation. Issues as broad as this will not be settled in boardrooms in the end, and they may well be settled on the barricades.

On the other hand, a part of me likes to see management consultants pushing this for it may mean it is just another management fad, like the Zillion others that they have pushed that have failed. They seem to generate a fad every 7 years or so. What was the last one? Oh, the "new ecomony,> that's right.

On a side note, management consultants must love offshoring because they can hire talent and not have to put them in the partnership laddering structure. It means fewer partners. That works until a fogging company figures out how to compete with them. Of course, senior partners will be retired by then.

There is one caveat: the efficacy of CMMI methodologies. They have not been used at level 5 on any broad basis, they mostly have existed in the defense contracting world and in Aerospace. There was a time not long ago when CASE and Mainframes were all the rage, then along came Bill Gates. It is an open question that cannot be resolved until there is more data. The use of CMMI in India does show, however, what sort of American institutions and background the Indian founders came up in. I notice a big push in CMM in some financial firms in NYC. These are hard methodologies to stick too, and could well stagnate into bureaucratic millstones down the line.

On the other hand, they could just make them work.

It seems to me that a problem that the shops that use this will encounter is converting client firms to their methodologies. What if the client will not convert. Then it descends into the standard consulting model, and that is a different business then "software manufacturing." As a consulting organization grows their methodology gets entrenched in the organization and it becomes hard to change it or adapt to changing circumstances. That is one of the reason (IMHO, at least) that the Big Six is now the Big 4.

Of course none of this will stop off shoring. The only way to stop it is to see it as a national security risk and penalize the off shoring companies. There must arise a consciousness about the issue and some real leadership toward curbing it for this to happen.

Bonus question: Was that cheap toaster at WalMart really worth giving China global dominance?

Well considering the interdependnce between economies of the various countries (including both China and the U.S.) that the elites around the world have created. That by buying that toaster I helping in the short term to crash the U.S. economy. BUT because of that interdependnce, in the long term, when the U.S. economy crashes, it is taking the rest of the world's economies with it, thus spuring possible regime changes in several counties (including China and the U.S.), which might be helpful to us in the long term.

You just got to think things through.

Note to the authors of this article, DO NOT WIZ DOWN MY BACK AND THEN TRY TO TELL ME IT IS RAINING!!!!!!!

Also notice how they harp on performance. I do not know of anyone that has dealt with a vendor that would agree with this. There is a definate conflict of interest when someone builds something that will have someone elses name on it. Always, just good enough...never great.

But Americans' comparatively high wages are just fine when it comes time for these companies to peddle their crap. Talk about picking low hanging fruit.

IMO its past time for the US to start considering some kind of local content restriction.

The service capability maturity model (SCMM) is a standardized way of measuring the sophistication of software-development skills and processes.

Flat out untrue. SCMM measures how bogged in paper your development process is.

The practical implications are that if you don't know EXACTLY what you want you can't get it from a level 5 SCMM shop. They will build what you think you want (they expect you to have done all the hard analysis) at extra high cost, long schedules and just marginal functionallity (think EDS). They will then rape you on maintenance. In the end you will fire them if they have'nt pulled you down.

They are only effective for very large projects where being buried in documentation is the only way to keep control of a large (and often unskilled) development staff.