Charter Venture Capital's partner can quote economic theories to his heart's content. This is the reality at our house: My husband, a computer programmer with 14 years of experience, has been unemployed for eight months. He can't find a programming job. He has applied for customer service representative jobs paying $10 to $12 an hour with no success. At the age of 45 and in this economy, finding a job in a new field is doubly difficult.
Yes, I'm sure there will always be a cheaper source of labor somewhere. The real question about outsourcing is whether any jobs that pay a living wage will be left in the United States after this is over. Will there still be a middle class? In the meantime, we are comforted by the idea that corporations are saving money and boosting their profits while we face economic ruin.
-- Karen Sundfors
Your interview with Ravi Chiruvolu was a little thick on Free Market über alles, but interesting. I'd like to take exception to some of his arguments. The assertion that most of us are benefiting from free trade is ludicrous. Saving $20 a month at the K-Mart does not compensate for the loss of a middle class job. The concept of "moving up the value chain" is also questionable. First, the number of jobs won't come close to what is being lost. Second, tech work is unfortunately very outsourceable, so even more advanced jobs won't stay domestic for long. The kind of jobs which will stay domestic are going to be minimum wage service jobs. Basically, any job which pays a decent U.S. salary will be a target for cost cutting.
Not addressed in this article is the risk associated with pursuing a technical education. With the commoditization of what were once middle class jobs, it becomes increasingly difficult to recoup tuition and other educational costs.
Thank you for the piece.
-- Mike Gollub
As someone who is experiencing the destruction of the American IT industry firsthand, I always find the arguments presented by people like Mr. Chiruvolu to be rather disingenuous, even if they seem to make sense in this era where profit is more important than people.
For instance, Mr. Chiruvolu suggests that experienced engineers will always be in demand, and that if someone wants to survive in the IT market, they should work their way up the "value chain." But where does he think these experienced engineers come from? By relocating the cheap, inexperienced labor overseas, we are also relocating the fertile ground from which good engineers are grown. Keeping those jobs in America is not protectionist, it is an investment in the future. It's OK if an engineer from India wants to gain experience in the U.S., then take that experience back home. But the fertile ground needs to stay here.
Also, I don't really understand how promoting IT sweatshops where engineers only earn a fifth of their American counterparts is beneficial to the human race. Nor the increasing trend of American companies to work their non-outsourced employees longer, harder, and for less pay. Maybe if you define the human race as the 1 percent who make their living off the labor and misery of the other 99 percent you can see the benefit, but I don't.
In Mr. Chiruvolu's world, there will always be someone willing to do the job cheaper. The fact that China is now hoisting India by its own petard is proof of this. But cheaper is not always better. There's a reason why engineers command the salaries they deserve, in the same way that doctors, lawyers, and members of any other professional class do. Devaluing the importance of the IT professional devalues the importance of the IT profession, and vice versa.
Perhaps the inevitability of which Mr. Chiruvolu speaks is real. And maybe globalization is the world's way of saying that it can no longer afford a country like America. But if 20 years as an engineer has taught me anything, it's that the only thing inevitable to the human mind is that which we accept as inevitable.
-- Charles Snead
You'll please forgive me if I find Mr. Chiruvolu's "empathy" less than convincing. What he so cleverly fails to mention is that the venture capital money is coming from wealth created here, in the United States, not in China or India or anywhere else. And while it is true that capital has no flag, it was Americans -- indeed, the sons and daughters of immigrants -- who built up companies like IBM with American investment, American sweat and American know-how.
I am very happy that Bangalore is producing 200,000+ engineers a year, and I have a novel idea for them: Instead of taking jobs and entire industries away from other countries, why don't they produce some of their own? After all, if they're "just as good" as any engineer born, raised and educated in the United States -- or any immigrant educated here who wishes to make a life here -- then they should have no problem innovating their way to prosperity on their own, should they?
But therein lies the rub, and I have a personal story that is illuminating. In 1999, at the height of the boom, my then just-recently acquired job as a technical writer for a Silicon Valley firm was sent to India. The work of three technical writers and one technical editor was to be done from that point onward by seven Indians making a quarter of our salaries and benefits. Not long afterward, I was laid off. About a year ago I heard from a former colleague still at my old company that all but two of the Indians had been terminated for gross incompetence. In other words, their documentation was unreadable and therefore unusable.
But then I guess you get what you pay for, don't you?
Here's the bottom line: India and China are quite capable of swallowing every job in this country that pays a middle class wage. Countries with no middle class turn unstable very quickly. That instability often takes the form of violent revolution. I would advise the Ravi Chiruvolus of the world to think on that whenever they're tempted to espouse the "inevitability" of "job mobility."
-- Rob Anderson
Ravi Chiruvolu says about the rush to outsource:
"And all consumers benefit ..."
But he fails to explain how.
It is interesting, I think, that the folks running corporations these days have a serious disconnect going about what a "consumer" is. They no longer seem to know that an "employee" is a "consumer."
One wonders who these corporations are going to be selling products to once all our salaries are slashed by 5/6ths.
-- Mark K. Bilbo
Mr. Chiruvolu will obviously make a great deal of money in the outsourcing game.
But I wonder if he would be kind enough to tell the readers how much Indian money went into R&D for the Internet? The Internet being the sole solitary technological innovation that makes outsourcing of white collars jobs possible. This of course was bought and paid for by U.S. taxpayers over the last 30 years. Indian taxpayer dollars contribution to this enterprise is how much?
As for the other attendant technologies; telecom, and satellite technology; personal management techniques and in fact the computer software development industry itself has as a huge component in its business model the U.S. government as customer for or investor in the startup technology. Think Department of Defense, the number one investor, developer and consumer of all advanced technologies. How much development has the Indian defense industry put into R&D of advanced technology?
Does Indian have the equivalent of Cal Poly or MIT? Why would Indian grad students come to the U.S. in droves? And does Mr. Chiruvolu really think that an Indian grad student pays the full cost of his education at a U.S. institute of higher learning?
And finally do India and Indian workers pay the true cost of pensions, health care, and environmental regulations implicit in hourly costs of the U.S. worker?
What is the Indian taxpayer's contribution to the development of any of these technologies which they will now take advantage of?
Unfortunately Mr. Chiruvolu simply makes the argument for why he will benefit hugely without asking himself to what extent he is gaming the system and taking advantage of U.S. taxpayer investments in the technologies that he hopes to appropriate at no cost.
-- Tim Kaastad
There are surely a finite number of experienced, highly skilled software engineers in India. You can't go find random people off the street in India and have them write good code for you any more than you can here.
After they all get hired, then the only way another company can get them is to pay them more than they're already making -- which is how the price of software engineers got so high in the U.S. And I imagine that as soon as the tech economy gets going properly again, people will be bidding up the rates for good software engineers in India.
Sure, you save money running an international development project if you can hire experienced developers for one-fifth the cost. But will you save anything at all if it's only half the cost? I doubt it. The higher cost of managing a business across continents will surely drive out any cost advantages.
Outsourcing is unfortunate for U.S. programmers, because it means that we are unlikely to see the return of the situation where anyone calling himself a programmer will have more job offers than he knows what to do with. And the days of programmer salaries continuing to skyrocket far ahead of inflation are probably over for a while. But programmers already make very respectable salaries, and there are plenty of businesses that are not prepared for the management challenge of working with employees on another continent, so there will continue to be plenty of jobs in the U.S. As the economy recovers, there should be plenty to go around, even if there won't be the vast surplus of jobs there was a few years ago. I'm sure this is cold comfort to those who are out of work and find it hard to find a new job, but it's simple economic reality.
-- Andrew Norris
After having been outsourced and laid-off twice in two years, by two major corporations which have built themselves entirely on one form or another of U.S. benefit -- tax rate, protectionism, technical development sponsorship -- I have only one question.
Do any of these new outsourcing pioneers have any recollection as to why Henry Ford decided to pay his line workers $5 a day, when the standard rate was less than half that?
-- A.J. Plotke
Ravi Chiruvolu is yet one more flim-flam businessman whose primary interest is the content of his bank account. Strip away the effort to sound tough, yet empathetic, and all that's left is: "So sorry, you're expendable and 'we, the majority stockholders,' are exercising our right to give you the shaft."
He's right. This sort of thing happens with almost every industry. Textile, steel, automobiles, software, [insert next big thing]. There's a reason that companies that go offshore might find it difficult to get loyal employees. They look at what's happened in the U.S. and see that these companies have no loyalty to their employees. The executives and shareholders have set the example. Soon enough China will be too attractive to resist and the Indian software industry will be up a creek. Within a decade or so, the cost of doing business in China will be high enough that somewhere else will look better. Russia, or maybe Vietnam or some African country with a low cost of living that's developed a pool of technically educated people in desperate need of a job.
Sooner or later, the U.S. will fit the bill and the tech-industry du jour will start ditching dead weight and offshore to the U.S.
Meanwhile, the rest of us get to try and figure out whether we should learn Hindi so we can move to India (where the jobs are), or get a jump on the future and learn Mandarin.
-- Noah Romer
In 1990 the software company I worked for wanted to save money by moving software development to India. After due diligence, they passed. In 1999 another software company I worked for, with mostly Indian management, shut down their software development branch in India.
From the standpoint of software companies nothing has changed. Programmer's salaries have always been secondary costs. Primary costs have always been maintenance and administration. A well-known rule of thumb is that the cost of changing software multiplies by 10 when the change is made at a later stage in the process. Changing software after a customer installs it is ruinously expensive.
Experts on the costs of software strive to minimize the time it takes to find and fix a bug or change features. A premium is placed on physical proximity and rapid in-person communication for all involved in software development. Including corporate management. Companies that understand this see the cost of miscommunication with programmers thousands of miles away as prohibitive.
Companies that don't understand this naively treat programming like an assembly line where every step is well-defined and the result is always predictable. They typically ship products very late, that aren't reliable, and wind up losing money because they are too expensive to maintain.
So if programming offshore doesn't pay, why has it become fashionable? What's changed are venture capitalists. The late Gene Kleiner created Silicon Valley venture capital in his own image. He considered himself an engineer and insisted that venture capitalists were expert in the technologies as well as the businesses they funded. They funded billion-dollar chip-making plants and had a highly profitable rate of success. Today's venture capitalists are more like mutual fund managers placing bets on companies. Throughout the dot-com bubble they threw money at companies they didn't understand. Now they are afraid to fund companies because they still don't understand. Programmer jobs are shipped to India not because they are overpaid but because they've been made scapegoats by money-losing VC's.
-- Gary Struthers
Mr. Chiruvolu brings up the same arguments every white-collar senior management or VC always brings up about outsourcing and, as usual, his logic cannot be argued with. It's a dog-eat-dog world out there, and if businesses don't do things as competitively as possible, they'll die.
I'm OK with that. Really.
On the other hand, I'm reminded that ostensibly one of the biggest reasons we give corporations so many different tax breaks is because they help our economy and employ people.
You want a truly competitive business? I'm down with it. Let American businesses outsource everything they want. While they're doing that, yank out every single tax shelter and loophole they use to cut down on their taxes. Have them carry a fair and equitable tax burden that assumes them to be what they are -- money-hungry beasts without a care for our own economy -- rather than some sort of benevolent, trickle-down, "we're all here for the people" entities.
I'm sure Mr. Chiruvolu would consider this eminently reasonable.
-- Roy Rapoport
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