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An Independent Study on Offshoring IT? 642

vsprintf writes "What are the real effects of offshoring on the U.S. technology sector? Pick your economist on the subject. The Bush administration's Gregory Mankiw says it's all good, and exporting jobs is just a new way to do trade. In Congressional testimony, Ralph Gomory says a little bit is okay, but too much is bad, while Herman Daly says it's just plain bad. The ITAA's paid mouthpiece, Harris Miller, says it must be good because IT workers in India wear Nike tennis shoes. At last, it appears the IEEE-USA has persuaded Congress to pay for an independent study to determine how offshoring really affects U.S. IT."
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An Independent Study on Offshoring IT?

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  • Nike shoes (Score:5, Interesting)

    by mrchaotica ( 681592 ) on Monday September 06, 2004 @05:04AM (#10167216)
    So IT workers in India are wearing shoes made in Indonesia. How is this good for the US economy, again?
    • Re:Nike shoes (Score:4, Interesting)

      by ceeam ( 39911 ) on Monday September 06, 2004 @05:05AM (#10167223)
      US gets the money (Since IT companies and shoe companies are US-based financially).
      • Re:Nike shoes (Score:4, Insightful)

        by Senjutsu ( 614542 ) on Monday September 06, 2004 @05:08AM (#10167233)
        And this is good for anyone who isn't an exec at Nike, or significant shareholder therein, how exactly?
        • Re:Nike shoes (Score:3, Insightful)

          by ashwinds ( 743227 )
          and it should be - why ? Someone buys shoes somewhere with money they have earned - earning money for someone making the shoe and I should benefit?
          • Re:Nike shoes (Score:4, Insightful)

            by Senjutsu ( 614542 ) on Monday September 06, 2004 @05:17AM (#10167262)
            There's an argument there, but it's irrelevant here. The claim here is that IT outsourcing is beneficial to the US as a whole, because the IT engineers in Bangalore wear Nike tenis shoes.

            If this is at all true, then clearly there must be some way in which Indians purchasing shoes made in Indonesia is beneficial to the average US citizen. The question is, outside of the vanishlingly small minority of the population who are either Nike execs or large Nike shareholders, how does the US (taken here to mean the majority of citizens thereof) benefit?
            • Re:Nike shoes (Score:3, Insightful)

              by ashwinds ( 743227 )
              Social Responsibility Vs Entrepreneurial Spirit - always a delicate balance. I guess in a round about way the average citizen benefits because more profits => more corporate tax => more benefits/facilities/amenities/ less personal tax. But I know that it doesnt make sense to someone who has just lost their paying job. As an Indian, I would like to point out a couple of things: 1. Dont worry too much about outsourcing - its America which holds the strings of that puppet show - the Govt. can step in a
        • Re:Nike shoes (Score:3, Insightful)

          by Spy Hunter ( 317220 )
          If Nike does better, all US-based employees of Nike, from execs down to janitors, benefit. The extra money the US workers earn gets spent in the US, further benefiting other US companies and strengthening the US economy. Maybe those janitors will buy computers, benefiting the tech industry. Also, since anybody can buy shares in Nike, the average US citizen is free to benefit from Nike's success directly as a minor shareholder. You don't need to be a "significant" shareholder to benefit from Nike's succe
      • How's that? (Score:4, Insightful)

        by melted ( 227442 ) on Monday September 06, 2004 @05:22AM (#10167281) Homepage
        Corporations don't pay any taxes these days. If this poorly made garbage never enters the US, no US tax will be paid on it.
      • The fallacy (Score:5, Insightful)

        by hopethishelps ( 782331 ) on Monday September 06, 2004 @05:50AM (#10167360)
        US gets the money

        The big fallacy in all the economists' arguments for offshoring is right here: "US GDP increases, so that must be good for the US."

        But what's really happening is this: incomes of a few CEOs go up from (say) $1M to $2M, while incomes of 10 times as many engineers go down from (say) $100k to $20k. That's a gain in money terms, but it's very bad for 90% of the people affected. So, it's bad for the USA.

        • You're leaving out the benefit to the hundreds of thousands of shareholders.

      • Re:Nike shoes (Score:3, Interesting)

        Only the exec's at the companies and the share holders are seeing any of the money, so how is that good for the economy. That is the whole problem with outsourcing and Bush administration policies. They only benefit the high end of the economic spectrum. They are so blinded by greed they don't see that the larger market of middle class Americans is shrinking. Some say that is the plan to break the country down to rich and worker class. Once they break the middle class and reduce salaries the jobs won't
    • Re:Nike shoes (Score:2, Interesting)

      " So IT workers in India are wearing shoes made in Indonesia. How is this good for the US economy, again?"

      Ah, the ironies' of globalisation!

      But Nike is an American company, no?

      The buyer in India spend money on the Nike shoes, Nike pays the labourers in Indonesia, and pockets the difference.

      Some share traded on the American stock market incrases in value, and Americans are happy.
    • Re:Nike shoes (Score:2, Insightful)

      by beavis07 ( 811089 )
      You wanted globalisation America, this is what you get. it's not all wine and roses you know... It's all good fun when the only people suffering are foreigners you dont have to see, but as soon as it hurts a few jobs in the local economy everyone is up in arms about it... Does that not perhaps strike any of you as selfish at all? Reap what you sew america... reap what you sew...
      • Um, guess what, not everyone in the US wanted globalisation, esp. the kind that you are talking about. It's quite obvious that you have a vendetta and like to group people accordingly.
    • That money can be put to better use in other areas in a company.

      I thought that was self evident, but many people here in /. seem to be Stalinists.
  • by Anonymous Coward on Monday September 06, 2004 @05:06AM (#10167225)
    The only people who will benefit from outsourcing are corporate execs and stockholders.

    The rest of us will be left with nothing to do and it won't matter if goods and services are cheaper if you don't have a wage to pay for them.

    Meanwhile the Indians etc. will be undercut by the Chinese and they'll be undercut by someone else.

    Where does it end?
    • by halowolf ( 692775 ) on Monday September 06, 2004 @05:11AM (#10167244)
      Where does it end?

      It all ends when the world abolishes money and robots perform all our manual labor! In the end we should all be better off :)

      • someone's gonna have to pay for those robots, ya know :-)
    • This is the start of the falling of today's economic system, call it capitalistic, call if corporate-centric (opposed to human-being-centric) or call it the "american" way of seeing capitalism...
      • This is the start of the falling of today's economic system, ...

        Not much of a surprise - not built to meet the challenges encountered today. Although, too plain clear for many to see.

    • by Anonymous Coward
      It also greatly befenits us, the programmers in these countries. I make 1000USD monthly by working part-time and when I finish the university I will probably get 5000USD+. All these in a situations where the minimum wage in our country is 75 USD and the average is 150 USD.

      An other idea would be (this just a personal opinion): most probably the lowest quality (e.g. untalented) workers will be fired first, so what we see is a bunch of people who demand money for their very few merits.
    • by jcr ( 53032 )
      The only people who will benefit from outsourcing are corporate execs and stockholders.

      Do you have a retirement plan? If so, then you're a shareholder.

      Get over your zero-sum marxist mind set. The more people working, the more wealth is created. The USA is the economic powerhouse that it is, because there are basically no trade barriers from coast to coast, for some 200 million people.

      As international trade barriers fall, wealth everywhere increases.

      • Yes, IF international trade barriers fall... As I don't see them to do in recent time. Problem is that actually capitalism and free marketing isn't marriage made in heaven - actually they are barerly compatable. Capitalism targets money and money flow torward several magnets, as the free market is all about many, multiple money magnets all over the place. Guess what will happen if free market really will kick in? Sure, it will be our current political and finansial platform at it's best, but do you really t
      • by hopethishelps ( 782331 ) on Monday September 06, 2004 @07:29AM (#10167626)
        Get over your zero-sum marxist mind set. The more people working, the more wealth is created.

        You are correct to remind us that capitalism is not a zero-sum game; wealth is created. It is unevenly distributed, but still, most people have gained in the past. If your boss increases his own income by $100k and increases yours by $5k, well, the bottom line for you is a gain of $5k.

        Now, that is changing. Today's CEO is greedier than Carnegie or Rockefeller or J. P. Morgan were. To increase his personal income by $1M, today's CEO will destroy the careers of dozens of engineers. They are not being replaced by automation, which increases the productivity of other American workers. They are being replaced by Indians and Chinese. To economists, it's a gain if one man gains $1M while 10 others lose $80K each. In the real world, it's a disaster for our society.
        One possible way to attack the problem, without unduly restricting the economic freedom which helps the whole world to progress, would be to recognize what these CEO's are doing. They determine their own salaries, in reality. A CEO who takes home more than 40 times the median salary of employees in his company is basically a thief. "Compensation" in excess of 40 times the median salary in the same company should be regarded as prima facie evidence of theft.

        • by dpilot ( 134227 ) on Monday September 06, 2004 @07:50AM (#10167687) Homepage Journal
          To add to that point, and sound more capitalistic about it...

          That one person's work can be worth more than another's is obvious, IMHO. That it is worth THAT MUCH more (your example is 40X, I'm not going to quibble about numbers) indicates to me that the CEO is grabbing money. I would argue that the CEOs have formed a sort of club, and in that club they can all raise their own pay, and that they have done so completely out of line with what they're producing.

          Even failing companies have highly paid CEOs with golden parachutes. If the CEO were worth THAT much, the company wouldn't be failing. Even when a CEO gets dumped, he gets a severance package that exceeds my life's earnings.

          The disparity is not the issue, the magnitude is.
      • by Znork ( 31774 ) on Monday September 06, 2004 @07:48AM (#10167680)
        "As international trade barriers fall, wealth everywhere increases."

        That would be true if the other factors were globalized at the same time, the way they are in the US. Education, labour rights, workplace environment, worker protection, social development, freedom of movement, etc.

        For the moment, it's hardly as if people can move to a place where there's a lot lower cost of living and follow the jobs. Instead they have to wait for equilibrium to be reached, and those other countries to evolve, until they lose the jobs in question, whereupon another labour pool gets exploited for a certain period.

        Wealth everywhere does not increase from that. Wealth gets concentrated to the abusers of the situation, and a miniscule amount (as small as is possible to maximize profits) gets redistributed to the exploited labour pool.

        The problem with globalization is that it's not going far enough. Opening markets should be accompanied with freedom of movement and balancing social systems.

        Otherwise we end up with the current exploitation system that ultimately will benefit only a few individuals.
      • by Phoenix666 ( 184391 ) on Monday September 06, 2004 @08:37AM (#10167831)
        IAACSE (I am a Chicago School economist):

        The previous post by jsebrech was much closer to what actually happens: corporate execs and shareholders benefit from outsourcing, the average American does not. There is some benefit to a person holding a retirement plan, sure, but do you really think that a 2% rise in your well-diversified , oh, say, $70,000 stock portfolio due to outsourcing will offset the $90K job you just lost because they outsourced you? And I'm not even getting into externalities here, such as unemployment insurance to be paid, broken marriages because of increased stress, lost tax revenue for the government, etc. etc.

        Losing lots of jobs is, I'm sorry to say, a big deal. Especially when no new jobs are being created to replace them, at the same general salary level. The only way for outsourcing to not be a zero-sum game is for them to be able to move to India to keep their same jobs. That's classical economic theory. In order for labor and capital to balance, they must be allowed to seek equilibrium. But while capital is allowed to move freely, labor is not. If your annual income is less than seven figures, outsourcing is most likely a zero-sum game for you at this point.

        • by dave420 ( 699308 ) on Monday September 06, 2004 @09:05AM (#10167998)
          What I want to know, is why someone with a $90k job feels it's their right to have that job, especially when someone else can do it for less. If you're that worried about money, you should be able to understand why your vastly-overpaid job went elsewhere.

          That's the risk you run being in a footloose sector. There are no physical requirements for the IT work being offshored, so there are no reasons for it to stay anywhere. The person who offers the best deal (note: not necessarily the cheapest) gets the business. It's not just charging a low price that gets these companies the IT work, but a certain guarantee of quality. If the US can't compete financially, then it must add some value that can't be added somewhere else.

          It's the free market at work. Something the US has been pushing on everyone for a long time. Something about cakes and eating springs to mind ;)

          • by demachina ( 71715 ) on Monday September 06, 2004 @11:39AM (#10169028)
            Unfortunately you've really oversimplified the situation. Do you work for the Bush administration? They do that too.

            Your glossing over the fact that countries like China artificially manipulate their currencies and wage rates, and have a dramatically lower cost of living. It will simply be impossible for anyone living in a developed country with a free floating currency to complete against them in any field outside of the service sector. If you want to rant about free trade then China has to let their currency float. Until they do they are going to steal the rest of the world blind.

            Amazingly enough the U.S. is evolving to nothing but service sector jobs for precisely this reason.

            To put it another way, if a Chinese worker and an American worker are equally educated, equally qualified and equally hard working the Chinese worker will win everytime.

            Now lets turn to an area where the U.S. did have an advantage. If a creative mind in the U.S. invents something and patents it, or a company invests a bunch of money developing a complex and innovative device. This is a one of a kind device that would insure the company financial success especially with the backing of a patent. You see patents are bad in software but they are priceless in the hardware world. What does China do. It buys the device, reverse engineers it for a fraction of what it cost to develop originally. They sell a knock off for half the price and the American company goes out of business.

            Another path to the same demise, an American company has over the years developed a huge portfolio of intellectual property, a dumbass CEO decides he wants to exploit cheap labor and offshore the manufacturing of the products based on the IP. When he does his IP is quickly stolen by an employee and a competing company pops up owned and operated solely by the Chinese and they again bury the American company.

            All in all I agree America has spent all its history singing praises of free markets so they should live and die by them, but if you are going to have them they have to be really free, which means freely floating currency and wages along with intellectual property protection. We don't have free trade today, we have trade completely stacked in favor of America's competitors. Unfortunately the Bush administration is to stupid to realize this is going to bury the U.S. in the end. All they see at the moment is cheap labor and improved profitability for corporations who are off shoring. Republicans are generally dumb enough to think thats all that matters.

            It should also be noted that Bush's labor secretary is, I think second generation American. Her family is from China. Intestingly enough they make their family fortune in container shipping from China to the U.S. Isn't it interesting the Labor Secretary who should be looking out for the welfare of American workers actually has a personal conflict of interest in favor of off shoreing. Of course she isn't heading the Labor Department to look out for American workers, she is entirely there to drive down wages and improve corprate profitability, for example through the new overtime rules designed to deny overtime pay to millions of American workers.
  • by Anonymous Coward on Monday September 06, 2004 @05:07AM (#10167229)
    He basically wrote all these economic books and once he was hired by the Bush administration, he contradicts his writings.
    • by NearlyHeadless ( 110901 ) on Monday September 06, 2004 @07:14AM (#10167564)
      He basically wrote all these economic books and once he was hired by the Bush administration, he contradicts his writings.
      Almost all economists agree with what Mankiw said, e.g. leftish econcomist J. Bradford Delong [], a Democrat who hates George Bush says "Greg Mankiw is on the right side" of the outsourcing debate. What Mankiw said caused most members of the Bush administration to cringe. Although most know it's true, it's not the kind of thing you're supposed to say out loud.

      For an economically-informed discussion of outsouring, see this article [] by Daniel Drezner [].

  • De-skilling (Score:4, Interesting)

    by KontinMonet ( 737319 ) on Monday September 06, 2004 @05:18AM (#10167265) Homepage Journal
    There's been discussion before on this subject which affects us here in the UK too.

    I maintain the major problem is gradual de-skilling. If potential software engineers simply see that their future jobs are likely to go offshore, they will not go into the profession. Software is still a somewhat apprentice based profession in that you usually require some coding skills before becoming team leaders or designers and then development managers and CIOs or CTOs.

    If you are pulling away base support in the profession, then de-skilling will gradually move up the ladder. More jobs,more high-powered jobs will move offshore until wage parity ensues. By then, it's too late, corporates will have followed the skill base. An industry responsible for (a rough guess) 15% of Western economies will have moved elsewhere.

    And you can't compare the software industry to manufacturing. Software is not manufactured and, so far as I can see, will not be manufactured for at last 25-30 years. But guess which countries will reap the benefit of writing the code manufacturing software?
    • ... once Indian work becomes too expensive a magic wall will stop cheap UK and US workers providing those same services.

      Smell the coffee folks, what may be working against you now may be your blessing in the future.

      Global markets and competition are here to stay. You either get used to it and act in consequence or will be left behind with your unemplyment benefits.
    • by Gopal.V ( 532678 ) on Monday September 06, 2004 @07:51AM (#10167693) Homepage Journal
      *DISCLAIMER* I'm a programmer in India

      What I'm personally seeing is that the US/EU companies are firing the junior programmers and keeping the senior architects due to outsourcing to India. The effect of this is to essentially cut out the entire next generation of software architects because they do not get enough experience (and often quit IT totally).

      If you were a selfish nationalist , they are selling tomorrow for today. But if you were a Capitalist nation , it makes perfect sense :). In fact America is hit harder by outsourcing because it means "make a quick buck" for the Execs , while EU people are a lot more cautious , as culturally they are not that brainwashed with capitalism and rags to riches stories.

      Don't dish it out , if you can't take it applies for Capitalism as well. (think of this as payback for all the agent orange and napalam used in name of Capitali^H^H^HDemocracy)

      The real sad part is that actual losers in this nothing to do with the past events which built up to this (and neither will those of the future).
      -- 250 USD per month and 70 hour weeks does not a sweatshop make.
      • Actually, we are losing our senior ppl as well. But what you are saying about IT here is essentially correct.

        I find it funny that when I went to school (Colorado State University), I was #1 in all my classes. But my competition were the Indians and Chinese, not Americans. As a nation, we have gotten lazy and and are paying the price.

      • What I'm personally seeing is that the US/EU companies are firing the junior programmers and keeping the senior architects due to outsourcing to India. The effect of this is to essentially cut out the entire next generation of software architects because they do not get enough experience (and often quit IT totally).

        I don't know that that's what will happen. Maybe what it will lead to is a realignment of software engineering as a discipline, along the lines of other engineering disciplines. When US com

    • Re:De-skilling (Score:3, Interesting)

      by dave420 ( 699308 )
      Why do we deserve to do the jobs in the first place? If I demanded a salary of £50k to sweep the streets, I'd expect my job to go to someone else. That's just logical. IT is footloose, by which I mean it's not dependent on location (no raw materials needed), and as such it can operate almost anywhere. If India can do the same work we'd do here, but for less, who are we to complain? We're the ones who have priced ourselves out of the market. If we offered something the Indians can't do (as in add
  • Easy answer (Score:5, Interesting)

    by MemoryDragon ( 544441 ) on Monday September 06, 2004 @05:28AM (#10167295)
    I dont live in the US, but the effects are clearly visible (in Europe less, because the outsourcing is since May within the EU, so basically there is not too much outsourcing)

    a moderate outsourcing is good for everyone, it opens new markets because it helps to develop. Massively outsourcing, produces huge trade deficits and basically only shifts money.

    What currently happens is following development, currently everybody thinks that companies can produce cheaply and sell expensive here. That only works as long as people have money. The long term trend goes towards crash of the monetary system in the west, or at least in the US, with trade deficits which are enourmous. The classical example of this was Argentina in the nineties, basically a classical example of a country which did not produce anything inshore but imported everything. The crash was imminent, and came around 2000-2001.

    What currently happens is that some people thing a patent system which basically acts as a highway robbers tool might help. This might delay things but only for a certain period of time. Once the production is gone entirely, the research also will follow and with it the so called IP holders (which shift overtime, since patents run out), unless the current patent system crumbels under its own weight, because of the massive abuse which is currently happening before.

    So what would be the solution. Simple, try to keep certain core industries and research in the country, and do moderate outsourcing which opens the doors for the wealth of everybody. But for heavens sake, keep some industries and research in the country or at least in the monetary zone.
    • Re:Easy answer (Score:2, Insightful)

      by KontinMonet ( 737319 )
      Simple, try to keep certain core industries and research in the country, and do moderate outsourcing which opens the doors for the wealth of everybody. But for heavens sake, keep some industries and research in the country or at least in the monetary zone.

      Not so simple, I suspect. Who do you stop from outsourcing? Specific industries or govt. departments only? By amount? Since the bulk of IT growth in the last couple of years in the UK has been from govt. IT contracts, I can't see the govt. deciding
  • Im sure all the studies are taking into consideration how its a good thing for the corporations and few business's that are able to take advantage of the available workers over seas, but is it good for the people (in america)? Anyone who has a job in the US that are in the know about jobs being moved over seas, would say no, in fact the very idea of saying, "moving jobs over seas is good for the econemy" is the same thing as saying we dont care who does our work, as long as its cheap. When it comes right
    • According the the Bush admin. (and a massive number of the so-called "top economists") if the economy is good for the big corporations then the economy is good for EVERYONE.

      This kind of thinking is crap. It might have been true 20 or 30 years ago, but it isn't true anymore. Just because money is flowing into a corporate entity doesn't mean its automatically going ANYWHERE, let alone to citizens and workers that desprately need it to survive.
  • by eric76 ( 679787 ) on Monday September 06, 2004 @05:36AM (#10167323)
    One common thread to anything done by the U.S. government is that big business is preferable over small business is preferable over independent contractors.

    After all, how often does the federal government do anything to protect small businesses or individuals from being destroyed by large businesses?

    They are more likely to protect the big businesses from being mistreated by small businesses.

    For example, the whole patent system is nothing but protection of big business from small businesses and individuals.

    When it comes time for important contracts, who gets the contracts, the big business or the small business? From what I see, it doesn't matter at all if the small business has much greater expertise in the matter.

    So if the big business can make money by moving some activities overseas, everything is just fine with Congress.

    As long as the big corporations and those corporations with friends in Congress make tons of money, nothing else matters.

    Of course, there is a bigger issue that everyone ignores.

    When we export jobs, we are exporting vital expertise. After those who used to do the work are no longer up to date, we lose the ability to do the work ourselves. We're not there with software development and it will take a while, but it is forseeable that at some point we won't have the expertise we need to handle emergencies.

    So what happens when China declares war against us 40 or 50 years from now? What do we do after they cut off our access to the exepertise we will need to win the war?

    Include all the manufacturing that we no longer have the capability of doing without a long lead-time, and we're going to be in serious trouble.

    Our chances of prevailing against China will be about like Poland's chances against Germany in the early days of World War II.

    It looks to me like we're well on our way to losing the next WOrld War.
    • I'm sure in 50 years time we'll still have enough nuclear weapons to turn all the important bits of China into glass if they should try anything.
    • As long as the big corporations and those corporations with friends in Congress make tons of money, nothing else matters.

      And you just hit upon the cause of 95% of the problems in the U.S. today.

      The U.S. essentially has a ruling class. Elections won't change a thing because the U.S. Corps. have bought off both sides.

      The only way to fix it is to throw the Corporate influence out of government... good luck trying to do it.
      • This isn't just a problem with the US (though it is particulary advanced there). All the large Anglo countries suffer from the same problem, as do most of the EU member states. People have been bribed with welfare and 'tax breaks', blinded by manipulation of the media and outright lied to by their leaders - the result? A populace who actually take comfort in the fact that they have no control of their leaders and so no control over their own lives. I have no pity for people so willing to be exploited.
    • by Confused ( 34234 )
      So what happens when China declares war against us 40 or 50 years from now?

      Why should they want to invade, if all knowledge has left the USA because of heavy outsourcing and all that is left are a few hundred million people whose major skill is to ask if one want fries with the order?

      Seriously, that is one of the most ridiculous arguments I heard against outsourcing. Brain-drain and loss of skill are serious problems, but before worrying about chinese supertanks and missiles, one should be concerned abou
  • hypocritical (Score:5, Insightful)

    by JanneM ( 7445 ) on Monday September 06, 2004 @05:37AM (#10167324) Homepage
    Well, first you persuade other countries to open up their economies to your imports, claiming this will enable them to step up on the ladder towards geater societal wealth and towards a more skill-based economy.

    Then, when they actually do, and start reaping some rewards from it, you start acting like it's the second coming of antichrist.

    So what do you suggest? Stop outsourcing, stop manufacturing abroad? Are you also then prepared to accept the trade retaliations from the rest of the world? Some people applauded your steel tariffs as something good. Of course, the US ended up losing a lot more money - and more jobs - total than it saved in that particular sector by postponing an inevitable restructuring.

  • Outsourcing "IT" is like outsourcing "engineering."
    If the question or design is simple then it is simply begs for a commodity-based result -- an answer or drawing. This is not to say that the people working on these problems are simple, it's just an issue of language, culture, and time-zone barriers.

    America and the UK have proven themselves to be at the forefront of technology -- constantly improving on older developments; driving in directions yet unforseen. This happens daily, and in every secto
  • by jimicus ( 737525 ) on Monday September 06, 2004 @05:42AM (#10167343)
    From the summary:

    ...Congress to pay for an independent study...

    Call me naive, but surely there's no such thing as an independent study? After all, someone's paying for it and usually the someone who's paying for it has already got an opinion. I've yet to see an "independent study" which didn't favour the organisation paying for it.

  • by Anonymous Coward
    If you look at whole countries, free trade, in services as well as goods, is a good thing. Even if one country is less efficient at doing everything, it still pays for it to trade. This is such an important theory, that economists have come up with a name for it: the theory of comparative advantage.

    However, economics, and particularly the classicial sort of economics, is not very good at sorting out what happens to the distribution of income within each economy. And, as several posters have pointed out,
  • hmm.. (Score:5, Interesting)

    by manavendra ( 688020 ) on Monday September 06, 2004 @05:54AM (#10167373) Homepage Journal
    I just think there is an ever-growing paranoia in the developed countries about software job offshoring. Hasn't such offshoring of other jobs happened in the past, like say, manufacturing? Aren't most cars and other white goods manufactured in Japan and China? What happened to the workers in that industry some of who would obviously have lost jobs?

    More to the issue, I'm not sure what decides the level of outsourcing - "some", "moderate" or "massive". Even when offshoring wasn't happening, a lot of companies prefered "outsourcing" - subcontracting their IT needs and business to specialist companies who had the skills and knowledge to fulfill them, leaving the parent organization free from the usual worries of delivery, quality, acceptance etc. So if the same happens now, it's bad? Because there is growing fear of losing jobs? Surely, the involved professionals would be smart enough to know that economics drives a business, not preferences!

    Further, if the products of US-based companies are used/consumed by people elsewhere, from the (less) money earned from US companies, surely the profits are going back to USA. So the article gave an example of Nike. I'm sure more parallels can be drawn without stretching the imagination too far!

    Finally, if the cost of building a product, be it software, is relatively less (and so is the cost of maintaining it), then the cost of direct users/consumers would be much lesser. Say, if the Air-traffic control systems cost less to build and operate, it would lead to less fees towards airlines, which means they can cut costs further and offer cheaper tickets.

    And contrary to what another poster mentioned, yes, the corporates may follow the skills, but why would they distance themselves from consumers? They have nothing to gain there, if there is a growing resentment against their products/services. And if they decide to not pursue offshoring, they stand to lose considerable market share simply due to the cost-benefits offered by the competitors. So, from their perspective, its a downward spiral.

    Outsourcing is happening. Live with it. Some jobs are going elsewhere. Sure. Are those the best jobs? Surely, it gives the professionals in the developed world better jobs (creative as compared to monotonous, boring, trivial).

    Maybe this brouhaha is there because IT professionals have a bigger mouthpiece, and a cheaper and far easier means of voicing their concerns.

    • Re:hmm.. (Score:3, Interesting)

      by Anonymous Coward
      Mod down; the US didn't outsource manufacturing to Japan, rather Japan through better skills (political, financial, technical etc) took over these jobs.

      Japan does not manufacture for the US, Japan manufactures for Japan and sells to the US. That is a major difference.
    • Guess what, you might like to oversimplify the truth and say, "well, it happened to manufacturing, and that was good, so globalisation must be always a good thing"
      That is both myopic and naive. Guess what, as much as all the economists in the world like to tell you they know what will happen and they know what is good for the economy, they don't really know, and are just guessing. The only thing is if they tell you they are guessing, they would be out of a job.
      Economics is a science, but it is probably
  • by ahfoo ( 223186 ) on Monday September 06, 2004 @05:56AM (#10167377) Journal
    It's good because it is symptomatic of the real underlying issue which is that jobs of any sort are no longer necessary in the most advanced economies.
    Think about it, on balance the really enormous social result of the various industrial revolutions that took place in and around the nineteenth century was the end of slavery. Slavery ended because it could, not because it should. This is true with so many things that are attributed to good will and heroic characters. That's all mythology.
    This struck me the other day when someone was talking in a wide-eyed manner about all the things that would have to be done manually without industrial and agriculural machinery. The person kept using the pronoun "you" saying "you would have to do this by hand and you would have to do that by hand." I spoke up and said, no actually a slave would most likely have done most of the things you're referring to before the age of machinery.
    So, if machinery and centralized power ended slavery, then IT probably will end work as we know it and this offshoring issue is really symptomatic of a huge evolution in society that is just beginning. And, of course, in the beginning the resistance will be enormous and it will still be here hundreds of years from now. In evidence I would introduce, among others, the confederate flag issue in the American South.
  • by QuickFox ( 311231 ) on Monday September 06, 2004 @06:03AM (#10167398)
    As it is today, people in poor countries see their young children starve to death, or die from lack of medicine, just so people in rich countries don't have to suffer the discomfort of looking for a new job. Outsourcing is part of a re-shuffling of wealth that may be uncomfortable for a while, but in the long run economies around the world will become more similar, so we won't see the extreme cruelties and conflicts of desperation that we see today.
    • Oh but we will (Score:5, Insightful)

      by MacFury ( 659201 ) <me&johnkramlich,com> on Monday September 06, 2004 @06:54AM (#10167504) Homepage
      so we won't see the extreme cruelties and conflicts of desperation that we see today.

      Problem...not everyone can live like the US...if they do...then we all die. There aren't enough resources to go around. 6 billion plus people all can't drive cadilacs. Not that we shouldn't raise the standard of living...but we need population control before that becomes a universal option.

      Some people live in the desert and complain that there's no rain

  • A basic fallacy... (Score:3, Interesting)

    by jkrise ( 535370 ) on Monday September 06, 2004 @06:10AM (#10167409) Journal
    in such a kind of study is this. Is it possible in the long run that just the US makes money (pieces of paper, no more) while the rest of the world suffers? Is it possible for a single 20 metre tall wave to stay like that in a calm sea around?

    An action or transaction that results in monetary gain for the US cannot be construed as 'good'. Hardly anything innovative happens in the US that is of importance for the rest of the world. In fact the US has lagged behind in things like cellphones and bandwidth. And within the US, the patents system seems so messed up, true innovators can hardly be expected to stay motivated.

    Money, like blood, needs to circulate. If it accumulates in just one place, it can lead to a heart attack.

  • by little1973 ( 467075 ) on Monday September 06, 2004 @06:10AM (#10167410)
    ...if the three points below are realized.

    1. Free trade of goods. Almost done. Shipping goods from country A to country B is cheap (even if some tariffs are applied).

    2. Free movement of workforce. Countries all over the world have a limitation on this. You just can't go to work in an other country. Even in the EU it is not easy (lot of paperwork) to do so. Also, language and cultural differences make a person reluctant to move.

    3. Free trade of knowledge. Patents and copyrights restrict the sharing of knowlegde. They should be eliminated entirely.

    Big businesses want point 1 to be realized, but do not want point 2 and 3. Until point 2 and 3 become true, outsourcing is most probably bad for everyone.
    • by Roger Keith Barrett ( 712843 ) on Monday September 06, 2004 @06:25AM (#10167444)
      In effect, what has happened is that there has been a split in the American economy. There are big differences between what a corp. or big company can do as compared to a regular joe.

      As a regular guy I don't have the same choices. I can't decide to send my dry cleaning to Indonesia because it's cheaper. I only have local choices to buy things like milk and gas and those prices are all similiar and regionally based. And, as you mentioned, I don't have global choice as to where I can live and work... I am limited by laws that protect the jobs of citizens (present in all countries but no longer enforced in the USA... face it). Then you have the corps that DO have all these choices... especially when it comes to labor and raw materials.

      So the economy is split. You essentially have a lower and an upper class.
    • Don't agree with you on points 2 and 3.

      2. Movement of employees - First off, it's very easy in the EU. There's almost no additional paperwork as compared to hiring a national. There are some problems with recognition of qualifications and social security but these can generally be sorted out. Companies REALLY want freedom of movement because it allows cheap laborers to move to domestic factories and qualified management to move abroad to run new factories/outlets.

      3. Patents and copyright - patents are ope
      • You might be correct when you talk about movement of workers WITHIN the EU, but you are totally wrong when it comes to workers from outside of it. The door is especially shut when it comes to anyone from the U.S.

        I have tried to work in the EU... believe me it's damn near impossible. They protect the jobs from their member countries FIRST which is logical. Every country has these laws, but thanks to dominance of our friend the American Corporation they are basically no longer enforced here. With "friend
      • Concerning point 2:
        You are right, I made a mistake. I should write that the State itself does not want its taxpayers to go to a foreign country.

        On point 3:
        You are right about the original intentions behind the creating of the patent system. However, the patent system is widely abused nowadays. Applications are so vaguely described that even those in the profession cannot comprehend them.

        About companies keeping their inventions secret, you imply that knowledge is scarce. This is not the case, knowledge is
  • Other IT organizations have also been lobbying this for awhile.

    I sat with other Washtech [] members and tried to beat it in Jay Insley's head (democrat from Boeing, err Everet) that outsourcing was an area of concern, as well as H-1 and L-1 visas.

    He tried to tell us that India would buy enough Boeing airplanes (he's head of some India Caucus or something other) and that H-1 visas were needed to help get unique talent like 7' tall Chinese basketball players.

    After an hour of listening to us, something m
  • The Bush administration's Gregory Mankiw says it's all good, and exporting jobs is just a new way to do trade.

    Hmm, I guess the trade deficit must be at an all time low [] then.
  • ...cos it's always better to have somebody else doing your job aint it?

    Now if you're a shareholder of Nike, then it may help you that Indian programmers are wearing Nikes. If you're the CEO of Nike it sure as hell is going to help you.

    If you work in a Nike factory overseas it may well help you. But Indian programmers wearing Nikes aint going to help you when you're working in a McJob wishing you could afford to buy a pair of Nikes for your kid.

    Never confuse what's good for large corporate shareholders wi
  • I think this would spark off a downward trend.

    First, corporations outsource, and locals loss jobs/move to poorly salaried jobs.

    They will have less spending power, and hence only able to afford cheap china branded imports etc.

    Local businesses still employing expensive americans in manufacturing etc feels the heat since they just can't compete, so either they will go bust or outsource too.

    More jobless.

    The cycle continues.

    Finally, one fine day China can just openly declare "we are going to take over Taiw
  • ... Lets get a truly unbiased assessment by sponsoring slashdot's own outsorucing effects study, we would come off looking really trendy, especially if we outsource the work to India.
  • Protectionism (Score:3, Insightful)

    by the_womble ( 580291 ) on Monday September 06, 2004 @07:27AM (#10167615) Homepage Journal
    The protectionist instincts of the US strike again. The arguments for off-shoring IT are EXACTLY the same and exaclty as valid as free trade in any good, what exactly is the study needed for, unless the US is questioning free market economics?

    Actually the west is moving away from free markets, just as the rest of the world has been perusaded to move towards them, so this is no surprise (examples patent and copyright laws deisgned to protet existing industry stuctures for fear of job losses, high regulatory burdens which criplle start-ups and small firms, heavy government subsidies for certain industries)

  • Ultimately, jobs which can be exactly and specifically tied to a process / response tree (a flowchart of actions) are easy to outsource.

    Programmers who are handed a function spec and expected to return with a function can be outsourced.

    Creativity cannot be outsourced effectively. It lives where it lives. There may be creativity in the other country, but that's not outsourcing.

    Most outsourced IT fails not due to the failure of the outsource employees, but due to the failure of the inside company project managers. As any consultant can tell you, the vast majority of people who think they know how to manage a project clearly do not. As a result, what gets sent overseas are poorly thought out specifications that don't properly describe the process the project manager intended, which itself never matached the user's need.

    When I sit in a meeting with a project manager and an end-user constituency representative, 90% of the time I spend is reconcilliation of the ideas from both -- when they are quite sure they'd already done this "in the spec"

    As long as there are bad specs and bad managers to watch over them, there will be jobs for local people with the chops to turn those into functional code.

  • by santos_douglas ( 633335 ) on Monday September 06, 2004 @10:25AM (#10168493) Journal
    Seems like /. has this outsourcing discussion every other day, if not more often. Try this instead, the Dallas FRB's Appreciating The Churn: []
    What is the Churn? In the 1930s, Joseph A. Schumpeter advanced the idea that an economy doesn't grow but evolves as people discover new ways to improve their standards of living. The capaitalist economy continuously recreates itself as resources are redirected to new and more profitable uses. Schumpeter called this process "creative destruction." Today "the churn" is sometimes used to describe the same principle. Implicit in either term is the paradox that Schumpeter uncovered: innovation--the manifestation of the individual's quest for gain--is central to economic progress but, at the same time, is the cause of most economic difficulties.
    Make sure to check out the related articles off to the margin there - "The Upside of Downsizing" and "The Churn--The Paradox of Progress".
  • by WCMI92 ( 592436 ) on Monday September 06, 2004 @11:22AM (#10168898) Homepage
    These "Benidict Arnold" corporations, in exporting good paying jobs to other countries, will do themselves in in the long run.

    These megacorps want to get away without paying US wages, while at the same time, being dependent on a US consumer-supported MARKET to sustain their product.

    Dell and HP, for example, aren't selling their expensive services and products to India. They are selling them to the USA and Europe.

    Therefore, outsourcers depend on EVERYONE ELSE NOT outsourcing middle-class jobs, or else their market will ultimately collapse.

    It's not just the corps that are betraying the American worker. Corporations will do anything allowed by law to make a buck. I don't have a problem with that, if business didn't make money, NONE of us would have jobs.

    The traitor here is our government which does NOTHING to stop this practice, nor to even discourage it. Both parties are responsible. Both parties are beholden to the corps.

    John Kerry gave some lip service to stopping outsourcing, but when you look at where his fortune comes from (his wife), mainly from OFFSHORING Heinz plants, one must wonder how serious he is about it.

    The problem of outsourcing, like the IP cartels (MPAA/RIAA) are enemies that we can't vote out of power because BOTH parties are under their spell.

    My solution to outsourcing is very simple.

    Give all American businesses a tax credit equal to the salaries of all American citizens they employ inside the USA, minus the salary of all non-US citizens employed outside the USA.

    This will allow outsourcers to play by the existing rules, while giving businesses who employ Americans a tax advantage over them.

    There really won't be a loss in tax revenue, as all corporate taxes are illusory (all taxes get passed on to the customer), and it will help it, as it will encourage employers to employ more people and to pay higher wages.

"Marriage is like a cage; one sees the birds outside desperate to get in, and those inside desperate to get out." -- Montaigne