more on Tech: A 'hostile environment' for US natives????

[David Farber <dave () farber net>]

Begin forwarded message:

From: Guy Hummel <ghummel () shaw ca>
Date: May 10, 2005 10:24:19 PM EDT
To: dave () farber net
Cc: ip () v2 listbox com
Subject: Re: [IP] more on Tech: A 'hostile environment' for US  
natives????


Many people think that it's inevitable that nearly all US IT jobs  
will disappear, but you may be interested to hear about the rather  
different experiences in my company. I am the CEO of a small startup  
ASP / software company based in Calgary, Canada. As you can imagine,  
we are extremely cost conscious, especially since I started the  
company in 2000 and had to survive the tech wreck without significant  
outside investment and with almost no revenue for the first few  
years. Nevertheless, we have not outsourced any of our work outside  
of North America.

Recently, we needed to outsource a portion of our Help Desk, one of  
the most common tasks picked up by Indian firms. I talked to Wipro,  
the largest outsourcing firm in India, and decided that their price  
was too high. I know that this may be hard to believe, but we ended  
up outsourcing to a US company! We also needed some custom software  
development for one of our clients and again we made an arrangement  
with another US software company. Are we crazy or just stupid? Well,  
it's possible, but our company is experiencing triple digit growth  
rates and is quite profitable.

When I look at the various parties in our value chain, there don't  
seem to be any countries that are truly winners or losers. Canada  
benefits because our company is headquartered here. The US benefits  
because we have outsourced some of our work to US companies, but also  
because our US customers (almost all of our customers are in the US)  
are increasing their revenues and cutting their costs as a result of  
using our services. One fairly large software company in Silicon  
Valley reported increasing its training revenues by 38% after  
implementing our system. Since almost all of their instructors are in  
the US, this revenue increase should result in new US jobs being  
created. Most of our partners are also based in the US and they are  
reaping the rewards of reselling our solution. We even expect India  
to benefit because we are partnering with a reseller in India who is  
going to sell our software to Indian outsourcing companies.

Perhaps our company is an anomaly, but then again, maybe it's not.


At 08:42 AM 5/8/2005, you wrote:



> Begin forwarded message:
>
> From: "Jonathan S. Shapiro" <shap () eros-os org>
> Date: May 8, 2005 9:18:10 AM EDT
> To: dave () farber net
> Cc: Ip ip <ip () v2 listbox com>
> Subject: Re: [IP] more on Tech: A 'hostile environment' for US
> natives????
>
>
> [For IP]
>
> Gordon poses the question:
>
>
>
> > ...just how I can seriously compete with someone in another
> > country who's delighted to do essentially equivalent work for
> > (what to him is a princely salary) $450 a month?
>
> Nobody else seems willing to come out and actually say it, so  
> perhaps I
> will to do so: he can't.
>
> Here is the point that everyone seems to agree on. Most of us don't  
> like
> it, but we all seem to agree that in an international marketplace  
> it is
> a fact:
>
>   Setting aside certain "boutique" markets, the price of programming
>   is set by an international market. It follows directly that US
>   programmers will either lower their prices to  or they will,
>   professionally speaking, cease to exist.
>
> But nobody wants to be the "sounder of doom" for the US programming
> market, so none of us want to state the consequence:
>
>   US programmers *cannot* lower their prices to that point.
>
>   Therefore, absent a fundamental change in the economics of
>   software, it's time for US programmers to (a) move to places
>   where what they can earn is a living wage, or (b) find a new
>   job.
>
> It's not that the US has a "tech hostile" environment. It's that the
> laws of global economics are hostile to expensive providers.
>
>
> The right question isn't "How do we keep programmers employed?" The
> right question is: "How do we change the economics of software?"
>
> Here are some options (good and bad, none realistic):
>
> 1. Tariffs. We could impose protective tariffs on software written
> outside the US, just as we do for many other goods. The bottom line is
> that this isn't a long-haul solution, and we need a long-haul  
> solution.
> Tariffs just won't work.
>
> 2. Eliminate software patents. It is now widely agreed that the main
> effect of software patent has been to stifle innovation and change in
> the software industry. Innovation is one of the places where the US
> still holds a fundamental advantage vs. the rest of the world. Get rid
> of the impediments to innovation. Use our international political
> leverage to tear them down elsewhere.
>
> 3. Remove liability protection for software vendors. In my opinion  
> this
> is long overdue, and it would benefit the users. No better way to  
> employ
> programmers than to finally force us to rebuild everything  
> correctly --
> and for that matter, to discover *how* to rebuild things correctly.
>
> 4. Invest in raising the standards of living in India and China.  
> This is
> a long term strategy, and a good one. We've been doing it for a long
> time. It doesn't solve anything in the short term.
>
> 5. Re-think the way we train programmers. We still view Computer  
> Science
> as a science discipline rather than an engineering discipline.  
> Making US
> programmers 10 times as effective would go a long way toward  
> offsetting
> their higher salary. The problem with this approach is that
> international students can go to school too.
>
> 6. Recognize that in the commodity software market the cost of  
> software
> construction basically doesn't matter, because the profit margin is so
> high. The place where the cost of programming really matters is in
> contract effort and/or efforts where there are only a small pool of
> potential customers. In one sense, the free software people are right:
> customers do not, and never have, paid for software.
>
> 7. Invest in the free software process, since that price cannot be
> undercut. Shift our business attention to other parts of the value
> chain.
>
>
> Some of these thoughts just won't work. Others are politically
> unacceptable, but I do think that I'm asking the right question:  
> How do
> we change the nature of software economics?
>
> The one thing I'll add to the mix, which may prove thought- 
> provoking to
> programmers: the answer isn't going to be initiated by software
> companies. It is in your employer's interest to hire at the lowest
> price. If you want to see change happen, you are going to have to
> organize a grass roots lobbying effort. This probably means creating a
> serious programmer's union to protect your jobs as you lobby  
> against the
> entrenched practices of your employers. It's a long, rough haul.
>
> Personally, I'ld prefer to see a more productive solution. I just  
> don't
> see one within the current political and economic climate.
>
>
> Jonathan Shapiro
>
>
>
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