|Contents||Bulletin||Scripting in shell and Perl||Network troubleshooting||History||Humor|
|News||See also||Introductory Article||Other IT Myths||Recommended Links||Obscurantism||Outsourcing and IT security||IT Obscurantism|
|Outsourcing and Cronyism||Capability Maturity (CMM)||ISO-9000 Certification fraud||Mongol horde approach to software development||Demoralization||Loss of speed and flexibility||Outsourcing and creation of greedy middlemen||Sweetshop mentality and problems with retention|
|The Danger of Micromanagement||Understanding Micromanagers||Survival under Micromanagers||Ten Commandments of the IT Slackers||Manifest of IT Slackers Society||Maryfran Johnson||Humor||Loss of critical mass of knowledge and talentEtc|
|The truth is rarely pure and never simple
Oscar WildeHell is truth seen too late
|16 years ago at conference in Washington D.C I told Sen.
Dorgan that advocates of free trade
in the United States were just racists. Most people
thought I had lost my marbles, but I went on to say that the
conventional thinking was that the US could keep the high paying
jobs while transferring the low paying jobs overseas what makes
you think that the India's of this world will be content with just
the low paying jobs and that they won't come after the high paying
jobs as well?
To believe that wasn't going to happen was pure racism. I don't
think most people got it but a few did. Unfortunately I have been
proven right. and as long we continue to believe in "American exceptionalism"
at the expense of a hard look at our competitive situation, we are
going to get screwed.
This is a page that contains research materials to the article: A Slightly Skeptical View on IT Offshoring
Offshore software development and, to lesser extent, moving to software maintenance oversees creates complex and expensive to resolve and contain problems that are usually swiped under the floor in the quest for quick buck. In all cases, but especially in "Total Offshoring" cases, those problems tend to increase with the age of the relationship.
The key observation is that when you outsource everything on a marginal cost basis, you create an inherently unstable operating regime. This is classic “race to the bottom” problem. In case of IT outsourcing the costs you had not even acknowledged to exist at all – might come later, and they tend to arrive all at once and by surprise.
When you outsource everything on a marginal
If we outsource IT in the interests of lowing labor costs, we must be mature and acknowledge that there are no free lunches. As you will see evaluating the actual risks/rewards of unbridled globalization of workforce is not an easy task.
|“First you destroy those
who create values. Then you destroy those who know what values are, and
who also know that those who have already been destroyed were in fact
the creators of values.
But real barbarism begins when no one can judge or know that what they are doing is barbaric."
-- Ryszard Kapuscinski
Mar 19, 2017 | economistsview.typepad.comlibezkova : March 16, 2017 at 09:51 PM , 2017 at 09:51 PM"the U.S. middle class - with household incomes ranging from two-thirds to double the national median"reason -> libezkova... , March 17, 2017 at 04:24 AM
Median household income in the US in 2015 was less the $60K. Two-thirds is $40K. That's almost poverty not middle class.
Sociologically the middle class is a quasi-elite of professionals and managers, who are largely immune to economic downturns and trends such as out-sourcing.The definition game? Define something to something else as is being talked about and then claim, claims based on a completely different definition are false?Lyle -> libezkova... , March 17, 2017 at 12:47 PMActually with the change in ratio professionals and managers now tend to upper middle class, (29% of us is upper middle now, 32% middle).cm -> libezkova... , March 17, 2017 at 10:48 PM
One of the influences is that post WWII it was possible to be middle class and work on an assembly line in a job that was described as check your brain at the door. Automation and process changes have wiped the high pay of such jobs out. Steel makers for example thru mainly process changes (electric furnaces using scrap, continuous casting and the like) mean that it takes 1/5 the hours to produce a ton of steel in did in the 1970s.
The movement of assembly line jobs to the middle class occured because there was a period where the US was much less involved with the rest of the world economically, because their industries had all been destroyed. The change started during the Johnson admin, and showed up in the high inflation of the Nixon admin.Most "professionals and managers" are nowhere near being immune to downturns and outsourcing, in aggregate.D. C. Sessions -> libezkova... , March 18, 2017 at 10:16 AM
You could likewise claim that "low skilled" or any other occupations are "immune" as somewhere around 70-80% of their members continue being employed through tough times, in aggregate.
If you take "tech", companies laying off around 5-10% or even more of their staff in busts is a frequent enough occurrence. And that's in addition to the "regular" age discrimination and cycling of workers justified with "outdated skills". Being young and (supposedly) impressionable is a skill!
"the U.S. middle class - with household incomes ranging from two-thirds to double the national median"
That's almost tautological. By definition, there can't be a whole lot of change in the population of groups defined relative to median. Income and wealth of those groups, though, can be enlightening.
Substitute "mean" for "median" and watch what happens. When inequality is driven by extremes at the tail, using "median" means that you don't see much change in the demographics. (Hint: if "middle class" is defined as half to twice the average income, there are damned few in that bracket.)
Mar 03, 2017 | economistsview.typepad.com"Back in the mid/late 90's, there was a running joke that tech companies were looking for people with more years of experience with certain programing languages than the programming languages even existed (in a form to be usable for commercial work)."
That's a very good and historically accurate point(in 90th Java was a crush ;-). And this type of parasitism continues to flourish even now. Just with the new buzzwords...
When employee's complain that that can't fill open positions that often means that they painstakingly define the position is such a way that the person deemed suitable can hit ground running on the first day or week on the job. No retraining period is needed. Like a new brake pads in a car. Totally replaceable.
To say nothing that in reality Google and other giants (Amazon, Microsoft, Facebook, etc) are to a large extent "cemeteries" for IT talent. What's so exciting is creating Gmail and many other Google products ? Absolutely nothing. This is a pretty disgusting reimplementation work.
cm -> New Deal democrat... March 01, 2017 at 07:55 AM , 2017 at 07:55 AMOne issue that you both don't mention is lags. Translating a demand for skill into available skill takes years to decades in the best of circumstances. Even for many so called "low skilled" jobs, people have to be trained commonly for several years. For "knowledge work" or "new technology paradigms", you basically have to bring up a new generation of school/college graduates.reason -> cm... , March 01, 2017 at 07:57 AM
Expecting training to happen "just like that", or to be funded by the workers themselves, is a non-starter.
And when the business has to pay for the training (with the risk that some of the cost cannot be recouped because trained up people may leave), then we are back at "lack of profitability".
Back in the mid/late 90's, there was a running joke that tech companies were looking for people with more years of experience with certain programing languages than the programming languages even existed (in a form to be usable for commercial work).
"Back in the mid/late 90's, there was a running joke that tech companies were looking for people with more years of experience with certain programing languages than the programming languages even existed (in a form to be usable for commercial work)."cm -> reason ... , March 01, 2017 at 08:24 AM
The trouble is, I think that was no joke, it was literally true. Which means that were deliberately recruiting liars. Maybe that explains a lot.Yes, the joke was based on true anecdotes. Not sure about "deliberately", my most plausible assumption is that they just plugged the "skill" description into the standard job ad templates.cm -> reason ... , March 01, 2017 at 08:27 AM
Looking for about 5 years experience - enough to (presumably) be able to do stuff, but not yet too old/tainted.
Also it is not necessary to have exactly all the asked experiences, at least when your resume will be selected/reviewed by a human. Of course if the recruiting process has been made "efficient" that will filter resumes by strict criteria, then the honest/modest applicants will be disproportionately screened out.cm -> reason ... , March 01, 2017 at 08:30 AM
In a lot of big corps, the early stages of recruiting (processing/screening incoming resumes) are often outsourced to HR who obviously have little idea about the subject matter of the work, and can only go by buzzwords, possibly using computer software (OCR processing of resumes).Anachronism -> cm... , March 01, 2017 at 09:44 AM
I have heard the story often that hiring managers are presented with unsuitable resumes/candidates, and often find better matches going through the raw data themselves. But that costs time ("inefficient").
I can tell you that, from a consulting standpoint, I have been on several contracts where we've interviewed someone who had great skills, and the person who showed up had zero. So now companies will Skype with people to make sure they're talking to the actual consultant.DrDick -> cm... , March 01, 2017 at 11:28 AMSadly, that is true of far too many companies of all sorts today, who refuse to train their workers and expect them to come preprogrammed with the company's proprietary software.
Feb 20, 2017 | tech.slashdot.org
Barb Darrow, writing for Fortune: Tech jobs took it on the chin last year. Layoffs at computer, electronics, and telecommunications companies were up 21 percent to 96,017 jobs cut in 2016 , compared to 79,315 the prior year. Tech layoffs accounted for 18 percent of the total 526,915 U.S. job cuts announced in 2016, according to Challenger, Gray & Christmas, a global outplacement firm based in Chicago. Of the 2016 total, some 66,821 of the layoffs came from computer companies, up 7% year over year. Challenger attributed much of that increase to cuts made by Dell Technologies, the entity formed by the $63 billion convergence of Dell and EMC. In preparation for that combination, layoffs were instituted across EMC and its constituent companies, including VMware.
Jan 11, 2017 | www.nakedcapitalism.comcocomaan , January 10, 2017 at 4:04 pmalex morfesis , January 10, 2017 at 4:59 pm
Coulnd't get the JOLTS, November 2016 links to work, but the skills gap is wild.
At an institution of higher ed I'm familiar with, both faculty and administrative positions continue to be unfilled. There are very few candidates even for entry level positions. Failed searches are now the norm. It's feast or famine: either people are perfect for the job and have many options, or have no related experience at all.
I wonder if the labor force participation rate is starting to catch up with the job market. That is, there are a lot of healthy adults who have dropped out of the workforce who would be the people you'd want in those positions.
Or that the job market is not nearly as liquid as they'd have you believe, and people can't relocate from where they are because of adult children who live with them, or things of that nature. All kinds of weird things now in the job market. I know someone who commutes a significant distance to work that has to look for another job because their workplace's health care plan only covers a geographic area close to that job.
Discrimination thru stupid job descriptions is catching up to the economy paying 12 per hour five years experience required nonsense job descriptions designed to help the accredited and credentialed have a leg up
There seem to be three types of employment categories
real jobs that might last through 12 quarters
and surfdumb/$lavery gigs where your hours are messed with, your schedule is messed with & you are expected to pay for the stupid uniform some bean counter thinks is branding
IMUO it is not a skills gap it is the demanding of irrelevant capacities and experience that almost always have very little to do with the actual tasks required
Dec 26, 2016 | it.slashdot.org
Posted by EditorDavid on Sunday December 25, 2016 @05:05PM from the Bob-Cratchit-vs-Scrooge dept.
In early December, Carnival Corp. told about 200 IT employees that the company was transferring their work to Capgemini, a large IT outsourcing firm. The employees had a choice: Either agree to take a job with the contractor or leave without severance. The employees had until the week before Christmas to make a decision about their future with the cruise line.
By agreeing to a job with Paris-based Capgemini, employees are guaranteed employment for six months, said Roger Frizzell, a Carnival spokesman.
"Our expectation is that many will continue to work on our account or placed into other open positions within Capgemini" that go well beyond the six-month period, he said in an email.
Senior IT engineer Matthew Culver told CBS that the requested "knowledge transfer activities" just meant training their own replacements , and "he isn't buying any of it," writes Slashdot reader dcblogs . "After receiving his offer letter from Capgemini, he sent a counteroffer.
It asked for $500,000...and apology letters to all the affected families," signed by the company's CEO. In addition, the letter also demanded a $100,000 donation to any charity that provides services to unemployed American workers. "I appreciate your time and attention to this matter, and I sincerely hope that you can fulfill these terms."
And he's also working directly with a lawyer for an advocacy group that aims to "stop the abuse of H-1B and other foreign worker programs ."Re:Dear Matthew ( Score: 5 , Insightful) by Anonymous Coward writes: on Sunday December 25, 2016 @06:00PM ( #53553189 )Re:Dear Matthew ( Score: 2 ) by ShanghaiBill ( 739463 ) writes: on Sunday December 25, 2016 @06:13PM ( #53553247 )
Foreign workers are willing to do a job at a lower salary in most if not all cases b/c the cost of living in their respective countries is a fraction of ours.
I would be willing to do my job at a fraction of what I am paid currently should that (that being how expensive it is to live here) change. It is equally infuriating to me when American companies use loopholes in our ridiculously complicated tax code to shelter revenues in foreign tax shelters to avoid paying taxes while at the same time benefiting from our infrastructure, emergency services, military, etc..
Its assholes like you that always spout off about free market this or that, about some companies fiduciary responsibilities to it's shareholders blah blah blah... as justification for shitty behavior.Re:Dear Matthew ( Score: 2 ) by PolygamousRanchKid ( 1290638 ) writes: on Sunday December 25, 2016 @06:33PM ( #53553303 )It is equally infuriating to me when American companies use loopholes in our ridiculously complicated tax code to shelter revenues in foreign tax shelters to avoid paying taxes
So who are you infuriated at? The companies that take advantage of those loopholes, or the politicians that put them there? Fury doesn't help unless it is properly directed. Does your fury influence who you vote for?... while at the same time benefiting from our infrastructure, emergency services, military, etc.
No. Taxes are only sheltered on income generated overseas, using overseas infrastructure, emergency services, etc. I am baffled why Americans believe they have a "right" to tax the sale of a product made in China and sold in France.Re:Dear Matthew ( Score: 3 ) by fibonacci8 ( 260615 ) writes: on Sunday December 25, 2016 @08:43PM ( #53553777 )I am baffled why Americans believe they have a "right" to tax the sale of a product made in China and sold in France.
In a seriously silly Monty Python sketch about taxes, someone mildly suggested:
"I think we should tax foreigners, living abroad."
Kinda sorta the same idea . . .Re:Dear Matthew ( Score: 5 , Insightful) by Rob Y. ( 110975 ) writes: on Sunday December 25, 2016 @06:37PM ( #53553317 )
I suppose it's related to the idea that intellectual property "rights" granted by a country of origin should still have the same benefits and drawbacks when transferred to another country. Or at the very least should be treated as an export at such time a base of operations moves out of country.Re:Dear Matthew ( Score: 5 , Insightful) by geoskd ( 321194 ) writes: on Sunday December 25, 2016 @07:35PM ( #53553547 )
Except that calling, say iOS sales 'generated overseas' when the software was written in the US, using US infrastructure, etc . And the company is making the bogus claim that their Irish subsidiary owns the rights to that software. It's a scam - not a loophole.Re: ( Score: 2 ) by ShanghaiBill ( 739463 ) writes:It's a scam - not a loophole.
They are the same thing. The only way to ensure that there are no tax dodges out there is to simplify the tax code, and eliminate the words: "except", "but", "excluding", "omitting", "minus", "exempt", "without", and any other words to those same effects.
Americans are too stupid to ever vote for a poltiician that states they will raise taxes. This means that either politicians lie, or they actively undermine the tax base. Both of those situations are bad for the majority of americans, but they vote for the same scumbags over and over, and will soundly reject any politician who openly advocates tax increases. The result is a race to the bottom. Welcome to reaping what you sow, brought to you by Democracy(tm).Re: Dear Matthew ( Score: 2 , Insightful) by Anonymous Coward writes:
Except that calling, say iOS sales 'generated overseas' when the software was written in the US, using US infrastructure, etc .
That makes no sense. Plenty of non-American companies develop software in America. Yet only if they are incorporated in America do they pay income tax on their overseas earnings, and it is irrelevant where their engineering and development was done.
It has nothing whatsoever to do with "using infrastructure". It is just an extraterritorial money grab that is almost certainly counterproductive since it incentivizes American companies to invest and create jobs overseas.
Yes, taxes are based on profits. So Google, for instance, makes a bunch of money in the US. Their Irish branch then charges about that much for "consulting" leaving the American part with little to no profits to tax.
Re: ( Score: 2 ) by SwashbucklingCowboy ( 727629 ) writes:Re:Dear Matthew ( Score: 4 , Insightful) by msauve ( 701917 ) writes: on Sunday December 25, 2016 @07:45PM ( #53553601 )
Oh get real. Companies make it appear that nearly all income is generated overseas in order to get around that. It's mostly a scam.
"I am baffled why Americans believe they have a "right" to tax the sale of a product made in China and sold in France."
Because the manufacturing and sales are controlled by a US based company, as is the profit benefit which results. If a US entity, which receives the benefits of US law, makes a profit by any means, why should it not be taxed by the US?
Rich Puchalsky 08.04.16 at 11:40 am 177fn: "Of course there is a subtext to these racist hate campaigns that someone else here raised and rich ran with a bit, which is the hatred of the unemployed. I think a lot of people voting leave imagine that the next thing on the agenda is slashing the dole to force poor white people to do the work the Eastern Europeans did. "
Yes, in part. In part, also, people imagine that poor citizens will get jobs that previously were done by migrants. This has a hatred of slackers element that is bad, but as economics, it's pretty well-founded that if you reduce the size of the labor pool relative to the population then unemployment will go down and wages will go up. Neoliberals often argue that people should be glad to lose employment at 50 so that people from other countries can have higher incomes, and leftists often agree because hey "free movement" and because after all the professional class jobs aren't at risk. But strangely enough some people seem to resent this.
Layman 08.04.16 at 11:48 am 178Lupita: "I think Trump is afraid the imperial global order presided by the US is about to crash and thinks he will be able to steer the country into a soft landing by accepting that other world powers have interests, by disengaging from costly and humiliating military interventions, by re-negotiating trade deals, and by stopping the mass immigration of poor people."
... ... ...
Rich Puchalsky 08.04.16 at 12:03 pmengels 08.04.16 at 12:25 pm
"I can't recall any particular instance where someone made this argument."
No one has literally argued that people should be glad to lose employment: that part was hyperbole. But the basic argument is often made quite seriously. See e.g. outsource Brad DeLong.
While this may be the effect of some neoliberal policies, I can't recall any particular instance where someone made this argument
Maybe this kind of thing rom Henry Farrell? (There may well be better examples.)
Is some dilution of the traditional European welfare state acceptable, if it substantially increases the wellbeing of current outsiders (i.e. for example, by bringing Turkey into the club). My answer is yes, if European leftwingers are to stick to their core principles on justice, fairness, egalitarianism etc…
Lupita 08.04.16 at 2:42 pm
Large numbers of low-income white southern Americans consistently vote against their own economic interests. They vote to award tax breaks to wealthy people and corporations, to cut unemployment benefits, to bust unions, to reward companies for outsourcing jobs, to resist wage increases, to cut funding for health care for the poor, to cut Social Security and Medicare, etc.
The same thing has happened in Mexico with neoliberal government after neoliberal government being elected. There are many democratically elected neoliberal governments around the world.
Why might this be?
In the case of Mexico, because Peña Nieto's wife is a telenovela star. How cool is that? It places Mexico in the same league as 1st world countries, such as France, with Carla Bruni.
Patrick 08.04.16 at 4:32 pm
To the guy who asked- poor white people keep voting Republican even though it screws them because they genuinely believe that the country is best off when it encourages a culture of "by the bootstraps" self improvement, hard work, and personal responsibility. They view taxing people in order to give the money to the supposedly less fortunate as the anti thesis of this, because it gives people an easy out that let's them avoid having to engage in the hard work needed to live independently.
They see it as little different from letting your kid move back on after college and smoke weed in your basement. They don't generally mind people being on unemployment transitionally, but they're supposed to be a little embarrassed about it and get it over with as soon as possible.
They not only worry that increased government social spending will incentivize bad behavior, they worry it will destroy the cultural values they see as vital to Americas past prosperity. They tend to view claims about historic or systemic injustice necessitating collective remedy because they view the world as one in which the vagaries of fate decree that some are born rich or poor, and that success is in improving ones station relative to where one starts.
Attempts at repairing historical racial inequity read as cheating in that paradigm, and even as hostile since they can easily observe white people who are just as poor or poorer than those who racial politics focuses upon. Left wing insistence on borrowing the nastiest rhetoric of libertarians ("this guy is poor because his ancestors couldn't get ahead because of historical racial injustice so we must help him; your family couldn't get ahead either but that must have been your fault so you deserve it") comes across as both antithetical to their values and as downright hostile within the values they see around them.
All of this can be easily learned by just talking to them.
It's not a great world view. It fails to explain quite a lot. For example, they have literally no way of explaining increased unemployment without positing either that everyone is getting too lazy to work, or that the government screwed up the system somehow, possibly by making it too expensive to do business in the US relative to other countries. and given their faith in the power of hard work, they don't even blame sweatshops- they blame taxes and foreign subsidies.
I don't know exactly how to reach out to them, except that I can point to some things people do that repulse them and say "stop doing that."
bruce wilder 08.04.16 at 5:50 pm
The extent to which "poor white people" vote against their alleged economic interests is overblown. To a large extent, they do not vote at all nor is anyone or anything on the ballot to represent their interests. And, yes, they are misinformed systematically by elites out to screw them and they know this, but cannot do much to either clear up their own confusion or fight back.
The mirror image problem - of elites manipulating the system to screw the poor and merely middle-class - is daily in the news. Both Presidential candidates have been implicated. So, who do you recommend they vote for?
There is serious deficit of both trust and information among the poor. Poor whites hardly have a monopoly; black misleadership is epidemic in our era of Cory Booker socialism.
bruce wilder 08.04.16 at 7:05 pm
Politics is founded on the complex social psychology of humans as social animals. We elevate it from its irrational base in emotion to rationalized calculation or philosophy at our peril.
T 08.04.16 at 9:17 pm
I think you're missing Patrick's point. These voters are switching from one Republican to another. They've jettisoned Bush et. al. for Trump. These guys despise Bush. They've figured out that the mainstream party is basically 30 years of affinity fraud. So, is your argument is that Trump even more racist? That kind of goes against the whole point of the OP. Not saying that race doesn't matter. Of course it does. But Trump has a 34% advantage in non-college educated white men. It just isn't the South. Why does it have to be just race or just class?
Ronan(rf) 08.04.16 at 10:35 pm
"I generally don't give a shit about polls so I have no "data" to evidence this claim, but my guess is the majority of Trump's support comes from this broad middle"
My understanding is trumps support disproportionately comes from the small business owning classes, Ie a demographic similar to the petite bourgeoisie who have often been heavily involved in reactionary movements. This gets oversold as "working class" when class is defined by education level rather than income.
This would make some sense as they are generally in economically unstable jobs, they tend to be hostile to both big govt (regulations, freeloaders) and big business (unfair competition), and while they (rhetorically at least) tend to value personal autonomy and self sufficiency , they generally sell into smaller, local markets, and so are particularly affected by local demographic and cultural change , and decline. That's my speculation anyway.
T 08.05.16 at 3:12 pm
Patrick, you're right about the Trump demographic. https://fivethirtyeight.com/features/the-mythology-of-trumps-working-class-support/
Layman - Why are these voters switching from Bush et al to Trump? Once again, Corey's whole point is that there is very little difference between the racism of Trump and the mainstream party since Nixon. Is Trump just more racist? Or are the policies of Trump resonating differently than Bush for reasons other than race? Are the folks that voted for the other candidates in the primary less racist so Trump supporters are just the most racist among Republicans? Cruz less racist? You have to explain the shift within the Republican party because that's what happened.
Anarcissie 08.06.16 at 3:00 pm
Faustusnotes 08.06.16 at 1:50 pm @ 270 -
Eric Berne, in The Structures and Dynamics of Organizations and Groups, proposed that among the defining characteristics of a coherent group is an explicit boundary which determines whether an individual is a member of the group or not. (If there is no boundary, nothing binds the assemblage together; it is a crowd.) The boundary helps provide social cohesion and is so important that groups will create one if necessary. Clearly, boundaries exclude as well as include, and someone must play the role of outsider. While Berne's theories are a bit too nifty for me to love them, I have observed a lot of the behaviors he predicts. If one wanted to be sociobiological, it is not hard to hypothesize evolutionary pressures which could lead to this sort of behavior being genetically programmed. If a group of humans, a notably combative primate, does not have strong social cohesion, the war of all against all ensues and everybody dies. Common affections alone do not seem to provide enough cohesion.
In an earlier but related theory, in the United States, immigrants from diverse European communities which fought each other for centuries in Europe arrived and managed to now get along because they had a major Other, the Negro, against whom to define themselves (as the White Race) and thus to cohere sufficiently to get on with business. The Negro had the additional advantage of being at first a powerless slave and later, although theoretically freed, was legally, politically, and economically disabled - an outsider who could not fight back very effectively, nor run away. Even so, the US almost split apart and there continue to be important class, ethnic, religious, and regional conflicts. You can see how these two theories resonate.
It may be that we can't have communities without this dark side, although we might be able to mitigate some of its destructive effects.
bruce wilder 08.06.16 at 4:28 pmengels 08.07.16 at 1:02 am
I am somewhat suspicious of leaving dominating elites out of these stories of racism as an organizing principle for political economy or (cultural) community.
Racism served the purposes of a slaveholding elite that organized political communities to serve their own interests. (Or, vis a vis the Indians a land-grab or genocide.)
Racism serves as an organizing principle. Politically, in an oppressive and stultifying hierarchy like the plantation South, racism not incidentally buys the loyalty of subalterns with ersatz status. The ugly prejudices and resentful arrogance of working class whites is thus a component of how racism works to organize a political community to serve a hegemonic master class. The business end of racism, though, is the autarkic poverty imposed on the working communities: slaves, sharecroppers, poor blacks, poor whites - bad schools, bad roads, politically disabled communities, predatory institutions and authoritarian governments.
For a time, the balkanization of American political communities by race, religion and ethnicity was an effective means to the dominance of an tiny elite with ties to an hegemonic community, but it backfired. Dismantling that balkanization has left the country with a very low level of social affiliation and thus a low capacity to organize resistance to elite depredations.
But how did that slavery happen
Possible short answer: the level of technological development made slavery an efficient way of exploiting labour. At a certain point those conditions changed and slavery became a drag on further development and it was abolished, along with much of the racist ideology that legitimated it.
Lupita 08.07.16 at 3:40 am
But how did that slavery happen
In Mesoamerica, all the natives were enslaved because they were conquered by the Spaniards. Then, Fray Bartolomé de las Casas successfully argued before the Crown that the natives had souls and, therefore, should be Christianized rather than enslaved. As Bruce Wilder states, this did not serve the interests of the slaveholding elite, so the African slave trade began and there was no Fray Bartolomé to argue their case.
It is interesting that while natives were enslaved, the Aztec aristocracy was shipped to Spain to be presented in court and study Latin. This would not have happened if the Mesoamericans were considered inferior (soulless) as a race. Furthermore, the Spaniards needed the local elite to help them out with their empire and the Aztecs were used to slavery and worse. This whole story can be understood without recurring to racism. The logic of empire suffices.
...Workers of all ages are caught in a vice. Older workers need to keep working longer in an economy which values younger workers (and their cheaper healthcare premiums). Younger workers are caught in the vice of "you don't have enough experience" and "how do I get experience if nobody will hire me?"
Middle-aged workers are caught between the enormous Millennial generation seeking better jobs and the equally numerous baby Boom generation seeking to work a few more years to offset their interest-starved retirement funds. (Thank you, predatory and rapacious Federal Reserve for siphoning all our retirement fund interest to your cronies the Too Big to Fail Banks.)
Workers 55 and older are undeniably working longer. Here is the labor participation rate for 55+ workers:
... And here's why so many workers have to work longer--earned income's share of the GDP has been in a free-fall for decades as Fed-funded financiers and corporations skim an ever greater share of the nation's GDP.
I am 62, very much an older worker with a startling 46 years in the work force (first formal paycheck, 1970 from Dole Pineapple). (Thanks to the Fed's zero-interest rate policy, I should be able to retire at 93 or so--unless the Fed imposes a negative-rate policy on me and the other serfs.)
But I recall with painful clarity the great hardships and difficulties I experienced in the recessions of 1973-74, 1981-82 and 1990-91 when I was in younger demographics. My sympathies are if anything more with younger workers, as it is increasingly difficult to get useful on-the-job experience if you're starting out.
That said, here are some suggestions for 55+ workers seeking to find work in a very competitive job/paid work market.
1. Target sectors that haven't changed much. There's a reason so many older guys find a niche in Home Depot and Lowe's--power saws, lumber, appliances, etc. haven't changed that much (except their quality has declined) for 40 years.
The same can be said of many areas of retail sales, house-cleaning, caring for children, etc.
Everyone knows the young have an advantage in sectors dominated by fast-changing technology, so avoid those sectors and stick to sectors where your knowledge and experience is still applicable and valued by employers.
2. If at all possible, get your healthcare coverage covered by a spouse or plan you pay. Those $2,000/month premiums for older workers are a big reason why employers would rather hire a $200/month premium younger worker, or limit the hours of older workers to part-time so no healthcare coverage is required.
Telling an employer you already have healthcare coverage may have a huge impact on your chances of getting hired.
3. If you have any computer-network-social media skills, you can get paid to help everyone 55+ with fewer skills. Your computer skills may not be up to the same level as a younger person's, but they are probably far more advanced than other 55+ folks. Many older people are paying somebody $35/hour or more to help them set up email, fix their buggy PCs and Macs, get them started on Facebook, etc. It might as well be you.
4. Focus on fields where managerial experience and moxie is decisive. Even highly educated young people have a tough time managing people effectively because they're lacking experience. Applying biz-school case studies to the real world isn't as easy as it looks. (I found apologizing to my older employees necessary and helpful. Do they teach this in biz school? I doubt it.)
The ability to work with (and mentor) a variety of people is an essential skill, and it's one that tends to come with age and experience.
5. Reliability matters. The ability to roll with the punches, show up on time, do what's needed to get the job done, and focus on outcomes rather than process are still core assets in a work force.
Being 55+ doesn't automatically mean someone has those skills, but they tend to come with decades of work.
6. If nobody will hire you, start your own enterprise to fill scarcities and create value in your community. The classic example is a handyperson, as it's very difficult for a young person to acquire the spectrum of experience needed to efficiently assess a wide array of problems and go about fixing them.
#3 above is another example of identifying one's strengths and then seeking a scarcity to fill. Value, profits and high wages flow to scarcity. Don't try to compete in supplying what's abundant; seek out scarcities and work on addressing those in a reliable fashion.
Every age group has its strengths and weaknesses, and the task facing all of us is to 1) identify scarcities we can fill and 2) seek ways to play to our strengths.
That's easy: the elitist old people in power will start a war, force the young people into that war, where they will all be killed and the old people get their jobs.
Also, for those young people who protest the war, the government and corporate military security forces will detain and kill them, too.
Just wait 'til they get a load of our Mighty Morphin Tranny Ranger Battalion!
+1000 for that one.... :-))
Bob Seger: Ballad of the Yellow Berets
Exactly. Value youth? Is that why we saddle them with $250,000 worth of student loan debt and a degree in women's studies to find no jobs because we let in illegals and skilled workers with Visas from foreign countries? Seems like we hate our youth. Of course, they deserve it since they have been focused on being social justice fucktards rather than getting any marketable skills and paying attention to what the gov't is doing to their future. Schadenfreude.
No, they are stupid enough to saddle themselves with $250,000 worth of student loan debt for a degree in womens' studies.
The OP doesn't make much sense to me. Most of the work people my age do, the young people either don't want or are not qualified for. Maintaining vital COBOL apps or air traffic controller software from the 70's? Really? And the ones are, they don't mind working with older employees and seem to enjoy our "gravity".
I work in IT so maybe things are a bit different. Grey beards are huge around here and always will be.
But this has been a challenge for centuries, young people have to find their own way and "their way" (being probably a dream from childhood or an inspiration from a college professor) might not be practical at first. They bounce around a little until marriage hits them and then they find something that works for supporting a family. Same as it ever was. The idea that "their way" is some kind of unswerving life's mission is usually part of the corporate "just do it" meme that sells $400 specialty running shoes. Yeah whatever, just figure it out actually, life will tell you what you are supposed to be doing, and who you are supposed to be doing it with.
The market for COBOL programmers had a sudden surge around Y2K, but only certain industries still maintain their old COBOL apps. Curiously, a certain computer/software has recently tried pushing a visual version of COBOL, much like Gates did when he came out with Visual Basic back in the early 1990s. I retired after 40 years in IT in 2011, so I am a bit out of touch where COBOL is concerned. Does anyone even teach it anymore in college? Maybe if someone modified it to create phone apps and games it would once again be popular.
Then it's a good thing I didn't follow my undergrad English Prof's advice and switch my major from science to arts, because he thought there was some "real intelligence" in my writing style that even his grad students lacked. Maybe I should look him up....
I have two buddies, one a 61 year old attonery who has never lost a case and the other a 59 year old facilities director. The lawyer has been seeking work for 6 years and has pretty much given up...he can't even get hired at lesser jobs because he is overqualified and 'will leave when something better comes along'. The facilities director has a great resume and knows his stuff but has been out of work for almost two years. He has come in 'second' more times than I can count. He is working od jobs and living with a friends mother, exchanging work on the house for rent and meals. Welcome to Obama's economy.
He'd work if he'd accept less money, but he feels "entitled to earn what HE thinks he's worth". Just another lazy old-fart who feels the world owns him something. Welcome to a competitive economy old-fart, nobody said life was fair. Stop bitching and work for less.
If you ever need an attorney, you might look for an experienced attorney who worked so hard that he never lost a case.
If you ever inherit a zillion bucks and buy a bunch of properties, you might confer with an experienced facility manager who actually managed a bunch of properties.
I doubt an attorney who never lost a case achieved that record by going around saying, "somebody owes me something".
I doubt a facilities manager who managed a bunch of properties achieved that by going around saying, "somebody owes me something".
What a load of crap. Most will take anything. I know, I am one. Don't lecture me about being "entitled" you punk. Your post reeks of the entitlement generation. Slug through 50 years of working, rearing a family, kids to college... I am beginning to wonder if the hundreds of thousands spent on the education and well-being of your ingrate ass was a misallocation of funds.
Give credit where credit is due. This inability to find work at an older age has been going on for years and can't be blamed on Obama. Senior buyers at Macy's, older workers at Monsanto or television weather people at KSDK in St Louis all suffer the same fate. Labor cost and benefits are all less for the younger generation no matter what level of experience or capability. We develop a mindset throughout our productive career that we are indispensable and worth it because of our knowledge, contacts and industry wherewithal. It's all an illusion and we are NOT prepared or equipped to face the reality at an older age that we are completely dispensable.
At an older age if you want meaning you have to find it and think out of the paradigm that you've been led to believe is real. No one owes you anything for your experience or wealth of knowledge. Figure it out and rethink yourself as to what you love to do and want to do not what you must do to make money.
At 58 in 2008 I was fucked over by my corporation and wallowed in miserableness and poverty while i worked every contact and firm I knew. Nothing resulted. I had to work 3 part time jobs until I earned 2 full time ones and work over 90 hours per week because I enjoy it. It is work that covers the bills and allows me to create what I want to work on for the future while I still can walk think and breathe.
Best advice to your children: Go in business for yourself because just as it happened to me, it will happen to you when you become 55.
Nobody For President
Thanks for that, corporate whore. That sounds like an honest reprise of an incredibly hard time in your life, and I totally agree. I'm telling all (4) my grandkids, from 7 to 20, to live your life, not someone else's. The oldest one gets it, and I think the other ones will also, if I live long enough, because I walked that walk.
I'm old, and work full time (more or less) and make a living - not a killing, but a living - at it.
Good news old people, the economy currently doesn't value anything you can produce, unless you can print money.
You get up every morning
From your 'larm clock's warning
Take the 8:15 into the city
There's a whistle up above
And people pushin', people shovin'
And the girls who try to look pretty
And if your train's on time
You can get to work by nine
... ... ...
MSM says Baby Boomers "have stolen everything", but in fact Baby Boomers are having to extend their careers because they're broke. This is the easily foreseeable result of 20+ years of the Fed keeping interest rates artificially low, making Baby Boomers suffer the double-whammy of (1) not having their deferred income (pensions) grow, while (2) inflation in fact continued at 6% annual, thanks also to the Fed keeping interest rates artificially low.
Yes, someone "have stolen everything". That someone is the owners of the Fed.
www.amazon.comArthur Lindsey III , April 16, 2003A 246 Page "Support Group"
Being an unemployed techie myself, I cannot begin to describe what a godsend this book is. NETSLAVES finally reveals the truth about what it is to be part of what is likely the most under-appreciated sect of the working class. The stale stories of "dorm-room success" have been supplanted by the pathetically sad/darkly humorous accounts of those who have been saddled with with million-dollar job titles, bleeding ulcers, and ramen noodle grocery budgets. NETSLAVES is an entertaining and enligtening read, written by two men who have actually been passengers in every sewer pipe that is The new-media industry. This book is a must for every modern library, as it can be considered a "warning shot" for those with IT aspirations, or as a source of vindication for those of us who have been dismissed and trampled on. Bravo!
A customer, November 24, 1999
Handwriting on the Wall
NetSlaves tells it like it is for the millions of us on the business end of the IPO and monopoly screwdrivers. Apply these lessons to the law, publishing, automotive, chemical, airline industries, etc., etc. This book is not just a cerebral and satirical indictment of the internet industry.
It is a comment on upper and middle management corporate business practices in general, and the dismal fate of the vast armies of workers used as cannon fodder since day one for the follies of unscrupulous robber barons; or morons who just happen to find themselves in the right place at the right time to make market killings; or Scrooges who will never learn what it is to have a heart. Baldwin and Lessard are heirs to the muckrakers of the early 20th Century. Corporate E-merica, take heed.
Christianity TodayErin Brockovich
2000 | Rated RThe Journey of Natty Gann
directed by Steven Soderbergh
Based on the true story of an unemployed mother of three who forced her way into a job as a legal clerk and built an anti-pollution case against a California utility company. Erin Brockovich has become a name for someone with tenacity and perseverance.
1985 | Rated PGTootsie
directed by Jeremy Kagan
Disney's family-friendly adventure demonstrates how tough the Great Depression was on kids, namely the teenage girl of the title who journeys across America to reunite with her father. Grounded by strong performances, including a young John Cusack, this gem serves as a fine introduction of a difficult subject to younger viewers.
1982 | Rated PGUp in the Air
directed by Sydney Pollack
This light-hearted, quirky comedy stars Dustin Hoffman as an unemployed actor who pretends to be a woman for a full-time role in a soap opera. Beneath the hilarity is a sobering reminder that landing a job sometimes requires thinking outside the box, to say the least.
2009 | Rated R
directed by Jason Reitman
George Clooney is stellar as a veteran hatchet man who has lost his ability to form meaningful relationships, living a life on the road. Ultimately this is a poignant drama about identity and what defines us. If we are nothing more than our occupation, what remains when that is gone?
Russ Breimeier, a freelance film critic who lives in Indianapolis, was unemployed for two years until recently landing a part-time job.
Daily Plate of Crazy
Are you over 50, unemployed, depressed and feeling powerless? For that matter, are you any age and feeling hopeless because you can't seem to land a job?
Frustrated Middle Age Man
The recession may be officially over, and for some segments of the population, things are looking up. But too many are still sinking or hanging on by the skin of their teeth. Long-term unemployment or underemployment has become a way of life.
This issue, for me, is personal.
I know what it feels like to be marginalized because you're out of work. To be judged by others as if there's something wrong with you. To grow increasingly depressed, demoralized and despairing as three months turns into six months and that goes on for a year or more; as rejection after rejection becomes crushing, humiliating, and leaves you feeling worthless.
All money-related impacts aside, you lose confidence. You wear out. You start to give up. And you don't even make it into the "statistics." It's been too long since your last employment relationship.
Overqualified, Over-Educated, Over 50
Despite my fancy educational background and shiny corporate career history, for a number of years I was unable to obtain work that was even remotely close to using my skills. Paying me a living wage? Let's not even discuss it. I must have applied to 100 positions over the course of several years, attended the usual networking events, and schmoozed every contact I could come up with.
No go. I suffered from the three O's: Overqualified, Over-educated and Over 50, though I may not have looked it. That last? If you ask me, age was the kicker. Throughout that period, as post-divorce skirmishes continued to flare (further complicating matters), I nonetheless took every project I could eke out of the woodwork, supplemented by debt.
Hello, bank bail-out? How about a few bucks for those of us who foot the bill in tax dollars?
The Borrowing Trap
Now and then, an acquaintance will make an off-hand remark about those who borrow money or live on credit cards. The assumption is that credit purchases are frivolous, or that the person who racks up consumer debt does so out of irresponsibility and poor judgment.
Never assume. Yours truly? I borrowed to put food on the table. I borrowed to pay for school supplies for my kids. I borrowed to enable them to take advantage of academic opportunities that they earned through their own hard work. I also counted my blessings. While I had no family to assist, my kids were healthy and doing well, I was basically healthy despite chronic pain, and I was able to use credit. Borrowing is a double-edged sword of course, especially if it continues for an extended period. But for my little household, debt was the only path to survival. For all I know, it will be again.
Fighting Your Way Back
These days? I still live on a tight budget, I dream of recovering from the years of financial devastation "someday," and I take every gig I can get. Willingly. I've gained new skills along the way and continue to refine them, I'm always looking for another project and thrilled when I nab one, and I'm accustomed to a 12- to 14-hour workday. I put in long hours throughout my corporate career and I have no problem doing so now. In fact, I'm grateful for these workdays and I take none of them for granted. Moreover, I suggest that few of us should take our sources of income as a given.
You know the expression - "There but for the grace of God go I." Misfortune can visit any one of us. Layoff. Accident or illness. Gray divorce. The phone call or email with no warning, saying "you're done" as you're replaced by someone 20 years younger.
And yes, I've internalized the wisdom of this little gem: "If opportunity doesn't knock, build a door." But I also know it isn't always possible, and the secret to success is not as simple as hard work. It's aided by the assistance of others, not to mention - luck.
Unemployed and Depressed
Forbes reminds us of the clear links between unemployment and depression, which isn't to say that underemployment or hating your job is a picnic.
Forbes staff writer Susan Adams cites a Gallup poll as follows:
The longer that Americans are unemployed, the more likely they are to report signs of poor psychological well-being," says the study. "About one in five Americans who have been unemployed for a year or more say they currently have or are being treated for depression - almost double the rate among those who have been unemployed for five weeks or less.
She goes on to note:
The long-term unemployed, unfortunately, have good reason to be depressed. They suffer plenty of discrimination in the job market. A 2012 study by economist Rand Ghayad found that employers preferred candidates with no relevant experience, but who had been out of work for less than six months, to those with experience who had been job hunting for longer than that.
.... ... ...
How many of you have found yourselves laid off and unable to get another job? How many of you are struggling in midlife to create a career where once you were responsible for taking care of a family?
•How many of you have knocked on doors and connected until your blue in the face, only to give up?
•How many of you have drained away any savings you may have had or incurred crushing debt?
•Have you had more success at creating new ventures for yourself - a business or freelance work?
•Were you able to rely on the assistance of family or friends for a temporary period?
•If you're over 50, have you found it harder? Have you had an experience similar to Cindy's?
I'm certain that many of you have fought your way back; I'm still fighting after years, but I have seen progress. Slower than I'd like, but progress all the same.
If someone helped you out, have you paid it forward by making connections for others?
Please do read this comment from Cindy. I have responded as best I can. I'm sure she would welcome your suggestions.
A Note on Despair
To be in this position - wanting to work, needing to work, knowing you still have much to contribute but never getting a foot in the door - is deeply frustrating, horribly depressing, and leaves us feeling powerless. Add up these elements and you have the formula for despair.
It's brutally hard to fight your way back from despair. But sometimes, an act of compassion can help.
I've been on the receiving end of those incredible kindnesses - from strangers, from readers, and from one friend in particular, herself too long living on the edge.
One small act of compassion can breathe new hope into the worst situation. And here's what I know with 100% certainty. We may be unemployed, we may be depressed… but we aren't powerless if we come together and try to help one another.
... ... ...
January 3, 2012 | Palmetto Workforce Connections
When you find yourself over 50 and unemployed, the thought of finding another job may seem daunting and hopeless.
It is quite easy to become discouraged because many people fear being stereotyped because of their age, the tough job market, or the prospect of being interviewed by someone half their age. However, there are some things the older unemployed should keep in mind while on the job search. Using the following tips will increase your chances of a short job search and create an overall more pleasant experience.
- Quit telling yourself that no one hires older workers. This is simply just not true. In some cases older workers have to exert more effort to overcome discrimination, but this is certainly not the case for every employer. There are even entire websites with jobs posted specifically for older workers, and a quick Google search will render you a list of those websites. Take advantage of such resources!
- Take advantage of new technology. Learn to blog and micro-blog, via Twitter, about your profession and interests. You should even create a LinkedIn profile (a website similar to Facebook yet has a more career oriented function) to assist it meeting people in your desired field. All of which will help you stay fine tuned on your skills, while developing new ones. Learning to use social networking will indicate to potential employers that you can adapt to change and learn new things, particularly technology, fairly quickly.
- Use all those hard earned contacts. Using contacts, no matter how far in the past they rest, is nothing to be ashamed of! You've probably spent most of your life working, and meeting a lot of people along the way. It is completely acceptable to reach out to former colleagues, class mates, co-workers and employers for job possibilities. Using resources like Facebook or LinkedIn are great ways to find those long lost contacts as well. Chances are they would love to hear from you and help you out if possible.
- Don't clutter your resume. Your resume should be tailored to each and every job you apply for. While it is important to showcase your talent and skills, how you present the information is equally important. This means keep it straight to the point and relate your past experience to the skills necessary for the job you are applying for. Essentially, don't do a history dump of every job you've ever had, instead, make each word count!
- Don't act superior to the interviewer. It is likely that the people interviewing you will be younger than you. But this does not mean you should look down upon them. Obviously they have earned their position, and if you play your cards right, in due time, you will earn yours! Even if you've worked more years than your interviewer has been alive, it's not okay to tell him or her that you can "teach" them anything. A better idea would be to state your experience working in a multi-generational work place.
Use these tips to help make your job search less stressful and more positive. Whatever you do, don't throw in the towel before you've even tried. Your experience and knowledge will be recognized. All you need is the right employer to identify it.
Nov 16 2013 | NBC NewsWhen Bret Lane was laid off from his telecommunications sales job after 16 years, he wasn't worried. He'd never been unemployed for more than a few days since he started working as a teenager. But months passed, and he couldn't find a job. One day, he heard the Purina plant in his Turlock, Calif., neighborhood was hiring janitors for $14 an hour. When he arrived early at 4 a.m., he counted more than 400 people lined up to interview.
"That's when I realized things had gotten serious," said Lane, 53, who called being out of work "pure hell."
Lane's experience is hardly unique. As of September 2013, 4 million people had been unemployed for six months or more. The economy has been slow to regain the 8.7 million jobs lost during the Great Recession, making prospects grim for many of the long-term unemployed.
Older workers like Lane make up a larger percentage of the persistently jobless than ever before. Nearly 40 percent of unemployed workers are over the age of 45 - a 30 percent rise from the 1980s. And for this group, the job hunt can be particularly long and frustrating. Unemployed people aged 45-54 were jobless for 45 weeks on average, and those 55 to 64 were jobless for 57 weeks, according to an October 2013 Associated Press-NORC Center for Public Affairs Research poll.
Younger workers didn't have such a hard time, perhaps because many employers perceive them to be more energetic or productive than older workers, said Linda Barrington, an economist at Cornell University's Institute for Compensation Studies. Employers "acting on such inaccurate assessments or stereotypes is what benefits younger workers and disadvantages older workers," she said.
Addressing the emotional side of unemployment
An innovative program based in Bridgeport, Conn., is helping to get those who are over 50 and unemployed for long periods back into the market. Platform to Employment started in 2011 when a Connecticut job center called the WorkPlace was overwhelmed by calls from "99ers"-people who had been unemployed for 99 weeks, exhausting their unemployment benefits-many of whom were older workers.
The exact number of 99ers across the country is unknown; the Bureau of Labor Statistics hasn't distinguished between 99ers and those out of work for a year since 2010, an oversight that some say renders this group even more politically invisible. Already, the long-term unemployed face biases in hiring. It's both legal and common for employers to write "unemployed need not apply" on job postings.
There has been virtually no public policy tackling long-term unemployment since the recession hit, said P2E founder Joe Carbone, and his program seeks to fill that gap. "These people have lost access to opportunity, which is a basic American tenet," said Carbone. "We find a way to make them competitive and feel hopeful."
P2E is an intensive, individualized five-week bootcamp that teaches job skills and works to build job-seekers' confidence and emotional health. "We acknowledge that there are serious emotional issues for people who'd been unemployed for that long," Carbone said.
The privately-funded program makes deals with businesses who hire P2E graduates for "internships," a few-week trial period for the would-be employee, whose salary is subsidized by the WorkPlace. Often, it leads to full-time work. According to P2E, 80 percent of their participants have been granted trial periods, and of those, more than 85 percent have been hired by employers.
Accepting a new economic realityBret Lane washes out his coffee pot at his home after a shift at a call center in San Diego, Calif., on Oct. 31. Lane was laid off after 16 years as a salesman in telecommunications and was unemployed until he got a job at a call center. Sandy Huffaker / Getty Images for NBC News
The program has spread to 10 other cities across the United States, including San Diego, where Lane, a P2E graduate, has been employed full-time at a call center since May. After a year and nine months of unemployment, Lane sold his two-bedroom house, pared down his possessions to fit in a 5x10 storage unit, and drove to San Diego to live with his sister. That's when he saw an ad in the paper for Platform to Employment.
He learned how to make his online resume more searchable by adding keywords, as well as how to create an impressive LinkedIn profile. "It also occurred to me that I was being discriminated against" because of age, rather than being rejected for not being good enough. Lane now makes about half of his previous salary and still lives with his sister, but he's "happy to be working again."
This acceptance of a new economic reality is at the heart of P2E; the program isn't solving the problems of precarity, real-wage decline, or manufacturing losses so much as doing damage control.
"I'd say 100 percent of the people who went through Platform are making less than they did previously," said Carbone. "We get them prepared for the fact that their standard of living will go down, that they probably have to change careers."
This guidance is necessary, Barrington said. "A lot of [the long-term unemployed] came into the workforce still thinking you could work for the same company for your whole life," she said. "Someone has to sit you down and tell you that's not going to happen."
She added that businesses need to be reminded of the value of older workers, who often bring intangible skills, such as punctuality, responsibility, and "being able to write a memo," that younger employees may not yet have.
Heidi DeWyngaert, President of Bankwell, a holding company of several banks in Connecticut, said one of her banks hired an older worker from P2E who is succeeding on the job precisely for these reasons. "She's mature, reliable and responsible with a great attitude," said DeWyngaert.
The program has gained so much prominence that it's become competitive in its own right. Early last year, after P2E was featured on 60 Minutes, the Bridgeport office was flooded with inquiries. The program routinely gets 1,000 applicants for around 20 spots.
Hoping to spark a national conversation
Vanessa Jackson, 57, saw the segment and kept track of P2E's growth until it expanded to her area in Chicago. Jackson had been unemployed off and on since 2008, when she lost her $100,000 job as a marketing manager during a corporate downsizing. "I thought, of course, I would get another comparable job," she said.
But it didn't happen. She decided to get an MBA to "ride out the recession," but that just landed her more debt. She finally got a part-time job as a deli clerk, until she broke her arm and went on disability for 10 months. Her $300,000 401(k) account dwindled to $60,000. She sold her house in the suburbs and moved in with her boyfriend on the South Side of Chicago.
"It was the most desperate thing in the world," Jackson said. It pained her to remember the days when recruiters would tell her she was one of "the top African-American women in marketing."
P2E "revived my energy," she said. "It lifted the depression that was very much there."
Jackson now works part-time as a project coordinator at a home care service agency for $13 an hour, which she admits is inadequate for her level of education. Still, she almost missed out on the opportunity. When P2E came to Chicago earlier this year, she wasn't selected at first. "It felt like applying for a job in itself," she said. "I beseeched [Chicago program manager Michael Morgan]. He said 'I admire your ambition' and let me in."
Carbone is all too aware of P2E's limited reach. "We've helped hundreds of people, but that doesn't put even a small dent in the amount who need help," he said. Carbone hopes to spark a national conversation and, eventually, get the attention of Washington.
"Let's be clear," Carbone said. "I wouldn't be doing this if there were appropriate and relevant government policies."
March 14, 2011 | Health.com
With unemployment still high, job seekers who have been discouraged by a lack of work might be inclined to take the first opportunity they're offered. That will help pay the bills, but it could cause other problems: A new study suggests that some jobs are so demoralizing they're actually worse for mental health than no [...]
With unemployment still high, job seekers who have been discouraged by a lack of work might be inclined to take the first opportunity they're offered. That will help pay the bills, but it could cause other problems: A new study suggests that some jobs are so demoralizing they're actually worse for mental health than not working at all.
The findings add a new wrinkle to the large body of research showing that being out of work is associated with a greater risk of mental health problems. In the study, which followed more than 7,000 Australians over a seven-year period, unemployed people generally reported feeling calmer, happier, less depressed, and less anxious after finding work, but only if their new jobs were rewarding and manageable.
"Moving from unemployment to a poor-quality job offered no mental health benefit, and in fact was more detrimental to mental health than remaining unemployed," says the lead author of the study, Peter Butterworth, PhD, a senior research fellow at the Centre for Mental Health Research at the Australian National University, in Canberra.
The study was published in the journal Occupational and Environmental Medicine.
Butterworth and his colleagues analyzed data from an annual survey in which participants described their mental state, their employment status, and-for those with a job-details of the working conditions that they enjoyed (or didn't enjoy, as the case may be). The survey respondents were asked how strongly they agreed with statements such as "My job is complex and difficult" and "I worry about the future of my job."
The researchers focused on four job characteristics that are closely linked with mental health: the complexity and demands of the work, job security, compensation, and job control (i.e., the freedom to decide how best to do the job, rather than being ordered around).
Unemployed people who found a job that rated well in these areas reported a substantial improvement in their mental health. By contrast, newly employed people who felt overwhelmed, insecure about their employment, underpaid, and micromanaged reported a sharp decline in their mental health, including increased symptoms of depression and anxiety. Even those who couldn't find a job fared better.
This last finding was "striking," Butterworth says. "This runs counter to a common belief that any job offers psychological benefits for individuals over the demoralizing effects of unemployment."
Although certain types of jobs-such as working in a customer-service call center-are more likely to be downers, the working environment tends to have a greater impact on mental health than the job description itself, Butterworth adds.
Managers are especially important to employee well-being, says Robert Hogan, PhD, an expert on personality in the workplace and a former chair of the department of psychology at the University of Tulsa. "Bad bosses will make anybody unhappy," Hogan says. "Stress comes from bad managers."
Policymakers should address the impact that the workplace has on mental - and not just physical - health, Butterworth says. "In the same way that we no longer accept workplaces that are physically unsafe or in which employees are exposed to dangerous or toxic substances, there could be a greater focus on ensuring a more positive psychosocial environment at work."
Alberta Oil Magazine
How to Lay Off An Employee - the Right Way
Companies that fought to attract and keep staff have been learning the hard way how to shed them in a hurry. But that doesn't mean it can't – and shouldn't – be done right
One day last October, when employees at Cenovus Energy showed up at the office, many discovered that they couldn't access their computer files on the company's internal system. That's how they found out they were being laid off. Two months earlier, employees at Hutchison Ports Australia in Sydney and Brisbane got a text message, then an email in the middle of the night inviting them to a beachside hotel. They, too, were being laid off.
Cenovus called its move a mistake. Hutchison Ports Australia said it had begun its consultations with staff and unions regarding redundancies in June. Whatever the explanation, companies need to start approaching layoffs more carefully. And though everyone in the energy business is hoping the bloodletting is over, if it isn't, there are ways to soften the blow of layoffs, and do them fairly and transparently.
A company should keep its employees informed of the economic forces acting on the business and their employment prospects, says Martin Birt, president of HRaskme.com and a human resources consultant with 30 years in the business. "Closures…should never, in my view, be a surprise," he says. Neither should layoffs. You can communicate messages with your employees such as how decisions will be made in what Birt calls a "long-game communications plan," a set of HR principles that will be applied should anything be decided regarding the company's long-term employment potential. That way, employees have some context as to what to expect when market circumstances change.
If you choose not to share your long-game communications plan in your employee manual, when speaking to the people you're laying off, at least communicate how, why and when you made the decision, Birt says. Your actions will get back to suppliers, contractors and layoff survivors. And if you've communicated fairly and awarded appropriate compensation and benefits, the external environment will understand what kind of corporate citizen you are.
Listen to Your Experts
Involve the correct teams – operations, human resources and legal – and involve them as early in the decision-making process as possible, says Birt. These teams will protect you as a corporation from any liability associated with a layoff.
Soften the Blow
Henry Hornstein is an assistant professor at Sault Ste. Marie, Ontario's Algoma University, specializing in organizational change management. In the early 1990s, he was among the staff let go from Imperial Oil's Strathcona refinery. "It was not pleasant," says Hornstein, "but the way Imperial Oil handled that at the time cushioned the blow." They provided him with a year's worth of salary and benefits, and services with an outplacement firm. These included resumé writing, interview training and networking support. "Rather than treating people as commodities, people are treated compassionately," says Hornstein of the experience. You can provide your employees with psychological support in addition to proper severance, benefits and outplacement services, he says. Consider offering group meetings where people can talk to others about the negative psychological impacts of downsizing that they've experienced. "Downsizing is a significant assault on an individual's self-esteem…Everybody has a story, and when somebody is downsized, the organization can [seem to] take an approach that they don't care what the background story is, they just want to get rid of the people." says Hornstein. Birt agrees, saying companies should be prepared to offer an employee assistance program (EAP), a short-term counseling service for employees in need of support. This can also add a buffer against the company's liability.
Having said that, to maintain confidentiality, limit the planning group to only those whose participation is necessary, says Birt. Consider using specific project-related confidentiality agreements, as well, and clearly describe the consequences for breaching confidentiality. He also suggests reminding participants with pre-existing confidentiality agreements of the terms of those agreements. If you are a publicly traded company, you should know if you are required to first inform the markets of your actions. If that is the case, managers must be prepared to communicate with employees immediately after informing the markets.
Finalize the Details
Before you deliver the news of layoffs, finalize all the details with human resources and legal, including severance, benefits and pension entitlements, says Birt. You'll be prepared to immediately answer individual questions. Everything you say orally in a termination meeting should be captured in a termination letter as well, he says. However, give terminated employees a few days to review their termination package and ask any questions, says Fraser Johnson, a professor at the Ivey School of Business in London, Ontario. "As soon as you hear the words that you're being laid off, your mind might go blank," he says.
Share the Pain
Rather than targeting employees with layoffs, share the cuts across the corporation, just as Canadian Natural Resources did when all staff pay was cut by up to 10 percent. Or, introduce flexible work arrangements like part-time work, voluntary leaves of absence, or deferred compensation in which an employee can work full-time at 80 percent salary for several years before taking a paid sabbatical.
Synoia , March 3, 2016 at 10:25 am
Q: What do you call a 50 year old engineer?
naked capitalismPosted on January 9, 2016 by Yves Smith Yves here. Many members of the top 10% regard their role in society as relatively secure, particularly if the are in a niche that serves the capital-deploying 1% or better yet, 0.1%. But a new book suggest their position is not secure. And trends in motion confirm this dour reading, such as the marked decline in law school enrollments, and the trend in the US to force doctors to practice out of hospitals or HMOs, where they are salaried and are required to adhere to corporate care guidelines. For instance, my MD is about to have her practice bought out, and is looking hard as to whether she can establish a concierge practice. Mind you, she appears regularly on TV and writes a monthly column for a national magazine [not that is how I found her or why I use her]. Yet she has real doubts as to whether she can support all the overhead. If someone with a profile can't make a go at it solo in a market like Manhattan, pray tell, who can?
Adapted from the new book The Future of the Professions by Richard Susskind & Daniel Susskind (Oxford University Press, 2015).Originally published at Alternet
The end of the professional era is characterized by four trends: the move from bespoke service; the bypassing of traditional gatekeepers; a shift from a reactive to a proactive approach to professional work; and the more-for-less challenge.
The Move From Bespoke (Custom) Service
For centuries, much professional work has been handled in the manner of a craft. Individual experts and specialists-people who know more than others-have offered an essentially bespoke service ("bespoke" is British for "custom"). In the language of the tailor, their product has been "made-to-measure" rather than "off-the-peg." For each recipient the service has been disposable (used once only), handcrafted ordinarily by a solitary scribe or sole trusted adviser, often in the spirit of an artist who starts each project afresh with a blank canvas.
Our research strongly suggests that bespoke professional work in this vein looks set to fade from prominence, as other crafts (like tailoring and tallow chandlering) have done over the centuries. Significant elements of professional work are being routinized: in checklists, standard form materials, and in various sorts of systems, many of which are available online. Meanwhile, the work that remains for human beings to handle conventionally is often not conducted by individual craftspeople, but collaboratively in teams, sometimes collocated, but more often virtually. And, with the advance of increasingly capable machines, some work may not be conducted by human beings at all.
Just as we witnessed the "death of gentlemanly capitalism" in the banks in the 1980s, we seem to be observing a similar decline in bespoke professionalism.
The Bypassed Gatekeepers
In the past, when in need of expert guidance we turned to the professions. Their members knew things that others did not, and we drew on their knowledge and experience to solve our problems. Each profession acted as a "gatekeeper" of its own, distinct body of practical expertise. Today this set-up is under threat.
We are already seeing some work being wrested from the hands of traditional professions. Some of the competition is coming from within. We observe professionals from different professions doing each other's work. They even speak of "eating one another's lunch." Accountants and consultants, for example, are particularly effective at encroaching on the business of lawyers and actuaries. We also see intra-professional friction, when, for example, nurses take on work that used to be exclusive to doctors, or paralegals are engaged to perform tasks that formerly were the province of lawyers.
But the competition is also advancing from outside the traditional boundaries of the professions-from new people and different institutions. We see a recurring need to draw on people with very different skills, talents, and ways of working. Practicing doctors, priests, teachers, and auditors did not, for example, develop the software that supports the systems that we describe. Stepping forward instead are data scientists, process analysts, knowledge engineers, systems engineers, and many more. Today, professionals still provide much of the content, but in time they may find themselves down-staged by these new specialists. We also see a diverse set of institutions entering the fray-business process outsourcers, retail brands, Internet companies, major software and service vendors, to name a few. What these providers have in common is that they look nothing like twentieth-century doctors, accountants, architects, and the rest.
More than this, human experts in the professions are no longer the only source of practical expertise. There are illustrations of practical expertise being made available by recipients of professional work-in effect, sidestepping the gatekeepers. On various platforms, typically online, people share their past experience and help others to resolve similar problems. These "communities of experience," as we call them, are springing up across many professions (for example, PatientsLikeMe and the WebMD communities in medicine). We say more about them in a moment. More radical still are systems and machines that themselves generate practical expertise. These are underpinned by a variety of advanced techniques, such as Big Data and artificial intelligence. These platforms and systems tend not to be owned and run by the traditional professions. Whether those who do so will in turn become "new gatekeepers" is a subject of some concern.
The keys to the kingdom are changing. Or, if not changing, they are at least being shared with others.Jim Haygood ,, January 9, 2016 at 8:57 pmalex morfesis , January 10, 2016 at 12:05 am
'medium and large corporations are also struggling to deal with increasing regulation'
My claim is that large corporations don't "struggle to deal with" regulation - they write it.
Case in point, Obamacare was drafted by Liz Fowler, formerly of WellPoint.jrs , January 9, 2016 at 3:49 pm
You nailed it on medical professionals…would like to add, that at least here in flori duh there seems to be massive pricing fraud by malpractice and liability insurance providers which state regulators allow to continue to force small or single practitioners to join groups by financial obliteration…at least in floriduh, there is the usual massive distortion suggesting insurance companies are paying out huge amounts when there in fact seems to be collusion amongst insurance companies neglecting the legal requirement to try to settle on good faith and end up forcing people to settle for pennies on the dollar…yet the insurance companies keep picking the pockets of medical professionals
The proof is in how there is one premium cost if the medical provider is on their own and magically it is cheaper if theu are part of a group or hospital.. Same doctor…same practices…lower rates…prima facia evidence of insurance company rate fraud…Local to Oakland , January 9, 2016 at 4:13 pm
Yes some of it is only logical though, if masses of the population see their income declining and yet the costs of medical care keeps increasing eventually noone can afford to see the doctor never mind the ACA etc.. And it can get to be this way with a lot of professional services less urgent and distorted than medical care, like soon noone can afford an accountant, you use turbo tax, a lawyer – no middle class people start to make their own wills. Many professions seek ever further protections of government for their guilds (more and more requirements to practice to try to preserve their privilege) and yet with nothing protecting the income of the other 80% (read: unions, that would be their role) unless they plan to only serve the fellow 20% …
So solidarity? Yea, but making the solidarity argument with many (not all) members of such professions is a waste of time as they instinctively side with the 1s.ilporcupine , January 9, 2016 at 4:33 pm
Re solidarity, you might be surprised. One reason law school enrollments are down is that it is becoming public knowledge that employment for graduates in upwardly mobile career positions is way down …
Many are shunted into low level proletarian type legal work, churning out evidence for use in lawsuits owned and managed by large firms. Lawyers who do this earn less then a good paralegal with less job security and no benefits.flora , January 9, 2016 at 5:39 pm
It has been said Paralegals are being squeezed out, to make way for the huge increase in law graduates from prior class booms. Why not use cheap lawyers, with better credential, and desperate for employment?guest , January 9, 2016 at 6:25 pm
So much of the 'grunt work' of professions – once the entry and training province of new graduates – is now being done overseas by shops that specialize in legal research, or reading x-rays, or accounting and tax preparation.
There are 3 downsides to this, in my opinion. New college grads have fewer entry slots. The 'grunt work' that grounds one in the full knowledge of the profession and how it works is slowly removed from the profession. That omission leaves future practitioners with an incomplete understanding.
This loss makes them more reliant on big data as both assistant and excuse/defense, and makes them less master craftsmen (if I may use the term without giving offense) and more the front-end interface of one-size-fits-all processes. Very good for corporate profits. Not so good for the professions or their clients.polecat , January 9, 2016 at 8:18 pm
Big Data is not a solution.
Your first two points (no entry-level jobs for beginners, no acquisition of professional basics) are essential - and their detrimental effects are already painfully felt in some professions.
Case in point: software development.
Long ago, firms started off-shoring basic, tedious, repetitive tasks, generally considered as unrewarding, such as software testing or error correction to India. The idea was to focus on "high added-value" jobs such as system architects or project management, and leave low-level operations, supposedly requiring less qualifications, to cheaper Indian contractors. Decades later, there is a shortage of qualified people for those high-skilled jobs - precisely because fewer and fewer young people have had the possibility to
(a) start in the profession at entry-level positions (when job postings all require qualifications as senior software engineer and five years experience, what do you do?)
(b) learn the ropes and practice the skills from the ground up (the necessary step before rising in the professional hierarchy).
The result? It is now necessary to import expensive project managers and system architects from foreign countries.
From what I read, the UK has been especially hit by this phenomenon, because it was particularly enthusiastic about off-shoring IT to India.Phil , January 10, 2016 at 2:34 am
Uhm…..oh wait…uh ..I know….uh…Brondo's got what plants need…..right?armchair , January 9, 2016 at 5:17 pm
Attorney's work is being automated and outsourced. For more on one aspect of outsourcing:
I can't find the cite, but last year I read that some of the Indian companies that American law firms have outsourced to are now moving offices "stateside" to hire American attorneys, here.
Bottom line: the race to the bottom for wages is "on". Add to this job automation that will only get more efficient, over time.
http://www.futuretech.ox.ac.uk/news-release-oxford-martin-school-study-shows-nearly-half-us-jobs-could-be-risk-computerisationpolecat , January 9, 2016 at 8:26 pm
The Washington State Bar has initiated a legal technician program , and I find the timing questionable, even if the premise of the program is good-hearted. As the market is awash in underemployed, licensed attorneys, the Bar is going ahead and turning veteran paralegals into the people to undercut the market even further. It seems like bad timing to let someone who has years of experience, and no law school debt get over on a bunch law school grads who are facing a life of being hounded for their debts. I spoke to someone at the Bar who made a good defense, that the legal technician is like an ARNP. Only later did it occur to me that there are very few out-of-work doctors.
From another perspective, the legal technician answers another problem of the collapsing paralegal market. Much of the collapse has been driven by advances in document management, especially scanning that 'reads' the text and makes it searchable. But hey, here is a shiny new program. Go ahead and set up a parenting plan with your abusive ex for $75! What could go wrong?
The key to really get the legal field de-humanized would be robot judges and robotic juries. I hope someone is already working on it.armchair , January 9, 2016 at 9:02 pm
Don't worry…what's old is new again. At some point in the future we'll all be scratching glyphs on clay tablets….once the 2nd law of thermodynamics really kicks in………..plenty of work then!MyWag , January 9, 2016 at 5:33 pm
Work! What about George Jetson? The go west value system we are stuck with these days is almost perfectly incompatible with a future that requires very little human labor.Brooklin Bridge , January 10, 2016 at 12:00 pm
Professionals would be the next logical choice of squeezing cost out of work; unions, middle management, big industry, airlines, manufacturing and construction have all paid their price at the alter of the 1%.
Public sector unions are hanging on but as the majority of local & state taxpayers have less to give, these wages, benefits and especially pensions will be cut. Those earning less and less will gleefully pull down those public employees who are 'living like kings'.
I also agree with the concept of there being less for the bottom 90% to spend. And as more automation kicks in, there will be even less bad choice jobs for these folks to scramble for. Just waiting for truck drivers to be slowly replaced with auto-drive trucks.
This leads us to an enhanced confrontation at the Federal level on how to go forward. The earned income tax credit, a good concept also under siege, I believe, will have to be supplemented with a minimum guaranteed income.
By this time, 20 years, the DEMs will be the party of business and the GOP will be entirely dependent on fed govt subsidies. Oh the irony.Ptup , January 9, 2016 at 6:12 pm
By this time 20 years, the GOP will be saying, "I told you so", regarding Global Warming.RBHoughton , January 9, 2016 at 7:31 pm
Reading Rise of a The Robots right now, and the law and accounting profession have and will continue to be hurt hard by computers armed with big data, and the education and medical profession are next. Has to be. It's already a travesty that education and medical costs continue to rise as incomes stagnate and drop, and that just cannot continue. Well, maybe it can, until all of those guns out there are used by the people as they rise up. Look at the buffoon who many are considering for the Republican nominee, more out of blind, misinformed anger, than anything. Scary.different clue , January 9, 2016 at 9:19 pm
"…. Prefer a fence at the top of the cliff to an ambulance at the bottom…"
You have a delightful way with words Yves. Many thanks.James Koss , January 10, 2016 at 11:13 am
The rich and the truly rich will always have skilled, artistic human professionals to serve their personally tailored bespoke needs. It is the rest of us who will be assigned the doctorobots, the lawyer machines, etc.Inverness , January 10, 2016 at 11:29 am
The French phrase "Everything changes and remains the same" remains true today.
Whereas today the top of society has its professionals to isolate and protect them from the remainder of the population and the rules nobility and the church had its knights, nobles, obedient serfs and peasants to fight and protect "their" nobility. Names and titles changed but the rules remained. Those who have will get those who don't will not.Disturbed Voter , January 9, 2016 at 10:42 pm
Correct. The same applies in education. The wealthy know what kinds of schools serve their children best: those with better teacher to student ratios, rich arts curricula, and a progressive approach to instruction. Just see what Obama's kids got at their fancy Quaker school. The rest get standardized lesson plans, big class sizes, deep cuts in music and the arts, and high-stakes testing.
They can privatize their lives; we cannot.flora , January 10, 2016 at 2:19 am
Part of the "crapification of everything" … except for managers and owners, it is part of their cost cutting plan.
Why would you trust a medical system run by politicians and insurance companies … a system promoted by those same managers and owners. Like hiring the Three Stooges as your plumber, electrician and roofer. Gullibility will be the death of us … that and malice.
First they came for the blue collar workers, and I did nothing? Then they came for the white collar workers, and I did nothing? Now they are coming for the professionals, and they are laughing at my passivity?
They have played all the classes, higher than the one they are currently discarding, and the remaining consumers are happy to throw their neighbors under the bus. But your turn will come. Karma.digi_owl , January 10, 2016 at 4:12 am
In Oregon some doctors are unionizing to resist medical assembly line medicine.
Doctors Unionize to Resist the Medical Machine
"Dr. Alexander and his colleagues say they are in favor of efficiency gains. It's the particular way the hospital has interpreted this mandate that has left them feeling demoralized. If you talk to them for long enough, you get the distinct feeling it is not just their jobs that hang in the balance, but the loss of something much less tangible - the ability of doctors everywhere to exercise their professional judgment."
http://www.nytimes.com/2016/01/10/business/doctors-unionize-to-resist-the-medical-machine.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=second-column-region®ion=top-news&WT.nav=top-news&_r=0Jesper , January 10, 2016 at 6:55 am
I find myself thinking about an episode of the original Connections series, that was produced in the 70s.
There it was mused about how corporate management would idle their days away waiting for the computer in the basement to crunch the numbers and come up with company decisions they were then to implement.
Instead what happened was that the professional managerial class, the MBAs, dug in while computers instead replaced the laborers via robotics.financial matters , January 10, 2016 at 8:11 am
Or shorter: The common argument that 'we (by that I mean you) have to become more employable' is about to hit home among the people with long education. Will they recognize the similarity to what has already happened to others and/or will they themselves make themselves more 'employable'?financial matters , January 10, 2016 at 8:17 am
I think one of the major consequences we are seeing as a result of a misguided professional system is the lack of basic legal services for millions of people. This resulted in people being thrown out of their homes as the result of very obvious fraud and yet having no recourse unless they were able to spend hundreds of thousands of dollars on legal fees.
I think the popular new series 'Making of a Murderer' emphasizes this problem. I don't think a show that emphasizes the problems that the very poor have with justice from the lack of being able to pay for legal services would have been this popular 10 years ago.Wade Riddick , January 10, 2016 at 8:53 am
I think this would require a 'single payer' legal system similar to the need for a single payer medical system.Brooklin Bridge , January 10, 2016 at 1:00 pm
Once corporations start setting guidelines and dictating the drugs you can and can't use for treatment, do you think they'll do it according to what's cost effective and least risky for the patient based on current science or do you think they'll do it based on their own profits?
What happens when they own their own pharmacies – as they're all scrambling to do right now – and try to jack up reimbursement through that unit too? Do you think patients were served when Philidor started (criminally) altering scripts and making substitutions?
For profit healthcare is really sickcare, isn't it? Why cure a disease when treating it brings in more revenue? Why sell cheap human insulin when you can patent a variety on the molecule, jack up the price and carve up the market?
Keep the sucker paying the vig…
These guys aren't adopting better guidelines for treating chronic disease based on the best available science. In fact, as they corporatize they're getting worse. I've talked to these clowns. They're typically ten years behind the state of the art in their field. Patients do the reading and then they stare at us like we're morons. Fifteen years later they swear they knew the truth all along.
If these corporate suits are setting the guidelines for care, how come there's no common national board standard for care, no portfolio investment model approach where they model the disease with the best available experts, determine how to intervene in the various genetic pathways that are perturbed and then pick the simplest, cheapest methods/chemicals to try first?
That sounds like a pretty reasonable, scientific approach to treatment – but, if that's your standard, then these people are in breech of fiduciary duty left and right and it all has to do with that old canard "maximizing shareholder value." What about maximizing customer service? Corporate medicine will lead to tobacco-level deaths. I know doctors who have been personally injured in this system already. Corporations want to avoid risk to their profit – *not* their patient. Imagine what *those* mandatory arbitration clauses are going to look like. Imagine what the sequel to _Merchants of Doubt_ will look like in the era of corporate medicine and Supreme Court decisions that bust doctors' unions.
I'm still burning from Peter Thiel's comments on monopolies in the New York Times this morning. Does he have any clue how bad the service is in regional hospital cartels already and how fast prices are rising?
It's not even a matter of price in the drug markets now. It's basic availability. Aside from the persistent shortages of cheap, effective generics due to the kickback scheme in PMOs/PBMs, we now have explicit regulatory interference. The FDA has been moving to withdraw entire lines of medication from compounding pharmacies even when there's no rival big pharma product competing against them or any indication of patient risk. These are decades-old treatments. (It's the CDC's job to set treatment guidelines, by the way, not the FDA's).
It's just a knee-jerk reaction at this point to protect imaginary future profits, I suppose. You can't make up this stuff. The FDA has even imposed a 30% sales volume rule for "safety." It has nothing to do with purity or contamination of compounded products. If Tesla sold exploding cars, how would restricting 30% of their sales volume to California improve consumer safety? It's clearly a market-rigging reg – and it's because the corporate medicine lobby wants it.
What does this have to do with corporate medicine? Compounding pharmacies in big chain hospitals – which are often pitifully narrow in their professional scope – are all magically exempt (oligopolistic and more expensive too). Isn't that wonderful?
The current corporatization of medicine rests on the notion that the chief challenge faced by those of us with serious illnesses is that we simply don't read enough fine print or fill out enough paperwork.
If you think that corporations have done a fine job handling your retirement investments in this era of lax accounting standards, wait until you see what they do with your actual body.Brooklin Bridge , January 10, 2016 at 12:18 pm
Exceptional comment!Brooklin Bridge , January 10, 2016 at 12:26 pm
This article is based on the faulty perception that this is all normal benign efficiency working it's way out of an antiquated system, perhaps with a few -to be expected- hiccups. It isn't.
What we are experiencing is wholesale greed and corruption on an international scale working it's way into the core of our civilization like mold or cancer, and perverting technology as well as the process of social change and adjustment to that change – for it's exclusive benefit – as it goes. It is unconscionable that we could call this progress or adjustment in anything but the most cruelly ironic sense.
The shift from reactive to proactive my foot! 60 years ago doctors were getting out proactive messages far better than today via education, television, the media and so on. And they gave a damn!!! Today, insurance companies are devising ever new ways to minimize what they spend on your care, maximize what they charge you for it, and call it, "proactive." Proactive theft, or genocide for fun and profit, would be closer to the mark.
Proactive cannibalism also comes to mind…
aws. , 01/08/2016 at 10:50 pmBack in early 2012, the Premier of Ontario suggested that the loonie (Canadian dollar) was becoming a petro-dollar. He was slapped down by the Cons, and walked back his comment.Paulo , 01/08/2016 at 11:40 pm"That has knocked the wind out of Ontario exporters and manufacturing in particular," explained McGuinty.
"The only reason the dollar is high - it's a petro dollar , right? It's been driven by the global demand for oil and gas to be sourced in Western Canada.
"So if I had my preferences, as to whether we have a rapidly growing oil-and-gas sector in the West or a lower dollar benefiting Ontario, I'll tell you where I'd stand - with the lower dollar."
Canadian Dollar's Worst Rout Ever Raises Petro-State Worries
Ari Altstedter, Bloomberg, January 4, 2016
By the middle of 2014, oil's share of Canada's total exports reached 19 percent from about 6 percent a decade earlier. Meanwhile, the Ontario-based auto industry was seeing its share of the export pie fall to to 14 percent from 22 percent. The heavier reliance on crude became an issue in last October's national election, as Harper and his Western-based Conservatives were accused by all their opponents of having favored oil to the detriment of other regions.
In the process, the Canadian dollar had effectively joined the ranks of petro-currencies. The correlation between movements in the price of oil and the loonie has increased five-fold since 2000, according to data compiled by Bloomberg. In 2015, while all commodity-exporting countries faced currency pressure, the Canadian dollar was more sensitive to oil price movements than such petro-states as Mexico, Norway and Russia.
I don't actually see low oil prices re-balanacing the Canadian economy. The cure for low oil prices is low oil prices. Would you invest in an export dependent industry in Canada? One can reasonably model a scenario where the price of oil goes up to $100/barrel, the loonie returns to parity with the greenback… and an exporters competitiveness disappears with our petro-loonie's parity with the U.S. dollar.
Being a petro-state makes for a pretty ugly domestic economy.
AWS (and Ron)
I believe the decline will bring us Canadians back to our roots and strengths. Personally, I have been disgusted with our past 30 year transformation into urban consumers, no matter what part of the country we live in.
I remember my Grandparents playing penny poker on winter evenings. I grew up with stories of the Depression. While I am 60, my good friend down the road is 75. He often tells me about living in our Valley from '46 onwards…..a time of bailing water from the river into a 45 for home supply, canned venison and salmon for winter, oil lamps because Hydro did not arrive until the latter '60s. His Dad built up a sawmill and his folks provided room and board for 'the crew'. His mom washed their clothing by hand on Saturdays and finally got a gas powered ringer washer to make it easier. Nowadays, he scrounges scrap steel (old bedframes and the like) from the recycling bins for our welding projects. He helps me make up power saw chains from scraps and pieces. His motto (which he shares with me every other day), is, "Never throw anything away". And damned if he can't find exactly what I need when I come over to scrounge at what I call, "Our Store".
I don't know what will happen to the Vancouverites or Torontonians when property values dive. I imagine that many will lose everything they think they have, (when their debt bomb blows). I guess then we will see what people are made of. Will they whine? Or will they pick themselves up and make the best of it?
As for Ron's post, it is similar to one last year. I could hardly read that one as well. Yes, there are deserts and sewers made by man, and that will be the best that many can hope for. But what is your sphere of influence and power to change things? I have replanted several thousand trees on our property and let most of it regen into a bramble-filled mixed forest. I have put in a pond that trout have found from the drainage ditches and flooded wetlands next door. I have cut trails for deer and elk crossing routes. We grow our gardens without pesticides and with as much compost as possible. We wear our clothes out and watch what we buy. We don't travel by air, and limit trips to local visits with family. In the future, perhaps this will be the norm for most instead of today's extravagent consumption which is thought of as normal for Canadians and a birthright.
Ron, the facts are glum. Your story is true. I accept that. What I don't accept is allowing it to bring me down and giving up….on myself, my loved ones, and my people. Perhaps as a group, as a species, it seems as if we never learn and make the same and even greater mistakes over and over. But as individuals we can try to do things better, live better; until we can't go on. That is my plan, and I am sticking with it until I can't go on.
I am teaching myself to play the banjo. (My blessed wife is so so patient). Today, the weather was cold and foggy, my lumber is frozen into ice lumps, and I was quite house bound being sick of crunching around my frozen yard trying to be productive. So, the banjo prevailed and damned if it isn't getting better. I am well on the way to mastering (to use that term loosely) an Iris Dement version of "Leaning on the Everlasting Arms", "I can See Clearly Now" by Johnny Nash, and "I Believe In You" by Don Williams. I think I have sub-conciously chosen these songs to combat my own confessions of doom and gloom. Sometimes, it is all we have. For you post readers, I will provide the Youtube links for a pick-me-up. A nice glass of whiskey makes for a good listening partner.
regards and thanks for your heartfelt honesty and efforts
By J. Mann on April 8, 2005Masterpiece, offers solution for THE problem of our time/div> I am astonished at the quality of this book, which is about the eighth book in a personal reading program that included Paul Roberts' The End of Oil, Kenneth Deffeyes' Beyond Oil, Jared Diamon's Collapse, Cottrell's Energy and Society, Michael Klare's Blood and Oil, and others, all extremely good and relevant books. The task this author undertakes is to help readers find a new perspective from which to constructively and usefully interpret inevitable and major changes the world around us. By taking this approach, the author is providing the very essential tool we need to cope with these changes.
The issue is our ecological footprint.
Catton uses the term "Age of Exuberance" to represent the time since 1492 when first a newly discovered hemisphere and then the invention of fossil-fuel-driven machines allowed Old-World humans to escape the constraints imposed by a population roughly at earth's carrying capacity, and instead to grow (and philosophize and emote) expansively. He then reminds us that we are soon to be squeezed by the twin jaws of excessive population and exhausted resources, as our current population is utterly dependent on the mining and burning of fossil energy and its use to exploit earth's resources in general. In spring 2005, the buzz about "the end of cheap energy" is reaching quite a pitch, and when and if the "peak oil" scenario (or other environmental limit-event) is reached, the impact on our social / political world will be enormous. Already the US is brandishing and using its superior weaponry to sieze control of oil assets; this same kind of desperate struggle may well erupt at all levels of society if we don't find a way to identify the problem, anticipate its consequences, and find solutions. Catton offers a perspective based on biology / ecology -- not bad, since we are indeed animals in an ecology and we are indeed subject to the iron laws of nature and physics.
With this perspective we can avoid ending up screaming nonsense at each other when changes begin to get scary. My urgent recommendation is, read this G.D. book and do it now.
peakoilbarrel.comJavier , 01/09/2016 at 5:29 am
I wholeheartedly agree that even a cursory look at things reveals the overwhelming scope of things and quickly leads to despair.
It doesn't have to lead to despair. I recommend Stoicism , which is the way Greeks and Romans coped with their own decline.
In the words of Seneca:
"Let Nature deal with matter, which is her own, as she pleases; let us be cheerful and brave in the face of everything, reflecting that it is nothing of our own that perishes." (De Provid. v.8)
It has to be explained that Stoics believe that nothing external to the individual is secure, and thus the truly important thing is virtue, based on ethics and moral. Virtue can not be taken from an individual whatever the circumstances, and helps him deal with adversity. That is what Seneca means with "nothing of our own that perishes" .
Stoicism is the appropriate philosophy for what awaits us. It brings out the best of us and it eases the anguish. The illusion of control is our worst enemy. Matters are completely out of our control and Nature will deal with them as she pleases.
Dec 14, 2015 | Economist's View
Syaloch said in reply to cm...
So you think that offshoring does not eventually increase living standards in the destination countries? That's odd. What's your evidence?
Automation may not be the first response, but it's always in the equation:
CEO: "Those pesky foreign workers are asking for more again! Machines are so much easier to work with. Can we replace them with machines yet?"
CTO: "Let me check... No, not yet, but a lot of smart people are working on it."
CEO: "OK, then let's look for another offshoring partner with more complacent workers for now and revisit this later."
The answer to this automation question only has to be yes once to permanently change the playing field.
I actually think that the bigger effect is not just offshoring, but a vicious circle relating to increasing inequality. After all, most of the economy today is services, but if normal people can't afford the services anymore, then that will of course stagnate, forcing down wages decreasing the affordability even more (or causing substitution of inferior automated or remote services).
That is why the one employment bright spot is medical services which are subsidised (one way or the other) almost everywhere. We really have to investigate more the distribution of the circulation of money, how the concentration of money in a few hands means that money circulates through relatively hands. I don't know of anybody who actually investigates this. You could say, it is the disaggregation-is-important problem.
One thing that really annoys with political discussion today is the dominance of money illusion. This is particularly extreme in the Euro area today where Germans keep complaining that so and so will be taking "our tax money". No one ever seems to stop and think, "where does the money come from in the first place", and yet, in macro-economics, this is absolutely the most important question. Nobody even seems to notice that both deleveraging and bankruptcy actively destroy money and that money needs to be replaced.
RC AKA Darryl, Ron said in reply to pgl...
"...the empty suits running GM and Ford were both greedy and incompetent..."
The United States of Toyota: How Detroit Squandered Its Legacy and Enabled Toyota to Become America's Car Company
September 11, 2007
by Peter M. DeLorenzo
The United States of Toyota is many stories in one. First and foremost, it is a business story, detailing the decline of the American automobile industry - and the simultaneous rise of an Asian manufacturer to take its place. It is also a history book, providing an intimate portrait of the larger-than-life personalities and cars that led the American auto industry through its glory days and down the path toward extinction. It is a political/current affairs piece, presenting the rise of a Japanese company - Toyota - not just in terms of its sales success but also in terms of its cultural success, as it works to assimilate into American society. And finally, it is a never-before-seen primer on Detroit - The Motor City - a town and a region dominated by the auto companies, their suppliers and their ad agencies - and by a mindset and culture all its own. In commentary that is as accurate as it is blunt, Peter De Lorenzo presents the players and the action in the auto business in a way not seen before in print. His voice is unique and refreshingly candid. His provocative analyses and assessments - grounded in personal experience and a lifelong immersion in all things automotive - present a compelling picture of the state of the auto business - how it used to be, what it has become and where it is headed. From the arrogance and short-sightedness of the Detroit manufacturers to the acumen and relentlessness of Toyota, The United States of Toyota paints an insightful portrait of an iconic American industry as it struggles for survival in the early years of the 21st century.
The End of Detroit: How the Big Three Lost Their Grip on the American Car Market
September 21, 2004
by Micheline Maynard
An in-depth, hard-hitting account of the mistakes, miscalculations and myopia that have doomed America's automobile industry.
In the 1990s, Detroit's Big Three automobile companies were riding high. The introduction of the minivan and the SUV had revitalized the industry, and it was widely believed that Detroit had miraculously overcome the threat of foreign imports and regained its ascendant position. As Micheline Maynard makes brilliantly clear in THE END OF DETROIT, however, the traditional American car industry was, in fact, headed for disaster. Maynard argues that by focusing on high-profit trucks and SUVs, the Big Three missed a golden opportunity to win back the American car-buyer.
Foreign companies like Toyota and Honda solidified their dominance in family and economy cars, gained market share in high-margin luxury cars, and, in an ironic twist, soon stormed in with their own sophisticatedly engineered and marketed SUVs, pickups and minivans. Detroit, suffering from a "good enough" syndrome and wedded to ineffective marketing gimmicks like rebates and zero-percent financing, failed to give consumers what they really wanted - reliability, the latest technology and good design at a reasonable cost. Drawing on a wide range of interviews with industry leaders, including Toyota's Fujio Cho, Nissan's Carlos Ghosn, Chrysler's Dieter Zetsche, BMW's Helmut Panke, and GM's Robert Lutz, as well as car designers, engineers, test drivers and owners, Maynard presents a stark picture of the culture of arrogance and insularity that led American car manufacturers astray. Maynard predicts that, by the end of the decade, one of the American car makers will no longer exist in its present form.
[Like the executives of the US steel industry before them, the management of the big three (plus one) US automakers possessed legendary inabilities when it came to product development and production quality control. One can only imagine that their golf games must have been better than their understanding of auto making.]
pgl said in reply to RC AKA Darryl, Ron...
Exactly - products designs that were better than our. Lean production which we were slow to adapt. And there are those Jan commercials. Toyotas are selling like crazy. But at least Ford and GM is finally under new management.
sanjait said in reply to pgl...
A few decades later ... Ford and GM do indeed look to be getting their act together. I'd buy a car from either one of those companies today.
lower middle class said...
Paging Dr. Proteus... Dr. Paul Proteus!
cm said in reply to lower middle class...
That was automation, not offshoring.
Syaloch said in reply to cm...
In the end that's a distinction without a difference.
Julio said in reply to Syaloch...
Yes, I see offshoring as a transitional stage while foreign workers are cheaper than machines.
RC AKA Darryl, Ron said in reply to Julio...
Machines could not open up SE Asian markets to US firms in the way that offshoring could.
Syaloch said in reply to RC AKA Darryl, Ron...
Suppose we visited those factories from Player Piano and discovered that the few highly educated workers remaining were not overseeing automated machines, but rather shipping raw materials over to a foreign country where goods were produced by low-wage laborers. In terms of the domestic economy, would that make any difference?
Large-scale offshoring was enabled by machines that made the exchange of goods and information between remote locations possible. Whatever residual labor component is involved is merely an automation problem that hasn't been solved... yet.
RC AKA Darryl, Ron said in reply to Syaloch...
MNCs wanted their capital investment to have access to the markets with the most growth potential. Regulatory and FOREX arbitrage helped. Labor costs were low on the totem pole.
Syaloch said in reply to RC AKA Darryl, Ron...
That's more true with offshored manufacturing than with services. US companies aren't sending call center jobs to India because they hope to serve the Indian market.
But even with regard to manufacturing labor costs are obviously a major consideration. Just watch any episode of "Shark Tank" and listen to the sharks explain how stupid anyone is for trying to manufacture anything here in the US. Are t-shirts sewn in Bangladesh because of the huge growth potential in apparel sales there? Were the Mexican maquiladoras set up to have better access to the Mexican market?
lower middle class said in reply to cm...
The plot was about automation, but the moral was about humanity. :)
"The main business of humanity is to do a good job of being human beings," said Paul, "not to serve as appendages to machines, institutions, and systems."
― Kurt Vonnegut, Player Piano
Syaloch said in reply to lower middle class...
Toward the end of Player Piano the Shah of Bratpuhr asks a very good question: What are people for?
When I first read Player Piano I also happened by pure chance to be reading a collection of essays by Wendell Berry titled "What Are People For?"
The eponymous essay from Berry's collection was a great complement to Vonnegut's book.
lower middle class said in reply to Syaloch...
Time for me to visit the library, thanks Syaloch!
New Deal democrat
Yes, it is part of your name (and was copied then throughout the Western world). Then of course there was the Russian and Chinese revolutions, which at least initially were very egalitarian.
New Deal democrat said in reply to reason...
I think you misunderstood my point, which was about liberalizing international trade. I'm not 100% sure, but I don't think that was a really high priority of the Russian and Chinese revolutions. :)
pgl said in reply to New Deal democrat...
I studied Russian history. Free trade was not exactly what drove Lenin. And it is certainly not what drives Putin.
PPaine said in reply to New Deal democrat...
There was a significant debate about trade early on with bukharin advocating. Two way openness. And Lenin a two way state monopoly. Lenin anticipated what happened to russia after the wall fell ....70 or so years later.
He had a keen insight into MNCs free for all tactics. Unfortunately state concessions which he supported faced a tacit constriction.
Despite notable exceptions including Pater Koch
P.S. New Deal democrat
It is not the PRODUCERS who have a huge incentive to make sure it never happens. Au contraire, they want their consumers to have more money. It is the OWNERS who want to make sure it never happens because that would dilute their power.
RC AKA Darryl, Ron said in reply to reason...
Yep. Capital gains... and gains... and gains, until there is little left for labor gains.
pgl said in reply to RC AKA Darryl, Ron...
Nike makes obscene profits. And for what? Designing new shoes? They don't make anything - their third party Chinese manufacturers do the hard work at low wages. BTW - the US does not get to tax those Nike profits as they end up in Bermuda.
economistsview.typepad.comAvraam Jack Dectis said...A good economy compensates for much social dysfunction.A bad economy moves people toward the margins, afflicts those near the margins and kills those at the margins.cm -> Avraam Jack Dectis...
This is what policy makers should consider as they pursue policies that do not put the citizen above all else.
"A good economy compensates for much social dysfunction."
More than that, it prevents the worst of behaviors that are considered an expression of dysfunction from occurring, as people across all social strata have other things to worry about or keep them busy. Happy people don't bear grudges, or at least they are not on top of their consciousness as long as things are going well.
This could be seen time and again in societies with deep and sometimes violent divisions between ethnic groups where in times of relative prosperity (or at least a broadly shared vision for a better future) the conflicts are not removed but put on a backburner, or there is even "finally" reconciliation, and then when the economy turns south, the old grudges and conflicts come back (often not on their own, but fanned by groups who stand to gain from the divisions, or as a way of scapegoating)
Dune Goon said..."backwaters of America, that economy seems to put out fewer and fewer chairs." ~~Harold Pollack~
Going up through the chairs has become so impossible for those on the slow-track. Not enough slots for all the jokers within our once proud country of opportunities, not enough elbow room for Daniel Boone, let alone Jack Daniels! Not enough space in this county to wet a tree when you feel the urge! Every tiny plot of space has been nailed down and fenced off, divided up among gated communities. Why?
Because the 1% has an excessive propensity to reproduce their own kind. They are so uneducated about the responsibilities of birth control and space conservation that they are crowding all of us off the edge of the planet. Worse yet we have begun to *ape our betters*.
"We've only just begun!"
"Many of us know people who receive various public benefits, and who might not need to rely on these programs if they made better choices, if they learned how to not talk back at work, if they had a better handle on various self-destructive behaviors, if they were more willing to take that crappy job and forego disability benefits, etc."
George Orwell: "I doubt, however, whether the unemployed would ultimately benefit if they learned to spend their money more economically. ... If the unemployed learned to be better managers they would be visibly better off, and I fancy it would not be long before the dole was docked correspondingly."
cm said in reply to William...
A valid observation, but what you are commenting on is more about getting or keeping a job than managing personal finances.
Perhaps you are commenting on the aspect that when (enough) job applicants/holders define down their standards and let employers treat them as floor mats, then the quality of many jobs and the labor relations will be adjusted down accordingly, or at the very least expectations what concessions workers will make will be adjusted up. That seems to be the case unfortunately.
October 28, 2015 | Peak ProsperityWe are damned to fail when we avoid hard truths
Wednesday, October 28, 2015, 9:10
I wrote the article below in January 2013, but never published it. The strong response to last week's post on the hubris and hype of Silicon Valley, as well as this recent interview, jogged my memory and inspired me to dig this out of the mothballs. I was pleased to see how relevant it remains 2.5 years later.
My old employer, Yahoo!, has been in the news again of late.
Its latest CEO (and former Googler), Marissa Meyer, is currently at the World Economic Forum in Davos, Switzerland, where she has just given her first televised interview detailing her strategy for the beleaguered web giant.
I wish her and the current team at Yahoo! well with their plans, I really do. The saga of Yahoo!'s descent over the past decade was heartbreaking to watch and experience from the inside. I'd love to see the company find a way to become a leader again.
But I don't have faith.
In my opinion, the company can't be "fixed." At least not the way the tech pundits and the past parade of Yahoo! CEOs have touted it can.
Why? Because of a congenital failure to define its identity, paired with a chronic refusal to be honest with itself.
I get asked a lot for my opinion regarding Yahoo!'s fall from grace. I believe the seeds of its failure were sown from the beginning, and I've come up with the following analogy to make it as intuitive as possible. It all starts at the very formation of the company.The Importance of Clear Vision
First, look at Google. When the founders Sergey Brin and Larry Page first started collaborating, the Internet had been around for a while and they were insightful enough to realize that the data on the Web was growing exponentially. They reasoned that the company who made it possible to sift through all this data and find the most useful content, when needed, would create immense value.
So, they designed the Google platform from Day 1 to optimize around their core goal: "to organize the world's information and make it universally accessible and useful." This gave them a maniacal focus that enabled them to target talent, refine strategy, and prioritize resources. To this day, while there are many other businesses that Google has become involved in (from alternative energy to self-driving cars), everything revolves around first making sure that the central mission is protected and enhanced, and then leveraging the core platform to do ever more innovative things.
In this way, you can think of Google as the Borg of the Internet, following their mission of technical perfection with a methodical, measured dedication; unwavering in its focus.
Now, look at Yahoo!. Yahoo! is the Internet's Jedd Clampett.
If you don't know the story, the founders Jerry Yang and David Filo shared a trailer while graduate students at Stanford in the early 1990s. (It was literally a trailer. Stanford's graduate campus housing has improved much since then.) The graphical pages of the World Wide Web were just emerging, and as interested computer science students, David and Jerry spent a lot of time exploring them. As the number of Web sites multiplied, they created a simple directory – really nothing more than a page of bookmarked links – to help them keep track of the growing number.
This was the Internet's equivalent of Jedd Clampett missing a varmint with his shotgun, only to find "a-bubblin' crude" spilling out of the earth.
As simple as this directory was, nothing like it existed yet. So word got out, and people started flocking to it in ever-greater numbers. Pretty soon, the founders realized they had a phenomenon happening before their eyes, and they were savvy enough to enlist some seasoned help in structuring a business around it and monetizing it through advertising.
Well, the rest is history. Yahoo! experienced mind-boggling, stratospheric growth over the next several years. For a period of time for most people,Yahoo! WAS the Internet. For everyone else, it was the Internet's front door: occupying the best real estate within the new virtual universe of the World Wide Web.
But the key element to note here is that there was no fundamental vision or guiding mission that preceded Yahoo!'s creation. The company simply sprang into existence; a "happening" created by an unforeseen, rapid and gargantuan transmogrification of the world's analog audience base into digital 'users'.
And it's because of this lack of central identity that Yahoo! has floundered. What is Yahoo!? is a question that has plagued its executives since before I walked in the door in 2001. You would not believe the amount of manpower, brain cycles, and advertising agency dollars that have been thrown at answering this – and yet no enduring answer has emerged.The Cost of Willful Blindness
Without knowing what its "core" is, Yahoo! hasn't known where to put its focus. It has tried to do everything, and as a result, its diluted efforts allowed pure-play competitors to claim the dominant position in each of the important verticals that it wanted to win. Google became the dominant player in search (helped along in its early days, ironically, by Yahoo!'s patronage). Ebay won auctions. Amazon won online retail. Facebook dominates social media. YouTube cornered the online video space. The list goes on...
As the early 800-lb gorilla, Yahoo! could easily have claimed any or all of these industries. But it didn't. And I know why: Unrealistic expectations.
I personally was involved in several of the never-ending attempts to resolve this need to define Yahoo!. Each one ended up devolving into inaction – or worse, producing some declarative statement of vague pablum that only made folks even more confused. (Examples: Yahoo! is a "life engine," Yahoo! is "the premier digital media company," Yahoo is "you.")
The main reason for the failure to craft a clear vision is that the executive staff was unable to imagine giving up on major existing lines of business, even if there was no clear strategy for why they existed. Because there were so many directions Yahoo! could go in, you could make a compelling reason for why Yahoo! should retain its foothold in any multi-billion-dollar market segment. So again and again, after all the pontificating, theYahoo! executive team would convince itself it could indeed be all things to everyone.
Of course, having a clear identity means you know what you are and you know what you AREN'T. That second part is easily as important as the first. It's what gives you the discipline to say "no." To look at alluring market opportunities and pass on them, knowing that your core competencies aren't a good enough fit. To avoid wasting time and treasure chasing a losing game.
Without this clarity and discipline, Yahoo!s diluted and aimless efforts have resulted in its services becoming less and less relevant as the Web has evolved and matured.
I used to believe very passionately that the company could be turned around. But as time went on, I lost that hope, for two reasons.
First, I witnessed enough changings of the executive guard to conclude that the courage and ruthlessness required is simply not likely to happen. There are business lines at Yahoo! that are like Tolkien's Ring of Power. Every new CEO thinks they can withstand their allure as they unsheathe their cutting sword, and then soon finds themselves jealously protecting their "precious".
The second is that too much time and damage has occurred. Yahoo! has been rotting for years, resulting in unwieldy infrastructure, underperforming talent, poor partner relations, and consumer apathy. If the new CEO was suddenly bestowed from above with the "next big idea" for the Internet, why would you possibly want to saddle that gift with all of the albatrosses around Yahoo!'s neck? She'd be much better off starting a new company from scratch, with the right talent, the right culture, the right platform, and a clean shot at defining the brand.The Hard Truth
So why am I going on so much about a struggling tech company?Because I read this today from Robert Reich:
Brace yourself. In coming weeks you'll hear there's no serious alternative to cutting Social Security and Medicare, raising taxes on middle class, and decimating what's left of the federal government's discretionary spending on everything from education and job training to highways and basic research.
"We" must make these sacrifices, it will be said, in order to deal with our mushrooming budget deficit and cumulative debt.
But most of the people who are making this argument are very wealthy or are sponsored by the very wealthy: Wall Street moguls like Pete Peterson and his "Fix the Debt" brigade, the Business Roundtable, well-appointed think tanks and policy centers along the Potomac, members of the Simpson-Bowles commission.
These regressive sentiments are packaged in a mythology that Americans have been living beyond our means: We've been unwilling to pay for what we want government to do for us, and we are now reaching the day of reckoning.
The truth is most Americans have not been living beyond their means. The problem is their means haven't been keeping up with the growth of the economy - which is why most of us need better education, infrastructure, and healthcare, and stronger safety nets.
He goes on to make the argument for a wealth tax on the richest Americans to pay for that education, infrastructure, and healthcare.
I'm not going to tackle the wealth tax concept here (though I have strong opinions). But I want to point out that I see the same blindness to reality, the same unrealistic expectations, in Reich's commentary as I did in Yahoo!.
Reich mentions but then dismisses the only point that matters: America does not have the wealth to meet the entitlements it has promised. Nor can it sustainably meet its operating costs.
Why is that? Because we, as a society, have very much indeed lived beyond our means. By building up such a tremendous amount of debt through our profligacy that a small rise in interest rates would be catastrophic. That our children and children's children will be "paying backwards" for our largess, unless some debt-clearing event transpires (which I think will).
Being unwilling to acknowledge this unpleasant but fundamental truth dooms any attempts to avoid it, via wealth redistribution or any other means. It's the same flavor of willful ignorance that caused Yahoo! to convince itself it could claim all mountaintops until it eventually begrudgingly realized it wasn't summitting any.
There were many times in my years at Yahoo! where I would listen to the "rah rah" all-hands presentations by the executives and walk away disconcerted. Despite the assurances of the great talent within the company and the wonderful ideas currently on the drawing board, it increasingly appeared that they were not admitting the obvious: The strategy was flawed, the company was failing, and radical change was needed if we wanted to succeed again.
That's exactly how I feel when reading Reich's piece. If this is the logic that our country's leaders are using in their decision-making, then Houston, we indeed have a problem. Having seen this movie play out in the smaller Yahoo! microcosm, I have no appetite for watching a sequel at the national level. But I fear that's what we're in store for.
I don't know how much influence Reich has these days, as he's not working in the current Administration as he did for three other Presidents (Ford, Carter and Clinton). But from the current fiscal and monetary policy we're pursuing, it sure seems like his mindset is not that far from those currently in DC.
So I find myself reflecting on how I reacted when I decided Yahoo! wasn't going to change course. I decided I was going to need to change mine, instead.
I invested in self-discovery to identify work that was meaningful for me. Fulfilling work that I'd be happy doing no matter the compensation. I cut the cord, resigning before I knew what I would do next. Staying on would only delay the hard work I'd need to do to create my future. I started developing the skills I'd need for my new chosen profession. And I began to tap the power and goodwill of other people who could help me (and whom, in turn, I could help back).
Seems to me this is good advice for our national predicament.
The ride from here is likely to get bumpy as reality punctures our leaders' unrealistic expectations. But if we, as individuals, invest in living authentically, working hard, and fostering supportive community, we'll enjoy the benefits of a resilient life regardless of what transpires.
I, for one, am ecstatic that both you and Chris realized "something" was off kilter with our present situation and have done us a tremendous service by escaping the corporate treadmill and then running this site.
You are 100% correct for pointing out that people have unrealistic expectations about future financial directions.
However, I think you need to see another side of this. Reich is representing the lower class vision of the economy. In this regard he is acting as a politician, more than as an economist.
IMHO we are looking at the death throes of a debt backed, paper money system and it is very similar to playing musical chairs. Reich is fighting for the slower and less coordinated people to get access to some of the chairs. Otherwise, the Predator class naturally ends up with every chair. There is always more money for "Defense", more money for Israel, more money for "Homeland Security", and if there is another bank issue, there will be more money for that-again. There will always be more money for the well connected and well represented until we hit the wall.
My point is Reich is providing a little bit of balance in the political spectrum, probably knowing full well that one day this will all end up really ugly. No politician would dare tell people the economic truth, as we see it. If such a politician appeared on the scene, and was taken seriously, he or she would be dealt with as a severe threat to the status quo.
Found this article on Yahoo's finance page. It dovetails nicely with this article.
why would anyone be against wealth re-distribution?
Ok, I'll bite. Let's pretend we live in a society that is run by sociopaths, whose entire apparent goal is to redirect a good chunk of the tax loot they collect to their friends that run various cartels - let's call them the military industrial complex, TBTF banking, big pharma, big tobacco, industrial sugar & fatty food production, captive media, big energy ... have I missed anything? Yeah anyhow, lets pretend the mechanism of governance is completely captured by this group: sociopaths & cartels.
Only, we don't really need to pretend, do we? Because that's pretty much where we live.
So if you are advocating raising taxes on - pretty much anyone - and handing the money to the sociopaths, I'm going to say that's a bad idea.
Here's the thing. Under your plan, wealth will DEFINITELY be redistributed. I just don't think it will end up in the place you hope it will end up.
If we can arrange to have a system that isn't run by sociopaths - somehow - then I'd be for some amount of redistribution. That, of course, is the trick. Those pesky sociopaths always seem to float into positions of power. Communism had that issue, if I recall correctly...
Nov 04, 2015 | naked capitalism
... ... ...
Despite Wolf's bloodless language, he clearly regards the issue as serious. He describes this withdrawal from work as a "dysfunction" and says it demands not just study but action as well.
The underlying pathology is not hard to describe: employers (enabled by the Fed which has since the 1980s been only too wiling to provide for higher levels of unemployment so as to curb labor bargaining power to keep inflation tame) have succeeded in eliminating labor bargaining power. That program has been aided and abetted by the popularization of libertarian ideologies, which encourage many to see themselves as more in charge of their destiny than they are and thus see success and failure as the result of talent and work, as opposed to circumstance. For instance, one group that could have disproportionate power if they chose to use it, tech workers (particularly systems administrators and key support personnel in large systems deployments) have never seemed inclined to find a way to use it.
And as we saw in the widely reported story yesterday, on rising death and morbidity rates in less-educated white men and women aged 45 to 54, the scarcity of jobs in some parts of the country and the erosion of low-end work conditions and pay is now doing damage on a societal level. And some of this is, as Wolf suggests, not just because candidates can't find jobs, but in many cases, the jobs just aren't good enough (or more accurately, the pay is not good enough; the fundamental rule of neoliberalism is that everything can be solved by prices, and higher pay makes a crappy job more bearable).This is not just armchair theorizing. In 2014, the New York Times reported on the issue of how labor force participation had fallen among prime working age men since the 1960s and have been accompanied by a decline in the participation of women since 2000. The article focused on how some middle aged men were remaining unemployed even though there were jobs they could take because they felt the work didn't pay enough. From the story:
Frank Walsh still pays dues to the International Brotherhood of Electrical Workers, but more than four years have passed since his name was called at the union hall where the few available jobs are distributed. Mr. Walsh, his wife and two children live on her part-time income and a small inheritance from his mother, which is running out…
"I'd work for them, but they're only willing to pay $10 an hour," he said, pointing at a Chick-fil-A that probably pays most of its workers less than that. "I'm 49 with two kids - $10 just isn't going to cut it."
The article relied on a poll by the Times, CBS News, and the Kaiser Foundation. From its findings:
Many men, in particular, have decided that low-wage work will not improve their lives, in part because deep changes in American society have made it easier for them to live without working. These changes include the availability of federal disability benefits; the decline of marriage, which means fewer men provide for children; and the rise of the Internet, which has reduced the isolation of unemployment.
At the same time, it has become harder for men to find higher-paying jobs. Foreign competition and technological advances have eliminated many of the jobs in which high school graduates like Mr. Walsh once could earn $40 an hour, or more. The poll found that 85 percent of prime-age men without jobs do not have bachelor's degrees. And 34 percent said they had criminal records, making it hard to find any work.
This ties into the widely-reported story yesterday, of rising death rates among less-educated whites aged 45 to 54. Recall that the rising mortality and morbidity afflicted both men and women. And remember that work is important not just to provide income, and in the old days, health insurance, but as a way to organize one's time and to see people during the day, some of whom generally become at least social acquaintances. So the "oh I can busy myself on the Internet" may be true short-term, but over the long haul, it's not a substitute for seeing real people.
And these men recognize that they are paying a price for not taking work, yet a significant portion could take a job but can't stomach the pay and other terms of offer:
For most unemployed men, life without work is not easy. In follow-up interviews, about two dozen men described days spent mostly at home, chewing through dwindling resources, relying on friends, strangers and the federal government. The poll found that 30 percent had used food stamps, while 33 percent said they had taken food from a nonprofit or religious group.
They are unhappy to be out of work and eager to find new jobs. They are struggling both with the loss of income and a loss of dignity. Their mental and physical health is suffering.
Yet 44 percent of men in the survey said there were jobs in their area they could get but were not willing to take.
jonboinAR, November 4, 2015 at 8:25 am
It's just unconscionable to pay people less than it takes to live. I understand that a wage minimum might put some kind of distortion or other on the "labor market" (I don't know what, but that's what will be argued by someone of a libertarian bent who chimes in), but so be it!
griffen, November 4, 2015 at 8:25 am
Profit margins. And short term obsessed managers or executives ( who can be accused of lacking vision past 12 months ).
jonboinAR, November 4, 2015 at 8:27 am
Note: I know we have wage minimums already. I'm talking about having meaningful ones like $18/hr or something.
ChrisFromGeorgia, November 4, 2015 at 9:38 am
i think the employers "wet" dream is no employees/slaves whatsoever – just "virtual" ones. Robots, small shell scripts and AI to replace us all. How awesome – no pesky unemployment insurance or health care benefits to pay! But as you point out, there is a fly in the ointment – who's left to buy their crapified products?
Ivy, November 4, 2015 at 9:48 am
Job crapification ... has been underway for decades. When consumers have their demand curves probed continuously through targeted pricing (monetary or otherwise), there is a wear-and-tear effect as lives are worsened.
Extrapolate that probing across all consumers and you see a decline in the societal goodwill that took generations to nurture. The trend is toward an atomization of life, where each interaction (monetary or otherwise) is targeted at extraction of the last ounce of available assets, or of potential for greater debt. Welcome back to the jungle.
Jetfixr in Flyover, November 4, 2015 at 10:21 amCarla
"Non college educated" includes me, an aircraft mechanic with 30 years plus experience, and a page long list of technical training on airframes, engines, and avionics.
My discussion with the CFO of the company I work for is illuminating.
(As the chief mechanic/technician in the flight department, I'm a direct report to the CFO)
Laid off, out of work for almost a year in 2009 (when the SHTF, the first people thrown under the bus are the company airplanes). Hired in as a contractor, which turned into a full time position, at 40% below what various salary surveys say I should be making. Brought this disparity up at my performance review, provided print copies of the various surveys, etc. In the end, I was told "It is what it is, and if you don't like it, feel happy to pursue employment elsewhere"
The suits screw employees "because they can" and much like the fable about the turtle and the scorpion, its in their nature.
And this is supposedly a job where there is a "shortage of qualified people".. Which there is. Mainly due to the fact that they are throwing old, expensive guys under the bus as fast as they can, and replacing them with newbies who are making a lot less money
In my case, I've become a part time contractor that enables me to pull down another $10-20k/ year. But its not lucrative or steady enough work to live on. It did save my azz when I was out of work for almost a year in 2009.
@Jetfxr: your experience is a perfect description of job crapification: you actually do work that is ESSENTIAL to the safety and well-being of the public (not only the flying public, BTW, but all of us on the ground whom you and your colleagues save from being crushed by falling airplanes). And the thanks you receive is to be mis-treated and ill-paid so that some suit who never did a lick of essential work in his life can sneer "It is what it is, and if you don't like it, go elsewhere."
Well, I would like to say "Thank you" to you, and to all the millions of Americans who perform the essential tasks everyday that keep so many of us safe and relatively comfortable. I wish you were fairly compensated and decently treated, and I wish my current level of safety and comfort extended to everyone else. And I do not take it for granted for a second.
And not once will it ever occur to the suit that the 100K bonus he receives (or gives himself) for "keeping costs down" is carved directly out of the salaries of people like this gentleman.
I wonder if the newbies can be brought in because at least one old guy is left to do the training and the quality control. Amazing that this is done for aircraft maintenance! If only more CEOs and CFOs directly experienced the downside of their actions. My experience has been that employers have taken advantage of employee good will. Good, talented employees have taken on more responsibility without added pay and do most of the training for new employees. But, the mood is different now that the abuse has continued for so long. While not directly refusing the employer demands, saying no can cost you your job, the task is just done poorly.
He keeps paying union dues to preserve his shot at a pension, but that also means he can't get nonunion work as an electrician. He says he would like a desk job instead. He used email for the first time last month, and he plans to return to community college in the spring to learn computer skills.
Wait, I thought that people like Frank Walsh were supposed to wake up and realize their reliance on the quasi-nanny state of unions and pensions is what is really holding him back. Isn't he supposed to become an entrepreneur? It's almost as if the guy hasn't read Atlas Shrugged.
However, that trip back to community college sounds like a great plan. Lifelong skills developed in one area that are no longer "economically viable," a few classes in computer technology and boom, problem solved! Wonder who gave him such a great idea. Good luck getting rid of that student loan debt!
Jetfixr in Flyover
The trend seems to be "rewarding" the "creative people" in the "profit centers", while squeezing the turnips who are considered "overhead". This includes everyone who keeps the house of cards infrastructure in this country running
I find it interesting that the monkey in the video who is shortchanged with the cucumber reward throws the cucumber at the researcher on the second go. Also, shakes the cage a bit.
For some time I've been mystified by my fellow citizens reaction to the wealthy elite who have been steeling and lying to them for years. There is a form of respect and reverence that is always extended to them that I just don't get. At the very least, looting elites should be shunned by working class people. Respect is a two way street, and the wealthy do not respect working class people at all. Why should our limited resources and energy be extended to them- in any form. Being forced into an exploitive situation is one thing, willful participation is another.
The larger issue is that the current economic system is rewarding corruption at the cost of long term stability of both businesses and society as a whole. Rebuilding that system from the bottom up based on fairness is the only way to go. When more people turn off their TVs, embrace their poverty with dignity, and dedicate themselves to helping and creatively working with others, maybe there is a chance for a future.
The new frontier is turning ones back, once and for all on the elite worldview of greed and corruption.
Not taking crappy jobs is good thing if you are doing so to rebuild your life in a more dignified manner. Honest employers can hire workers at living wages. Not buying products or services from corporations working on the model of slave labor would send a strong message. Power of the boycott.
Like banks that are too big to fail, jail or hang, businesses that should have failed for not supplying jobs with a living wage are being supported to viable status by handouts from the government directly to the CEO's or to their workers so the workers can continue to work at less than livable wages and the CEO's can claim higher and higher bonuses. This corporate welfare state is crapifying everything and people should be horrified – but they're not. We're surrounded by zombies, zombie banks, zombie corporations of nearly every ilk and, like a mad scientist, a government that insists on keeping them alive through direct transfusions from every American citizen – this is the zombie apocalypse.
"DIE QUICKLY!" The Democratic answer to suppressed wages, industrial decline and a stagnant labor market. Older white working class people offing themselves with pills and alcohol – what's not to like? That counts as an all-upside no-downside policy for Blue Team.
Great post. Thank you.
Reading this and yesterday's post on declining life expectancy I wonder who in the EU thinks it a good idea to join the TTIP ? Serious question. If EU countries think joining TTIP will be great because they'll get access to the supposedly rich US consumer market, these to posts ought to wake them up to the fact that the US consumer market has been hollowed out to nothing by neoliberal policies of both parties.
What is has happened in the US would shock even Dickens.
The Greek concept of themis is in play here. As social order and fairness falls by the wayside, increasing numbers recognize that playing by the rules is a fools errand. This is what drove Hercules berserk and we see it played out regularly now in mass murder events.
Classic reaction. Millenia old. Mass media promulgates the oligarchic narrative.
Jetfixr in Flyover
I went to the funeral of a 50-ish former co-worker about a year ago. Died of a "accidental drug overdose". Was demoted from his mid-tier management job for cost cutting reasons, then terminated by his new boss, for drinking. Was a licensed mechanic, but that work was demeaning/regressive, eventually fired from several jobs. Last job before he went to the halfway house was wearing a blue vest at Lowe's.
He always acted like manual work was below his station, I suspect his ego would not accept the fall from the rarified heights. There's no such thing as "second chances" anymore, if you are among the "wretched refuse"
Level since 2010, Even Share Buybacks Don't Work Anymore
By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street.
Financial Engineering bites back
When IBM announced earnings last week, it talked about all the great things it was accomplishing to compensate for the fact that revenues had plunged 14% from a year ago to $19.28 billion, and that even "revenues from continuing operations," after accounting for operations it had shed, dropped 1%. It was the 14th quarterly revenue decline in a row. Three-and-a-half years!
It's not the only American tech company with declining revenues. There are a whole slew of them, mired in the great American revenue recession, including Microsoft, whose revenues plunged 12%. So they – big tech – are in this together.
But turns out, IBM's revenues, as bad as they have been, might have been subject a little more financial engineering than normally allowed.
Today, IBM disclosed that the Securities and Exchange Commission is investigating how it has accounted for these lousy revenues. The one-sentence disclosure was tucked away in a footnote on page 45 of its SEC Form 10-Q, which it filed today:
In August 2015, IBM learned that the SEC is conducting an investigation relating to revenue recognition with respect to the accounting treatment of certain transactions in the U.S., U.K. and Ireland. The company is cooperating with the SEC in this matter.
"A company spokesperson wasn't immediately available to elaborate on the probe," according to the Wall Street Journal.
As I'm writing this, IBM is down 4% to $138, a new 52-week low:Chris in Paris October 28, 2015 at 3:23 amClive October 28, 2015 at 4:41 am
They've been up to the same behavior (the stock buybacks) for 15 years. Gutting the internal employee knowledge base, especially accounting teams, which were impeccable in the past, made a mistake inevitable. Sad.sam s smith October 28, 2015 at 12:57 pm
It isn't the first software company to have been tempted by the siren call of financial engineering in an attempt to solve a revenue decline problem and I don't suppose for one singe second it will turn out to be the last. There's one biggie already which is well known for its, ah-hem, "aggressive" culture which already seems particularly stinky to me.
As Chris in Paris rightly notes above, if you prod the zombie a little and analysed the reasons why revenue has declined, the reason is that what has now reinvented itself as a Professional Services enterprise lacks the skills and competencies which are essential to actually deliver - IBM is neither professional (amateurish is more like it) nor does it provide much of a service (unless you think the ability to gibber inanely in a heavy and largely incomprehensible Asian/Indian/East European accent is the same thing as providing a service).
Even the stupidest of corporate CIOs (and they are pretty stupid, as a whole, it's only taken them about 10 years to have spotted this decline) eventually realises that people get fired all the time for buying IBM because of the, well, general crapness.
This isn't even the first time IBM has done something like this.
Back in the late 80's, IBM leased the majority of its mainframes. Someone came up with the bright idea of converting those leases to sales. Income jumped and bonuses were paid for the next 5 years. At that time, there were no more leases to convert and sales plummeted.
Jim Haygood October 28, 2015 at 6:55 amcnchal October 28, 2015 at 8:20 am
'Instead of blowing tens of billions of dollars on stock buybacks … IBM should have invested those funds in actual engineering and in people, which might have helped it become great again.'
Stock buybacks aren't necessarily bad. Whether IBM should invest in growth depends on its investment opportunities.
If (as it appears) IBM is basically in long-term liquidation (a la Xerox) as its 20th century mainframe technology fades from the scene, then stock buybacks are a more tax efficient way than dividends to return capital to the shareholders, until it's all gone.cdub October 28, 2015 at 8:45 am
. . . then stock buybacks are a more tax efficient way than dividends to return capital to the shareholders, until it's all gone.
Would it be more or less tax efficient if IBM just gave up the ghost, and had a fire sale auction of it's assets instead of waiting till it's all gone?Jim Haygood October 28, 2015 at 8:46 am
But no management team has ever elected to go that course. If just the Board would take action. Snap, back to reality.cnchal October 28, 2015 at 9:37 am
It's still a $140 billion company in market cap, so the number of potential buyers is limited.
IBM's corporate culture would be a good fit with Microsoft, I reckon.Jim Haygood October 28, 2015 at 10:24 am
I was thinking more along the lines of say having Ritchie Bros Auctioneers come in and sell the physical assets. There must be some interesting machine tools that IBM is misusing that would be more "productive" in someone else's hands, no?
The service side of the business could be sold off piece by piece. IBM looks like the individual parts are worth more than the whole.
I completely discount the $140 billion market cap as a pure Fed enabled fiction.
This just in -
IBM Corp. on Wednesday confirmed the purchase of The Weather Company, which includes the Weather Channel and its related technology platforms and sensors, to enhance its cloud ecosystem.
IBM said the purchase adds to the $3 billion investment IBM committed earlier this year to build out products and services in the Internet of Things.
It's all too likely that a simple semantic error - confusing white puffy clouds with high-tech electronic ones - has led to a tragic misallocation of capital.
Arizona Slim October 28, 2015 at 11:49 amJason October 28, 2015 at 4:38 pm
IBM buying The Weather Company reminds me of AOL and Time Warner merging. Can't put my finger on why, but …
Once again, life imitates The Onion imitating life…
sam s smith October 28, 2015 at 12:54 pm
Tata or Wipro would be a better suitor. IBM already has a large number of its employees outside the US.
MikeNY October 28, 2015 at 10:33 amLil'D October 28, 2015 at 11:27 am
I remember an academic paper from some years ago demonstrating a negative correlation between share buy-backs and future stock prices. The obvious explanation is that such financial engineering is attractive to management only when all other options (organic growth, attractive acquisitions) have either been tried, and/or are unappealing. In other words, it's usually sick companies that resort to it.MikeNY October 28, 2015 at 11:39 am
Although the empirical evidence actually show that shares of companies with share buybacks have price return greater than that of the general market. Basis behind TTFS and PKW ETFs. Trim Tabs (which really sounds like a diet pill company) keeps track of float. Of course share price increasing is not the same thing as company value increasing
Well, it probably depends on the time frame and the cohort. If I can dig up that old study I'll post it.
Jim Haygood October 28, 2015 at 1:04 pmMLS October 28, 2015 at 1:36 pm
The S&P 500 Buyback Index is up 7.5 percent this year through Oct. 3 compared with the 6.5 percent advance in the S&P 500, after beating it by an average of 9.5 percentage points every year since 2009.
Buybacks increase leverage. It's not surprising that companies shrinking their equity base (often while simultaneously enlarging their debt) outperform in a bull market.
Presumably these same companies will get smashed harder when we finally (like Thelma and Louise) drive off the edge of the Permanently High Plateau.
And the index:
As S&P points out, there's an ETF for that. Two of em, in fact.MikeNY October 28, 2015 at 5:19 pm
Buybacks increase leverage. It's not surprising that companies shrinking their equity base (often while simultaneously enlarging their debt) outperform in a bull market.
Presumably these same companies will get smashed harder when we finally (like Thelma and Louise) drive off the edge of the Permanently High Plateau.
Correct. Buybacks increase the risk of the equity by changing the capital structure. They are helpful to a certain extent to eliminate the dilutive effect of employee stock options, but beyond that they add no long-term value of the company.
Yes, I agree with you on the effect of shrinking the equity base. It increases equity vol.
participant-observer-observed October 28, 2015 at 12:52 pmArizona Slim October 28, 2015 at 12:53 pm
Especially if you are going to live happily ever after on the MIC boondoggle:
Drones, IBM, and the Big Data of Death
IBM could also return to selling CD ROMs of installable SPSS instead of looking for subscription junkies.
I'm typing this comment on a pre-Lenovo IBM ThinkPad. And I'm remembering the days when IBM actually made things that were good to own. Y'know, like this laptop.
participant-observer-observed October 28, 2015 at 12:55 pm
They seem to be in the banality of evil business, keeping the homeland in freedom, etc etc, when not supplying social scientists with data analysis software:
Drones, IBM, and the Big Data of Death
Chauncey Gardiner October 28, 2015 at 12:22 pmMLS October 28, 2015 at 1:34 pm
Considering the numbahs, Wolf Richter is much too charitable in this piece IMO. Where are the debt rating agencies?… back in the same bars they hung out in back in the day? And does the SEC have authority to investigate beyond accounting treatment of matters like revenue recognition? IBM is far from the only major corporation where this behavior, which also serves to maximize gains under executive stock options, has been occurring.
Negative $19 billion tangible net worth and very high debt leverage after massive stock repurchases and high dividend payouts over a period of years. Wonder what will happen if interest rates ever rise?
… Oh, but Look!!… The stock is up this morning! "The Market" has spoken. All is well, people!… Move along.Howard Beale IV October 28, 2015 at 8:04 pm
I'm a little confused – on one hand the author is saying that IBM has been "pulling a bag over investor's heads" by tricking them with faulty per-share metrics. One the other hand there's a chart of IBM that shows that the stock is flat since the end of 2010 – a period where the broad market is up over 60%. There was certainly a period where IBM did well in that time, but that was largely on the expectation that they were actually turning the business around and taking steps to, you know, try and grow the thing. When that failed to materialize, the stock rolled over.
I don't disagree with the author that financial engineering in general is hardly the panacea Wall Street makes it out to be, but I think investors as a group deserve more credit for figuring out what's really going on.
Some of the smaller iSeries shops are more at risk of getting converted over to more modern systems as well as some of the smaller zSeries boxes-but the bigger the systems the higher the risk and cost to do so-IBM released the z13 family earlier this year and got billions in orders and sales. They're still the backbone of just about every major financial corporation in the world (we just got done upgrading all of our boxes last month.)
The real problem is that colleges and universities stopped teaching mainframe technology two decades ago-so now we have to do the education ourselves
May 27, 2015 | nakedcapitalism.com
Disturbed Voter May 27, 2015 at 12:52 pm
Great post with lots of out-of-box insight.
In the IT world, one can see both the dumbing down of the users, and the dumbing down of the IT staff. Thanks to automatic spell check and copy/paste … the clerical world has pretty much absorbed as much productivity increase as it can … but the people doing the writing on a PC with Word are less skilled than someone with an IBM Selectric was 30 years ago.
This is applied to IT personnel as well … IT support is increasingly centralized with fewer and fewer local support people, thanks to more highly skilled specialists at the server farm, but the net-net is fewer people and lower labor costs. Eventually local IT help will only be able to show users what they could have done for themselves, if only they had read the instructions. This promotes less able users … since they don't have to do this themselves, they can always call up an IT dog's-body to come show them for the Nth time how to do something.
And not only is quality declining, but superfluous quantity is king … particularly with email.
Mark, May 27, 2015 at 1:54 pm
Interesting thesis. One answer about why we work is to live, but another quite separate answer is, to secure the means we need to live the lives we think we ought to live.
That is to say, the Western preoccupation with occupation has perhaps shifted (devolved?) from a dutiful, industrious working out of some sense of calling to some to more material motivation for industriousness purposed toward working out how to keep up with the Joneses, whoever they are. In this, organisational productivity is not unimportant, but perhaps appearances of importance to productivity are more important. As you note, the work that goes into appearing important is often at odds with actually getting a task completed faster, or for less. In this logic, having a certain job is a bit like what it meant to have a title in eras and states where nobility came with real privilege. So people go for these things, big time.
As I think about the ridiculous efforts required to make it in "society" in bygone eras, I'm uncertain whether this decoupling of work and material productivity is a new thing.
Either way, it's a big thing.
subgenius, May 27, 2015 at 4:04 pm
I have actually been fired from a job for "time-wasting"… Thing is, I was so much faster than the surrounding drones that I had completed all my alloted tasks. Apparently appearance is all when working for little napoleon bosses (who, incidentally, have no problem telling you exactly how easy something THEY can't personally do is…)
hunkerdown, May 27, 2015 at 2:01 pm
Ritualized, exactly spot-on. The need for production may have lessened, but the desperate, singular need to take the inferior side of a power relationship that only gets worse… well, it is the English we have to blame for that.
Brooklin Bridge, May 27, 2015 at 10:45 am
In a corrupt society, the devices we invent and the system in which they operate will be corrupted. The rent extraction nature of smart phones, the case of John Deere and GM arguing their vehicles are part of a licensing agreement and are not "owned" by buyers, are good examples. That's the problem I have with technology more than unfair and harmful replacement of human labor.
At some point, assuming we deal with the above, we will have to deal with some sort of basic economic/resource guarantee based simply on being born. Robots and systems will be capable of doing more and more work from basic, to very sophisticated, so yes at some point they will replace more people than they create work for.
Another consideration and one that seems particularly overlooked is that all these things need energy and lots of it. It will be amusing (perhaps more along the lines of tragic) to create a society totally dependent on robots (where people forget how to be auto-mechanics, doctors, lawyers, or mathematicians, or really expensive people such as plumbers only to have it shut down (in some drawn out unplanned manner) due to energy depletion.
Pepsi, May 27, 2015
You're right on and you address what I was going to post.
This confluence of robots, jobs, and profit lead one to wonder, what is a job, what is profit, why do we need to make things at lower cost? There are no satisfying answers, just loops back to creating profit and satisfying some arbitrary need. We have to destroy this 'market' based thinking and instead think about things in terms of the world and its people, or we'll all be screwed, robots or no.
Peter, May 27, 2015 at 12:06 pm
Digby calls it "The Midas Cult." Which I think sums America up quite nicely.
Disturbed Voter, May 27, 2015 at 1:07 pm
Having effective artificial doctors, lawyers, scientists, engineers … other than providing labor saving tools for the people already doing those jobs … is based on the AI myth. AI is a con, and unfortunately most people aren't intelligent themselves to see thru it. A back hoe replaces a ditch digger, but there is nothing like a ditch digger to replace a thinking individual.
TG, May 27, 2015 at 10:48 am
The possibility that someday someone might produce a robot that can reliably act as a general purpose maid is of no relevance to TODAYS labor market.
For some jobs that need very high levels of precision like welding car frames or wave-soldering SMT components, robots are used. Some tasks, like mass-producing nails, are so efficiently done by machines that nobody will ever do that by hand no matter how cheap labor gets. But in general, industries are using LESS automation, not more! Nike has its shoes made by hand in Vietnam by disposable workers paid 57 cents an hour – even today we could at least substantially automate that process, but it would require a massive up-front capital investment. For now automation is a red herring, like gay marriage, designed to distract us from the real causes of falling wages.
Today $100,000 can buy you an industrial robot that can sort clothes about as well as a brain-damaged orangutang. Will robots someday be able to perform these tasks at human/human+ levels? Probably, although it could still be a ways off. But even then, how much will these robots cost? Computers are getting cheaper all the time – industrial machinery, not so much. It's not just whether a robot can someday do the job, but what are the total amortized costs and risks? (A sick or excess Vietnamese worker can be fired – a million dollar robot that breaks down or is no longer needed is a big hole in the bottom line of any business that purchased it).
One notes also that automation is generally found in high-wage countries like Japan, not so much in low-wage countries like Mexico or Vietnam. If automation was a major cause of low wages wouldn't you expect the opposite? The bottom line is that automation does not (for now) cause low wages – rather, because it is (for now) generally so expensive, automation is a reaction to high wages, that allows sufficient productivity so that businesses can operate with $40/hour labor costs.
So don't believe your lying eyes when you see pictures of workers jammed into sheds like battery hans assembling iphones by hand – no, believe that it's the evil robots that are taking all our jobs and driving wages down!
craazyboy, May 27, 2015 at 11:01 am
A cynic may even conclude that "capital" knows robots are expensive and offshored labor is cheap!
Santi, May 27, 2015 at 10:50 am
Somehow, the Japanese mean, we should turn Henry Ford's quotation upside down:
"I will build a motor car for the great multitude…constructed of the best materials, by the best men to be hired, after the simplest designs that modern engineering can devise…so low in price that no man making a good salary will be unable to own one -- and enjoy with his family the blessing of hours of pleasure in God's great open spaces."
Instead of building products for the great multitude, nowadays businessmen should aspire to build consumers for their products… No wonder most products from the dot com panoply are free…
Bart Fargo, May 27, 2015 at 12:03 pm
The problem with robotic surgery is that it doesn't give any better results than manual minimally invasive surgical techniques, but is much more expensive – often multiple times the cost of laparoscopic surgery. That could change in the future, but for now demand is driven by direct-to-patient marketing by da Vinci's manufacturer (Intuitive Surgical, which has a monopoly on robotic MIS) as well as hospitals who buy the robots to advertise that they are cutting-edge and then are stuck trying to recoup the purchase cost by increasing volume, since insurance reimburses all forms of minimally invasive surgery the same.
roadrider, May 27, 2015 at 3:22 pm
The main problem with the results not surpassing traditional procedures is most likely the steep learning curve associated with the surgical "robots" (they're not really robots but are instead remotely operated devices that translate movements of the surgeons hands into more precise movements of the instruments). Once hospitals spend millions to acquire these devices they have quite an incentive to use them as much as possible. That means that patients may unwittingly become part of a surgeon's transition period from traditional procedures during which they may produce no better or even worse results. Trying to get information out of surgeons and hospitals about the experience level and outcomes is a trying exercise at best. This is a big problem in community hospitals trying to make a name for themselves.
I went through this last year when I had a robotic procedure (prostate). I declined to have my community urologist perform the procedure because I had doubts about his experience level about which he could not provide me with adequate reassurance. I ended up having the procedure at a high-volume government/academic medical center to which I had access as part of a clinical study (full disclosure: insurance – or lack of same – issues also figured into this decision). So far, I've been very happy with the results.
My advice: find the best surgeon accessible to you irrespective of the tools he/she chooses to use.
Steven, May 27, 2015 at 12:45 pm
This is a huge issue which I hope will be revisited in much greater depth. When you substitute machines and computers powered from inanimate energy sources for human labor and what Frederick Soddy called "diligence" (i.e. machine tending), it shouldn't come as a huge surprise that less labor will be required to produce what had been regarded as life's essentials. The real economic problem for more than a century has been finding a way to distribute what an advanced industrial economy has been able to produce. Even the 'iron law of wages' is under attack as human labor becomes more and more redundant.
Even in Soddy's day (the 1920s – 50s) our civilization found it easier to address the contradiction between its incessant drive to render human labor redundant and its rigid enforcement of the rule that '(s)he who does not work neither shall (s)he eat' than address more fundamental questions like the definition of wealth and 'how much is enough?' The Keynes / New Deal 'solution' was, along with some much needed investment in public infrastructure from which the bankers and financiers couldn't make enough profit, make-work programs for the public sector and vast subsidies for an 'American lifestyle' built around suburbia, the automobile culture, waste and planned obsolescence for the private sector. Those much vaunted 'services industry' jobs turned out to be mainly MILITARY services.
Some of us are old enough to remember all the talk and the promise of a 'leisure society' in which people had enough time to understand the world around them and perhaps explore the meaning of life, should they so chose. Apparently that is not to be. It must be sacrificed in the interest of a 'full employment for money' program under which profit margins not protected by government cost-plus contracts are allowed and encouraged to extract their required margins with ever more 'efficiency' (read displacement of human labor).
Nancy Pelosi is supposed to have asked "Where did they get all that money?" when informed of the sums involved in the Fed's QE policies. Perhaps the country's (and the world's) political leadership really is that dense when it comes to questions of money and economics. But the rest of us need not be. After 2008 it should be pretty clear by now that all that money was not real 'wealth'. It was – and remains – debt. For people who have more wealth than they could ever consume in several lifetimes, that debt is the real goal – control over the life and labor of present and future generations – of people or at least machines).
Time is running out for the West – if not the world – to order its affairs with by better definition of wealth than the money created by its bankers and financial engineers. Soddy's definition of wealth is a good place to start:
Wealth as a form, product or result of a draft upon the flow of available energy consists of the special forms, products, or results which empower and enable human life.
The keynote of the age is discovery, and life itself is discovery. Once made, countless generations may use it and live by it without conscious apprehension of the nature of it, without further changing their mode of livelihood, and, indeed, deeming it the only possible way to live.
Discovery, Natural Energy and Diligence— the Three Ingredients of Wealth.
Soddy, Frederick M.A., F.R.S.. Wealth, Virtual Wealth and Debt (Kindle Locations 874-876, 1982-1983, Location 1276 ). Distributed Proofreaders Canada.
Not all of us can be scientists or engineers. But most of us are at least capable of understanding who and what butters our bread. That is a job much more important than raking rocks.
Disturbed Voter, May 27, 2015 at 1:11 pm
Raking rocks is a job you assign to a junior Zen monk. It is the job of the senior Zen monk to contemplate the resulting aesthetic ;-)
fresno dan, May 27, 2015 at 1:52 pm
"I have to differ a little with the cheery, "Better policy will create new/different jobs." What passes for our leadership believes in the mantra of more education and more skilled workers as the answer. In fact, America is going in reverse in this category, as educational attainment has fallen and college and higher education costs rise into the stratosphere. Moreover, the notion that there is a raft of highly technical jobs with lots of unmet demand is a canard. As we've discussed at some length, STEM graduates are finding it hard to obtain work (see confirming evidence in The Myth of the Science and Engineering Shortage from the Atlantic last year)."
I can't help but reiterate what was pointed out in NC in the past:
So whether it is flat out conspiracies to suppress wages, or conspiracies to import workers, it amounts to the same thing. There is a desire at the top to harvest all the gains of society for themselves.
So, let's look at the arguments that more tech will increase productivity, and that rising productivity helps everyone. If that were so, we should all work less and have a higher standard of living. I think the working less is indisputable (maybe just not voluntarily). The higher standard of living…not so much.
Again, I would say that 99% have had stagnating incomes for 40 years. During this time there has been the "tech boom" – Whether its tech or policies that is the cause of the stagnation, it doesn't seem to me that the oligarchy is much inclined to change what is making themselves richer and richer….
"...the IT industry now fills about two-thirds of its entry-level positions with guest workers."
Mar 18, 2015 | Network World
A Senate Judiciary Committee hearing today on the H-1B visa offered up a stew of policy arguments, positioning and frustration.
Much of the frustration focused on the IT layoffs at Southern California Edison, which is cutting 500 IT workers after hiring two offshore outsourcing firms. This has become the latest example for critics of the visa program's capacity for abuse.
Sen. Charles Grassley (R-Iowa), the committee chair who has long sought H-1B reforms, said he invited Southern California Edison officials "to join us today" and testify. "I thought they would want to defend their actions and explain why U.S. workers have been left high and dry," said Grassley. "Unfortunately, they declined my invitation."
The hearing, by the people picked to testify, was weighted toward critics of the program, prompting a response by industry groups.
Compete America, the Consumer Electronics Association, FWD.us, the U.S. Chamber of Commerce and many others submitted a letter to the committee to rebut the "flawed studies" and "non-representative anecdotes used to create myths that suggest immigration harms American and American workers."
The claim that H-1B critics are using "anecdotes" to make their points (which include layoff reports at firms such as Edison) is a naked example of the pot calling the kettle black. The industry musters anecdotal stories in support of its positions readily and often. It makes available to the press and congressional committees people who came to the U.S. on an H-1B visa who started a business or took on a critical role in a start-up. These people are free to share their often compelling and admirable stories.
The voices of the displaced, who may be in fear of losing their homes, are thwarted by severance agreements.
The committee did hear from displaced workers, including some at Southern California Edison. But the communications with these workers are being kept confidential.
"I got the letters here from people, without the names," said Sen. Jeff Sessions (R-Ala.). "If they say what they know and think about this, they will lose the buy-outs."
Infosys whistleblower Jay Palmer, who testified, and is familiar with the displacement process, told Sessions said these workers will get sued if they speak out. "That's the fear and intimidation that these people go through - they're blindsided," said Palmer.
Moreover, if IT workers refuse to train their foreign replacement, "they are going to be terminated with cause, which means they won't even get their unemployment insurance," said Ron Hira, an associate professor at Howard University, who also testified. Affected tech workers who speak out publicly and use their names, "will be blackballed from the industry," he said.
While lawmakers voiced either strong support or criticism of the program, there was interest in crafting legislation that impose some restrictions on H-1B use.
"America and American companies need more high-skilled workers - this is an undeniable fact," said Sen. Orrin Hatch (R-Utah). "America's high-skilled worker shortage has become a crisis."
Hatch, who is leading the effort to increase the H-1B cap, suggested a willingness to raise wage levels for H-1B dependent employers. They are exempt from U.S. worker protection rules if the H-1B worker is paid at least $60,000 or has a master's degree, a figure that was set in law in 1998. Hatch suggested a wage level of $95,000.
Sen. Dick Durbin, (Dem-Ill.), who has joined with Grassley on legislation to impose some restrictions on H-1B visa use -- particularly in offshoring -- has argued for a rule that would keep large firms from having more than 50% of their workers on the visa. This so-called 50/50 rule, as Durbin has noted, has drawn much criticism from India, where most of the affected companies are located.
"I want to put the H-1B factories out of business," said Durbin.
Durbin got some support for the 50/50 rule from one person testifying in support of expanding the cap, Bjorn Billhardt, the founder and president of Enspire Learning, an Austin-based company. Enspire creates learning development tools; Billhardt came to the U.S. as an exchange student and went from an H-1B visa to a green card to, eventually, citizenship.
"I actually think that's a reasonable provision," said Billhardt of the 50% visa limit. He said it could help, "quite a bit." At the same time, he urged lawmakers to raise the cap to end the lottery system now used to distribute visas once that cap is reached.
Today's hearing went well beyond the impact of H-1B use by outsourcing firms to the displacement of workers overall.
Hal Salzman, a Rutgers University professor who studies STEM (Science, Technology, Engineering and Math) workforce issues, told the committee that the IT industry now fills about two-thirds of its entry-level positions with guest workers. "At the same time, IT wages have stagnated for over a decade," he said.
H-1B supporters use demand for the visa - which will exceed the 85,000 cap -- as proof of economic demand. But Salzman argues that U.S. colleges already graduate more scientists and engineers than find employment in those fields, about 200,000 more.
"Asking domestic graduates, both native-born and immigrant, to compete with guest workers on wages is not a winning strategy for strengthening U.S. science, technology and innovation," said Salzman.
April 18, 2012 at 10:11 am
well the offshore workers may not be as good at the onshore ones at the moment, but they are on a learning curve and will get there. and they’ll be both cheaper and better.
no one has a right to a high paying job; it’s something that must be deserved.
what should IBM do? keep all the onshore workers? how will that fix the dominance of sales and marketing and the lack of product focus in the company? it won’t.
and if Steve Jobs was such a guru, then why are most of Apple’s workers in China? was it a case of do as I say, not as I do?
Obviously you are one of the shareholder value crowd. IBM is cutting jobs NOT because of skill set lack but often age and the COST of an American worker when India can get by at $2 an hour. FAIR???? Try living in this country for $2 an hour, OH WAIT, MINIMUM WAGE???? IBM and many other firms just LOVE the expense reduction of that low hourly wage, which is one reason why Disney and AstraZeneca (a $1 billion account) went elsewhere. Texas dumped the Data Center contract. Why? Texas does not speak Hindi very well. IBM is gutting smart staff for cheap staff. What does this tell you.
Well aren’t most of IBM’s customer in Asia too? Perhaps they like the Hindi accent.
Fake resumes invented in India? Give me a break. Most resumes I’ve seen here are fake.
I don’t own any IBM stock, but the company does have a fiduciary duty to increase shareholder value.
Do you believe that IBM will definately increase shareholder value by losing Disney, AstraZeneca and Texas? Why did these three projects leave? What got them angry enough to dump IBM? Particularly Texas, galling as it was a DATA CENTER MANAGEMENT job and IBM could not even do that!!! If that fails, then what can IBM do today?
My company told me the reason they were cutting me for IBM is because IBM could hire 5 people in Argentina for my salary.
Once working for IBM I wondered how any company could accept the service IBM was providing. Told by IBM management was how IBM was offering a total package with software and services (which made it an attractive package). And that IBM provides services not as bad as the other outsource companies.
Funny thing though, a lot of the clients are willing to accept the under staffed, under trained, and incompetence to make their bottom line better.
I am still scratching my head.
Add CapitalOne, and ING to your list
Francis — I think you are naive about the employees being cut. Within IBM we are now having situations where we want to ask someone for assistance because they know a product or a procedure and we find out that person whose expertise we valued and sought was part of the last Resource Action.
I can verify that this happens *all the god damn time*.
People like you are a cancer on American society.
Francis just made 3 statements that are quite logical and hard to refute. Other commentors have pointed out additional factors indicating that IBM may be harming itself in the long term. Let’s try to understand both sides.
Francis..think about what you just said…”learning curve”??? Really?
You call 15 years of offshoring services and call centers to India, including the training itself, a “learning curve”??? You couldn’t even sell that BS to a low level sales or marketing manager in IBM; let alone anyone here. You know nothing about IBM, if you believe that’s why they went to Brazil, Russia, India, China, Bulgaria, Chile, The Philippines, Vietnam, and Argentina….to name a few. None of those moves offshore were designed to have a 15 year learning curve…NONE of them. On top of that, you’ve just contradicted and exposed the “lie” that IBM has been telling about US IBMers “lacking” the skills to compete in the global market! It can’t be both ways, Francis! Cringely has nailed this and you should re-read his column.
I work for IBM in training. There is a learning curve for employees in developing countries, and once they start up it they leave IBM and get better jobs with other countries. We are constantly training new people in the developing markets. Average tenure for employees in Asia and Central America is probably less than 5 years now. But that works to Ginni Rometty’s advantage — and the advantage of other executives and share holders — because they can continue to pay entry level wages. Another strategy is to hire “consultants” rather than employees because you don’t need to give them benefits, and when you let them go it doesn’t show up as a “reduction in force.”
I have joined Alliance@IBM, and I am appalled by the number of people who haven’t. The union is only as strong as its membership. And working in a dispersed organization makes it harder to band together. Like most of my colleagues, I work from home (thereby saving IBM a bundle on infrastructure), and I wouldn’t even know where to go to picket on April 24th.
Ah, Francis. Let me tell you about that myth of “they are on a learning curve and will get there. and they’ll be both cheaper and better.”
As they learn, they get better, and walk out the door and get hired at a higher salary. Even call centre workers who have mastered the American mid-western accent go for a premium. As the workers get better, they can get hired for more money elsewhere until they reach equilibrium with us in the developed world. The ones who are paid crap will _deserve_ to be paid crap. They are the ones who couldn’t climb the learning curve.
Offshoring for cheap labour a short term fix with no long-term sustainability.
The thing is, they’re not on a learning curve. At HP Enterprise Services we’re in the same situation as IBM Global Services, upper management has been offshoring thousands of jobs to India to cut costs. The big problem with this is that EVERYONE is doing it, so there’s a situation where there aren’t enough qualified people to fill the jobs, and people who have no business working in IT are getting hired and are not able to do the job. Those who can do the job will get offered better salary/benefits at other companies so they tend to move on quickly, but the people who don’t know what they’re doing and don’t learn stick around.
This is very similar to what happened in the Silicon Valley during the DotCom boom. We have tens of thousands of tech workers in Mumbai/Pune, and the quality of the work they do is abysmal. Every once in awhile I’ll work with someone that is qualified for that job (or at least has a good base set of skills and can learn the job), but we don’t pay them enough so they end up moving on to a company that will pay them better, usually in less than a year of joining us.
This is a result from a fundamental flaw in upper managements thinking about labor, it’s viewed simply as a cost, not a valuable resource. Sure, they may give lip service to the idea that workers are some of their most valuable resources, but talking doesn’t do any good when they lay off experienced workers for cheap unskilled labor in India. And this type of thinking especially comes through when they can’t even hold on to skilled, or even semi skilled, labor in India at rock bottom prices.
Not only are IBM, HP, and the like replacing professionals who have acquired very valuable skills through years of experience with people without those skills, but they aren’t providing the training and career paths to those junior people who don’t job-hop. These companies are in effect downgrading not only the IT professions, but also professions such as Project Management. Innovation and business development through acquisition are not sustainable, and processes are only as good as the people executing them.
It’s fascinating what happened with jobs outsourced to IBM Brazil.
Some went up the learning curve quite quickly.
They now work elsewhere because even academia pays more than IBM in Brazil. Those that don’t move at all on the learning curve stay at IBM.
This post SCREAMS ignorance. The Foxconn employees are in manufacturing, not design, not development, not IT, not…
As for this “learning curve”, haven’t seen it yet and I’ve dealt with multiple off-shore contracts. The struggle is always cost vs. quality. As a hands-on IT guy in the US, my contract rates haven’t been going up because off-shore crews are “better and cheaper”. Get some real world experience…
And you can’t whine about “xenophobia” and then make comments about off-shore people being “better”. You’re doing the same thing
Those folks in India may be somewhat cheaper now, but that isn’t going to last. On linked-in I see offers for engineers in Inda in the $75K range – there’s lots of competition for employees, lots of turnover, and rapidly increasting pay. They may end up remaining worse (that turnover really hurts in areas where you need 5 years to become competent), but more expensive!
April 18, 2012 at 10:11 am
Can’t wait for the next installment. The Jobs quote about “IBM’s maniacal fixation on process, once a strength but now a
cancer” rings more true than ever in my head. I was part of the March 28 resource action from IBM and am looking forward to
vigorously competing against them, because if there’s one thing I can do, it’s beat them at their own game.
July 09, 2012 | InformationWeek
GM's new CIO Randy Mott plans to bring nearly all IT work in-house as one piece of a sweeping IT overhaul. It's a high-risk strategy that's similar to what Mott drove at Hewlett-Packard.
6 Steps For GM
- Insourcing Flipping from 90% outsourced IT to 90% of work done by internal staff. Lots of hiring ahead.
- Data center consolidation From 23 data centers to two new ones, with the latest hardware and more automation.
- Application consolidation 40% or more of GM's apps could go, by moving to standardized, global applications.
- Software development centers Likely three in U.S. sites to be determined, based on the local development talent.
- Portfolio management Every IT project will require a cost-benefit analysis and a priority set by business units.
- Data warehouse consolidation GM has about 200 data marts today and plans to move to one data architecture, so data's easier to access and use.
As Randy Mott, the new CIO of General Motors, goes about his workday, he carries with him a well-worn calculator. It sits in front of him in the place of prominence that most people reserve for a smartphone.
Mott, who has been CIO at Wal-Mart, Dell, and Hewlett-Packard and joined GM in February, believes in numbers. And as he tries to transform GM's IT operations, he plans to flip one set of numbers on a scale that no CIO has ever done before.
Today, about 90% of GM's IT services, from running data centers to writing applications, are provided by outsourcing companies such as HP/EDS, IBM, Capgemini, and Wipro, and only 10% are done by GM employees. Mott plans to flip those percentages in about three years--to 90% GM staff, 10% outsourcers.
Insourcing IT on that scale will require GM to go on a hiring binge for software developers, project managers, database experts, business analysts, and other IT pros over the next three years. As part of that effort, it plans to create three new software development centers, all of them in the U.S. IT outsourcers, including GM's one-time captive provider, EDS, face the loss of contracts once valued at up to $3 billion a year.
This dramatic move away from outsourcing is just one piece of the "IT transformation" Mott is leading, which includes consolidating data centers and applications, centralizing IT planning and execution, and getting a better grip on GM's customer and production data. GM's IT transformation doesn't emphasize budget cuts but instead centers on delivering more value from IT, much faster. In many ways, the foundation Mott is laying is similar to the one Ford started laying four or five years ago as part of its One Ford/One IT initiative.
The overhaul Mott envisions puts the everyday operations of GM at risk during a time when the world's No. 2 automaker (Toyota is now No. 1) is still climbing out of bankruptcy protection and a $50 billion government bailout. GM's factories, supply chains, and financial reporting rely on the IT organization to keep information flowing in near real time on a global scale. The fact that Mott's boss, CEO Dan Akerson, would bless this level of IT change and accept this level of risk at a still-fragile stage of GM's recovery shows how essential the best data and technology are to the company's future.
Akerson "was looking to make changes in the speed and cadence of the company," Mott says. "Whether it was with me or someone else, Dan Akerson was going to do an IT transformation here."
Mott's philosophy on outsourcing at GM, as it was at HP, Dell, and Wal-Mart, is that the company needs more creative, business-changing ideas from IT, and IT teams need to deliver those innovative projects faster. Mott doesn't think GM can be creative or fast enough with outsourced IT. "When the business says 'go,' then that means we start working on a contract, we don't start working on a project," Mott says of the current outsourced model. (Mott is on InformationWeek's editorial advisory board and was named our Chief of the Year in 1997, when he was at Wal-Mart.)
The shift away from outsourcing is only the most dramatic element of Mott's IT "transformation." The plan, approved by Akerson and the rest of the executive operating committee, comes straight out of the playbook Mott has developed over a three-decade career in the retail, high-tech, and now automotive industries. Mott's plan for GM is nearly identical to the one he led at HP between 2005 and 2008 under CEO Mark Hurd, before Hurd and then Mott got bounced in an executive shake-up.
Besides the move away from IT outsourcing, the key elements of Mott's plan include:
- Data center consolidation: GM plans to go from 23 sizable data centers worldwide to just two, both in Michigan. In the process, GM will replace servers, storage, and networking with today's more efficient gear, in hopes of reducing costs and using more automation so that fewer of GM's IT pros are involved in "run the business" kinds of IT operations and more are involved in new development and innovation.
- Application consolidation: Mott estimates that GM can cut 40% or more of the company's 4,000-plus applications that have sprung up in various regions and divisions by moving to standardized, global applications for everything from financials to factory-level processes.
- Hiring: Mott plans to dramatically increase the IT organization's hiring of new college grads and will look to top computer science schools beyond the universities with which it now has recruiting ties. Most of GM's development will be done in the U.S., even though the company's growth is very much tied to China, Brazil, and other countries. Mott does plan to hire internationally to bulk up an "IT planning community" that can gather the requirements needed for GM to build global apps.
- Three new software development centers: One will be in the Detroit area, with the other two in U.S. locations still to be determined. They'll be chosen based on the kind of development talent the company can attract there, including their proximity to key universities. (Silicon Valley, anyone?) Dispersing IT development will be a cultural change for the still Detroit-centric GM.
- Portfolio management: As he did at HP, Mott will require that a cost-benefit analysis be done on every IT project, spelling out the project's benefits in ways that the business unit, finance team, and IT agree to. The results of those CBAs produce a metric Mott calls the "revenue of IT," measuring the value IT projects generate, not just how much they cost. Likewise, Mott will insist that business managers prioritize the various projects they have planned.
- Data warehouse consolidation: GM has about 200 data marts today, and Mott wants to move all of them to one architecture. The goal is to make data easier to access and use, and to integrate it better across groups and divisions to reveal more insights. CEO Akerson told Fortune in a May interview, "We're looking at our IT systems real hard. Data warehousing of customer information was not a strength in the company. Maybe it wasn't even existent, but it will be in the future."
Mott's ambitious transformation plan won't be universally popular. End users will complain: You're taking away the application that I love for the greater good of cost savings? Business unit managers will complain: You're making me do a cost-benefit analysis for my little upgrade? Isn't this the kind of bureaucracy a nimble GM needs to avoid? Even Mott's IT team will grumble: You're messing with the fiefdom of IT contractors I manage?
Mott's critics at HP complained that he cut too fast and deep, leaving business units vulnerable, or that he spent precious resources on internal bean counting.
There's one additional, controversial piece of Mott's plan: It all happens at once, over the next three years. Mott described it in the past as "choosing is losing." For example, if you move to an insourced IT staff and away from outsourcers, but you don't modernize the data center to increase IT automation, then you won't get the benefit from those new staffers working on new projects instead of maintenance and support work.
It fits Mott's general philosophy that many IT projects fail because they just take too long. It's why he favors putting more staff on a project for a shorter period--doing fewer projects at a time, but faster. "Every month that goes by, every quarter that goes by, the ROI goes down," he says.
The clock has started ticking. Mott launched this IT transformation plan internally in late June on a town hall webcast with GM's 1,500 IT employees worldwide. The world will be watching: If Mott and his team botch any of this IT transformation, it could put the company's historic turnaround in jeopardy.
GM's History Of Outsourcing
To understand why Mott's decision to all but end IT outsourcing at GM is such a huge cultural change, consider the company's long history with the practice. GM spends more on IT outsourcing than just about any other company, and here Mott plans to go to the other end of the spectrum. He estimates that other automakers now outsource about 30% of their IT, whereas GM plans to outsource only about 10%.
GM bought Electronic Data Systems, founded by H. Ross Perot, in 1984 as it tried to diversify beyond making cars and trucks, and EDS subsequently took over almost all of GM's IT operations. In 1996, GM spun off EDS to refocus on its auto operations, cutting a deal for EDS to continue running its IT for 10 years.
Ralph Szygenda, GM's CIO from 1996 to 2009, inherited that deal. Szygenda was no great fan or foe of outsourcing--it was the model he had, and he knew there was no appetite at the time for the disruption and risk involved in changing it. His strategy was to evolve how GM did IT outsourcing.
In 2006, as the EDS pact ended, Szygenda split the work up among six IT outsourcing companies. EDS landed the most, but Capgemini, HP (which at the time didn't own EDS), and IBM took large new shares, and India-based Wipro was among the vendors added. Szygenda mapped out for the bidders how 44 IT processes would be done in a standardized way, making it easier for GM to change vendors if needed.
Mott didn't discuss the details of GM's existing outsourcing contracts and how he would unwind them. At HP, Mott slashed the company's IT workforce in half--from 19,000, with half of them contractors, to less than 10,000, with 90% on staff, in 2008.
Mott thinks GM has too many IT people running and supporting the business and not enough doing new development. "We're really upside down on that when 75% of the people are spending their time trying to make sure the same thing happens today that happened yesterday," he says.
Few CIOs are as adamantly against outsourcing as Mott. More often, they hire outsourcers to handle routine IT operations, with the idea that it will free up staff people for development.
A more typical example sits up the road from GM, at southeast Michigan's power company, Consumers Energy. CIO Mamatha Chamarthi this year hired Indian outsourcer HCL to take over Consumers' IT infrastructure and applications. HCL is building a new data center for that work, hoping to serve other U.S. clients from it. Chamarthi plans to retrain Consumers IT employees for development and business analyst roles.
While companies regularly take back projects or discrete functions from outsourcers they're not happy with, strategic shifts like Mott's are rare. Only 4% of the 513 business technology pros we surveyed in our 2011 State of IT Outsourcing Survey said their companies plan to decrease their use of IT outsourcing. Seventeen percent were weighing their options, and the remaining 79% were maintaining or increasing their outsourcing.
Differences From HP
Mott is using the same playbook he used at HP, but there are important differences. GM isn't looking to make big IT budget cuts, while at HP Hurd pushed Mott to cut IT spending from 4% of revenue to 2%. Culturally, GM has been humbled by bankruptcy and the government bailout, hiring a CEO from outside the auto industry to set a sense of urgency for change that HP didn't have (see "Randy Mott's Journey To General Motors").
And while cutting outsourcing will no doubt bring operational disruptions, job losses at outsourcers, and the end of some long-held relationships, Mott is hiring, offering candidates the chance to join GM at a watershed time in the company's history. (Note to readers: GM bought an ad in this issue. GM knew an article would be running about the company but had no knowledge of or influence over the content.)
But Mott and company face plenty of challenges.
Akerson noted how GM doesn't have a good grip on its customer data. Warranty data is in one place, VIN and parts numbers in another, social media sentiment analysis in a different silo, Mott says. Much of that data is outside IT's control at this point, and Mott plans to bring it under IT in one data architecture, so it's more accessible and integrated. Mott tried the same at HP, where internal IT was the marquee customer for HP's Neoview data warehouse product. While Mott says he closed more than 600 data marts at HP as it consolidated, HP ended its Neoview development and its plans to become a major data warehouse vendor.
It's a complex challenge to bring myriad data types under one architecture, and GM's consolidation will have to rely on different technologies, Mott says. If his team doesn't deliver something notably better than what employees and partners use today, it'll not only feel like changing tools for change's sake, hurting the team's credibility, but it could disrupt the business. "You have to run in front of what the business is doing today," Mott says. "... It has to be a step change better. Then you win their hearts and minds."
As far as GM's data center consolidation is concerned, work was under way before Mott arrived. His predecessor, Terry Kline, began building a modern data center in Warren, Mich., which should open in October. Mott thinks it's cheaper and more productive to run a few highly automated data centers and access them via powerful networks than to disperse that processing power. However, in addition to the two data centers GM will consolidate to, it will have six caching centers near most of its auto engineers, to ensure that the processing-intensive work they do maintains the highest performance.
Mott Addresses His Critics
Mott was a polarizing figure at HP, and his plans for GM are no less ambitious. Former HP employees have written to us charging that Mott's IT organization was too slow to get things done, cut too many valuable people, and left the company underperforming. Many of those comments came soaked in emotion. "Like Hurd, Mott was an operator who burned the furniture with a short-term focus," wrote one commentator.
Mott acknowledges the tension caused by IT restructurings of this scale. A business unit leader may OK shutting down an app in favor of one used worldwide, but for employees of that unit "what you just did is take an application with which they were very comfortable ... and you set the time frame and didn't give them a choice," he says. For that, he says, IT "sometimes becomes a lightning rod."
Mott organized that June town hall meeting, with about an hour of presentation and 90 minutes of Q&A, in hopes of getting his IT people behind the effort. While Mott talks about letting people move into new roles and hiring others, employees of GM and its outsourcers will lose their jobs in this transformation. "'Change the mix' is very personal," Mott says. "You've got skill sets that you're going to change, and in some cases people can make transitions to those skills sets and in some cases they can't."
There also won't be a rigid IT org chart. "We will organize every year based on what we're trying to accomplish for the business," he says.
Outside of IT, GM employees will feel the effect of transformation, too. Mott's portfolio management process was a culture shock at HP, since it centralized IT control and forced business managers to prioritize projects. Mott will fight to quash "shadow IT." He insists that his cost-benefit analysis process scales to fit the size of the project--that a small project won't generate excess red tape and that it's worth the effort in order to allocate scarce IT resources efficiently. But he knows it will work only if employees feel like they get more IT benefits as a result.
Mott won't say what GM plans to spend on its IT transformation, only that it's much less than the $1.7 billion in capital HP spent. "I'm competing with capital to build a car," he says.
But the three-year time frame is the same. By January, Mott expects to have many pieces in place: a strategy and vendors for GM's new enterprise data warehouse; the Warren data center up and running; an IT portfolio management and CBA system in place with business units; and a portfolio of projects laid out that's bigger than 2012's. "Part of the goal is to go to the business and get them to imagine" what they want from IT, Mott says.
That statement points to what Mott's grand transformation doesn't address: What GM will do with its faster, more effective IT operation if this overhaul works. Can GM use analytics to better forecast sales or better read changing customer tastes? Would better collaboration tools help engineers and designers be more creative? Could GM and its dealers share customer insights that move more metal off the lot? Those kinds of ideas will come from working with business units on their priorities.
IT isn't the key to whether GM lives or dies. Making great cars and trucks and selling more of them is. Mott's transformation is big, but its success will be measured by whether it helps or holds back that goal.
November 5, 2011 | voxeuAs the global economic downturn grinds on, more companies are acknowledging that labor costs aren’t always the most important factor when deciding where to build their next factory. This column argues that, in times of recession, some companies find that bringing their business home can give them a competitive edge.
While politicians argue strategies to create jobs in the faltering global economy, the debate around offshoring has intensified. Once considered a clear competitive advantage in the fast-changing global market, manufacturers rushed to replace domestic labour forces with lower-cost workers in emerging markets. By 2002–03, about a quarter to half of the manufacturing companies in Western Europe were involved in offshore production (Dachs et al 2006). And by 2008, more than 50% of US companies had a corporate offshoring strategy (Minter 2009).
Recently, though, many of the perceived offshoring advantages have been called into question. First, the sourcing costs from emerging economies have been rising rapidly. For example, as of mid-2010, many Chinese firms were facing labour shortages and were forced to boost wages to attract qualified workers (Plunkett Research 2010). Second, the global commodity price index has risen significantly (Archstone Consulting 2009). This has led to more expensive transportation costs, particularly as a result of higher oil prices, as well as higher production costs. Third, the economic recession that started at the end of 2007 has had a severe impact on the market. Consumers are more cautious in spending, and firms are seeking new strategies to retain customers (Dodes 2011).
So it should not come as a surprise that more US manufacturers are ‘reshoring’, ’onshoring’ and ‘backshoring’. General Electric announced last year that it is moving some of its appliance manufacturing from China to Louisville, Kentucky. NCR Corp. is pulling all of its ATM machine production from China, India, and Hungary back to a facility in Columbus, Georgia, in order to customise products and get them to clients faster. In their announcements, these firms emphasised that by being closer to the market, they can better understand the market and are able to respond quickly to market changes.
As these industry examples illustrate, the tradeoff between cost and flexibility can be quite involved and difficult to evaluate. It now appears that the labour-cost benefits gained from offshoring might not be sufficient to cover the lost flexibility under many circumstances. So before making any sourcing decisions, firms at the crossroads need to understand the business environment as well as the competitor’s sourcing strategy. The purpose of our recent paper (Wu and Zhang 2011) is to investigate the underlying factors that affect the sourcing trend and provide insights to firms on strategic sourcing decisions in a competitive setting.
Our paper studies a two-stage sourcing game in which competing firms could choose between sourcing internationally (call this the efficient sourcing strategy due to low production costs) and sourcing domestically (call this the responsive sourcing strategy due to short lead times). We first identify the point of equilibrium between the two sourcing strategies. Then we examine how that equilibrium shifts based on key parameters. We find three key factors that influence a shift from efficient sourcing to responsive sourcing: consumer demand, market size, and supplier costs.Consumer demand
All things being equal, when demand is relatively stable, most companies look for the lowest cost option, which usually translates to offshoring. As demand fluctuates, though, as in the recent recession, companies need to respond faster to shifting consumer sentiments.
Onshore suppliers give companies greater flexibility because they don’t have to deal with overseas transportation, which means they can place orders much closer to the selling season. As a result the firm can have a better forecast of demand information. It also gives the firm more time to understand the needs of the customer and integrate the updated product specification required by the customer into the production at the last minute.
Because the major benefit of sourcing from a responsive, or onshore, supplier is to obtain more accurate demand information, that advantage disappears when there is no demand uncertainty. At that point, the competitive advantage rests solely on cost efficiency. This implies that for products with highly predictable demand, offshoring is still a useful strategy.Market size
After that, firms need to consider market size. Companies targeting smaller markets need to stick closer to home because competition is more intense and the firms’ selling quantities are low. That makes accurate demand information more valuable because being able to respond quickly to their customers outweighs additional manufacturing costs. This may partly explain why the backshoring phenomenon became prominent during the recent recession.
Middle-market companies can benefit from diversifying their sourcing strategies by balancing the lower cost of offshoring with the increased flexibility of using domestic, or onshore, suppliers to fill short-term needs. Larger markets, though, mean bigger orders, so companies will use efficient, or low-cost, sourcing whenever possible.Supplier cost
Finally, any change in supplier costs can affect sourcing decisions. Naturally, when an offshore supplier’s price rises you would expect to find more companies preferring the convenience of domestic suppliers. What we found, though, is that when there is an equal cost increase for both domestic and offshore suppliers, more companies still place greater value on being able to respond quickly to their clients. The rising cost of commodities and the commensurate increase in backshoring by US companies is an example of this phenomenon.
Makers of innovative products in markets where tastes change quickly will value supply flexibility and are more likely to “backshore”. But for companies that rely heavily on low manufacturing costs, backshoring will decrease, although the countries from which they source may change. As wages increase in China and other developing economies, businesses will seek lower-cost manufacturing sites elsewhere.References
This article may be reproduced with appropriate attribution. See Copyright (below).
- Archstone Consulting (2009), “Does offshoring still make sense?” by Ferreira, J and L Prokopets, 17 February.
- Dachs, B, B Ebersberger, S Kinkel, BR Waser (2006), “Offshoring of production – a European perspective”, European Manufacturing Survey.
- Dodes, R (2011), “At Macy’s, a makeover on service”, Wall Street Journal. 11 April.
- Minter, S (2009), “Offshoring by U.S. companies doubles”, Industry Week,19 August.
- Plunkett Research (2010), “Introduction to the outsourcing and offshoring industry”. Tech. rep., Plunkett Research, Ltd.
- Wu, Xiaole and Fuqiang Zhang (2011), “Efficient Supplier or Responsive Supplier? An Analysis of Sourcing Strategies under Competition”, presented at the China Business Initiative conference, sponsored by the Chazen Institute of International Business at Columbia Business School.
on Thu, 09/30/2010 - 20:53
Invest in INFY
After all the ruckus about Indians getting green cards in US in the name of outsourcing, they have finally kicked the onsite guys off the planet and are going for extreeeeme outsourcing.
No more need for visas, green cards or anything!
All Fortune [only to their managers] 1000 companies will kneel before their fortunes and embrace this no-employee-onsite-running-the-company-by video-conferencing-model for next 10 years
why bother hiring people when all the software can be used online
This is the consequence of Hyper-computing !
who said revolutionary ideas are always good
Clap Clap Clap! Bring on the accolades, awards for the new innovation!
"We believe by removing the unreliable human component in the execution of projects we have drastically improved productivity and this should improve margins and make companies more competetive"
clap clap clap; so 2 geeky guys sitting in bangalore will manage HR,finance,legal,regulatory,CR and everything else on supercomputers and hyper-broadband internet
All a company needs is a CEO and a janitor
Rest of you humans can fall of the face of the earth duely after applauding these visionaries.
on Thu, 09/30/2010 - 21:26
We offshored some CAD work to Hyderabad, and it was a clusterfuck. I spent 3 months cleaning it up, and we lost money on the job. No way I will ever offshore again.
Quality at a reasonable price can be found in America, and you can understand what the hell they are saying on the phone.
Cheap ends up expensive.
September 1 2010 | FT.com
US universities are producing too few engineers to meet industry demand, Indian outsourcing companies say, leaving such businesses little choice but to hire foreign skilled workers to fill jobs in America.
Cognizant Technology Solutions, the US-listed Indian outsourcing group, says it has 57 recruitment staff in the US permanently looking for engineers locally but is still being forced to import Indians on work visas.
“If you look at the core of what we do, the technology work, the US simply doesn’t have the talent base today,” said Francisco d’Souza, Cognizant president and chief executive. “Although unemployment in the US today is high, IT unemployment is still very low.”
The US last month passed a border security law that will be partly funded by doubling the cost of visas for IT workers, a move that will mostly affect Indian outsourcing companies.
Indian outsourcing companies usually keep a small portion of their workforce in the US to work closely with clients, supported by the bulk of their staff in development centres in India.
But the protectionism move – a senator who sponsored the legislation described Indian outsourcing companies as “chop shops”, a reference to garages that dismantle and sell stolen cars – may have little impact.
About 70 per cent of US PhD students are foreign born and are often hired in the US, making their way into Silicon Valley or government agencies such as Nasa, said Partha Iyengar, of Gartner, the consultancy.
“The bigger challenge for the US is, if they start to lose this talent at the lower end, the innovation engine that has been driving the economy starts to dry up,” Mr Iyengar said.
India’s undergraduate university courses produce about 600,000 engineers a year compared with about 84,000 in the US in the 2007-08 academic year, according to the National Center for Education Statistics.
While less than one quarter of India’s engineering graduates are considered of international standard, they tend mostly to seek careers in the information technology outsourcing industry, creating a huge pool of talent for the sector.
By contrast, US engineering graduates are spread across all industries.
Mr d’Souza says about 20 per cent of Cognizant’s workforce of 88,700 work in the US and of those more than half are Indians or foreign nationals in the process of becoming permanent residents.
S. Gopalakrishnan, chief executive of Infosys Technologies, India’s second-largest IT company, said the group had 10,000 staff in the US but only 1,600 were nationals or permanent residents. The company wanted to hire 1,000 people a year in the US but faced a scarcity of talent. “It is a struggle,” he said.
Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
Lordie, if this isn’t disingenuous, I don’t know what is. From the Financial Times:
US universities are producing too few engineers to meet industry demand, Indian outsourcing companies say, leaving such businesses little choice but to hire foreign skilled workers to fill jobs in America
And why are there so few students studying computer science? Because there are no (well, more accurately, hardly any) entry level jobs. I’ve been reading about this on Slashdot for YEARS, about the utter dearth of anything resembling a career path in IT. Yes, there are no doubt ways to brute force getting trained, but that cold reality is not the sort of situation that encourages college students, particularly ones that have student loans, to pursue a technically-oriented field of study.
And the proximate cause is that companies only want to hire people that they don’t need to train (the cliche is that they can “hit the ground running”), and that they can get away with it because a lot of junior level work is farmed out to outsourcers.
But you’d never glean this from the FT, which takes the outsourcers’ complaints at face value:
“If you look at the core of what we do, the technology work, the US simply doesn’t have the talent base today,” said Francisco d’Souza, Cognizant president and chief executive. “Although unemployment in the US today is high, IT unemployment is still very low.”
Yves here. Yes, IT unemployment might be very low now, but for how many years was it higher than in other industries? My sample (high end IT consultants, the sort that can build mission critical systems and do cutting edge Web and apps development) is admittedly biased, but lots of high end shops shuttered, and another I know went through a Chapter 11. Things have gotten much better for them lately, but most of the last decade was pretty grim. So if the guys who weren’t competing with outsourcers had it rough, how was it for the rest of the industry?
Indian outsourcing companies usually keep a small portion of their workforce in the US to work closely with clients, supported by the bulk of their staff in development centres in India.
But the protectionism move – a senator who sponsored the legislation described Indian outsourcing companies as “chop shops”, a reference to garages that dismantle and sell stolen cars – may have little impact.
About 70 per cent of US PhD students are foreign born and are often hired in the US, making their way into Silicon Valley or government agencies such as Nasa, said Partha Iyengar, of Gartner, the consultancy.
Yves here. I’d like some reader comment, but the idea of a PhD as the proxy for talent in this space sounds questionable. The one highly regarded systems architect I know who does have a PhD has it in physics, not computer science.
Mr. Iynengar does comment on the real problem now that the horse has left the barn and is in the next county:
“The bigger challenge for the US is, if they start to lose this talent at the lower end, the innovation engine that has been driving the economy starts to dry up,” Mr Iyengar said.
More on this topic (What's this?)
FT.com: Indian and American Call Center Wages Now Reaching Equilibrium (Fund my Mutual Fund, 8/18/10)Selected Comments
I follow your blog with a lot of interest and I think you bring an interesting point of view forward. But your last few posts and links about Indians almost make it seem like you have a ‘blind spot’ when it comes to India, particularly when it comes to those of us who work in high tech.
Ill take the liberty of putting forward a very simple question. I have about 18 years of formal education, two of them in the US, where I received a Masters Degree in Computer Science.
What course of action on my part would make you happy?
- If I work in India, you would complain about outsourcing..
- If I come to the US, you would complain about H1B Visas..
Perhaps work in Germany or Japan?..
PS: These sort of posts invariably attract a vicious stream of commentary. I hope you have the decency to maintain a clean comments section.Patriot:
I’m not keen about outsourcing. It generally is a false economy from the corporate client’s perspective. I’ve pointed that out from the early days of this blog. And longer term, it’s damaging for the US.
This isn’t about India, it’s about IT outsourcing, although since India is the biggest center for outsourced IT, the two are often treated as synonymous. And that isn’t helped by Indian outsourcers conducting a vocal PR campaign against measures to restrict labor mobility.
Countries are generally not keen about foreign nationals taking jobs from the locals. I can’t work in Australia for the same reasons you are complaining about. If you make career plans that depend on foreign demand, you are at risk of rule changes abroad that will have an adverse impact on your employment prospects.purple:
Outsourcing is also bad for Indian nationals in the United States. There are many people here on H1B visas who are treated very badly by the so-called “body shops” that employ them. Many of these contractors are employed by a hiring agency and then placed at another firm, and are treated very shabbily by the hiring agency. Workers on H1B are treated poorly because the employers know that it is difficult for the worker to find alternative employment. If fired, the H1B holder has very little time to find a new job or face deportation. It creates a climate of fear and exploitation in the workforce, among the H1B holders.Poco Ritard:
It’s a modern day bracero program, in actuality.Cedric Regula:
At one of the *other* large famous software companies in Seattle, HR used to walk around the desks in the room where I worked, handing out paychecks and collecting paperwork for INS (yes, I witnessed this on several occasions). Most of the members (something like 25 out of 30, I counted at one point) of my group were from S. India, and I think they made on average half of what I did. They worked 7 days a week, shared tiny apartments, sent every dime they could home and were terrified of losing their job, since getting fired meant losing the H1B.
They were, as a group, no more or less skilled than anyone else I’ve worked with. I formed the impression that they were friendlier and more polite than most of the US citizens there.
Digital Braceros, sounds right to me.skj:
Go with your instincts, Ives. They screwed us. Who cares about silicon valley, it’s corporate IT that was the big employer.
The FT article also failed to point out all of our IT consulting firms opened up shop in Bangalore. Something about staying competitive with the Indian IT firms. Perot didn’t even warn us about that one.
Also, our helpful government handed out half a million work visa and didn’t ramp that down to a quarter million visas until 2004, which I believe was after the last recession that didn’t end. So you could import your very own Indian programmer too.
Also, anyone with a CS degree of any kind was a mainframer in the ’90s. The hot jobs were Unix and client server Wintel. That opened the door for the rest of us technically inclined people.
Also, engineers are technical people too and I’m sure you heard what happened to manufacturing?
So they say no one wants to be a technical person in the USofA? I’m shocked. It’s such easy work too.
>> It generally is a false economy from the corporate client’s perspective. I’ve pointed that out from the early days of this blog. And longer term, it’s damaging for the US.
I am not sure what you mean by ‘Its a false economy’. Do you mean to say that you dont think that the corporate client saves any money? What is false about this economic transaction?
>> This isn’t about India, it’s about IT outsourcing, although since India is the biggest center for outsourced IT, the two are often treated as synonymous. And that isn’t helped by Indian outsourcers conducting a vocal PR campaign against measures to restrict labor mobility.
What does labor mobility mean when the same task could be performed just as well in a different country? You start out by saying that its not about India and by the time you complete the paragraph, you put forward a couple of lame excuses to treat the two – India and outsourcing – as the same. Also, you do understand that its not just about ‘Indian outsourcers’.. IBM in all probability employs more people in India than in the US. All the companies that you would identify as American – Intel, Google, Qualcomm, Microsoft, IBM, Cisco, GE, netapp have fairly large Indian operations.
>> Countries are generally not keen about foreign nationals taking jobs from the locals.
When you drive a Prius thats made in Japan, aren’t you taking away a car manufacturing job from an American worker? Why limit the angst to IT?
>> I can’t work in Australia for the same reasons you are complaining about.
Actually, you can. Australia has a very comprehensive skilled worker immigration program. http://www.immi.gov.au/skilled/
>> If you make career plans that depend on foreign demand, you are at risk of rule changes abroad that will have an adverse impact on your employment prospects.
I actually work for an American company that is dependent on Asian markets to the tune of 50% of its business. So now I am really confused as to which ‘demand’ I have hitched my career plan to. Leaving my confusion aside, is your suggestion that I find a company that does a majority of its business only in India?
I can explain to you why this is a false economy based on my experience with outsourcing, especially in the form of offshoring which is now prevalent. The problem is not India, the problem is distance, cultural differences, implicit “IT slave” mentality and race to the bottom. Distributed development is more tough. Cultural problems “on the other side of the phone line” such as nepotism are significant. Distributed system administration is more plausible area then software development, but in both the level of loyalty is low and attrition rate is usually significant. People don’t like to be discriminated and labor arbitrage is discrimination in velvet gloves so to speak.
1. When you outsource everything on a marginal cost basis, you create an inherently unstable operating regime. And regime change often imply growing dependence on outsourcer as knowledge flows in only one direction: toward actual programmers who work in the trenches. Problems usually arise in two or three years. In case of IT outsourcing those additional costs inherent in brain drain initially are not even acknowledged. They come later, and they tend to arrive all at once and by surprise.
2. Loss of flexibility, divided loyalty, demoralization of staff and the difficulties inherent is distributed development and managing distributed workforce requires more complex and more costly coordination that saps a lot of talent and energy of both programmers and, especially, managers on both ends of the phone line, so to speak. To be manager of the team split between here and the other half of the globe is far from fun job.
3. As this is a classic labor arbitrage high attrition rate and incompetence-related risks are very high. People who cost $15 an hour in India are often entry level. And when you pay $25 per hour that does not mean that you get who you want. Indian counter parties are keen on saving money too and can outsource to save money (I know couple of funny stories with Indian companies sending some work to Ukraine). The level of “incorrect information” in resume of the staff of a typical outsourcing company will makes a nice Onion story, but it can have dire consequences for the project manager. The quantity of really talented, highly skilled people in India like in any other country is very limited. Not all graduates of US colleges are better then average (especially graduates from private US colleges, those McDonalds of high education. They often are ridiculously bad. I personally encountered computer science graduates with GPS close to 4.0 who cannot write a simple sorting program in ANY language; and they were from “brick” campuses not those sham Internet “take money and run” online universities). So not all of them are worth more then $15 an hour. As for really talented people few of them are patriotic enough to stay in India longer than absolutely necessary (that does not mean that they will not get into ruthless hands of middlemen here in the USA, if they get H1B). In such an environment abuse of resources for training, double dealing, architectural missteps and additional leaks of intellectual property are inevitable. Too often, a piece of code and the institutional memory of what it does and how it does it walks out the door when a developer leaves a company. It is important to understand that with attrition rate 15% in the three year offshoring project there might be no key developers at the end who were present at the beginning of the project. Still the truth is that even low level developer that is working on a particular module of code often possesses a lot important knowledge some of them can be classified as intellectual property with legs, the property that the company may not even know he/she possesses.
4. There is almost always middleman in IT outsourcing. Typically those are real parasites that drain blood from both side of the project. See other posts about details.
5. All those stories about $150K jobs are good stories but that does not mean that they happen frequently in the current economic circumstances. As a former manager I can tell you that in current environment those jobs, typically held by baby boomers, are ruthlessly pruned. My guesstimate that $50K-$60K now is more typical for medium level and $70-$90K for high level (talented, indispensable) IT staff. I saw quite a lot of advertisements for entry level IT jobs for $15 per hour. So labor arbitrage is almost over as $60K is less then $30 an hour.
1. Surveys of the major companies who outsources (for instance, once conducted by Deloitte Touche of very large corporate users, IIRC Fortune 100) find high rates of disappointment with outsourcing, often 70%. As I have explained repeatedly, the labor savings of low level workers distort the picture. These are offset by increases in costs at the managerial level, and those are much more expensive workers. And those offsets are considerable.
2. The contracts are typically negotiated in a naive fashion. They are so complex that the big corps rely on specialized consultants to structure and negotaite them. However, these consultants demonstrate their value by beating down the vendor to get the rock bottom price.
So what happens? Often a. Customer is unhappy with service and can’t do much about it (the outsourcer isn’t making much money and has incentives to cut corners in every way not prohibited by the contract and/or b. Something happens, the customer needs a variance from the contract, the outsourcer hits him for huge cost (not unlike change orders in construction projects.
3. You forget I lived in Australia for two years and am very familiar with theri visa regime, I have used visa highly regarded visa consultants and lawyers. You are simply wrong re my ability to get in under the skilled worker visa. My odds of being approved as someone over 50 are zero. The only way I might get in is with a corporate sponsor (which means if I leave their employ, I have to leave pretty pronto) or spousal (and they scrutinize spousal applications pretty heavily to see if the marriage is bona fide).lark:
How about Green cards instead of H1Bs? Ask these executives, trade organizations and lobbyists on why they’re so keen on increasing H1B numbers but not clearing out the Green Card backlog.Nameless:
H1B is only about destroying the job base for technical professionals in the USA.
Green card is another thing entirely.
Overall, more green cards for engineers would strengthen our innovation and job market, the latter by no longer undermining entry level jobs.Yves Smith:
“And why are there so few students studying computer science? Because there are no (well, more accurately, hardly any) entry level jobs. I’ve been reading about this on Slashdot for YEARS, about the utter dearth of anything resembling a career path in IT. ”
I’m sorry, but this is utter nonsense. Job & career prospects for people with bachelors’ degrees in computer science are better than in essentially any other area of study. Students with degrees in nursing will start with somewhat higher hourly rates (but with poorer career prospects), and some people will get professional degrees (MD, JD, MBA) which usually pay off quite well, but BSCS is still the best bang for the buck and has been for the last 15+ years. I can’t think of any other industry where people with a bachelor’s and 5 years of experience routinely make six digits.
If the industry had really been decimated and there hadn’t been “anything resembling a career path in IT”, I’m sure that I’d be able to afford a decent house with good neighborhood school within a 30 minute drive from Silicon Valley on less than a $200k/year household income.Nameless:
What is your data source for this assertion? This is a very frequent topic of discussion on Slashdot, and the commentors agree on the very small number of entry level positions in IT (perhaps until this year, but I have been seeing long threads related to this from at least 2005 to 2009).
And these people do not have the income expectations you describe either. The figures you suggest ($200K a year) are well above what Apple pays for very senior engineers which suggests to me that your have a limited data set.
Also, Silicon Valley consists of a LOT more than software coding.Patriot:
Well, 200k/year needed for a family of an engineer to buy a house in Palo Alto or Los Gatos is likely to be a double income. Ordinary engineers in non-managerial positions may make 120k, occasionally up to 150k. (Just check glassdoor.) The point is really that there are lots and lots of those 120-150k jobs out there; evidently, more than there are houses in the vicinity of Silicon Valley.
I’m not sure how to quantify the availability of entry-level jobs in particular, but, as of this moment, there are 6,700 job listings in Silicon Valley area on Dice, and there are “>1000 matching jobs” (it won’t tell me how many exactly) in that same area, in IT on Monster.Yves Smith:
When was the last time you applied for an entry level engineering job?Nameless:
Really? Senior engineers, and I mean the sort working on the top projects, namely iPad apps, make maybe $140K. They get stock options too, but you can’t pay for your house or the rest of your life out of deferred comp.
So tell me again what you know re the pay levels and number of entry level IT jobs? Your factoids are wide of the mark.?:
“If you’re going into industry and not Civil Engineering, I think starting is generally around $75-85k… I know ChemE’s, even with just a Bachelors, can make around 70-80K straight out… “Yves Smith:
As I said, a BSCS gets you nowhere. Thanks for agreeing.softwareveteran:
I see. The person says “I think” and is talking about Chem Es and civil engineers.
The topic is IT and the whether there are decent numbers of entry level jobs. You’ve still failed to disprove what I’ve read repeatedly on Slashdot.Yves Smith:
Ipad app writing is not a high end job, it is one of the low hanging fruit, low end job.Timo:
Sorry the guys in question are top people at Apple, they are very deeply involved in all the new product development (as in state secret stuff). And I do have their pay right. It may be that the party who told me what they are doing re the iPad oversimplified (I presume related to development of the apps but not apps writing).michael:
Apple isn’t necessarily that good a benchmark when it comes to IT salaries (and neither is a rather large, very well known web software company in Mountain View) – they’ve been highlighted as paying below average in the Silicon Valley area several times. Admittedly I’m not 100% sure if this is still the case in the Apple case.
That said, the $120k-$150k range sounds about right for what I would be asking for (and usually getting) as a senior software engineer with > 20 years experience.Poco Ritard:
Yves, please lets go back to the central statements Nameless made: “people with a bachelor’s and 5 years of experience routinely make six digits.”
I fully agree!
However, making it for 5 years in an IT job means not just you somehow made your BSCS, but you are able to work your way through all kinds of tangled messes, without drowning in the complexity.
About entry level jobs: I have only moved to the broader Silicon Valley area in end of 2007, and was surprised how long it took me to find a job as senior engineer in data management -actually 6 months- but since then I make 150k.
(But people buying a *decent* house in the Bay Ara on 200k income are still somewhat insane, in my opinion, as they violate the ‘you can afford a house for 3 times annual income max’ rule.)
Oh, and stock options comp is more something in start-ups, kind of “we cannot pay you more, but if everything works out perfectly, you might be able retire at 40″ lottery.Raging Debate:
I’m with you, Yves.
My kid’s 15 and I’m strenuously discouraging him from following me into Software Engineering. That train left the station a lot of years ago.
$140K? I wish. I’m a 30 year vet and not near that. OK, I’m in Seattle and not CA but I ain’t rich by local standards. For example, the median home price in King County is almost 4x my annual salary. Granted, I work in a non-profit but it *nix flavored medical research in Seattle and I am highly skilled (no boast). And most of my colleagues think I’m well paid.
My recommendation to him is to put together a network admin/support resume to use finding summer/part time jobs while getting a degree in something else.purple:
American management that can work with Chindian’s make great wages.
American coders are getting slaughtered on wages. The six figure coders on the East coast back in 2000 will take half of that nowadays but the trick there working with them is the problem of moonlighting. Managing American software talent requires a ton of day to day tedious task oversight.
The Slashdot folks don’t like me much but a few of their people stepped way out of line suing legit companies using Can-Spam Act of 2004, legislation I directly helped craft.poopyjim:
The big problem with nursing is, similarly, you can’t get hired without experience. And there are waiting lists at most nursing schools because schools ‘can’t find’ teachers given that being a nurse pays better than being a prof. And because the US education system is a joke.
A plus about nursing is that it has the most dynamic union movement in the United States, with a leadership that is almost entirely female – and welcome change.mp:
I have a CS degree and I work in patent law and I hate it, so I tried for months to get an IT job.
The job market was atrocious (this is in the D.C. metro area). I ended up getting one offer, for $50k a year (doesn’t get you far in D.C.), which would be a $25k pay cut for me. Also, the job involved no programming, no creativity, or anything intelligent whatsoever. The employer just wanted someone to update their website (with a CMS – no coding).
I also interviewed for a PHP/web developer job, the employer wanted 3+ years of experience and only wanted to pay around $25/hour with no benefits – absurd for D.C. And, I wasn’t “good enough” to get this job despite having a good amount of PHP programming experience (unpaid) – they said they really wanted an “expert”. All the other jobs I possibly could have gotten were temporary (e.g. 2-month) projects which of course paid by the hour with no benefits.
So yes, my experience with the IT field is that it is a desolate wasteland, though I’ll agree that there still exists a way into the field, and possibly a path to work your way up if you are determined.purple:
No one cares any more. I just can’t get worked up about it.
Empires eventually die. This one won’t be an exception.Tao Jonesing:
Yes, but this one won’t die with a whisper. The American ruling class will take down the whole world with them.Patriot:
In the last few months, I’ve met with two PhDs (one in Chemical Engineering out of MIT and another in Physics out of the University of California system) both asking for advice on how to break into the intellectual property field, which is my area of expertise.
Both are American citizens, but neither sees a future in the tech industry, so both are trying to figure out how to position themselves as either an expert to help out in financial transactions (e.g., M&A) or as a lawyer.
I found the discussions to be rather sad.
In the meantime, I have been working with some well-established and brilliant PhDs in the chip design space. The board of their company includes Bill Joy.
In terms of what is passing as the proxy for talent these days in the Silicon Valley (where I am located), I think the PhD is the true currency. The people that I know who get away with less than a PhD are those who have accumulated meaningful experience in the industry (myself included).
In spite of what I’ve said, I believe your intuition is correct. The popular narrative that is being pushed does not have to be the truth. Unfortunately, the policies that are in place seem designed to prove the popular narrative true.Patriot:
I have seen similar trends, where mid-senior technical people who are very qualified are also trying to get out of tech, or at the very least, start their own business. They see the writing on the wall and fear outsourcing. These are people who are in their late 20s, early 30s with ten years of experience. Some of them have advanced degrees, others are the proverbial Silicon Valley prodigies who started writing code at the age of 16.Nameless:
Should have been “started writing code for pay at 16.”Patriot:
People have been fearing outsourcing continuously for as long as I can remember (at least since 2000). In the mean time, programmer salaries in India have been growing at the rate of 10-15%/year, and potential profits for prospective outsourcers have been shrinking accordingly.Chester Genghis:
Rising salaries in India have nothing to do with the fact that people have been fearing outsourcing “forever,” which you defined all the way back to 2000. Thank you for making my point, though, that people have been fearing outsourcing for quite a while. It IS a problem. That’s why people fear it.
Actually it’s been an ongoing problem. You may not remember this, but the United States used to manufacture hard drives in quantity domestically. Yes, I know that some firms still run prototype lines here, but that’s not the same as series production. Certain industry “leaders” chose to outsource critical parts to Japan. Patents aren’t the issue. Technical know-how is, and is not contained in the patent app. American industrial policy made this possible, and gutted manufacturing of small precision electric motors in the US. Now that US firms have started making hard drives in Shenzhen, I expect that within 10 years there will be PRC based hard drive companies doing design.
US based Engineers in non-software jobs have become project managers– industry will lay off the entire domestic team and leave one engineer to manage the overseas operation.alex:
Re: PRC based design. You are exactly right.
Manufacturing (be it widgets, cars, hardware, or software) is the foundation of a healthy economy. Anyone who thinks you can outsource manufacturing without eventually putting at risk the related functions of engineering, service, marketing, finance, etc. is willfully short-sighted or a dupe.
That’s what is so pathetic about our (lack of) industrial policy.MyLessThanPrimeBeef:
‘Certain industry “leaders” chose to outsource critical parts to Japan. Patents aren’t the issue. Technical know-how is, and is not contained in the patent app.’
Hear, hear! If only more people understood that know-how is more important than all the so-called intellectual property in the world, and that know-how can only be obtained by actually doing it.
As for shifting production to Japan, that’s particularly depressing. Japan is not a cheap labor country, so even that excuse doesn’t work.bob:
Isn’t ‘progress’ when they someday come out with a robot that can write programs?
Then, we don’t have to worry about outsourcing.
I can already see people praying against ‘progress.’
What if one day, some genius comes up with a contraption that will manufacture/provide all our GDP by itself cheaper than any person or corporation can do? He will then own the whole world. But there is one tiny problem – with everyone else not working, the genius has no customers…unless the overwhelming majority votes to take from the genius to support themselves.
That would make a good science fiction.
Also, the next time you read in some economics textbook about automation doesn’t reduce employment, try the above exercise in reducio ad absurdum.jbmoore:
The 70% number is probably true, but it speaks much more to the failed immigration policy of the US. Most of those students want to stay in the US, and a lot of them come from very wealthy foreign families who can afford to have a student in school for that long.
I worked with lots within a state university graduate program. He drove a Porsche. He got pulled over 3 times in one week for driving well in excess of the speed limit. I suggested that he should tone down the car (asking him to slow down seemed crazy), not too many here in blue collar land drive cars that are that expensive. His response, “It’s the cheapest one they make.”Chester Genghis:
PhD level computer scientists can pretty much go where they please. They’ll be snapped up by top tier companies such as Google. IT consultants and other IT professionals have to compete for jobs where the educational requirement can range from a high school diploma to an Associates or Bachelors degree. An additional problem is that one not only has to be a systems administrator, but a database administrator and possibly another specialty as well these days just to get a foot in the door. I have a doctorate in Biology. I went into IT to make a living because the job market in academia had been ruined by a glut of PhDs and because my first postdoc went south. I earned more as a customer service representative fixing computers over the phone my first year than I ever did as a postdoc. The dot.com bust hurt a lot of IT professionals, and with virtualization one administrator may be taking care of hundreds or thousands of virtual systems running on 25-100 actual servers making the workloads even nastier than 10 years ago. Add in the learning curve of keeping current in a rapidly changing field while competing with cheap Indian and Chinese labor (H1B and outsource) and it feels like graduate school again. An additional complication is that Indians are now running the headhunter shops. Citibank uses Wipro, so one must go through Wipro to be hired by Citibank. Throw in language communication problems and the time difference and it makes phone screens and interviews more difficult.Raging Debate:
Re: Indians running headhunter shops. Be thankful fluency in Hindi isn’t typically a job requirement (not yet anyway).
But it will increasingly be so.michael:
You are joking right? The country speaks English as in everybody. I don’t see Hindi making a comeback, EVER.Nameless:
> An additional complication is that Indians are now running the headhunter shops.
That was my impression also in the greater Silicon Valley or SF Bay area.Jon H:
“I’d like some reader comment, but the idea of a PhD as the proxy for talent in this space sounds questionable. ”
There are two aspects here. One is that value of the PhD in natural sciences has been so badly degraded over the last quarter of a century, for a number of reasons (too long to discuss here, but I can provide links if anyone’s interested), that most people who do get into those programs, do that with an eye for a green card.
At the same time, the percentage of Americans who get into UNDERgraduate programs in CS and natural sciences is abhorrently low (as of last year, 1st-year undergrads in CS, physics, math, and statistics, taken together, accounted for a little more than 4% of total university freshmen), and that has more to do with the cultural stigma of being a scientist/programmer than with imaginary scarcity of job prospects.alex:
” and that has more to do with the cultural stigma of being a scientist/programmer than with imaginary scarcity of job prospects.”
I don’t believe that to be the case. Enrollment has dropped, largely due to the perceived lack of a future due to outsourcing.giulio:
“that has more to do with the cultural stigma of being a scientist/programmer than with imaginary scarcity of job prospects”
That “cultural stigma” must be a pretty recent development, because back in the 90’s undergrad CS programs were full up.
Apparently this “cultural stigma” has, by an astounding coincidence, coincided with the tech bust and the increase in outsourcing. Or maybe it’s not such a coincidence – maybe anyone foolish enough to go into CS in the last decade deserves to be stigmatized.alex:
“And why are there so few students studying (computer) science?”
Given the bad public high school system, the number of US high school leavers with a comparative advantage (be it ability or preference based or both) in sciences in general has fallen. The same is true for the UK.mudfarmer:
Wow, the US and UK school systems must have gone downhill in a hurry, because 10 years ago CS programs were full.
Where is William of Occam when you need him? Why such torturous alternate explanations for the simple fact that students are loath to major in fields with poor job prospects?Patriot:
Outside Silicon Valley and NYC’s Financial District, most routine I/T jobs just don’t pay enough to compensate for the the minimum education they require. The combination BS/MS that most require for even mundane jobs will set you back 5-6 years and leave you with $50-$75k in student loans (if you’re lucky).
I don’t know about India, but do know that my peers in other countries frequently graduated with comparable degrees with minimal if any debt. It’s difficult to compete for the same jobs with the same skills when you have a $75k debt dragging you down.
Ten years out of college I was at the “top” of my career ladder at IBM and barely keeping my head above water financially.
And to those of you who will retort: well then, don’t borrow so much money. How, precisely, would you get a BS/MS in the US then and remain competitive with the worldwide workforce? Your companies keep increasing the minimal requirements to get in the door while cutting salaries to be “competitive” on a worldwide basis. The market has responded — it costs too much to get the skills you require, so students look for other opportunities. Why are you at all surprised?
As far as outsourcing goes: firing a thousand people in the US to replace them with staff offshore is one thing. Firing them and then importing a thousand people via H1Bs to replace them is what the Schumer legislation targets.Yves Smith:
One of the major issues here is educational arbitrage. The Indian government heavily supports education such that middle class people can get a very affordable education. Then they can come to the US and accept jobs at lower salaries than their American counterparts. The Indian H1B contractors aren’t making payments on student loans.Micah:
Mathematics and physics, no question. Plus if you seek a graduate degree, you can do that without going into debt at all.alex:
Applied mathematics, maybe: http://www.payscale.com/best-colleges/degrees.asp
It’s interesting to read this, because it’s very different from my personal experience. I went to Harvey Mudd, graduated in 2007 with a degree in CS, and as far as I know, just about everyone from the CS department ended up with a job (or in grad school). Also, most of my close friends are either math or physics majors, and I started out with a better salary than any of them (and, having since moved on to Google, am now making significantly more).
But CS seems like one of those subjects where getting a degree from a top school might well be worth quite a bit more than anywhere else, in terms of how willing people are to look at you. When I got recruited at Google, it was because the recruiter saw Harvey Mudd on my LinkedIn profile.Lucio:
It’s good that you’re doing well, but frankly you’ve only been in the workforce for 3 years. Give us a post in 20 years and let us know about the rampant age discrimination. There’s no reason what you do shouldn’t be a long term career (historically it was), but I wouldn’t count on it these days. I honestly hope you’re an exception, but it’s not the way to bet these days.Chester Genghis:
Because your system is f****d up. Not only EVERY activity that can be privately run has been brought private, but eventually must generate HUGE profits for the supplier. Corporations (and institutions like colleges) in US have a leverage that we Europeans do not even think to allow them. Wherever you go (UK excluded) to obtain a college degree here, you won’t incurr in such costs. You will have to pay top money only for Masters programs like MBAs, but there the reward is really high.leroguetradeur:
Minimum requirements keep increasing, salaries are decreasing, AND the market & nature of work itself has changed drastically in the last 10 years. Job duties are narrower, more focused on a single set of skills (i.e. commoditized).
The market (at least for application software) changed as well. The perceived value of packaged solutions has gone down (along with the price point), the perceived value of point/custom solutions has gone up, etc. These developments are all related.jen:
“And why are there so few students studying (computer) science?”
The answer for the UK, from my recent visits, where it has become a topic of political discussion, is generally said to be that computer science is no longer taught. I am told it is impossible to study computer science at high school level or beyond. And very difficult in further education outside the best universities.
Instead, the schools and almost all further education institutions are full of ‘computer literacy’ and ECDL courses. These are basically courses taught by computing illiterates in how to use Google, Office, Facebook, Photoshop and Twitter. And Windows Explorer of course, for truly advanced students.
The result is that any able, interested and computer literate students interested in programming or systems management drop out or don’t go near the courses. Because the people who plan and run this stuff are themselves computer illiterates, they don’t think that the problem is that there are no computer science courses any more. They think the problem is that people are not taking the courses on offer. They actually don’t know there is such a thing as programming or systems management.
This is par for the course in much of UK public education, where the few bright and informed students who are left in it sit there, bored out of their minds, while being taught superficial travesties of the most basic aspects of a subject by people who themselves do not understand it and do not want to.againsomeone:
Here’s a good article on the subject by Vivek Wadwa at TechCrunch: http://techcrunch.com/2010/08/28/silicon-valley’s-dark-secret-it’s-all-about-age/
This is a constant theme in the press, and I believe it’s lobbying. Older workers get left in the dust by the younger CS workers b/c in addition to higher salaries, older workers also cost more in benefits.
PhDs! Wadwa describes a company that successful used HS students, who quickly became as productive as college grads.froggy:
I’m a former H1B employee now happily employed outside of US (~150k annual as systems architect) and while I don’t think outsourcing or restricting labor mobility on all levels is correct course of action, I absolutely agree that US must protect entry level jobs. Because if there are no entry level jobs available for US fresh graduates there won’t be any mid level folks few years down the road and we all will be worse off.
I think global labor mobility mobility for top 10-15% shouldn’t be a big deal. At senior level there shouldn’t be much harm from competition (given anecdotal data of my friends and colleagues around the globe it does look like earnings somewhat converge at the top). I think H1B visas should be reformed in a way with only small subset of visas allowed for entry level jobs with bulk of visas having high wage requirements floor around 90 percentile. Prevailing wage crap should be replaced by BLS wage data with some hard defined floor. I like SS wage cap that is subject to SS tax for instance, it gets indexed every year, so if company wants to bring some unique talent over it better pay above max wage that is subject to SS tax.Dave:
Good point about protecting entry level jobs. Right on the money. My observation has been there aren’t many jobs that appear enrty level and every employer wants somebody to hit the ground running.purple:
As long as our laws permit companies to import overseas workers and pay them below market wages there will always be a shortage of homegrown of tech workers. It’s simple supply and demand: pay people more for tech work and you will have more tech workers.Debra:
It’s too expensive to get a good ‘official’ education in the US. Going to a good public school K-12 requires buying a house in an over priced neighborhood. College requires loans, Masters and Phd to some extent as well, or at least there will be accumulated debt due to pathetic stipends. The debt from undergrad also discourages people from continuing on.
It’s much better to marry a foreigner from a ‘developing’ country and send your kids to the Free high quality public universities in those ‘developing’ countries. Mexico has a few, even.Yves Smith:
I liked the article, and appreciated the discussion, interesting.
There is something that runs ALL THE WAY THROUGH article, and discussion, though : it’s that the ONLY MOTIVATION for people in getting a job and a degree is the AMOUNT OF PAY they will receive for it.
This is a simplistic assumption that will not help us address the problems involved here.
One problem : diplomitis,(the assumption that a piece of paper EQUALS competence, and is the only way of acquiring it) and the increasing divorce between our educational system at all levels, and the world of work.
But we have become rather toxicomaniac in our approach to EVERYTHING, and not just drugs… moving from one bubble to the next IN THE HOPES OF GETTING RICH AND MAKING LOTS OF MONEY (for many) does not induce people to DIVERSIFY their activities, or take the risk of moving into areas that are not well known (law, medecine).
We need professional and economic diversity at this point. Not a succession of bubbles, as people seek to MAKE MONEY at all costs.GregL:
No, Debra, you are going for black and white thinking.
Being concerned about supporting oneself and making plans is NOT about making money at all costs. It’s called being responsible.
I went to college when it was affordable, and on top of that, my folks paid for it And I majored in an elite liberal arts major (as in they refused 2/3 of the applicants to that major).
Despite having done very well academically and taken some decent math and econ courses, no one would hire me because I had not majored in economics (and I had decent extra curriculars, the required leadership BS). Yet I got into every graduate school (law and business) I applied to.
That was over 30 years ago, when the world was less mercenary than now.
The pressure to major in something career related comes from employes. Students are merely responding to reality.skippy:
As a parent of 3, I urged my kids to get an undergraduate in whatever caught their fancy. I wanted them to get their bachelors degrees and the best way to do that (and get good grades) is to major in something that consumes you. I was pushing the virtuous circle of enjoyment -> success -> enjoyment. I was paying the full tab and they didn’t have to work at all.
All three felt that they needed to get jobs and work in school, take majors that would lead to jobs and sell themselves on the next step of their ‘careers’ (work or grad school). I tried to dissuade them from thinking like that but to no avail.
It must be something in the water…Micah:
Hay Asshats down load this.
The American Dream
Skippy…imprinting like a young person having sex for the first time..eh.jp:
I’d agree that a PhD is a poor proxy for talent in CS. As a recent graduate in that subject, basically the only people from my class who went on to CS graduate programs were either interested in theory of some kind or wanted to teach (though some then get lured back out by the salaries, if they’re good). If you can get it, a job tends to give you much more practical programming experience than a further advanced degree. But I do know a number of people with PhDs in other subjects who have since drifted into programming, which is probably the kind of person you’re talking about.Captain Teeb:
American born, IT pro of 25 years, consultant building enterprise applications for investment banks.
What the author means to say is that they can’t find the talent they need at the wages they want to pay. If they were paying 2001 money, they would be inundated with high quality, American born, applicants from the top tier U.S. technical schools. But because the H1b program has driven wages down, everyone who graduates from MIT these days wants to go to Wall St. or management consulting.
You are absolutely right– a PhD is a proxy for nothing in IT. Nobody in IT has an PhD, and none of the groups I’ve worked for would ever hire a PhD. Not because they are overqualified, but because they are wrongly qualified for day-to-day software engineering.
The Indian born Stanford PhD in computer science is the bugaboo that the H1B lobbyist always pull out. They point out that without these immigrants, Cisco and Qualcomm would be in deep trouble. And that’s probably true. What they ignore, of course, is that this deep sciency kind of engineering has nothing at all to do with IT. The vast majority of IT jobs are software development jobs that are done by bachelors or masters, and require no specialized education. Many of these jobs are carried out perfectly well by people who don’t even have engineering degrees.
I can promise you that most corporate IT jobs, whether executed here or in India or China, could be competently carried out by any bachelor, in a quantitative or near quantitative field, from a decent U.S. university.
And you are correct, there are now no entry level jobs for college grads. This state of affairs has arisen through a combination of government corruption (lobbying on the part of Indian body shops and large U.S. employers) and shortsighted decision making on the part of our youth. In the last 15-20 years, most engineering grads aspired to: wall St., management consulting, or law school. Hands on engineering was rightly considered a hard and dirty way to make a living. So 5 years ago, the only people you could find to take $90K jobs in the Jersey City back office of an investment bank were h1b.
And hiring managers are biased favorably towards h1bs for a couple of reasons (I know this very well first hand, having hired lots of h1bs myself).
- First, h1bs are (or were) here as indentured servants. That means they constantly go above and beyond the call of duty, or they are on the next boat back to India. This provides great flexibility for really poor IT management (which is most of it). As a project manager, you can totally screw up all aspects of forward planning, design and architecture, and still deliver something that (at least superficially) resembles what was supposed to be delivered. You simply make your indentured servants scramble really hard and work around the clock.
- The other favorable hiring bias for h1bs that I’ve seen is that many of the “recruiters” (h1b placement middlemen) are themselves Indian or Chinese and have good personal relationships with the hiring managers. These recruiters are much more inclined to place h1bs than non-h1bs because their profit margins are typically higher when placing h1bs. The profit margins for these guys are (or at least were until recently) huge. A “recruiter” will take 20-30% of a “consultants” salary continuously. They are able to take a bigger cut from h1bs (especially freshers) because the h1bs don’t understand how the system works (at least at first).
Now, of course, I’m sure there are plenty of U.S. college grads who would like to have that $90K/yr back office IT job in Jersey City. But there are plenty of experienced IT people (mostly through the h1b program) who are sitting tight on them.
Dont’ you think it’s kind of funny that Obama is willing to spend $800B on a stimulus that created (reportedly) a couple hundred thousand jobs? How many h1bs (of all statuses) + L1 + other “guest” visas workers are in the U.S. now? I’m not certain, but I’ve heard that the number is north of 1 million. Isn’t that a 1 million person unemployment reduction that can be achieved without spending any public money? It simply requires the stroke of a pen.Cooter:
Thanks for a interesting comment. These are not so common.
You sound a lot like me: 25 years in IT, really US-born (no ancestors arriving after 1800), MSCS. I can tell that you’ve been there, was even enlightened by your remarks on how H1Bs enable bad project management (which is the rule, not the exception). It all makes sense.
I say it’s all of a piece with sending factories to China. Every company wants to lower its costs at the margin, but if manufacturing and skilled jobs are relentlessly squeezed, then what does the working population do? This is a high-level policy decision, let’s not kid ourselves.
Thought experiment: I imagine that Citibank or Lehman could have found much cheaper Indian or Chinese versions of Dimon and Fuld, but my guess is that they didn’t even look at foreigners. Why? Are those guys smarter than everyone in India? (I doubt it.) So the deciding class decides not to replace itself with cheaper foreign hires, big surprise.
But this sets the patttern for the US: the hollowing out of the middle class that Yves has talked about before (as polarization of wealth, high GINI, etc.). How far can the trend go before something gives?
I saw this coming in the 1990s and emigrated to Europe. I’ve worked in four countries now and can say that, in IT, Indians are rare (and transitory), while Chinese are non-existent. Salaries are not what the US was during the Y2K (remember that?) run-up, but everyone’s working. Very few of my colleagues even have CS degrees (1 out of maybe 20); the rest just got a book and a PC and taught themselves (though I don’t recommend this; I’m glad to have the theory). So the job market must be pretty good.
There’s a greater sense in Europe that you don’t squeeze people simply because you can. Also, I’m 56, and have colleagues who are even older, so the US-style Cult of Youth is less important. (Sadly, average project management is no better here, and possibly worse.)
My favorite English-language job board is jobserve.com. If you’re interested, go there and put in your favorite skills, plus a country. Some (typically lowballers) have the salary or daily rate posted as well.00rush:
I have thought of doing exactly what you describe, although I am not quite yet in the position to pick up and move. Any other links or resources on visas/processes/blogs/etc on the subject would be greatly appreciated. If not, thanks for the information provided.
I agree with some of JP’s points above. Yes, most technical jobs can be done by anybody with a bachelor’s degree in a quantitative or numerical field. Most programmers now seem to use Google as an auxiliary coding tool anyway.
However, there is still a measurable difference in the quality of students coming out with a Comp Sci degree from a good US or UK university compared to those coming out with a degree from a middling Indian University. InfoSys, TCS and Wipro can hire thousands of graduates straight from college in India, train them up in whatever the ‘in demand’ skill or tool set is and get them doing grunt work on out sourced projects. I worked very closely with contractors based in India when I worked for a large US investment bank in London. I found their skill and motivation levels were poor, and anybody who showed aptitude / good communication skills was swiftly promoted and moved on-site. Quality suffers as a result.
There are jobs out here (well in the UK) for people with good degrees, and those who show an aptitude for the field.
jp is right on the money. That said, here is my “formula” for working in IT if you are a US native and are seeing the continuing rise of laughably low-cost competition and want to know how to survive:
1) Get a BS at a community college, cheap distance learning program, or simply skip the degree altogether.
2) Do not take on anything resembling large, ongoing expenses. This means you have to live in a city with good public transportation, be willing to live in a studio or tiny room, not own a car, never buy a house, don’t acquire any expensive habits (no gambling, drinking, drugs, smoking, etc.) and do NOT have any children or other dependents. Fortunately for me, I am very happy with those things; not everyone loves being a car-less, childfree, non drinking/smoking/drug taking/gambling, life-long urbanite living in a sardine can. If you have the option to telecommute or walk to work, do that as well.
3) Save plenty of money to deal with the lean/dry times. Following #2 you should not have a huge problem doing so.
4) Be willing to work for tiny companies, startups, sole proprietors, etc. If you can get past the hilariously stupid roadblocks put up by HR departments in many large companies, you could take a job in one of those, but do not count on it. America lost “lifetime employment” years ago; IT often doesn’t even have “5 year employment.” There have been times where I did work for 4-5 different clients a week. Your sleep may suffer sometimes, but there’s not a lot you can do about that one except try to make it up when things are quieter.
5) Be willing to work 80 hour weeks, be the go-to person for just about everything, be on call 24/7, and never take extended vacations. Start adapting your mind to stay-cations/3 day weekends to avoid burnout; forget about that 2 week trip to Europe forever.
6) Study and learn new things constantly. Even long after you start your career, you should still be reading up on the latest technologies posted on Slashdot, reading Q&A on stackoverflow, reading the ACM/Usenix/whatever email lists, reading 20 technology/development/admin blogs, and picking up any worthwhile O’reilly books. In today’s IT, your education /never ends/. The idea many people have
in other industries that you just “get a degree” and work without learning new things constantly is a pipe dream. You cannot do that in IT.
The above is not a joke. I’m a native New Yorker, and have lived here all my life. I’ve been in IT for 15 years and lived in Manhattan for nearly all of it (before that I lived in Brooklyn, my hometown). This kind of life is definitely not for everybody, but if you want to survive (and you aren’t the next Steve Jobs or Bill Joy) the above may help you.
I’m sure some will find the above sad (and perhaps it is in some ways), but this is the reality of IT in today’s America.Dan:
Whoops, left one out: be wiling to work for under 100k (sometimes half that), for well, maybe life. Again, #2 should help you there.JW:
JP’s thoughts on this matter resonate strongly with my own.
I have been a programmer in the New York area for 30 years where I have witnessed the slow death of a profession which was once attracted some of the best talent from the best schools in America. And outsourcing, and in-sourcing of H1b’s and L1’s is largely responsible.
If you walk the IT floors at Bank of New York, Citibank, Bank of America, et. al. you will not see a non Indian programmer. As JP mentioned, the approved head hunting vendors are Indian companies. At these banks, you must contract through these Indian firms, and it would appear that they will only hire H1B/L1 candidates.
If the quality of their work were superior I would certainly have no comment, since I think a company should hire the best talent available. Unfortunately, this is not the case. In most instances, they are really sloppy and untrained, but as was said before, they will work hard for fear of being replaced for lack of effort. Results be damned.
As far as PHD’s are concerned, they represent such a small minority at the banks of which I speak, that they are hardly worth mentioning, except of course by politicians who invoke them to defend this program.LastChanceUSA:
Alan Greenspan @ 3:50 of video below says;
“We pay highest skilled labor wages in the world…If we would open up our borders to skilled labor, far more than we do, ah we would attract very substantial quantity of skilled labor which would SUPPRESS THE WAGE LEVELS of the skilled…”
Notice that Alan Greenspan does NOT mention anything about “best and brightest” or “shortages” in the video clip above. Also notice his hand gestures as he exclaims; “SUPPRESS THE WAGES”!alex:
Outsourcing and off-shoring are about wage arbitrage, corporate profits, and nothing more. Unfortunately, career planning is very difficult for individuals, when they don’t know what occupation will be axed next.
I’m American born with have two MS degrees, one of which is in CS, and used to own a successful IT consulting firm. I had no problem competing with numerous foreign and US IT consultants on quality, quantity, and honesty. However, I was unwilling to compete solely on price ($11- $15 per hour in many cases). After three years of dealing with – “We can get IT people for about $15/hr. You need to rethink your hourly rates.” – I closed my business in 2003. I even got this line from a previous multi-billion dollar client after I single-handedly resurrected one of their projects from the grave, enabled them to meet their original deadline, and prevented millions in lawsuits for breach of contract. Another previous multi-billion dollar client let me go in 2000, after I told them that their muti-million dollar IT transformation project would fail, if they stayed on their current path. A couple of years later and millions spent on the transformation project, they lost over one billion dollars in revenue, because their new software simply didn’t work. They then called me back in to fix the project, as I was the only one who correctly predicated that the project would fail and why. I got the same line from this client, too.
I didn’t spend many years in college, thousands in tuition, and countless hours of self-studying after college to work for $15/hr or less with no possibility of a future. If I can make or save companies millions, I’m worth a lot more than $15/hr.
Most USA managers believe that one FTE (i.e. full-time equivalent) equals any other FTE. Unfortunately for those in the work force, it is much easier to offshore and outsource workers than it is for workers to retrain.
My advice to people today is to pick an occupation that you enjoy, are good at, and REQUIRES YOUR PHYSICAL PRESENCE. If you don’t, then you will eventually be faced with loss of livelihood or greatly reduced wages due to outsourcing and off-shoring.constantnormal:
“REQUIRES YOUR PHYSICAL PRESENCE”
With the H-1B and L-1 visa programs even that’s no guarantee.michael:
Not all of the hard times in IT employment can be blamed on outsourcing. The (entirely necessary) balls-to-the-wall push for Y2K remediation pulled a lot of employment demand forward, leaving a gaping vacuum following 2000, which accounts for a lot of the employment problems in the IT realm in the first decade of the new millennium.
And given the digging-in-the-dirt nature of much of the Y2K code remediation — that which did not involve complete rewrites or system upgrades, but mucking about in decades-old systems full of cruft and spaghetti-code — that sort of work was typically not considered suitable to be outsourced.
I’m not defending outsourcing, which I regard as a blight upon civilization, destroying the employee-employer relationship and reducing the career aspirations of domestic workers to piles of rubble and lifelong enslavement, but there are other factors that help to explain the employment situation in the realm of IT.alex:
Not sure why you mention this nowadays, 10 years later – the pull forward from Y2k impacted about the following 18 months.Jon H:
“Y2K code remediation — that which did not involve complete rewrites or system upgrades, but mucking about in decades-old systems full of cruft and spaghetti-code — that sort of work was typically not considered suitable to be outsourced.”
On the contrary – an enormous amount of the Y2K work was outsourced. So much so that some consider Y2K the take off point for outsourcing.wunsacon:
IMHO, CS PhD aren’t going to touch business IT with a ten foot pole. They have far better opportunities.wp:
The H1B program is a tax on studious Americans.
Let’s see what happens if we bring in H1-B’s to replace realtors, traders, salespeople, baristas, Congress critters, CEO’s, etc. (Even for barista positions, a company can always say it “can’t find qualified people for the salary it can pay”.) Then, we’ll see how much the rest of Americans like this program.
As it stands now, this program exists precisely because it hurts some people but not enough to piss *everyone* off.MKV:
In 1990-91, when Manmohan Singh was the finance minister, India was in deep trouble on the forex front. US demanded opening up of the indian economy to US multinationals as a quid pro quo to ease their forex shortfalls. IT offshore industry in India is the single most beneficiary of Manmohan Singh’s decision to open up indian economy to US multinationals.
US multinationals have expanded their reach to indian consumers at the cost of US programmers. It is a two way street.
About 70 per cent of US PhD students are foreign born and are often hired in the US, making their way into Silicon Valley or government agencies such as Nasa, said Partha Iyengar, of Gartner, the consultancy.
Something that I’ve found as someone recruiting for comp sci (not IT, mind you) in the elite schools here in the Northeast is that there is a massive injection of foreign students into post-graduates programs because their parents are willing to pay full tuition to put them into these schools, as opposed to many US students who are looking for scholarships in order to be able to attend these schools. These schools need to prop up their budgets so it’s very good business for them to market and recruit these kids. But it doesn’t correlate with good engineers.Ron:
This article is ridicules! What they probably are not stating is that what they are willing to hire people for is not competitive to the markets comparebles. Also it may be that people do not want to live in the small towns in America when they can work in the main cities. With U-6 being at 17 I cannot accept that non one is qualified for working for them.
Also if they are not qualified maybe they should be training them. Also it could be an excuse for people to bring more people from India and give them Green Cards and hire them at a cheaper price.
Please also note that in the past 10 years we had a major wage deflation in IT for American employees. People who made 80k-120k are making 20k-40k less, because of outsourcing. We are slowly eliminating any good paying jobs in the US. We are going to be stuck with Dr. and Lawyers and nothing else… wake up america!Chester Genghis:
1. US has ALWAYS benefitted from attracting the best minds. The US economy was NEVER built by local talent, but always by new immigrants.
2. US is not doing this as well as it did in the past. Think of the country as a company. Wouldnt you want to retain the top talent, rather than those that are “close to the decision makers” (usually from behind).
3. Some ideas
- Give stipends to top talent from other countries to study here for advanced degrees
- Give immediate working permits to foreign students graduating at the top of their class in US universities
- give immediate working permits to entrepreneurs in other countries that want to come here. Its a misconception that they take American jobs. Net-net, they create more jobs than they takealex:
We’re at almost 10% unemployment (only the official rate, mind you), with many more underemployed and you think the real problem is brain drain???LAS:
“US has ALWAYS benefitted from attracting the best minds.”
Is it your contention that H-1B’s and L-1’s are generally the “best minds”? What’s are your criteria and data for arriving at that surprising conclusion.
“The US economy was NEVER built by local talent, but always by new immigrants.”
First, H-1B’s and L-1’s are guest workers, not immigrants. Don’t mix apples and oranges.
Second, I gotta love positive stereotypes, which are just the flip side of negative stereotypes. Is it your contention that Americans have always been inadequate to the task? In additions to the millions of very capable rank-and-file Americans, do names like Edison, Ford, Westinghouse, Wright, Curtiss, Armstrong, Shockley, Bardeen, Brattain, Noyce and Gould mean anything to you?Pete:
Having worked with some Indian companies lately, it occurred to me at times that India doesn’t have the talent base either. I felt like it involved training them to get through the projects properly and they had a tendency to crumble before every new challenge. At some point, it just won’t be worth going to India anymore. Come on America, I’ve seen you do this work better than it’s being done over there now.Raging Debate:
Great post and great comments. I agree with the other commenters that a CS PHD is not really suitable for most actual corporate jobs. I have a nice technical analyst position for a large insurance company and a BA in History, with about 12 years experience in IT. I have a very niche business expertise which has allowed me some level of comfort, but otherwise there would be no way I could compete with the H1B folks on pure talent+work ethic+cost basis.
Workers in many industries have to deal with outsourcing, but throwing the H1B issue on top of it is a real problem for a couple of reasons. First, it is unfair to native workers to make a specific exception for one industry, especially when you consider that most of the jobs we are talking about are in no way “strategic” for our economy as a whole. Second, as you state it closes the door for people to get into the field.
I have many Indian friends and consider myself to be pro-immigration, so I don’t want my opposition to H1B to be construed as nativist in any way, but I really oppose the program. As has been stated by other commenters, these guys get paid less and work crazy hours out of fear of losing their immigration status. I do not understand how this could fail to depress wages in the industry, making it less attractive for new people to enter.bluffraise:
They just do what the programmers of the 1990’s did and stretch out completion of the project for eons. If you get something that actual performs to spec it is a miracle.
Some of the folks I speak to in high places in the corporate world get it, the cost-benefit of I.T. outsourcing is shrinking fast or already gone.Tom Hickey:
It’s tough to compete with someone who wants foreign work experience on his resume and will therfore work for a bus token and lunch money. Such was the case in 2001. Job prospects are a little better now.Cynthia:
“The bigger challenge for the US is, if they start to lose this talent at the lower end, the innovation engine that has been driving the economy starts to dry up,” Mr Iyengar said.
Another torch being passed to Asia. After a while it wil be the US trying to reverse engineer Asia innovations and get around Asian patents.
Energy is the biggest and baddest gorilla in the room though.
Der Spiegel: Military Study Warns of a Potentially Drastic Oil CrisisChester Genghis:
It’s only a matter of time before the world’s largest companies that produce things other than food and bottled water are headquartered in Asia and all of their CEOs are Asian born and live there, forcing American CEOs to join the ranks of the unemployed.
This is patently obvious to anyone whose head isn’t in the sand.
Power always follows production, which is the heart of any economy. When American corporations decided to offshore production to Asia so they could teach their greedy American workers a lesson and vastly overpay their CEOs while vastly underpaying their Asian workers, they dug their own grave and engraved their own tombstone.duffolonious:
I agree with you on the inevitable outcomes, but current CEOs are laughing all the way to the bank. It only takes 2-3 years for them to loot all they need –well before the other shoe drops.froggy:
Speaking of right now, I’ve been trying to hire a couple people at the small company I work at. One of the things we do is post jobs at the nearby Big Ten university – and we’ve gotten only a couple hits. Last time we hired (early ‘08) there were a ton of candidates (even _a_ woman [all the ones I knew when I was in college in the early 00's went to IBM]). If I had a referral from a friend I might even ignore a lack of schooling (I have a lot of college dropout friends – they all have great IT jobs – Intel, porn, et al).
And I’m not sure what I’m doing wrong. Except for one guy that we may hire once he’s done with school (in a year), all the rest have been pretty sad. One example is a candidate who does windows tech support at major US company – so no programming experience and our shop is entirely Linux. A problem with IT is all the sub-career paths – once you go down one, it’s a tough crawl back up to the others.
Our company is so niche that even the much better candidates we’ve hired in the past took a few months to get up to speed.
Another problem is that business is only OK. With the economic outlook I’m worried about making a mistake on hiring and it costing too much in time and resources. So it makes us more reluctant to expand in the first place.
There is a ton to write on the subject of IT companies and employment – it’s so specialized, and good candidates are a tough fight (how can we compete with Google).AFL:
It seems like your situation is similar to entry level workers; your an entry level businesses and have a tough time working your way up. Maybe the way to become a market force, is to think juggernaut and go public? Or sell your sole to some big company in need of creative new ideas? Being small is rough, and in a global business environment, seems like the challenge is how to sell and compete globally.duffolonious:
“Our company is so niche that even the much better candidates we’ve hired in the past took a few months to get up to speed.”
This is Yves point!
Most companies are unwilling to train. They always want people to be able to hit the ground running.
If you’re interested in the long term viability of your company, you have to invest in hiring and training entry level employees.
But if you invest in training, that’s money/time/effort not spent on your short term goals.
So as a business owner, do you race towards the bottom like everyone else, or do you take the high road which might lead to bankruptcy…Raging Debate:
“This is Yves point!
Most companies are unwilling to train. They always want people to be able to hit the ground running.”
Yep yep. And every company has to decide “how long will it take to train this person?” And “what is the maximum amount of training we want to give?” Those two questions set the stage. What is fair, for the employee and for the company?
In fact I like doing a decent amount of on-the-job-training, because the investment also seems to be rewarded with loyalty.
Nonetheless, I read the articles Yves bring up on the subject and think wanting people to hit the ground running (with little to no training) is more an excuse to not expand; than a reason to not hire.Software Insider:
Run ads in your local papers for a “Web Developer”. Shift through the couple of dozens resumes for those that have SQL and PHP experience (web design). Make sure they really have those data skills though. Setting up a database is tit, managing it for CRM functions, marketing etc. require some good hand-on experience by the employee. Best of luck.Dave:
As someone who has worked in the software industry for about 15 years, I have a few observations:
1. A PhD in Computer Science is overkill for most positions. The majority of projects/products in the overall software space do not require complex algorithms; rather, they require facility with a particular platform, ability to map business rules to functional designs and functional designs to technical designs, and general problem-solving ability.
Most positions involve either a focus on one of these skills or a mixture of the skills. None of these skills comes directly from a CS program, but the foundational skills for programming with some level of competency are taught in most undergraduate CS programs. The rest is either innate or comes only with experience working on non-trivial real-world projects and really understanding trade-offs.
2. As in a lot of industries, the entry-level job seems to have died out in software. I think some of this is endemic short-termism: anyone managing a project or team simply wants to get the product or release out the door, not spend time training someone. So you start to see a focus on lists of skills and meaningless measures of experience (e.g. “must have 10 years of object-oriented low-latency transactional processing at a large company”). I have worked at several different firms where the “business” side of the shop had a robust internship/trainee program, but the “technical” side was expected to only hire people who would be (in theory) immediately productive at a high level.
3. The majority of the people working in software are not designing world-class search algorithms or mobile operating systems, nor are they designing snazzy Web 2.0 interfaces. They are, instead, creating or maintaining systems into which people enter data, store data, retrieve data, and process data (think insurance, banking, accounting, etc.) These people do fairly boring work and get decent but not fantastic pay. It’s a nice middle-class job with limited career options.
Regarding the alleged problem of a skills shortage, there may be a few things at work. My guess is that companies are trying to hire a high level of experience at a low level of compensation. This means there is no match with entry-level candidates (say recent grads), nor is there a match with experienced candidates who already have jobs that compensate them well.
There may well be skills shortages at the very high end in technology (chip design, high-performance systems, etc.), but I don’t see it in the general business software area that makes up most of the job market.lark:
Another industry veteran here (10 years). Agree completely except for this: “It’s a nice middle-class job with limited career options.”
Correction, WAS a middle-class job. Wages are totally stalled and developers are on their way to joining the lower middle class, and eventually working poor.
A data point…I started in IT out of school earning $65k in 2000 (fabulous pay, I agree). Laid off in 2001 and spent a year minimally employed. Got another development job in late 2002. In 2006, I was making $87k. Inflation adjusted, this is maybe 10-12% more than my very first job.
10 years on, I’ve increased my productivity and skill by many, many orders of magnitude and lead a team of 4. I make $105k, barely a third more than my starting wage.
All these jobs are in cities where a dumpy 1200sf condo costs $600k and the schools are terrible. My benefits have always been typical for the IT industry (i.e. terrible…15 days PTO, no sick days, low to no 401K match, expensive health benefits, 8 holidays a year).
Barring some miracle whereby I become an executive, I expect this is very near the peak of my lifetime earnings as an engineer. At 36 years old, I figure I have AT MOST 15 more years of employability. I am responsible for funding my own retirement yet do not make enough save adequately, despite no kids and an extremely frugal lifestyle.
Here in Los Angeles, if you use reasonable assumptions about career duration and the present value of retirement benefits, you’ll find that the typical union carpenter, prison guard, or municipal bus driver earns far more over a career than the typical software engineer.Formerly known as Nameless:
Dave I hear you. The profession has been destroyed. The sick thing is that by the time it totally dries up we’ll be too old and broke to get something else that is decent.
And it’s amazing how they have broken the retirement systems in this country. Working in a business, as opposed to working for govt, has become such a rip off.Formerly known as Nameless:
105/65 = 1.615. And since when is 105k a lower-middle-class salary? 80% of the country would kill to make that money.Formerly known as Nameless:
“The median expected salary for a typical Bus Driver in the United States is $18,663″
and I bet that benefits are SPECTACULAR.Dave:
let’s check carpenters for sh*ts and giggles too.
“Salary: 41,000 – 50,000 Annually
Required Education: Some College
Required Experience: 2 Years of Experience in a Related Field Required”Larry:
Apparently you aren’t aware of a phenomenon known as inflation.
$65k in 2000 is about $78k today.Cynthia:
As an actual engineer… it’s rough out there. For one thing, I’d like to know exactly what counts as an IT job.
We’ve seen the collapse of the job market affect engineering departments. In last couple decades, radio frequency (RF) engineering, power engineering, petroleum engineering and nuclear engineering have all shrunk. So, all the knowledge in these fields are now overseas.Mike Snow:
According to Thom Hartmann (watch link below), the Obama Administration is proposing that the U.S. Bureau of Labor Statistics stop reporting the number of American jobs being outsourced. If he is right, then this is just another example of our most powerful elected officials trying to hide the ugly truth from us. First it was about our wars, now it’s about our jobs.
And I can’t think of a bigger slap in the face to the American workers for NBC to launch a comedy show about American jobs being outsourced to India!
I have spent 30 years in the commercial software industry, outsourced thousands of man hours to India (and other countries). As far as the impact on America’s abaility to inovate
1) Most of the offshore outsourcing hours come from big companies, like banks, telco’s, airlines, etc. These companies do very little in the way of innovation around software (just try their websites). Also more and more the big tech companies don’t innovate, just buy (Oracle, HP, Microsoft).
2) Most software innovation happens in tech companies, some large (Google, Amazon, or Apple), mostly small to medium. The small to medium guys do very little off shore outsourcing, and most of that is around testing (man power intensive). This is because you have to be close to your customer to design great software and so off shore is a non-starter.
3) Most off shore companies provide a lot of hype about innovation, but they don’t deliver. The do deliver low-cost, talented labor, who are very good at following directions, not so good about innovating in a way that is valuable to the end customers.
4) You don’t have to have a degree in CS to be an innovator in the software industry. Most of the real value comes from people who understand the business being served and don’t get obsessed by the tech. Many of the best designers learned to program after they got a degree in business or science.
So being a believer in the invisible hand, if the demand is really there, the supply will show up.Raging Debate:
Thanks for being honest about your role in outsourcing jobs.
I have my own startup in Silicon Valley and I can tell you, you are dead wrong about start ups being immune from outsourcing.
Venture capital requires outsourcing to be in place before they’ll fund. That has been true for years now. You info is out of date.lark:
Don’t know about that stringent a condition for VC but in speaking with the investors, you do have to be willing to consider it. I like the programmers in the Czech Republic. About 2/3 American wages and they innovate AND complete the bloody projects without a ton of micro-management.oliverks:
Yes I’ve heard the Eastern Europeans are the best.NR:
My experience after getting a PhD in math is I could not find anyone who wanted to hire me at all. Admittedly the market was not very good at the time.
CS PhDs may be more employable. Almost all PhD student in math want to become professors, although very few will eventually make it to be tenured. As a result the math departments do nothing to cultivate ties with industry.
I finally found a small little company where the owner was more interested in people. The pay was low (probably 10% less than a undergrad with CS), but it gave me my start.
I should mention that I was a TA for a computer programming course, so it was not like I had not programming background. But I had no formal education in programming.
I just don’t see why American companies can repatriate income by selling carbonated soda in India whereas India and China are blamed for providing goods and services to the US. When economic colonialism works for the West, why is there so much umbrage with the reverse? I could argue that highly sophisticated marketing ploy of coca-cola company is unfair against a vast majority of farmers in India who sell coconut-juice for a living (not to mention the health aspects)
If your argument is primarily around labor mobility, would you be okay if services are provided remotely from India with no onshore presence? Also, Labor arbitrage is a genuine competitive phenomenon, much like a country that possesses Uranium or makes Levis.
When does free-trade become fair-trade?lark:
Unfortunately I think it is too late to solve the problem. But in essence if you are going to allow the free mobility of capital, you have to allow the free mobility of people. Capital will still be at an advantage, but the US would still be the center of software development.
The salaries of programmers would be lower here, but the future would be brighter, and the tax base would be much better.
I think it is too late for this now.Cat:
Yves you are so right on the money on this. I speak from 20 years experience.
This whole discussion has revealed to me the sick stupidity of the media. They never learn, no matter how many times they get bombarded by feedback from engineers who know the facts on the ground.
They are captives of corporate spin and press releases. No wonder they were whistling Dixie when we walked over the cliff.
I am disappointed in the FT though. The best of the lot.Timo:
- Software engineering isn’t as easy as everyone thinks it is. A bad hire can cause your project to fail. This is probably the reason for a dearth of entry level positions. Lets not forget the IT revolution is still pretty young. After the big growth where almost anyone would do people now realize you have to pick and chose.
- IT Projects are hugely expensive, prone to cost over runs and failures. This keeps downward pressure on wages and hiring managers wanting specific skill sets that will help them get the project done on time with no training involved. The fractured nature of the IT business with your multitudes of programming languages and development platforms makes this even worse. While a skilled programmer with 10 years doing windows development would succeed on your Web blah point blah project, the safer route will always be to hire someone who has the ‘experience’ even if they might not be as skilled or have as much time in the workforce.
- Because of this the desire for specific experience the pay for engineers stalls mid career. You never got to those upper pay levels because the requirement for new projects are always changing to a new paradigm. Sure you are 5x more productive then someone with 2-3 years of work experience, but you don’t know Java or .net. You’ve never worked with the compiler or the Object framework so you aren’t qualified and if you do get the job you certainly aren’t worth your high salary.
- Which leads to the biggest problem. Software Engineer’s jobs have shelf lives unless they are elite of their profession. You will almost be unemployable with 15 years of experience or more as you will be too specialized for mid-level jobs or too expensive for mid-level jobs.oliverks:
Unfortunately one of the reasons that software engineers supposedly have a shelf life is because:
- Investment in training good engineers is considered a waste of money if your HR department is under the illusion you can hire someone cheaply who supposedly knows the technology already. Unfortunately a lot of the companies that write software in house for their own use are often not very clued up when it comes to proper IT recruiting.
- Most larger companies can’t tell a good software engineer from a mediocre one in the first place, which makes (a) even more prevalent, plus they are rare
- A lot of the IT community has so gotten used to having to change employers in order to advance their career in any way that they’ve often given up on any long term career planning. This is also mirrored by a lot of the larger companies not really offering any sort of longer-term career perspective for IT employees (hint: not every IT guy wants to be come a manager).sth:
I have argued before that programmers have problems pricing themselves in terms of ability. There is an interesting externality in that bad programmers get too much money by mooching of good programmers.
I don’t think software is unique to this problem. I find that lawyers suffer the same problem, and it is interesting that no one has found a way to solve this issue.
In both cases you are really paying for the prevention of future problems. For example, if a bad lawyer writes a flawed contract, it can cost millions to fix. Likewise a bad coder, who appeared to complete his / her module on time, can cost $100Ks in short term problems and $1M’s later on in software maintenance.
So the problem in both cases is that the lawyers or programmers appear to have met the short term requirements, but can saddle you with very long term costs. That is the hard part to sell, and why the price differentiation is not easy.
A genuine competitive phenomenon? It’s not possible to compete with countries that are Mercantilist/use near slave labor, or have standards of living that *should* disgust any human being (and so have much lower costs of living.)
Money flows freely, labor does not. When standards of living, worker protections, human rights, and immigration/emigration policies come to about parity between countries, maybe we can talk about “Globalization” or “Free Trade” (or opening up the H1B program). Until then, it’s a race to the bottom in a shiny McDonald’s-yellow veneer.
You can go to IIT, get sponsored, and live in California. Can you go to MIT, get sponsored, and live in Bangalore? This question was researched recently – someone contacted various organizations in countries like India (business orgs, government orgs, immigration agencies) and asked if they had programs like the H1B. They were laughed at hysterically.
Not to mention what was laid out in paragraph 2. Even if you COULD move to these places and get a job easily, do you really want to live in a race to the bottom world? Do you want to live in places with poor sewage systems, garbage on the streets, and terrible human rights policies? Places with health care systems more broken than in the US?
I’m ALL for it once we have all those protections/roughtly equal standard of living in place. The funny thing is, once that happens, NO COMPANY WILL EVEN BOTHER UNLESS THEY ARE DESPERATE FOR A PERSON WITH A PARTICULAR SKILLSET THAT THEY CAN’T FIND IN THEIR OWN COUNTRY. Why? Well, it’s not about skills in many/most cases – it’s about cheap labor. Once labor costs are a parity between countries, that “advantage” will disappear and these sorts of programs will get little more than a shrug.sth:
Your premise that trade is going down the path of “race to the bottom” is not well supported statistically. Trade improves countries, their peoples and their competitiveness. (Singapore, Malaysia, Japan, etc.). You cannot point to a Nike sweat shop to point out why it does not work. Generally, it works.
In the 50’s, you could have accused the Japanese of being mercantile. As their living standards improved, they enforced laws that are now consistent with global governance rules. Even within the Indian companies, the IT companies enforce better standards than the rest of the country as they start to globalize.
It is not possible to be selective about globalization, nor can you enforce pre-conditions. If the US decided not to import products and services from India due to a lack of “level playing field”, American companies should not be selling cars and juices either. Each country will come up with their criteria for level-playing fields and trade can just say bye-bye.Doug Terpstra:
Well, we could come up with some wild ideas about how to fix it. Here’s one:
Government enforced price and wage reduction down to India/China/Vietnam levels along with a massive wealth confiscation scheme to to keep all the percentages lined up (could likely be done by creating massive monetary inflation, or directly via fiat.) The same would be done with debt.
No one gets richer or poorer in real terms; it only affects trade.
Here’s another crazy idea: devalue our currency so that we’re as cheap as workers in other countries.
Along with all this, institute a /real/ free, universal higher education and jobs training program (which
would include paying for your food, rent, bills, etc.) until you graduate.
I could come up with more, but this would be plenty to get started.Jake:
NR, you say “It is not possible to be selective about globalization, nor can you enforce pre-conditions….Each country will come up with their criteria for level-playing fields and trade can just say bye-bye.”
Selective rules and enforcement is exactly what’s happening now under all SHAFTA agreements—by design—because the masters of the universe, the US architects of rigged trade (not fair trade), want it that way. Do you really think Chindia is required to meet fair trade rules? If so, please send for my latest book: “Easy money in Real Estate”
That reminds me of Sen John McCain’s insult to American workers in 2006 (when he was for amnesty before he was against it, who said we didn’t need a “dang fence” because Americans wouldn’t do the jobs of illegal immigrants). At a speech to labor, as clueless as M. Antoinette, he offered $50/hr to pick lettuce and was subsequently drowned by takers.
You’re right that FAIR trade is beneficial, but sth has it exactly right about the current rigged-trade regime:
“Can you go to MIT, get sponsored, and live in Bangalore? This question was researched recently – someone contacted various organizations in countries like India … and asked if they had programs like the H1B. They were laughed at hysterically.”Poco Ritard:
In most major engineering schools (I work at one), thousands of Indian and Chinese are brought in at full tuition rates to goose up the Universities cash flow.
So where does a poor Indian kid get $80,000 for two years masters program? Simple: the University arranges loans through Citibank and JP Morgan (no money down).
Unlike lower tier schools employers line up to hire here and until recently I’ve never heard of a single student not finding work after graduation. It’s funny to see them in the shops with their shiny new Chase credit cards swiping away.
After graduation they may work in the USA for 1 year on their student visas, which later translates into an h1-b or some other visa. In fact some go back home then return on L-1 visas; which is considered nothing more than an intra-company transfer.
Most people don’t realize that a small number of meg-schools dominate almost the entire production of US engineers. After many years of working with these people, I strongly dispute the notion these foreigners are the ‘best and the brightest’. Many can barely write a coherent sentence in English.
So Banks win, the Universities win and the employers get cheap slave labor. Now why would any of the above parties allow this state of affairs to end?
As for the IT/Software crowd one of the biggest abusers of ignoring US applicants is Bloomberg in NYC. If you look through their published (see link below) visa files from flcdatacenter.com they employ a vast number of foreign software developers across the country.
Just another anecdote:
While working at a certain enormous software company in Seattle in the late 90s, my dev lead (that’s “boss” to us code monkeys) was frequently out of the office. It seems there were so many trips abroad to recruit cheaper talent (particularly eastern Europe at that time) that his level of management basically was required to periodically do a stint on the meat hunt.
I remember one meeting at which THE WORD FROM THE MAN HIMSELF was loudly proclaimed “Find Something To Outsource Today!” Accompanied by blows on the conference table.
man so many good comments on this article. I have a BSCSE from an OK school, live in Dallas, and have about 10 years professional experience writing software for the health care industry, specifically pharmacy.
I agree that a PhD doesn’t mean a whole lot in my field with respect to salary. Software engineering is so broad and a PhD so focused that it’s hard to match a PhD to a job even remotely similar. Furthermore, most of the PhD’s I know took the route because they wanted to learn not because of job prospects. Much of the CS crowd are just people in love with technology.
Also, good software engineering is just plain hard. There will always be a shortage of people that can do it right. I’ve never ever seen an outsourced software project come to fruition but I have seen them drag on for years and years in a perpetual state of development which is common in my field unfortunately.Raging Debate:
Let me try to impress upon those who don’t get the dangers and common citizen’s objections to outsourcing Information Technology; mind you, IT data and information is not in the same category as outsourcing manufacturing of diapers and pens.
I assume you commonly receive spam emails requesting your SSN and bank details, written in poor English and orginating from overseas?
How would you like it if Nigeria became the next global hub of IT outsourcing for the Financial Industry, and industry which has been in the forefront of outsourcing IT with little heed as to the security consequences?
Your identity and asset information will be at the disposal of those who would otherwise pay to obtain it.
Such customer information is a national asset, it is not meant to be handled by those who have no vested interest in enforcing security of that information, and by those whose GDP per capita are orders of magnitude less than yours.
The American public is totally oblivious to the security breaches that are occurring with their information overseas – they’re kept well under the cover, not subject to US disclosure laws.
I really wonder if CEO and executives are aware of the risk they are exposing the trusting American public to, including themselves.
The true cost of outsourcing IT will be recognized… if only too late.S Brennan:
You are correct but what you are describing began happening in the 1990’s. Government programs Project Echelon and Carnivore were the data collection programs and this was orchestrated through the SAIC which is a private company and which also sells data. There is no more internet or data privacy in reality. I am not saying it is right, just stating the reality.Ron Hira:
I believe every word the CEO’s are saying about how critical the H1-B & L-1 programs are to America’s future and to their companies survival. Without them, their company would fail and that they are too big to fail…no matter what size they are.
Now that we have establish this as truth, it falls to congress & the white house to show the mindless minions of America that these companies are telling the truth, heretofore all these brilliant and critically needed H1-B’s / L-1’s are to be paid MORE than 1.5 times the wage of the top earners in the industry AND all over time is to be double time.
By their own statements, CEO’s would gladly do this to:
- Establish once and for all these brilliant and critically acclaimed individuals are truly needed to prevent their company from going into complete collapse.
- Shut those willfully slothful US citizens up once and for all. Let them work as maids & butlers.
So lets call the CEO’s bullshit, no limit on H1-B’s just pay them what you say they are worth.Formerly known as Nameless:
Data is available to answer at least a few of these claims/questions.
…said Francisco d’Souza, Cognizant president and chief executive. “Although unemployment in the US today is high, IT unemployment is still very low.”
RH: This is a false claim. According to the US Bureau of Labor Statistics the unemployment rate for Computer Professionals has averaged 5.8% over the first two quarters of 2010. That’s more than twice the rate of 2.6% in 2008. And more imporantly the current 5.8% rate is higher than its peer group of All Professionals, which is 4.5% for 2010. Can anyone argue that there’s a widespread systemic shortage of professionals today?
“About 70 per cent of US PhD students are foreign born and are often hired in the US, making their way into Silicon Valley or government agencies such as Nasa, said Partha Iyengar, of Gartner, the consultancy.”
RH: I guess the reporter was unaware that PhDs account for a miniscule number of workers, even in computing. According to the National Science Foundation there were 1,656 Doctorates awarded in Computer and Information Sciences at US universities in 2007 – this includes both to US and foreign students.
The US IT labor market is about 3.4 million so those 1,656 cannot have any material effect on the overall supply of IT workers. Almost all IT workers, even the ones Cognizant hires, do not hold PhDs.
Rochester Institute of Technologyalex:
5.8% is close to full employment. I’m not sure how to describe 2.6% unemployment in 2008 other that “shortage”. And note that it is directly at odds with Yves’ assertions that “most of the last decade was pretty grim” and “the commentors [at Slashdot] agree on the very small number of entry level positions in IT … from at least 2005 to 2009″.alex:
‘5.8% is close to full employment.’
For the economy as a whole, yes. For a specific profession, no. Ron Hira pointed out that 5.8% is higher than the 4.5% for all professions. Is it your claim that there’s no unemployment problem in the professions these days? Admittedly it’s not as bad as for all non-professionals, but that doesn’t make it good. Also the software engineer who’s now flipping burgers is not counted as an unemployed professional anymore, so those numbers can be very deceptive.
‘I’m not sure how to describe 2.6% unemployment in 2008 other that “shortage”.’
Why is that a shortage? That’s not an unusually low rate for professions. Incomes weren’t rising faster than productivity, so there was no shortage in any meaningful (as opposed to propaganda) sense. At best it’s close to market clearing. Is it your contention that we should always have as much slack labor as possible? Is that how your bread gets buttered?
‘And note that it is directly at odds with Yves’ assertions that … the very small number of entry level positions in IT … from at least 2005 to 2009″.’
Which isn’t a contradiction at all. The CS grad who can’t get a first job and winds up flipping burgers or going to grad school for a remunerative profession doesn’t get counted as an unemployed CS professional.Doug Terpstra:
Thanks for the hard stats. I don’t know how many people here are familiar with you and your work on this issue, but I personally want to thank you. For anyone who’s not familiar with Ron’s work, just search on his name.
I’d also suggesting searching on “Norm[an] Matloff”. Professors Hira and Matloff have been two of the best spoken and most authoritative people speaking about this issue. Both heavily base their arguments on hard data.yoganmahew:
Thank you, Yves. This is the classic lament, “you just can’t find good help anymore”, and it exposes another fine example of unenlightened self-interest inaction— Econners cutting off their noses, and eating their seed corn.
Beyond hand-wringing and blaming victims, TPTB and MSM make no attempt to address root causes, including the rising cost of college education and the generally pathetic public commitment to equal-opportunity education at all levels. The Neocon motto: “A mind is a terrible thing to waste [tax dollars on]”mezurak:
So many comments… who says the internet is for nerds…
Anyway, 20 years as of three days ago in airline IT (assembler). Based on an undergraduate degree in modern history and a three month training class at my first employer. The problem is, in my book, that employers aren’t prepared to spend the money (quite modest amounts) inducting people into the specific jobs they want them to do. Mostly because the employer has no idea what it is that they want done. Headless chickens on a hot tin roof…Wade:
You think you have it bad? Try being a hardware tech. Never mind if you have been working on computers since the Commodore 64. If you don’t have a string of certifications behind your email sig along with a BS to back it up then you don’t get in the door. I was a Field Engineer on mainframes in the 70’s. The only qualification I needed was some related military training and a HS diploma. The company taught me the rest. The young guys today are lucky to get on a help desk with a BS. Five years of experience gets them not Google but a gaggle of low end system admin jobs and useless certifications to put on their resume. Training? Ha! Hit the ground running, trial by fire, OJT, don’t let the door hit you on the way out, there’s your training. I feel sorry for these guys because they are on the buggy whip path once cloud computing strips the need for private data centers.lark:
I have worked in IT for 15 years and am a senior level systems engineer. Almost none of the people I work with have Computer Science degrees. As a matter of fact the best people at their jobs have either an engineering degree or no degree at all.
Since I started in the industry, there has been a shift from looking for aptitude to looking for people with degrees and certifications. This shift hasn’t helped the quality of worker at all. Getting a degree means that you can show up for 4 years, learn information that will be useless in your field, and pass tests with no bearing on reality. It doesn’t mean that you can think independently and troubleshoot problems to a rational conclusion. This has resulted in the shortage of suitable IT people since we discard candidates based on degree first.
As far as outsourcing to India goes, it isn’t as good as it once was. Training hundreds of thousands on people with no aptitude to work in the computer industry just diluted the talent pool to the point that you can’t separate the wheat from the chaff. Outsourcing was popular mostly because it was perceived as cheap, got lots of press, and most of all shifted responsibility for failure to someone else. The reality was that the outsource companies didn’t deliever what was contracted and their turnover was so high that they could not support anything that they wrote. I am seeing more and more projects being run in house.lark:
One more data point.
I started at HP in a high level systems software position in the mid 80’s and stayed 12 years (left before Carly).
At that time the company allowed you to attend simulcast Stanford graduate CS classes on site for free, audit or credit, to keep up with advanced topics in your field. You could watch the class videos over lunch. You could also be supported in local grad CS programs.
This from the same company that axed 75% of its R&D a couple of years ago. A lab mgr friend of mine took early retirement from HP Labs and left the field (saw it coming). This from the same company that throws money away on acquisitions because it axed its seed corn. This from the same company that axed profit sharing. On and on and on.
And of course, the huge facility where I worked (Cupertino) is now virtually empty, due to outsourcing, and the plan before Hurd (’Hurt’) got his golden parachute was to shut it down and move the survivors to Palo Alto.
One thing that really burns me is that the press and academia gets such a ‘rise’ out of free markets and global business and the like, that they are just incapable with seeing the facts on the ground. We shouldn’t have to lose the whole industry before some ‘expert’ notices!!!!!
It really shows the problem with captive media and ideologically captured economics. It happened with the housing bubble, the financial crisis – how much destruction can this country take??PQS:
Of course now they expect you to keep up with the field at your own cost and time – of which there is none to spare.2Cents:
We shouldn’t have to lose the whole industry before some ‘expert’ notices!!!!!
Amen. I’m in construction, and just last week saw an article on the local Pacific NW paper about the massive crisis in our industry.
Construction is always on the end of the butterfly in the Amazon, but the descent into 27% UI and so quickly is unprecendented. Yet I cannot think of a single news article about this issue. Maybe everyone thinks that only the hardhats are in construction. Most of the white collar people I know have been out of work for months or even into years. Architects, engineers (not the civil guys), PMs, Superintendents with decades of experience.lark:
In India entry level guys are mass hired in a batch, and based on the time they have done, they all expect their H or L visa to be filed. This is the reason all H visas are exhausted till recently the day they open for filing. Indian companies do not want to pay the additional cost arising out of visa fee hikes, nor can they manage their staff and file for visas just in planned time, they have to file them enmass.yoganmahew:
To see another example of media bias on this topic, see
This article weeps for corporations who can’t recruit freely because of H1B restrictions.
I wrote the writer of this article the following letter. Of course nothing changed in the coverage of this issue. The corporate bias is an outrage.
My letter to the NYTimes (not published by them of course):
Matt Richtel’s article, “Tech Recruiting Clashes with Immigration Rules”, left out a few essential facts and thus left readers with a view of the situation shaped more by industry propaganda than reality.
One cannot understand the H1B visa unless one grasps how it is used in practice. Richtel’s article portrays a highly skilled immigrant who wants to be a contributing member of American society. For the most part, H1B is not used for this type of immigrant.
H1B is and American visa used overwhelmingly by Indian software companies. Their engineers go into American firms where they are trained by American engineers and then they go back to India, taking the job to India. In 2006 the three companies who took the most H1 B visa slots were Wipro and Infosys (both Indian companies) and Cognizant Technology Solutions, which has most of its operations in India.
These companies took 70% of the H1B visas. Statistics for 2007 can be found at http://tinyurl.com/cwst2u. This information is easy to find. There have been well publicized Congressional hearings on precisely this topic.
Your article reads like a corporate press release. This is not a simple minded case of anti-immigrant sentiment. I am disappointed that the New York Times presented this careless and one-sided article.
If Google and Intel and the rest want to fast track highly qualified individuals through our immigration system, then there is a case to be made for that. But American corporations are not arguing or acting in good faith, and thus they have undermined both the trust of American citizens and the H1 B program. Your article perpetuates this dishonesty and I believe you owe your readers a correction.
Mind you, you chaps in the US have it easy in some respects. Your high-end technical salaries are very good and you have some status with your job. Pity us poor Irish who have to deal with this:
“I find it very hard to swallow the notion that a computer programmer is carrying on a profession. In what way is he any different from a clerk in the 19th century sense? He is just a numerate and literate person carrying out clerical work. Obviously, not all programmers fall into that category (numerate and literate).”
– Frank Carr, Irish Taxation Review, September 2002
Yes, our tax clerks look down on us programming clerks…Steve:
It’s interesting how so many IT industry folks read this blog.cougar_w:
After 21 year in consulting and seeing the outsourcing takeover of the last few years, I can say with certainty that the average Indian IT resource is pretty useless. We have to clean-up the messes of our offshore staff all the time with the onshore staff. They simply do not have the required aptitude, they were just run through some process to memorize enough to pass a test and become billable.
This is starting to become visible to the low and middle managers at the client side who are not happy with the quality of work, but the high level client managers are simply concerned about budgets and overrule their recommendations. The next few years should bring this to a head at many companies when failures are clearly identified from this approach, I doubt that the big banks etc. that have become too large to change will do anything, but the middle tier companies are going to see that they cannot afford to let a critical part of their business become unreliable, especially with the need to compete in the technical infrastructure required for their business.
I expect that this will stabilize things in the US and should help to revive the industry if we have not completely gutted the education and experience pipeline. However I would be hesitant to push a newbie into things just now, though to be honest, what job is safe today?
Just a data point:
20 years in IT, mostly web application development. Like most workers in my age group I am self-taught (there were pitiful CSCi departments in the 80s and everything now in play came about in the last 5 years anyway). I still make around 85K in the Bay Area CA.
I’ve actually worked in outsourcing for a little while. What a joke. I’ve been outsourced twice. One to India, a second time to Hungary.
I won’t let my kids do this work. Not on a bet. Mechanical or civil engineering if they want, but that’s it. IT and software development became a dead-end.
Will the US suffer for having slain their home-grown IT expertise? Seems inevitable. But companies don’t really care; current management is just harvesting the gains from innovation of a previous generation of workers, who (like myself) are now entering retirement. When that harvest has played out it will fall to the Chinese and Indians to take the game forward as the US IT industry follows the example of other empires that became deluded by their past greatness, and falls into decline and irrelevance.
Here’s a quote from Craig: “We were proud of the way we used to make things up as we went along. . . . It’s like robbing a bank but legal. We could take somebody straight off the street, teach them a few simple tricks in a couple of hours and easily charge them out to our clients for more than £7000 per week.” According to Craig (according to Hari), all of management consulting boils down to recommending that the client lay off thirty percent of its staff, after one week of observation and analysis.
James, thank you for your insights–do you also happen to recall the impact of McKinsey’s recommendations on those nine engagements you had worked on?
I had been on both ends of the consulting game myself.
When I was on the receiving end, with a large hi-tech company whose management was way over its head, McKinsey was brought in. Idiotic recommendations, made by bright young guys who knew nothing of technology, were formulaic and too much spreadsheet driven to help. In the end, if one stares long enough at those spreadsheets and cannot see round the corner, the only consistent recommendation is going to be cost cutting–that is, giving top management time/legitimacy.
After being a consultant myself for a number of years, I blogged about “The drama of most consultants”
I worked for a company that an incompetent board of directors and a succession of incompetent CEO’s destroyed, “ably” assisted all the way to oblivion by McKinsey.
Management consulting is legalized fraud and racketeering, IMHO. The management consulting firms just another group of enablers for the looting of American by the Wall Street banksters.
In both of those cases, a large proportion of the cost savings came not from firing people, but from dealing with various systems problems. (And in neither case did the recommendations come after one week.) The other projects were a combination of strategy, mergers and acquisitions, entering new markets, and implementing new processes.
This (a few anecdotes) is ambiguous about how much of this activity and the goals beings sought are really productive at all, not to mention actually destructive.
For example “Mergers and acquisitions” and generally destructive and rarely have any social value at all.
How much of why consultants are hired and what they recommend is really all about goosing the stock price? Yves Smith and others identify this Wall Street-imposed imperative as generally worthless and malevolent, one of the worst developments of the last 30 years. The same for “offshoring”, which is not in fact anywhere near as cost-effective as its fraudulently represented to be. But Wall Street and “the markets” love it, so their will must be done…
So yes, I’ve always pictured consultants as simply vectors of these nefarious Wall Street decrees. I’m glad to be told that’s not always the case, though I fail to understand why any reasonably intelligent high school graduate can’t be hired to do things like write down numbers and check to make sure things were photocopied correctly. He might even be able to make those copies without mistakes.
August 17, 2010 | Dot Mac
My experience as a programmer has taught me a few things about writing software. Here are some things that people might find surprising about writing code:
- A programmer spends about 10-20% of his time writing code, and most programmers write about 10-12 lines of code per day that goes into the final product, regardless of their skill level. Good programmers spend much of the other 90% thinking, researching, and experimenting to find the best design. Bad programmers spend much of that 90% debugging code by randomly making changes and seeing if they work.
“A great lathe operator commands several times the wage of an average lathe operator, but a great writer of software code is worth 10,000 times the price of an average software writer.” –Bill Gates
- A good programmer is ten times more productive than an average programmer. A great programmer is 20-100 times more productive than the average. This is not an exaggeration – studies since the 1960′s have consistently shown this. A bad programmer is not just unproductive – he will not only not get any work done, but create a lot of work and headaches for others to fix.
- Great programmers spend very little of their time writing code – at least code that ends up in the final product. Programmers who spend much of their time writing code are too lazy, too ignorant, or too arrogant to find existing solutions to old problems. Great programmers are masters at recognizing and reusing common patterns. Good programmers are not afraid to refactor (rewrite) their code constantly to reach the ideal design. Bad programmers write code which lacks conceptual integrity, non-redundancy, hierarchy, and patterns, and so is very difficult to refactor. It’s easier to throw away bad code and start over than to change it.
- Software obeys the laws of entropy, like everything else. Continuous change leads to software rot, which erodes the conceptual integrity of the original design. Software rot is unavoidable, but programmers who fail to take conceptual integrity into consideration create software that rots so so fast that it becomes worthless before it is even completed. Entropic failure of conceptual integrity is probably the most common reason for software project failure. (The second most common reason is delivering something other than what the customer wanted.) Software rot slows down progress exponentially, so many projects face exploding timelines and budgets before they are killed.
- A 2004 study found that most software projects (51%) will fail in a critical aspect, and 15% will fail totally. This is an improvement since 1994, when 31% failed.
- Although most software is made by teams, it is not a democratic activity. Usually, just one person is responsible for the design, and the rest of the team fills in the details.
- Programming is hard work. It’s an intense mental activity. Good programmers think about their work 24/7. They write their most important code in the shower and in their dreams. Because the most important work is done away from a keyboard, software projects cannot be accelerated by spending more time in the office or adding more people to a project.
Edward D. Weinberger:
Much of the content of this blog was originally posted in the classic THE MYTHICAL MAN MONTH, by Fredric Brooks. He was the guy that headed the IBM project to build the first modern operating system, OS/360, on IBM Mainframes in the 1960′s, so he clearly knew his stuff. He is convinced of the vast difference between the best and the average.
Believe it or not, the reason why managers make more than programmers is well captured by the comic strip DILBERT. Though Dilbert is technically adept, he clearly does not understand the business world. He therefore needs the “adult supervision” of the pointy-haired boss. Admittedly, the boss is an idiot, with absolutely NO technical savvy; however, he does understand the business world, including the importance of marketing.And one other thing. Programmers are paid for more than productivity, which is why productive programmers are not necessarily paid more than others. The technology is changing so fast that the guy who may be a mediocre user of a hot technology gets paid more than the best COBOL programmer in the world, simply because nobody cares much about COBOL any more.
A great developer may be worth a lot more than an average one. Might also be 100 times as productive. Then why again is the great one getting paid the same salary as the average one?
@MaintenanceMan Too many companies allow their software products to be managed by non-technical managers. They simply do not know who is good and who isn’t! They also don’t know good software from bad and evaluate performance based on speed of delivery most of all. They’re also acutely vulnerable to bafflegibber.
Thank you; good article. I recently worked (past tense) at a place that thought you could in fact speed software delivery by adding extra programmers and extra hours per programmer. Programming is not manual labor. Physical bodies can continue laboring long after the mind shuts off – whereas in programming, when the mind shuts off, you may code so ineffectively that you make negative progress. Bless the software managers that understand the pacing and rhythm of development.
@Maintenance Man, that’s a good question. I think it’s partly due to a lack of understanding on the part of managers and companies. As soon as it’s easy to quantify the increased value of a good programmer vs a bad one, the salary gap will increase.
Paul W. Homer:
Nice. Although I’m still a little unsure of the first two points. In the short run, I think a great programmer is not all that much more productive than an average one, but I definitely believe that if you factor in time and the amount of code that actually stays alive the difference is huge. Also, I could agree with the 10-12 lines per day, if you are talking averages. I know a lot of programmers who (without cutting and pasting) can produce thousands of lines in a very intense week, but who then slack shortly afterwards.
I’m seeing that “good programmers are X-times more productive than bad programmers” meme, again, and again without a description of the shapes of the curve. This leaves people with misconceptions.
Productivity is not a normal distribution, it’s a Rayleigh distribution. If good programmers are ten times better than bad programmers, the distribution will be such that good programmers are twice as good as average programmers, and average programmers are five times as good as bad programmers.
The curve is skewed, and the median is above the mean. (Meaning that most programmers are better than average, as odd as that sounds.)
I love reading something like this and then hear people talk about how this just proves how great they are at programming. No one ever seems to read and say, “Hmm … I wonder if I’m the guy that is a tenth as productive as good programmers?” On another note, although I agree with some generalizations, I think it is dangerous to put programmers in three categories: bad, good, and great. There is a lot of wiggle room where people don’t fit nicely in one of these categories. Some people are also good at some things and not at others. There are also people that have all the skills, but just don’t have experience yet. Everyone needs to make mistakes and learn from them, and that just takes some time.
Except that average programmers are not just a multiple better than bad programmers. Somewhere just south of average, poor programmers contribute less than the increased communication overhead needed to include them on the team. A little below that, you have really poor programmers whose typical coding change makes the system worse and either requires time by alert developers to fix the problems they create or dramatically increases the risk of failure of the effort if it’s not detected in time.
In my experience, the best programmers routinely achieve goals that average programmers don’t understand even when the result is later explained to them. In terms of pure productivity, the difference is something like 10-15x between the best and the simply good. I firmly believe that there is a transition to negative value that occurs well into “average” territory but which is only apparent to a few enlightened members of management.
Gabe da Silveira:
You’re making the same mistake though. It is some combination of talent and experience that makes one great at anything. There’s absolutely no reason to believe that great programmers were somehow better than average from the outset… they could have had breakthroughs throughout their journey. Likewise the most promising candidate could get lazy in a cush job or maybe lose interest in advancing their skills.
@Alfred: In my experience, software companies (esp larger ones) need many different kinds of programmers. The trick is to find your niche and figure out how you can best contribute.
The software industry as a whole needs inventors, finishers, motivators, maintainers, … and also project managers and line managers who are (or at least have been) skilled enough at programming. Some people love working for years maintaining and improving a particular product; others wouldn’t be caught dead doing that, but want to innovate, prove a concept, and then move on.
The trick for every company is to find the right mix, and dependable programmers who are Good Enough are extremely important. I have plenty of good war stories about brilliant programmers, but they are best told over beer…
When I see that much enthusiastic agreement, it raises my suspicions. The majority is rarely right.
And sure enough, when I look more closely at this, I see lots of problems covered up with sententious authority. I am glad to see that doctor doom caught one of them, but there are more.
I will focus on only one, the point about it not being democratic. This is true, BUT: if you let only one person do all the design, you feed frustration on the rest of the team, and then what do you do if the one designer is hit by the proverbial bus? It is better to admit that the design process cannot be entirely democratic, but let the one designer bounce his ideas of other members of the team. This solves both problems by giving them a hand in the design also, and by distributing knowledge of the design among several people, so that if he is hit by a bus, he is replaceable without as much loss.
For the same reason, it is important that that one designer know how to share with the team. Pick someone who is bright, but autocratic, and you will ruin the team and the project.
Weinberger had an interesting correction to the article too, but he overestimates the PHB’s command of the business world. The real problem of modern day business is that the PHB who is technically ignorant is nearly as ignorant of the business world, too! That is WHY Scott Adams has the recurring line about ‘manager’ really coming from an ancient word for “mastodon dung”. That is WHY he reminds us of the managers so dumb, they didn’t even know how to use voicemail. He didn’t make that example up, either. It comes from real life.
Nor is it really that new. The reasons such gross incompetence is tolerated in the overpaid management class of society was covered very well by Thorstein Veblen in his “The Theory of the Leisure Class”. If you really want to understand why managers are so destructive, why they will never admit that Fred Brooks was right, then read this book.
August 17 2010 | Financial Times
Call centre workers are becoming as cheap to hire in the US as they are in India, according to the head of the country’s largest business process outsourcing company.
High unemployment levels have driven down wages for some low-skilled outsourcing services in some parts of the US, particularly among the Hispanic population.
At the same time, wages in India’s outsourcing sector have risen by 10 per cent this year and senior outsourcing managers based in the country command salaries above global averages.
Pramod Bhasin, the chief executive of Genpact, said his company expected to treble its workforce in the US over the next two years, from about 1,500 employees now.
“We need to be very aware [of what’s available] as people [in the US] are open to working at home and working at lower salaries than they were used to,” said Mr Bhasin. “We can hire some seasoned executives with experience in the US for less money.”
The narrowing of the traditional cost advantage is also spurring other Indian outsourcers to hire more staff outside India.
Wipro, the Bangalore-based IT outsourcing company, started to recruit workers in Europe, the Middle East and Africa during the global economic downturn. Suresh Vaswani, joint chief executive of Wipro Technologies, forecasts that half of his company’s overseas workforce will be non-Indians in two years, from the current 39 per cent.
India is still expected to retain the overall cost advantage, particularly in more sophisticated software outsourcing.
Observers say that while the cost of some senior positions may have equalised with the US and certain call centre services may be more cost-effective to set up in depressed areas of the US, this phenomenon may not outlast the US downturn.
Even after a tripling in numbers, Genpact’s US workforce would still be only about a ninth of its total staff. The former in-house outsourcing unit of US multinational General Electric has operations in Chicago, Pennsylvania, Tennessee and New York.
The move to expand operations in the US also comes as protectionist rhetoric against outsourcers rises in Washington. Last week, Charles Schumer, a US senator, described Indian IT outsourcing companies unflatteringly as “chop shops”, a term referring to places where stolen cars are dismantled for their parts.
Mr Bhasin said Indian outsourcers needed to be more sympathetic to the deep economic woes in the US, not least because US business had helped India’s outsourcing industry “piggy-back” on its success.
August 17 2010 | FT.com
India’s information technology outsourcing companies have established global footprints that stretch from Saudi Arabia to San Diego in the US. Yet they have struggled to develop one of the most promising markets, just over the Himalaya mountains in neighbouring China.
So difficult a frontier is the Chinese market for India’s pioneering outsourcing groups that their leaders would sooner talk about the potential of Latin America than the world’s fastest growing large economy.
Employees at a call centre in Dalian: foreign companies working in the country have to get to grips with complicated personal networks
Yet some are still trying to make inroads, recognising the risks of shunning the lucrative opportunity presented by large, fast-growing Chinese companies. Tata Consultancy Services, India's largest IT outsourcing group, said on Tuesday that it planned to double its 1,100-strong workforce in China in the coming year.
China and Japan are widely acknowledged by India’s software leaders to be the hardest outsourcing markets to crack. Japan gets its rating on account of a perceived resistance to change among its country’s businesses and a lack of urgency to innovate, while China’s difficulty is ascribed to cultural differences. Both markets pose linguistic challenges for an Indian sector that has prospered using English as its medium.
“China, while it has significant potential, takes time to learn. It’s not easy,” says N. Chandrasekaran, the chief executive of Mumbai-based TCS, which employs about 160,000 people worldwide.
“We want to grow. We want to grow faster but it takes time to learn the market, attract people and retain people. Attrition levels are higher in China than they are in India and that makes it difficult.”
Most Indian outsourcing companies have established operations in China. They recognise the potential of servicing big, fast-growing Chinese companies with large customer bases and sizeable workforces, and developing expertise to service other parts of Asia.
Wipro Technologies, the Bangalore-based IT services company, has opened a global delivery centre in Chengdu, in addition to a facility in Shanghai. Its Chengdu centre offers services for manufacturing, banking, financial services and insurance industries. It has expertise in English, Chinese and Japanese.
Genpact, India’s largest business processing company, operates BPO service centres in the Chinese cities of Changchun, Dalian and Shanghai.
Suresh Vaswani, joint chief executive of Wipro, puts the challenges of building scale down to more granular market-related issues. He says India’s nimble private sector often finds it difficult to come to terms with China’s more state-driven enterprises.
He identifies strong possibilities working with multinationals in China and large domestic companies. But he recommends that any business strategy take into account the “state-influenced” nature of the market, and the need to create local jobs.
Pramod Bhasin, the chief executive of Genpact, agrees that India’s entrepreneurial style of doing business does not easily gel with China’s more deliberate business culture.
One of the keys to success, he says, is knowing how to navigate China’s corporate power structure, and the complicated personal networks that lead to business opportunities. Another is learning from the example of successful US companies such as McKinsey, IBM and Accenture that establishing a Chinese identity, and hiring a Chinese workforce, are essential. “In China, we are Chinese,” he says simply.
In spite of the obstacles, there is an increasing willingness among large Chinese companies including state-owned enterprises to outsource certain services to create a growing onshore market in China.
Beijing is taking steps to encourage the outsourcing industry, whose revenues grew to about $26bn last year, according to Deloitte, the auditing firm. This month, the Ministry of Finance announced that outsourcing service providers in 21 cities would be freed from business tax on offshore contracts until 2014.
Industry executives in China say Indian companies struggle to get the best out of their Chinese operations. “It is much easier for Chinese companies to manage large-scale operations in China with Chinese staff,” says Seth Pinegar, vice-president at iSoftStone, a leading Chinese outsourcing services provider.
The difficulties encountered by India’s outsourcers have caught the eye of New Delhi. Earlier this year, Anand Sharma, India’s commerce minister, extracted a personal commitment from Wen Jiabao, the Chinese premier, to rebalance a booming bilateral trading relationship skewed overwhelmingly in China’s favour.
But most of America appears to have deeply internalized the belief that labor lacks, and perhaps more important, ought not to have any bargaining power. This is a wonderful state of affairs for the managerial elite and investors. Having labor share in productivity gains was no impediment to growth; indeed, the record from the end of World War II through the mid-1970s versus the last two decades would suggest the reverse.
And the argument that US labor cannot compete with China et al is overblown. In most cases of outsourcing and offshoring, the results are disappointing (a dirty secret you will find if you burrow into the literature; for instance, IT, a popular candidate, has a particularly poor record). But it also serves to reduce lower-level labor costs and INCREASE managerial costs (greater coordination required). From the Wall Street Journal on IT outsourcing:
Dean Davidson, an analyst who follows outsourcing for Meta Group, in Stamford, Conn., says that companies usually find their actual cost savings from moving offshore are less than they would expect based on straight wage comparisons. “The reality is a general savings of 15%-20% during the first year,” Mr. Davidson says. That’s far less than the 50% to 80% savings based on hourly labor rates, he says.
Yves here. Recall this is software: no shipping or inventory financing costs. The gap between the raw labor costs and the net savings is an increase in compensation to managers (which could be either via larger bonuses or an increase in headcount).
Yves here. Recall this is software: no shipping or inventory financing costs. The gap between the raw labor costs and the net savings is an increase in compensation to managers (which could be either via larger bonuses or an increase in headcount).
I’ve had corporate staff of manufacturing companies (not in the production part of the business, hence no dog in the fight) maintain, having seen the internal plans, that the case for offshoring and outsourcing were not compelling, and could easily be depicted as not worth the risk given transit times and greater business system rigidity. But their corporations went ahead anyhow because Wall Street looked favorably upon outsourcing. Yes, some jobs and activities probably would have been lost regardless, but far more was ceded than had to be.
A second reason for complacency about unemployment is just as deeply rooted. There is little confidence in conventional policy remedies. Neoclassical economics posits equilibrium, so near collapses of the world as we know it are not supposed to happen. The Austrian and Keynesian schools believe in disequilibria and have prescriptions. However, the risk of the social breakdown with the Austrian prescription is correctly seen as high (one of the reasons Roosevelt had a block of support among major corporations was they recognized the country really could fall apart, and they saw aggressive intervention as less dangerous than violence and an increasingly popular Communist movement).
And the argument that US labor cannot compete with China et al is overblown. In most cases of outsourcing and offshoring, the results are disappointing (a dirty secret you will find if you burrow into the literature; for instance, IT, a popular candidate, has a particularly poor record). But it also serves to reduce lower-level labor costs and INCREASE managerial costs (greater coordination required).
From the Wall Street Journal on IT outsourcing:
>> This link that you have given is a poor example of outsourcing. That talks about outsourcing documentation. One sparrow doesnt make a summer. Neither does a write up about documentation sum it up!
First, you miss the significance of this example. Technical writing ought to be EASY to offshore given that it is less dynamic (in particular, is less or not at all affected by interaction with the client). The fact that something with fewer moving parts than many other parts of IT development still fails is telling.
Second, this example is replicated across many sectors. I’ve seen repeated studies by Deloitte Touche over the years with Fortune 100 companies. 70% ish are disappointed with outsourcing. If the biggest companies can’t succeed, who can?
And the structure and incentives guarantee lousy outcomes. Companies hire a consultant to manage the contracting process. The consultant drives to lower costs to the max. That squeezes vendor margins. You see one if not both outcomes: one, vendor scrimps on quality, making client unhappy (recall these relationships are hard to unwind, so once you are in them, they can easily become very unhappy marriages). Two, if you as client need a variance (something beyond contract norms), the vendor will charge through the nose for it, to make up for the margin squeeze. This makes client unhappy, he feels (and is) exploited.
My brother and his wife has spent their entire careers in outsourcing, I have tons of data points here.
There was a “Der Spiegel” article about that back in 2007. Mainly citing studies by the “Fraunhofer Institute for Systems and Innovation Research (ISI)”.
“…insufficient analysis of all relevant production location factors prior to engagement abroad.”
And filling that article with some colorful examples.
My own experiences of outsourcing are IT at a very large bank and a very small software shop. The small shop was much more successful, but that is because two of the three principals in the company offshored themselves to the office they opened in eastern Europe.
The large company made such a hash of software management locally, that when they outsourced to India, things went from bad to disaster.
But then again, management today seems to consist of scaring employees and keeping them off balance, rather than fostering relationships and spotting talent to promote and nurture. In software it is really bad in that software projects are generally immensely complex, and at banks especially, you have business types managing developers and treating them as fungible quantities — as if they never read The Mythical Man Month from 1975… and I’m sure they didn’t. Instead, they read crap from management “experts” who teach them how to screw employees.
Management in the US has become a joke; so no wonder we can’t expect outsourcing (the premise of which is self-contradictory in the big picture, as Yves notes above), which makes the managers job ten times more complex, to work out to the company’s advantage.
Re: If the biggest companies can’t succeed, who can?
There’s a common misconception about IT and success. The purpose of IT in big companies is to spend money, success is generally the lack of massive failure.
Nothing is more like an embedded government agency (like a tic) than IT. Nobody – outside of IT – knows what we do, why we do it, or if anything we say is really “real” (meaning, they can’t tell when we spew bullshit – in fact, IT many have invented business bullshit, this might make an interesting book some day for someone. Nobody level-sets the tablesteaks in a going forward-space like IT management)
Some of the funds I was once discussing with you Yves outsourced to the Indians for technology build-out of video conferencing tech. They were VERY unhappy. I had a working system up in three weeks whereas a year had gone by and the code was not completed. It was profitable to outsource tech to the Chindians in 2000 when the wages were half what they are now. The Chindians still require an expensive technology manager.
This entire concept of “offshoring” is an idiocy, as the principal model of labor arbitrage is to increase the internal profits (to the senior management and owners) while externalizing the costs through cheaper labor.
Since they are offshoring the jobs, causing a major leak in the economy loop, while bringing back the products of said offshored jobs, part of the lowering in demand, it is obviously self-defeating from the get-go.
And, since that BLS study last summer so effectively pointed out, we have reached critical mass in the abominable offshoring process in America since July 1999.
“My brother and his wife has spent their entire careers in outsourcing.”
Well, we know who’s related to the devil, don’t we????
(And may all traitors to the tribe and country suffer the consequences of their misdeeds!)
Imports are linked to higher cost mark-ups and firm profits, and the gains from such non-competitive imports—the result of offshoring—are increasingly associated with the reinvestment of these higher profits. Our regression analysis of 35 US manufacturing and service industries over the period 1998–2006 supports aggregate and firm-level studies showing that offshoring is associated with a higher share of corporate profit in total value added. But the ‘dynamic’ gains from offshoring have not been fully realised because firms have purchased financial assets—especially share buybacks and higher dividend payments—to raise shareholder value, rather than investing in productive assets that raise productivity, growth, employment and income. Despite the corporate sector's contribution to national savings over the past decade, the offshoring–financialisation linkage reduces the capacity of non-financial corporations to act as a driver of the recovery from the economic crisis that emerged in 2008.
Here is an Email from "Voice in the Dark" about IBM and outsourcing. VID writes ...Hello MishHello "Voice in the Dark".
I read your blog every day. I do not comment much, but I think the MSM and most blogs are missing out on the greatest story not being told.
Large corporations are abandoning the US. I work for IBM. Here is a snapshot of IBM's US headcount:
2010 98,000 estimate
These are all good paying jobs that can support a family and pay taxes.
Today, 75% of the total headcount is overseas. The overseas revenue is 65%. The company reported record profits last year. IBM decided to stop reporting their US headcount this year.
You know that many companies are moving their resources overseas. China is the new spot to build development centers. These incremental loses are adding up. But the saddest thing is that they are giving away the building blocks for innovation.
I just read a few weeks ago the Applied Material is planning to replace their US research center for a new one in China. That is another example of what is going on.
And no venture capitalist would attempt to build a solar panel factory from scratch in the US. The costs and the EPA will prevent that.
Please tell this story.
Sign me: Just Another Voice in The Dark
I covered the situation with Applied Materials in High Tech Research Moves From U.S. To China
Goodbye Silicon Valley, hello Xi’an China. Applied Materials will do new cutting edge research on solar panels in Xi’an. ...Please see Brain Drain as a followup.
Two Drivers For Outsourcing
Outsourcing jobs has been going on quite some time. Let's address why.
For starters, global wage arbitrage is one huge factor in play.
Unfortunately, wage equalization and standard of living adjustments between industrialized countries and emerging markets will be a long painful process for Western society.
On that score, there is little that can be done except reduce wages and benefits in the public sector and stop wasting money being the world's policeman. We simply can no longer afford it. Besides, neither of those things ever made any sense anyway.
US Tax policy is another reason for outsourcing, and that can easily be addressed, at least in theory.
US corporate tax policy allows deferment of profits overseas, but profits in the US have a tax rate of 35%. This policy literally begs corporations to move profits and jobs, overseas.
I have been cut down for saying this before, but I will say it again:
Balanced trade is ok, so no more than say 10%+/- with any country. Beyond that tariffs 100%. Otherwise we are po-house bound. You can assemble all the Nobel Economists you like, but the slide to the bottom will and is happening. India has more kids under 15 than the US population. China has 200 million people that are migrant labor. Need I say more? Sufficient capital is/will find where the cheap labor is, always!
By BusinessWeek's admittedly rough estimate, offshoring may have created about $66 billion in phantom GDP gains since 2003 (page 31). That would lower real GDP today by about half of 1%, which is substantial but not huge. But put another way, $66 billion would wipe out as much as 40% of the gains in manufacturing output over the same period.
But the new numbers also require a reassessment of productivity and wages that could add fire to the national debate over the true performance of the economy in President Bush's second term. The official statistics show that productivity, or output per hour, grew at a 1.8% rate over the past three years. But taking the phantom GDP effect into account, the actual rate of productivity growth might be closer to 1.6%--about what it was in the 1980s.
More broadly, it becomes clear that "gains from trade are being measured instead of productivity," according to Robert C. Feenstra, an economist at the University of California at Davis and the director of the international trade and investment program at the National Bureau of Economic Research. "This has been missed."
Pat Byrne, the global managing partner of Accenture Ltd.'s (ACN ) supply-chain management practice, goes even further, suggesting that "at least half of U.S. productivity [growth] has been because of globalization." But quantifying this is tough, he notes, because most companies don't look at how much of their productivity growth is onshore and how much is offshore. "I don't know of any companies or industries that have tried to measure this. Maybe they don't even want to know."
Phantom GDP helps explain why U.S. workers aren't benefiting more as their companies grow ever more efficient. The cost savings that companies are reaping "don't represent increased productivity of American workers producing goods and services in the U.S.," says Houseman. In contrast, compensation of senior executives is typically tied to profits, which have soared alongside offshoring.
But where are those vigorous corporate profits coming from? The strong earnings growth of U.S.-based corporations is still real, but it may be that fewer of the gains are coming from improvements in domestic productivity. In fact, holding down costs by moving key tasks overseas could be having a greater impact on corporate earnings than anyone guessed--or measured.
There are investing implications, too, although those are harder to quantify. Companies with their primary focus in the U.S. might suddenly seem less attractive, since underlying economic growth is slower here than the numbers show. But if the statistical systems of other developed countries suffer from the same problem--and they might--then growth in Europe and Japan might be overstated, too.
When Houseman first uncovered the problem with the numbers that is created by offshoring, she was primarily focused on manufacturing productivity, where the official stats show a 32% increase since 2000. But while some of the gains may be real, they also include unlikely productivity jumps in heavily outsourced industries (see BusinessWeek.com, 6/2/07, "Overseas Sweatshops Are a U.S. Responsibility") such as furniture and audio and video equipment such as televisions. "In some sectors, productivity growth may be an indicator not of how competitive American workers are in international markets," says Houseman, "but rather of how cost-uncompetitive they are." For example, furniture manufacturing has been transformed by offshoring in recent years. Imports have surged from $17.2 billion in 2000 to $30.3 billion in 2006, with virtually all of that increase coming from low-cost China. And the industry has lost 21% of its jobs during the same period.
Yet Washington's official statistics show that productivity per hour in the furniture industry went up by 23% and output by 3% between 2000 and 2005. Those numbers baffle longtime industry consultant Arthur Raymond of Raleigh, N.C., who has watched factory after factory close. "And we haven't pumped any money into the remaining plants," says Raymond. "How anybody can say that domestic production has stayed level is beyond me."
Paul B. Toms Jr., CEO of publicly traded Hooker Furniture Corp., (HOFT ) recently closed his company's last remaining domestic wood-furniture manufacturing plant, in Martinsville, Va. It was the culmination of a wrenching process that started in 2000, when Hooker still made the vast majority of its products in the U.S. Toms didn't want to go overseas, he says, but he couldn't pass up the 20% to 25% savings to be gleaned from manufacturing there.
The lure ofoffshoring works the same way for large companies. Byrne of Accenture is working with a "major transportation equipment company" that's planning to offshore more than half of its parts procurement over the next few years. Most of it will go to China. "We're talking about 30% to 40% cost reductions," says Byrne.
Yet no matter how hard you look, you can't find any trace of the cost savings from offshoring in the import price statistics. The furniture industry's experience is particularly telling. Despite the surge of low-priced chairs, tables, and similar products from China, the BLS is reporting that the import price of furniture has actually risen 6.7% since 2003.
The numbers for Chinese imports as a whole are equally out of step with reality. Over the past three years, total imports have climbed by 89%, as U.S.-based companies have rushed to take advantage of the enormous cost advantages. Yet over the same period, the import price index for goods coming out of China has declined a mere 2.3%.
FACADE OF GROWTH
The import price index also misses the cost cut when production of an item, such as blue jeans, is switched from a country such as Mexico to a cheaper country like China. That's especially likely to happen if the item goes through a different importer when it comes from a new country, because government statisticians have no way of linking the blue jeans made in China with the same pair that had been made in Mexico.
Phantom GDP can also be created in import-dependent industries with fast product cycles, because the import price statistics can't keep up with the rapid pace of change. And it can happen when foreign suppliers take on tasks such as product design without raising the price. That's an effective cost cut for the American purchaser, but the folks at the BLS have no way of picking it up.
The effects of phantom GDP seem to be mostly concentrated in the past three years, when offshoring has accelerated. Indeed, the first time the term appeared in BusinessWeek was in 2003. Before then, China and India in particular were much smaller exporters to the U.S.
The one area where phantom GDP may have made an earlier appearance is information technology. Outsourcing of production to Asia really took hold in the late 1990s, after the Information Technology Agreement of 1997 sharply cut the duties on IT equipment. "At least a portion of the productivity improvement in the late 1990s ought to be attributed to falling import prices," says Feenstra of UC Davis, who along with Slaughter and two other co-authors has been examining this question.
What does phantom GDP mean for policymakers? For one thing, it calls into question the economic statistics that the Federal Reserve uses to guide monetary policy. If domestic productivity growth has been overstated for the past few years, that suggests the nation's long-term sustainable growth rate may be lower than thought, and the Fed may have less leeway to cut rates.
In terms of trade policy, the new perspective suggests the U.S. may have a worse competitiveness problem than most people realized. It was easy to downplay the huge trade deficit as long as it seemed as though domestic growth was strong. But if the import boom is actually creating only a facade of growth, that's a different story. This lends more credence to corporate leaders such as CEO John Chambers of Cisco Systems Inc. (CSCO ) who have publicly worried about U.S. competitiveness--and who perhaps coincidentally have been the ones leading the charge offshore.
In a broader sense, though, the problem with the statistics reveals that the conventional nation-centric view of the U.S. economy is completely obsolete. Nowadays we live in a world where tightly integrated supply chains are a reality.
For that reason, Landefeld of the BEA suggests perhaps part of the cost cuts from offshoring are being appropriately picked up in GDP. In some cases, intangible activities such as R&D and design of a new product or service take place in the U.S. even though the production work is done overseas. Then it may make sense for the gains in productivity in the supply chain to be booked to this country. Says Landefeld: "The companies do own those profits." Still, counters Houseman, "it doesn't represent a more efficient production of things made in this country."
What Landefeld and Houseman can agree on is that the rush of globalization has brought about a fundamental change in the U.S. economy. This is why the methods for measuring the economy need to change, too.
June 12, 2007
The Truth Comes Out About Offshoring
By Paul Craig Roberts
On January 6, 2004, Senator Charles Schumer (D, NY) and I scandalized the economics profession and Washington policymakers with our New York Times article, Second Thoughts on Free Trade. We noted that the two conditions on which the case for free trade rests no longer exist in the present-day world and that there was no basis for the assumption that offshoring of US jobs was beneficial overall to Americans.
...Since 2004 I have written a number of articles pointing out that offshoring is really labor arbitrage and that if offshoring had the mutual economic benefits associated with free trade, there would be US employment growth in export and import-competitive industries. Instead, employment in these industries has declined in the US but grown remarkably in Asia. In the 21st century the US economy has been able to create net new jobs only in nontradable domestic services, such as waitresses and bartenders and health and social services. Moreover, the growth in productivity and GDP attributed to the US economy were inconsistent with the stagnant real incomes of Americans. Somehow productivity and GDP were growing strongly, but it wasn’t showing up in the incomes of Americans.
Economists have found it difficult to think about the issues that I have raised. Economists are taught that free trade is a good thing and that anyone who disputes it is a protectionist in the pay of some industry scheming to raise prices that consumers have to pay. The notion that there could be any problem with free trade is beyond the imagination of most economists.
In addition to their unexamined commitment to free trade, economists disbelieved my analysis because they thought it was inconsistent with statistics indicating high US productivity and GDP growth. They thought GDP and productivity statistics trumped my use of job data.
All of this may be about to change. Susan N. Houseman, a good but previously obscure economist with the Upjohn Institute, has discovered a problem in the statistical data that produces phantom US GDP. Phantom GDP results when cost reductions achieved by US firms shifting production offshore are miscounted as US GDP growth. Phantom productivity increases occur when gains from moving design, research and development offshore are counted as increases in US productivity. Obviously, production and productivity that take place abroad are not part of our domestic economy.
Business Week’s June 18 cover story by Michael Mandel [The Real Cost Of Offshoring] explains the problem identified by Houseman. Economist Matthew J. Slaughter, a proponent of offshoring, says: “There are potentially big implications. I worry about how pervasive this is.” Business Week says the implications are big. The cover story estimates that 40% of the gain in US manufacturing output since 2003 is phantom GDP.
Most likely that estimate is low. Consider, for example, that furniture imports have doubled in the past few years (offshored production counts as imports) while US jobs in furniture manufacture have declined 21%. US statistics, however, show that US output and productivity rose even as US manufacturers closed their plants and no new investment went into the industry.
My hat is off to Business Week. It requires courage for a publication dependent on advertising from global corporations to tell the truth about offshoring.
Re: Indian programmers.
Having worked at multiple companies that unsuccessfully (from a development not dollar savings point if view) I have come to the conclusion that management does it for two reasons.
1). Wall Street and current business practices require a company to show that they are following the pack
2). You can fail a project for cheaper.
The reality us that the bean counters know that most software projects fail. Might as well fail fir cheaper.
As long as it limps along and is not a colossal failure the financial bottom line is what counts.
So you end up with 80% of the team offshore but 80% of the actual work still done onshore.
The only time I have seen it work successfully us when a whole self contained business/dev/management unit is built from the ground up at a new location.
Oddly I write unit tests becuase I used to do it when I worked in white box QA.
But most devs dont do it, because well... it takes time and that's what QA people are for. I do not really have a dedicated QA staff at the small company I work for now, so it is more a necessity than ever.
The odd thing is if you are a "good" programmer you can get stuff done in 10 times less time. When I first worked here we had 100 employees. We probably have 200 now (in 2 years). So when I started things would need to get shipped and I'd have like maybe 1 person to help. So now we have a full project management staff, and tons of bureaucracy and much slower development teams.
So basically I just sit at work and do nothing for days on end, and its "ok" as long as I code as fast as the "average team" because the project managers schedule projects like that.
Its sad how in 2.5 years you can turn a startup into a small company and destroy all the startup qualities of it. haha.
Barley (member) wrote on Thu, 04/09/2009 - 7:09pm.
"I'd like to see the H1-Bs go home"
Why cause you cant compete?
Blackhalo (member) wrote on Thu, 04/09/2009 - 7:16pm.
"Why cause you cant compete? "
I have worked with a LOT of H1-Bs, and they are fine folks and do great work. But in my experience they we not so exceptional that domestic labor could not do the job as well or better. Which is out of line with the stated propose of the visa.
In my experience, they were used by large corps to flood specific markets and depress wages.
Jay D.. wrote on Thu, 04/09/2009 - 7:23pm.
"Why cause you cant compete? "
...........most of H1-B holders don't speak English well and have some communication problems......but they are skilled workers......I don't think kick-ass-out-of-this-country policy can solve unemployment issue......it's another linear thinking .......kindergarten stuff..........
August 28, 2008 | Computerworld
Jobs most at risk for offshore outsourcing are computer programming, development
As many as 8% of IT workers have been displaced by offshore outsourcing, either through job loss or an involuntary transfer to a new job by their employer, which is twice the rate of workers in other occupations, according to a study based on data collected from some 10,000 people, which may be the largest survey of its kind.
The survey, conducted by researchers at the New York University Stern School of Business and the Wharton School of the University of Pennsylvania, also backs up the long-standing view that IT employees in purely technical jobs -- computer programmers and software developers who have little customer interaction -- are at the most risk from offshore outsourcing.
... ... ...
The job site Careerbuilder.com funded the research, which looked at a spectrum of occupations, including technology, and published initial data from the survey in April. But the 44-page paper, posted this week on the Social Science Research Network (registration required) analyzes what the data is saying about the fate of high-tech workers who have been directly affected by offshore outsourcing.
... ... ...
IT workers concerned about displacement "can focus on further developing these interpersonal skills, or may find more robust long-term careers in IT professions that involve significant face-to-face interaction such as those involving cross-organizational process change or hands-on support functions," the report's authors wrote.
Since IT workers have been more severely affected than other types of workers, Tambe and Hitt argue that policy-makers could focus on tech workers to provide help, including job training and government compensation to offset wage losses. Educational institutions will have to react as well, with "increased emphasis on the development of interpersonal and management skills within the IT curriculum."Related Content
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February 21st, 2006 | Managing L'unix
About two o’clock in the morning, I heard Bukowski’s publisher talking about the New Formalists, a group of poets that wanted to take poetry back to the strict forms, such as sonnets and metered verse, alledgedly because they were offended by the likes of Bukowski’s rude honesty in free verse.
... ... ...
"As the spirit wanes, the form appears," Bukowski had written...Our IT Commandments:
- Thou shalt not outsource mission critical functions
- Thou shalt not pretend
- Thou shalt honor and empower thy (Unix) sysadmins
- Thou shalt leave the ideology to someone else
- Thou shalt not condemn departments doing their own IT
- Thou shalt put thy users first, above all else
- Thou shalt give something back to the community
- Thou shalt not use nonsecure protocols on thy network
- Thou shalt free thy content
- Thou shalt not ignore security risks when choosing platforms
- Thou shalt not fear change
- Thou shalt document all thy works
- Thou shalt loosely couple
Re:Thanks Cringely(Score:5, Insightful)
by MightyMartian (840721) on Friday May 04, @05:08PM (#18995031)It's true of most corporations, but most certainly true of IBM that management never get touched. They really only did a management purge once that I'm aware, back in the early 1990s, and that was just middle management. It's a general rule that the incompetent CEOs get to completely fuck over the company in every possible way before someone finally figures out that they shouldn't be left alone to manage a Dairy Queen never mind a multi-billion dollar company. Part of that fucking up is to fire a good portion of your workforce, outsource them to India, demoralize the remaining workforce, have your projects then seriously compromized, your customer satisfaction go down the tubes and then watch a stagnant or downward-pointed share price now start some sort of nasty nose dive. Finally the board and the shareholders get all pissed off, fire you (which means paying you millions to vacate your office), and you head off to some other company and start fucking them over.
(Last Journal: Tuesday March 13, @03:39PM)
Re:Thanks Cringely (Score:5, Insightful)by Thangodin (177516) <elentar@sym p a t i c o.ca> on Friday May 04, @11:29PM (#18998627)
Of course, massive layoffs never work. There are two kinds of employees--politicians and workers. The workers are too busy to see the boom come down, so they are the ones who get laid off. The politicians keep their eyes on the politics of the company, which means that they don't really have time to get much work done. They are really good at looking good--but not very good at actually getting work done.
Each time you downsize, you cut a disproportionate quantity of productive employees. Think of it as a crash diet; you waste muscle and increase the percentage of fat. This is why crash dieting is a good predictor of future obesity. It's also why companies that go through this binge/purge cycle become less and less competitive with each cycle. Look at Ford, GM, and Chrysler. How many times have they done this? My, now there's a success story... Re:Thanks Cringely (Score:5, Informative)by dreethal (985821) on Friday May 04, @04:15PM (#18994049)
It's true. I'm soon to be out of my job at the end of the month, as well as the rest of my team (IBMers and (Perma-Temp) Contractors. My account was slated for transfer to Brazil in January and the talks started before that. We were expected to train our replacements who have basically been warm bodies. They're not even particularly talented. The rest of IBM Global Services is going the same way. So this is a VERY real thing. I was hoping to get hired on this year to IBM from being a contractor and that's shot. I'm just concerned given the massive offshoring that's occurring and how much this WILL impact IT. The displacement of this many workers is still going to have quite an impact on IT.
IBM has also implemented LEAN in effort to cut their IBM'er workforce in response to offshore outsourcing, which ironically is the very thing they're doing themselves. The survivors, although being survivors might mean they sorta wished they weren't. It's seriously bad.
I'd suggest not touching IBM with a 10 foot pole. They're calling this the wave of the future... if they want to turn IT into something equated as fast food. That's the dream they're going for.
Check out http://www.ibmemployee.com/ [ibmemployee.com] . They have more news on the matter.
The sad part about the whole thing is that I enabled this to happen. I've spent my time there since day one migrating dying backup environments from Veritas Backup Exec and ArcServe IT to TSM and the resulting clean-up work. I am massively disappointed.
Anyone need a Arcserve / Veritas / Tivoli Storage Administrator ?but... (Score:5, Interesting)
by Junta (36770) on Friday May 04, @04:18PM (#18994129)That's the publicly announced ~1500 or so, it does not confirm a 40% US workforce layoff. 40% would be a ludicrously desperate move for a company that at worst is described as stagnant, not exactly in trouble. When you aren't announcing any losses, just less-than-awesome gains, it doesn't make sense to just cut out that much in as short a period as a year. IBM is topheavy and I definitely agree that the management is the bulk of the problem (not only *way* too many of them, but they are also more highly paid than the technical people who do real work), and so I wouldn't be surprised if a couple thousand more get screwed over the year, but 40% would be the dumbest thing and I think even shareholders would see it as a detrimental, stupid move.
One problem they do seem to have is startup envy. They see a company come out of nowhere and achieve great fame and a sizable market cap, and wonder why they can't achieve the same percentage growth. The obvious answer (that IBM's market cap is overwhelmingly huge already, nowhere to really go) doesn't seem to occur to them.
Let's be (Score:5, Interesting)by Daishiman (698845) on Friday May 04, @05:04PM (#18994979)
Let's be honest here. I work in Global Services in South America. A lot of the accounts were way overstaffed and the people there were not exactly the best and brightest yet still getting 80K+ a year. I'm not a senior sysadmin by any stretch of imagination, but it can be seen from all 5000 miles away that my American counterparts are in no way superior to many of the seniors that I work with who have 10+ years of experience managing servers in environments where there's less money and you have to be more inventive to solve problems, and who've had to face even more difficult economic situations
Many accounts are overspecialized and action is held back by massive bureaucracy. Despite everything, my pet theory is that IBM simply can't support its massive managerial structure divided by a million differente criteria -accounts, competencies, etc.- , eventually it had to give way.
Sun did the same trick a few years ago (Score:3, Interesting)by Anthony (4077) * <firstname.lastname@example.org> on Friday May 04, @07:36PM (#18996917)
(http://adavid.com.au/ | Last Journal: Monday January 01, @06:57PM)
Laid off a large bunch of their Professional Services staff here without informing their customers. The customers pulled out the signed contracts asking who was going to fulfill them. By the time the dust settled, Sun had either lost a lot of people to other companies or had to hire the sacked staff back on at higher contract rates to fulfill the obligations.
Let Me Tell You How it Actually Works (Score:5, Insightful)by Greyfox (87712) on Friday May 04, @04:30PM (#18994349)
Lets say you've got small project A. Small project A has 5 or 6 guys working on it. They've been working on it for years, wrote a good bit of the underlying system, know everything about it and can generally tell you exactly where the problem is if you call them with a problem.
Now you fire all those guys and hire a bunch of guys from Brazil at 1/4 the original team's salary. Even if the original team hangs around to train the new guys the new guys have to ramp up from scratch. Even if they're excellent programmers it's going to take them 6 months to a year to even get comfortable with the code, even with documentation in place. During that time the overall application design will get slightly worse as they try to implement new features in ways that don't fit in with the original application design.
In the mean time you've got 150 other tech companies realizing that people in Brazil will work for peanuts and they'll all move in to the country. Now your programmers are realizing that they can get more peanuts if they do the same sort of job hopping that we did in the 90s to get more peanuts. So over the course of the next year your team is replaced by new people who you have to pay a lot more money to and who are completely unfamiliar with your code base again. So now you're paying your Brazilians as much as you were paying your original programming team and they have no experience with your code base. Good job!
You can only save money that way if you buy into the fallacy that people are pluggable resources and experience counts for nothing. If you believe that then you can get as much done with a summer intern as you can with someone with 20 years of programming experience. Give it a shot sometime. And you can find a company that doesn't have that philosophy. I wouldn't want to work for a company that thinks I'm just a body taking up space anyway.
Jun. 19, 2006 (sandhill.com)
... when I took the reins at KANA last year, I found a company with tremendous assets but many operational challenges. One significant challenge for KANA involved its development operation in India. After a thorough analysis, I chose to end the relationship with our vendor and bring development back to the U.S.
The decision we made to "back-shore" our development was the best move for KANA. Other small to mid-size software companies may be similarly constrained by their offshoring strategy - and they may not have taken the time recently to reevaluate the value of their initiatives.
When I joined KANA as CEO last year, I immediately recognized the company's strengths - a large, loyal customer base, significant technological assets and a great employee team. However, the company seemed to have trouble executing as a sustainable, profitable business.
We set about fine tuning KANA's three core assets.
The Decision to Back-shore
- People - During the "bubble" days, KANA had been a very large company. Though it had downsized, it had retained the large management infrastructure with the expectation that the company would grow again. Out of 142 employees, we had 22 Vice Presidents. In fact, KANA had only four field sales reps in the U.S. but it had five VPs of strategy.
We restructured the corporate management, including an almost-entirely new executive team. With only one exception, all of these new executives were found inside the company.
- Clients - KANA has 600 clients - everyone from Best Buy to Verizon to IBM. These large firms have utilized our technology to support call centers, email, collaboration and chat. Yet within our client base, we only had 20 percent penetration, a big opportunity for upselling and cross selling.
- Technology - KANA has the only multi-channel, highly-scalable, enterprise-class solution for customer service. Our renewal rate on maintenance was 92 percent - a testament to the fact that customers were getting real value from our product. Yet the core product was being developed offshore with questionable efficiency.
KANA was one of the earliest software companies to offshore its engineering and support. The effort began almost four years ago. At one time, KANA had 250 engineers employed in India and China through its vendors.
After analyzing the state of KANA's development operation, we decided to put together a strategy to bring the work back inside the company. There are three main reasons KANA decided to back-shore.
1. Regain Control of Intellectual Property
In my first days as CEO, we made an inventory of our core assets. KANA's intellectual property was at the top of the list.
Yet the company had decided to outsource and offshore core product development. That was a major mistake, in my opinion. It is one thing to outsource porting or localization or special features and another move core intellectual property offshore.
KANA is not Oracle. When a large vendor hires thousands of its own employees offshore, the company can manage human resources activities and ensure protection of these assets very differently than KANA can at its size.
As a small company, IP is a critical part of KANA's asset base - one that deserves full control and protection. Globalization is a powerful force. But I believe it is important to outsource only those things that enhance the success of your product delivery without outsourcing the core product engineering.
2. Achieve a Comparable R&D Total Cost of Ownership (TCO)
When we began the process to bring engineering back to the U.S., I thought it would end up costing KANA more money. What happened, however, is that when we analyzed the costs, we realized that KANA hadn't saved any money by offshoring.
Indian developers have a very high level of skills. It's no wonder that executives become fixated on the fact that you can hire 2-3 Indian programmers for the cost of one U.S. programmer.
However I would be willing to bet that few software vendors have an idea of the TCO of their offshoring operation. For KANA, the competitive labor market in India meant that we had little control over who was working on our projects. There was no way to curb high turnover rates, control labor cost increases or to hold onto key talent.
Another area of added costs involved significant management resources from the U.S. KANA had to employ a program manager for every five engineers in India. These managers typically spent two to three weeks in India every quarter to ensure the development process was moving forward. This added travel, documentation and quality assurance expenses.
A factor which has improved America's competitiveness is the readjustment of engineering salaries. During the "bubble," developers were like "hired guns." They could write their own ticket in terms of compensation - salary plus a demand for hundreds of thousands in equity. It was a seller's market.
That's changed dramatically. I'm not saying finding the right engineer in the Silicon Valley is an easy task, but applicants have a more logical, realistic approach to the job. U.S. developers are simply not pricing themselves out of the market anymore.
Offshoring may eliminate as many as one in five programming, software engineering and back office jobs such as data-key entry during the next several years in certain metropolitan areas where employment in those fields is the heaviest, according to a study (download PDF)by The Brookings Institution released this week.
Brookings, a Washington-based think tank, has attempted to put job loss numbers around one of the most worrisome issues for IT workers today, while also recommending steps the government can take to slow the trend.
Where this report, The Implications of Service Offshoring for Metropolitan Economies, differs from others that have tried to assess the implications of offshoring is its analysis of how the trend will affect metro areas with high concentrations of IT-related jobs.
Overall, Brookings found that 28 metropolitan areas with 13.5% of the nation's population are likely to lose between 2.6% and 4.3% of their jobs to service offshoring. Those metro areas that could see the highest job losses, above 3.1%,, are Boulder, Col.; Lowell, Mass.; San Francisco; San Jose; and Stamford, Conn.
Several other cities, including New York, Chicago, Philadelphia, Los Angeles, could lose between 2.1% to 2.5% of their service jobs.
Among the areas where workers could fare better are Las Vegas and Riverside, Calif. These two metropolitan areas with more than 1 million people are likely to see no more than than 1.5% of their jobs moved offshore. Indeed, Las Vegas in particular is in need of IT workers.
Although overall "a small share of all U.S. jobs will be lost to service offshoring in the next decade," the report said that some types of service jobs are more likely to go than others, including those that rely heavily on IT and routine or rule-based work.
Some occupations, "especially those in IT or back-office services, could lose up to 24% of their jobs in particular metropolitan areas by 2015 as a result of offshoring," the report said. Breaking its results down by occupation, Brookings found that at least 17% of computer programming, software engineering and data entry jobs are likely to be offshored [from] certain metro areas."
Areas that appear to be particularly susceptible to IT and back office job losses from offshoring, include Bergen-Passaic, N.J.; Boston; Boulder, Col; Danbury, Conn.; Denver; Hartford, Conn.; Minneapolis, Minn.; Nashua, N.H.; Newark, N.J.; Orange County, San Francisco and San Jose, all in Calif.; Stamford, Conn., and Wilmington, Del.
Softpanorama hot topic of the month
Feb 8, 2007, MSNBC.com America's visa program for temporary workers was originally set up to allow U.S. companies to bring skilled workers who are in short supply to the U.S. Microsoft, IBM, Intel, Oracle, and Sun Microsystems have been active participants in the program, hiring foreign workers for specialized computer programming jobs and positions managing projects with overseas staff.
The visas, known as H-1Bs, are popular enough that President George W. Bush is calling for an increase in the cap on the number of workers who can come to the U.S. under the program. "We've got to expand what's called H-1B visas," he said in a January speech. "It makes no sense to say to a young scientist in India, you can't come to America to help this [country] develop technologies that help us deal with our problems."
But a review of new information from the federal government suggests that the companies benefiting most from the temporary worker program aren't U.S. companies at all. Rather, they appear to be Indian outsourcing firms, which often hire workers from India to train in the U.S. before returning home to work. Data for the fiscal year 2006, which ended last September, show that 7 of the top 10 applicants for H-1B visas are Indian companies. Giants Infosys Technologies and Wipro took the top two spots, with 22,600 and 19,400 applications, respectively. The company with the third most applications is Cognizant Technology Solutions, which is based in Teaneck, N.J., but has most of its operations in India. All three companies provide services to U.S. companies from India, including technology support and back-office processing.
The only other U.S. companies among the top 10 are the accounting and consulting firm Deloitte & Touche and consultancy Accenture. They rank seventh and ninth, with 8,000 and 7,000 applications, respectively.
The dominance of Indian outsourcing companies raises public policy questions about the temporary visa program. Some experts say that while the intent of H-1B visas may be to help U.S. companies hire workers with rare skills, the effect in some cases may be to facilitate moving jobs abroad. The issue has also sparked concern among some prominent U.S. tech companies, which worry that outsourcers could abuse the visa program, harming the tech firms' ability to attract foreign talent.
Ron Hira, a public policy professor at the Rochester Institute of Technology, says it appears that Indian firms may be using their H-1Bs to bring in workers from their home countries to make them more effective at outsourcing jobs in India. "The visa program serves a good purpose when it brings in the best and the brightest," says Hira, who is on leave at the nonprofit Economic Policy Institute and crunched the recently released visa data to compile the list of top applicants. He says that as recently as 1998 eight of the top 10 H-1B visa applicants were U.S. companies. "It serves a bad purpose when it's used to facilitate outsourcing."
Or competitive edge?
The Indian outsourcing firms say that's a misinterpretation of the data. They argue that the temporary visa program allows outsourcing firms to help U.S. companies become more flexible and ultimately more competitive in the global economy. Wipro has more than 4,000 employees in the U.S., and roughly 2,500 are on H-1B visas. About 1,000 new temporary workers come to the country each year, while 1,000 rotate back to India, with improved skills to serve clients. "Our goal is to make our customers more competitive," says Laxman Badiga, Wipro's chief information officer. An Infosys spokeswoman said executives from that company were not available for comment.
The government visa data cover only the number of applications for visas, not the number actually awarded. U.S. Citizenship & Immigration Services releases the identities of companies that apply for H-1B visas, not those that receive them. A spokesman for USCIS, which is part of the Homeland Security Dept., says it won't discuss individual companies because of privacy issues.
Still, the number of visas awarded is likely correlated to the number of applications. Efran Hernandez, chief of business and trade services for USCIS, says H-1B visas are awarded on a "first-come, first-serve" basis and there is no preference given to U.S. companies over non-U.S. companies. "You have to be a U.S. employer," says Hernandez. "That doesn't mean you have to be a U.S. company."
In addition, the temporary visa program includes no requirement that companies in the U.S. try to hire American employees before they turn to foreign workers. To obtain a permanent visa, companies must conduct and provide to the government a labor market test, in which they demonstrate that they sought to hire American workers first. But the H-1B temporary visa program mandates no such market test. Instead, companies are required only to pay the prevailing wages and benefits for a certain job in a certain market.
The government, including USCIS, says that the provision means that most companies are going to hire Americans, because there's no financial advantage to choosing a non-U.S. worker. But Hira says Indian companies could choose to hire workers from India for training purposes, rather than financial gain. Government officials acknowledge that companies that want to give preference to workers from other countries could theoretically do so. "There's nothing built into the law to stop that," says Hernandez.
Many U.S. companies are enthusiastic supporters of the H-1B visa program. Tech companies may be the most active participants, but the visas are also used by companies from General Electric and Boeing to Lehman Brothers and Caterpillar. Companies have been lobbying the government to increase the cap on the number of H-1B visas from the current 65,000. (Because there are exceptions for certain kinds of jobs, the number of visas issued regularly exceeds that level.)
Squeeze on temporary visas
Top technology companies would like to see the cap almost twice as high as it is now. The Information Technology Industry Council, whose backers include Apple, Dell, eBay, and Intel, last year asked that the cap be raised to 115,000. The group says that bringing foreign workers with very specialized skills to the U.S.—both temporarily and permanently—is critical to increase innovation and competitiveness. "Visas are a key component of the innovation agenda," says Kara Calvert, director of government relations for the council. "It's really important to grow the economy here rather than overseas."
Yet the ITIC has become concerned in recent months that the temporary visa program is not being used for its original purpose. The council's members may not be able to get the workers they want from abroad because the numerous applications from non-U.S. companies mean fewer H-1B visas are available for U.S. companies. "We hit the cap earlier and earlier," Calvert says. "We think it's important to ensure that the visas are used for the purpose for which they were intended."
One reason for the squeeze may be that Indian outsourcers have boosted their visa applications just as the cap has been lowered. Wipro applied for 3,100 visas in 2001, when the H-1B cap was 195,000 workers, according to Hira's calculations. Wipro applied for six times that many H-1B visas last year, when the cap was a third of the previous total.
No easy answers
Wipro's Badiga says Indian companies are helping to create good jobs in the U.S. and fostering innovation. The jobs that Wipro offers in the U.S. to both Indian and U.S. workers, he says, are more skilled positions for high-level software design or important customer relations. What he calls "rote programming jobs" are done from India. He says that the H-1B visa program allows Wipro workers to get valuable experience in the States and be more effective at serving customers in the U.S. "The key question is whether we can create the best value chain to help our customers be as competitive as possible," says Badiga.
Even critics say that there are no easy solutions for revising the temporary worker program. Restricting the ability of Indian outsourcing companies to use H-1Bs, for example, may not stop them from being used for more effective outsourcing. Accenture, an active participant in the program and one of the top U. S. outsourcing firms, could hypothetically use the visas in exactly the same way that Wipro and Infosys do. A spokeswoman for Accenture did not return calls seeking comment.
U.S. tech companies may push for revisions to the H-1B program. They could ask that Congress limit the number of visas that go to non-U.S. companies or that the identities of the recipients be disclosed fully and speedily. President Bush has said that he wants to work with the Democratic Congress on new immigration and visa policies, although it's unclear what shape those reforms might take. "If companies are abusing those visas, that hurts U.S. companies," says the ITIC's Calvert. "We want to be at the table when the discussions [on H-1Bs] occur."
LONDON - Workers who survive downsizing measures and hold on to their jobs may consider themselves lucky but they have a higher risk of suffering from mental health problem, Finnish scientists said on Thursday.
After studying the impact of downsizing on municipal employees they found men who kept their jobs were 50 percent more likely to be given a prescription for an antidepressant or sleeping pill than people where there had been no enforced layoffs.
“This quasi-experimental outcome study of 26,653 city employees suggests that downsizing is a mental health risk, not only for employees who lose their jobs, but also for those who remain in employment,” said Professor Mika Kivimaki, of University College London.
Women in the study published in the Journal of Epidemiology and Community Health were 12 times more likely to use a prescription drug after downsizing.
Sleeping pills were the most commonly used drug for men while women were more often prescribed anti-anxiety drugs.
Kivimaki and his team said employers, policy makers and occupational health experts should recognize that downsizing poses mental health problems.
One of the drawbacks of being an IT professional is being experimented on by pointy-haired bosses who have fallen in love with a new management fad. The PHBs have taken us through downsizing, rightsizing, vision statements, mission statements, dead Chinese warriors, SPC, Extreme Programming, Quality Circles, Synchronous Manufacturing, Total Quality Management and (if you were among the really unlucky ones), weeks of butt-numbing meetings on something called Six Sigma. But we can survive such things, for geeks have developed a unique ability to doze off with our eyes open.
The latest PHB craze, however, is far more baleful than any of those dear old nostrums. It's called offshore outsourcing.
Remember back in 1999, when you had a job, what a hard time you had talking the boss into letting you telecommute two days a week? "Look at the savings on office supplies," you said. "Four more hours a week I can spend working instead of plowing the freeway!" Management's counters to your arguments were always the same: "All environments other than the Datawhack Inc cube farm are potentially distracting;" "When you're not there physically, how will anyone know what you're doing?" and that ultimate deal killer, "We can't possibly allow our proprietary software and sensitive client data in the insecure environment of a spare bedroom!"
... ... ...There are a number of other well-known problems with offshore outsourcing. In the interest of brevity I'll breeze through some of the larger objections:
The PHBs love outsourcing because it saves money. In long-range corporate planning departments, where the B-school elite gaze ahead all the way to the hazy outlines of next quarter, the thinking is that the savings will goose the value of their shares, so that the last eight employees left in the company will someday retire rich.
- Project design is a tennis game played between developer and customer: Customer asks you to do X, you respond with a client-level explanation of what it would take to do X, he strokes his beard and asks you if X-prime would be possible, you volley back a revised design, and so on. It goes on for at least a few iterations before you put cursor to code development window. How long does this game take if the developer is halfway around the world, learned the customer's language as a college junior, and is embedded in a totally different culture?
- Offshoring is the ultimate development of the management philosophy that all IT people are as interchangeable as urinal cakes. What happens in the middle of a multi-year implementation when, in their ongoing quest for a country where people will work for free, the PHBs switch to a development team in a different part of the world?
- The ongoing controversy over patent and copyright in America leads us to believe that corporate boards are concerned about protecting their intellectual property. What happens to IP when the work is being done in a country with a radically different legal system? And if a legal dispute were to arise, do you appeal to a tribunal run by a tribal chieftain, or do you burn incense before a multi-armed deity and hope for the best?
- When you outsource, you don't go overseas to hire your own staff. You retain a consulting firm based where the workers are. Of course, you made sure that this firm had expertise in your company's field. So now how do you know how many of your direct competitors the same staff might be working for, right at this moment?
- The first outsourcing operations farmed out programming tasks only. That was, after all, where most of the money went. Everyone promised to audit the hell out of the code being sent back. And of course, it was all going to be rigorously tested. But then you discovered business process outsourcing! Now that you've sent the whole back office overseas, including the auditors and testers... well, let's just say that if I find out who you are, I'm not going to ride on your planes or rely on power from your grid.
- The North American developers who used to work for you had an average of 16 years of experience. But those doddering 28-year-olds demanded three meals a day, medical care and in a few cases, weekends off, so you plugged in offshore replacements with an average of 4 years on the job. What do you think might be the actual depth of their knowledge? How adaptable will they be as new technologies come along?
- Dealing with work located at a great distance requires advanced remote management. Folks, we're talking about people who are not confident of their ability to manage a project on the other side of town.
What these folks are ignoring is the effect of outsourcing on politics. Geeks are not very political, but have until now leaned libertarian. All through the 80s and 90s, the tech vote created the sunny business climate that made the big boom possible. Today the geeks – and office workers in general - are running through their own retirement savings as they vainly look for work. Once they lose their houses, they will turn into another sullen huddle of trailer-dwelling outsiders. Like the Greens, their sole political focus will become vengeance against "the suits." Management, by jumping into one fad too many, will lose the very political world it had hoped to create for its own comfort. Look forward to a nation of fifty Californias where every city is Eugene, Oregon.
In the recent interview Bill Gates noted that "The IT systems are your brain. If you take your brain and outsource it then any adaptability you want (becomes) a contract negotiation". I think that this aptly describes what we are experiencing now with the helpdesk.
Here is the full quote:
Q: What's your view of this idea of utility computing? And how does it speak to seamlessness if indeed this is a case of "here they go again," putting their twists and turns to what they want to propagate?
Bill Gates: You have to be careful with utility computing. That was a rage during the 1990s, that everything would be hosted and moved outside the company. Where are those hosting companies now? Only a few things--like running Web sites--fit those models. The IT systems are your brain. If you take your brain and outsource it then any adaptability you want (becomes) a contract negotiation.
SeeBill Gates Unplugged CNET.com for the full text.
Objective must be to improve business process efficiency
Outsourcing projects are at risk of failure because they are driven by cost savings rather than a desire to improve the efficiency of business processes. A survey of 400 IT and finance decision makers in private and public sector companies across the UK commissioned by Unisys found that the finance department views outsourcing almost entirely as a means to cut costs, even in organizations where IT is represented at board level.
Paul Bevan, strategic marketing director at Unisys, explained that understanding business objectives, rather than a desire to slash budgets, needed to be the driving force behind outsourcing decisions.
"Even in sectors where IT representation at board level is good, such as financial services, and where the relationship between IT and finance is considered better, the IT director's influence dropped away dramatically and the finance director was much more instrumental in the decision making process about outsourcing," he said.
"Outsourcing has come from a history of 'sunset' areas that are technologically difficult or bitty, or because it's a time consuming activity not perceived to add a lot of value.
"It's no coincidence that, as we go into a recession, instances of outsourcing go up, but outsourcing is becoming more complex where it's questionable whether real cost savings are to be gained."
The research also found that, while two thirds of private companies had already embarked on or were considering outsourcing projects, enthusiasm is not being mirrored to the same extent in the public sector, where less than half outsource IT functions.
Earlier this year analyst firm Gartner predicted that 50% of IT outsourcing arrangements would fail in the next 12 months because of bad management.
At the same time, poor employee communication is also causing uncertainty, affecting employees' performance and threatening outsourcing projects.
One in five staff claim that they first hear about an outsourcing contract though the grapevine rather than official communication channels.
A separate survey sponsored by IT services provider Steria found that more than half of employees suffer from reduced productivity, and almost a quarter make errors in their work, during the outsourcing process due to high levels of stress.
The company warned that human resources departments need to play a strategic role in the outsourcing process, particularly given widespread misunderstandings about legislation that protects outsourced employees.
But 51 per cent felt that outsourcing had a positive effect on their career, and 68 per cent said that they provide a better service than they did before outsourcing.
"Treating staff badly, not giving them the information they deserve, and not caring for affected employees is not simply bad practice, it's a false economy," said Kim Lambert, director of managed services at Steria.
IEEE Software. From the Editor: The Sabateur Within by Warren Harrison
On Thursday, May 20, the Center for American Progress held an event, "The Impact of Offshoring on the U.S. Economy: Policy Perspectives," on Capitol Hill. The panel was moderated by the Center's director of economic programs, Gene Sperling, and featured Martin Bailey (International Institute of Economics), Lael Brainard (Brookings Institution) and Thea Lee (AFL-CIO). Below are suggestions for how the U.S should deal with offshoring, as well as links to offshoring resources. A transcript of the presenters prepared remarks will be posted here when available.
In recent months, Americans have become increasingly concerned about the impact of offshoring on the United States economy. The practice of offshoring – when U.S. firms relocate their production and service facilities overseas – has increased over the past few years, particularly in white-collar industries that were previously viewed as more stable and less vulnerable to global competition. The phenomenon has raised fears that the U.S. economy may be permanently shedding certain jobs and job categories, which could lead to a hollowing out of the middle class and downward pressure on wages.
Current labor market data show that Americans are justified in worrying about job creation – the economy is still millions of jobs short of where it should be at this point in its recovery. And while the data on offshoring suggest that it is not the primary culprit for our current labor market woes, there is considerable uncertainty as to how large its future impact will be – leaving many unanswered questions about its impact on the U.S. economy. As a country, we need to engage in a serious dialogue on these questions and consider a range of potential public policy responses to address not only the pain and dislocation that offshoring creates, but also the steps necessary to ensure that the American workforce continues to compete and win in the global economy.
- Job creation in the United States is too slow. The U.S. economy has lost more than 2 million jobs since President Bush took office and analysts believe the economy is still significantly lagging in job creation (Morgan Stanley estimates the economic recovery is short 2.4 million jobs from where it should be, while EPI estimates a job shortage of 5.5 million). The Bush administration tax cuts – aimed primarily at the wealthy – have done little to address this concern.
- The pain and suffering of those who have lost their jobs is real. Although many unemployed workers will eventually find new jobs, a substantial number of them will have to work for less pay and fewer benefits. For those that are unemployed, public assistance is woefully inadequate. More out of work Americans are losing their unemployment benefits than ever before (nearly 2 million workers so far this year). Health insurance premiums have skyrocketed and support for job retraining is underfunded.
- Congress should consider specific policy proposals to address the problems created by job loss and offshoring. Congress should immediately strengthen adjustment policies to help dislocated workers. First, Congress should extend the Trade Adjustment Act (TAA) to service workers, who are not currently covered. They should also consider more ambitious wage insurance and temporary health insurance proposals designed to give unemployed workers a cushion of stability and ease the transition between jobs. Finally, Congress should increase support for lifelong learning and retraining programs and consider retraining tax credits or grants to individual workers.
- To compete globally, the United States needs to greatly improve its education and health care systems. Congress needs to focus on improving the U.S. education system so the population is prepared for a new economy. They should increase investment in science and engineering education; ensure that schools focus on math and science at the primary and secondary levels; and increase support to community colleges. We also need a healthcare system that provides for all Americans regardless of their employment status.
Insiders exploit their legitimate role within an organization to harm it. Their knowledge of and access to the organization pose a substantial threat—probably greater than external threats. In many cases, the only thing preventing insiders from exploiting their privileged access and knowledge is the perception that their interests and the organization’s are aligned. So, if delivering a project on time or making a customer happy is in the insiders’ best interests, you can expect them to contribute and work toward a common goal. However, when individual and corporate goals aren’t so clearly aligned, a certain segment of the workforce will have no qualms about passively or actively pursuing their own interests at their employer’s cost.
The first report focuses on the people who have had access to and have perpetrated harm using information systems in the banking and finance sector, which includes credit unions and financial institutions. This study, made possible by significant financial support from the Department of Homeland Security's Science and Technology Directorate, is the first of its kind to provide a comprehensive analysis of insider actions by analyzing both the behavioral and technical aspects of the threats.
The findings underscore the importance of organizations' technology, policies and procedures in securing their networks against insider threats, as most of the cases showcased in the report were perpetrated by insiders with minimal technical skills. Various proactive practices are among the suggestions offered by the report.The definition of an insider for this study includes current, former, or contract employees of an organization. The cases analyzed in the Insider Threat Study involve incidents in which an insider intentionally exceeded or misused an authorized level of system access in a manner that affected the organization's data, daily business operations, or system security, or involved other harm perpetrated via a computer.
For the Insider Threat Study, researchers from the Secret Service CERT/CC have focused on identifying the physical and online behaviors and communications that insiders engaged in before the incidents, as well as how the incidents were eventually executed, detected, and the insider identified. This approach addresses a broader phenomenon than previous studies on the topic of insider activity.
I find it useful to draw a contrast between two different organizational development styles: "process-oriented" and "commitment-oriented" development. Process-oriented development achieves its effectiveness through skillful planning, use of carefully defined processes, efficient use of available time, and skillfull application of software engineering best practices. This style of development succeeds because the organization that uses it is constantly improving. Even if its early attempts are ineffective, steady attention to process means each successive attempt will work better than the previous attempt.
Commitment-oriented development goes by several names including "hero-oriented development" and "individual empowerment." Commitment-oriented organizations are characterized by hiring the best possible people, asking them for total commitment to their projects, empowering them with nearly complete autonomy, motivating them to an extreme degree, and then seeing that they work 60, 80, or 100 hours a week until the project is finished. Commitment-oriented development derives its potency from its tremendous motivational ability—study after study has found that individual motivation is by far the largest single contributor to productivity. Developers make voluntary, personal commitments to the projects they work on, and they often go to extraordinary lengths to make their projects succeed.
When used knowledgeably, either development style can produce high quality software economically and quickly. But both development styles have pathological lookalikes that don’t work nearly as well, and that can be difficult to distinguish from the genuine articles.
The process-imposter organization bases its practices on a slavish devotion to process for process’s sake. These organizations look at process-oriented organizations such as NASA’s Software Engineering Laboratory and IBM’s former Federal Systems Division. They observe that those organizations generate lots of documents and hold frequent meetings. They conclude that if they generate an equivalent number of documents and hold a comparable number of meetings they will be similarly successful. If they generate more documentation and hold more meetings, they will be even more successful! But they don’t understand that the documentation and the meetings are not responsible for the success; they are the side effects of a few specific effective processes. We call these organizations bureaucratic because they put the form of software processes above the substance. Their misuse of process is demotivating, which hurts productivity. And they’re not very enjoyable to work for.
The commitment-imposter organization focuses primarily on motivating people to work long hours. These organizations look at successful companies like Microsoft; observe that they generate very little documentation; offer stock options to their employees; and then require them to work mountains of overtime. They conclude that if they, too, minimize documentation, offer stock options, and require extensive overtime, they will be successful. The less documentation and the more overtime, the better! But these organizations miss the fact that Microsoft and other successful commitment-oriented companies don’t require overtime. They hire people who love to create software. They team these people with other people who love to create software just as much as they do. They provide lavish organizational support and rewards for creating software. And then they turn them loose. The natural outcome is that software developers and managers choose to work long hours voluntarily. Imposter organizations confuse the effect (long hours) with the cause (high motivation). We call the imposter organizations sweatshops because they emphasize working hard rather than working smart, and they tend to be chaotic and ineffective. They’re not very enjoyable to work for either.Cargo Cult Software Engineering
At first glance, these two kinds of imposter organizations appear to be exact opposites. One is incredibly bureaucratic, and the other is incredibly chaotic. But one key similarity is actually more important than their superficial differences. Neither is very effective, and the reason is that neither understands what really makes its projects succeed or fail. They go through the motions of looking like effective organizations that are stylistically similar. But without any real understanding of why the practices work, they are essentially just sticking pieces of bamboo in their ears and hoping their projects will land safely. Many of their projects end up crashing because these are just two different varieties of cargo cult software engineering, similar in their lack of understanding of what makes software projects work.
Cargo cult software engineering is easy to identify. Cargo cult software engineers justify their practices by saying, "We’ve always done it this way in the past," or "our company standards require us to do it this way"—even when those ways make no sense. They refuse to acknowledge the tradeoffs involved in either process-oriented or commitment-oriented development. Both have strengths and weaknesses. When presented with more effective, new practices, cargo cult software engineers prefer to stay in their wooden huts of familiar, comfortable and-not-necessarily-effective work habits. "Doing the same thing again and again and expecting different results is a sign of insanity," the old saying goes. It’s also a sign of cargo cult software engineering.
(Skeptical Inquirer, May/June 1995 vol. 19, no. 3)
"Our brains and nervous systems constitute a belief-generating machine, a system that evolved to assure not truth, logic, and reason, but survival. The belief engine has seven major components ..."
There is a convergence of two trends here: subcontracting and what’s been described as "lean, mean supply-chain management."
An early example of subcontractors working inside the plant because of the corporate outsourcing craze has been General Electric’s use of outside maintenance personnel — a practice contested by UE from the shop floor to national negotiations.
It’s becoming a common practice for companies to rent each other’s employees.
And as example of supply-chain management, look at how GE Transportation Systems in Erie, Pa. (the employer of Locals 506 and 618 members) has built a close relationship with suppliers like Dominion Castings, a Canadian division of Chicago-based NACO. Beginning with a long-term contract for truck castings in 1993, GE’s relationship with its supplier deepened when NACO became involved in the design and production of its steerable locomotive truck. "The NACO tie-up fits into a larger GE strategy that targets just-in-time delivery from suppliers and significant inventory reductions.
In another variation, IBM, Hewlett-Packard and Compaq have begun sending bare-bones machines to distributors; the distributors finish assembling the computers when the orders come in. One Hewlett-Packard executive was quoted saying, "Putting parts together? Others can do that." Another HP executive recalled for Fortune magazine how 20 years ago, H-P workers made screws and steel, and wound motors. Now production is quickly farmed out.
Nike and Dell are extreme examples of "hollow corporations" — all of their goods are produced by subcontractors.
Visionaries say that if manufacturing has a future, this is it. Inventories all but disappear as product designers, manufacturers and distributors are linked electronically. Goods will be produced based on retailers’ daily needs; even cars will be assembled according to customer specifications.
Promoters of insourcing say the new partnerships allow companies to cut costs, use their resources more efficiently, focus on specific goals, gain access to other’s production expertise, gain economies of scale and get product to market quicker.
For example, management at VW’s Resende plant claims it can concentrate better on logistics, product engineering, process and quality assurance and customer service.
"Observers in Brazil believe that this type of closer manufacturer-supplier relationship represents a trend that is here to stay—and not just in the automotive industry," reports Industry Week. "It may be more easily implemented in a greenfield plant, they acknowledge, but if the right strategy is followed regarding unions, it might be possible to introduce it in existing plants as well."
THE ‘RIGHT’ LABOR STRATEGY
The "right" labor strategy would presumably require neutralizing, if not eliminating, and certainly avoiding union organization. If organized, workers would have a way of objecting to the seamy side of this flexibility — layoffs, deskilling and smaller paychecks.
This institutionalization of a two-tier employment strategy gives the bosses a powerful weapon against unions. Not surprisingly, last November union members at GM and VW plants in Sâo Paulo, Brazil accepted management’s first offer on a new contract.
In Resende, Brazil, local union leaders hope to organize the VW plant eventually but admit the web of employers poses a challenge.
OUTSOURCING IS ‘IN’
The insourcing phenomenon is bad news to those American workers who are already under threat from outsourcing — and should be of concern to those who work for suppliers. In the new "flexible" and "lean" global economy, subcontractor jobs can be outsourced.
In 1994, U.S. companies subcontracted about $16 billion worth of work — a figure expected to grow to $37 billion in 1998. A 1997 study by the OI saw companies planning projects that would double their outsourcing of all types, including services as well as production of parts. Last year, companies covered by a Dun & Bradstreet survey said they would increase manufacturing outsourcing alone by 25 percent. Manufacturers account for nearly two-thirds of all outsourcing
The electronics industry’s subcontracting manufacturing sector is growing faster than overall electronics sales. Nestlé Corp. may own 495 plants world-wide, but subcontractors produce more than half its production and almost half its packaging. Big pharmaceutical firms are relying on small specialized biotech production companies.
GM outsources about 55 percent of its work, Ford 62 percent and Chrysler 67 percent, compared to 75 percent for Japanese automakers. Four out of five auto-parts plants are non-union.
"The restructuring that has swept the automobile industry for the last several years seems pointed toward a two-tier industry: one union, one non-union; one more or less well-paid; one, not; both with super-stressed workplaces," writes Kim Moody in Labor Notes.
SERVICE AND PUBLIC SECTORS
Of course, not only manufacturing workers are affected. Information services is a growth industry for subcontractors. For example, a subcontractor in India handles the medical records for a hospital in suburban Washington, D.C. Companies from the Philippines to Ireland are vying for U.S. office jobs.
Postal workers unions have been protesting plans by the nation’s ninth-largest firm — the U.S. Postal Service — to subcontract work. Public sector employees — federal, state, county and municipal — face severe threats from subcontracting. School districts contract for services like cleaning.
Then again, UE Local 792 members at Wright State University are employed by the university’s food-service subcontractor.
While many UE members are fearful of — and have been fighting against — the threat of outsourcing, a growing number of UE members work in manufacturing plants that supply parts to factories owned by major auto and electrical manufacturing companies. They have benefited from the 1990s growth in outsourcing, but their jobs, too, may be in danger.
"One change in outsourcing is that the suppliers of outsourcing services themselves are beginning to outsource non-core functions and form alliances with other providers to offer end-to-end services," says The Outsourcing Institute. Sub-suppliers are providing hundreds of individual parts to main suppliers.
Already in the auto industry, companies are supplied by subcontractors who in turn outsource work.
The ultimate so far, reports Fortune magazine: "A ‘rolling chassis’ being delivered by Dana Corp. to Chrysler’s new $315 million Dodge Dakota pickup-truck plant in Campo Largo, Brazil. The chassis arrives on inflated tires complete with brakes, steering components, gas tank, and other parts supplied by 70 companies, including ITT, TRW, Eaton, and Bosch."
U.S. industry’s love affair with outsourcing and new fling with insourcing is ominously reminiscent of Japan’s reliance on subcontracted labor. Each big company employs 100 subcontractors, which in turn contracts out to hundreds more companies, some with only a few employees. The wages and conditions of workers employed by subcontractors are inferior to those employed by the major corporations.
The big Japanese corporations like this system because the work of the tiny subcontractors can be of very high quality; if minor changes are needed they are easy to make, allowing the corporations to remain highly competitive.
The bottom layers of the Japanese workforce are made up of subcontract employees, "temporary" employees, "extra-workers," day laborers and casual workers, employed by the subcontractors and myriad of small employers dependent on big capital.
Despite the hype, insourcing has already exhibited real-life problems for big corporations — like finding reliable suppliers and maintaining good relations with subcontractors. When Daimler entered into a joint venture with a Swiss firm to produce a micro-car plant in France last year, quality problems delayed the car’s introduction by six months. Daimler says modular assembly works but will not entrust suppliers with production of its high-price Mercedes luxury sedans.
As the boundaries of U.S. manufacturing become blurred, all the way from parts to distribution, accountability becomes more difficult — a problem potentially for business and labor. A subcontractor intricately involved in production is not so easily fired. And who do unions bargain with — or strike against?
As vertical integration gives way to "virtual integration," the danger for business is that the insourcing model will simply shift labor costs without cutting costs.
For workers, the danger is that business will succeed — at the expense of their wages, benefits and jobs.
The union must get on top of insourcing — or any subcontracting — before it becomes a reality in their workplace, counsels UE Genl. Pres. Hovis.
"We must be more vigilant about bargaining over subcontracting while we still have bargaining power, before work is moved out or in," says Hovis.
The "Virtual Company"
Business theorists like to develop fancy names for their theories. One of the latest is the "virtual company." According to this theory companies should subcontract ALL their manufacturing and only do product development, sales, or maybe provide engineering expertise to companies that use their products. As crazy as this sounds many big US corporations are falling for this. One model that is held up as an example is Nike Corporation, which owns no manufacturing facilities. Nike only designs and markets the sneakers. Of course the people who boast about Nike usually fail to mention that Nike has been condemned for subcontracting to companies that use child labor or pay workers 10 cents per hour.
The Japanese Model — Almost every management fad of the last 20 years has claimed to be based upon the Japanese miracle and the subcontracting fad is no different. Following the defeat of Japanese fascism in World War 2, business was restructured with the help of "experts" from the United States. What came out of this restructuring was bigger monopolies and a system of subcontracting that was legislated and enforced by big corporations. Small companies could only work for one big company, thus they and the workers were and are totally dependent on the big company.
When business slowdowns occur it is the workers in the small companies that are laid off first, and naturally wages and benefits are much lower than in the big companies. Since the Japanese economy has been in a slowdown for the last several years not as many "experts" boast about the Japanese model.
"Modular consortium" — This is a fancy name for one of the latest trends in subcontracting, that is just beginning to start in the US. Volkswagen opened its newest Brazilian auto factory in late 1996. In this factory Volkswagen gathered together 6 of its major parts suppliers and had them set up production right inside the Volkswagen factory! They supply and assemble all the major components (engines, chassis, painting, transmissions, etc,) while Volkswagen just oversees final assembly and testing. Since then other auto companies like General Motors and Renault have followed this example in Brazil. In the US, some companies (including some UE employers) are beginning to experiment with this form of subcontracted production.
(See: UE News, "Outsourcing Goes Inside")
Top of Page • Information for Workers Contents
AUGUST 09, 2004
(COMPUTERWORLD) -Now here's a real classic on the comeback trail: developing your own applications. Sounds so retro, doesn't it? The kind of thing start-ups do when the CEO doubles as the chief product engineer and surrounds himself with a cabal of MIT grads writing code. So what's going on when large pharmaceutical companies, insurers, hotel chains, health care providers and online powerhouses like travel firm Orbitz are found, in this day and age, productively rolling their own?
Computerworld reporter Gary H. Anthes answered that question last week in his cover story about the many sensible, cost-saving and even surprising reasons why companies build their own applications rather than buying into more packaged software ["Roll Your Own," QuickLink 47884]. What he uncovered flies in the face of conventional wisdom that buying is better than building -- a belief assiduously promoted by software vendors of all sizes.
And no wonder. The lifeblood of so many software companies increasingly flows directly from their maintenance and support fees, which have risen to nosebleed levels of 18% to 25% annually to offset the economic drag of lower sales in recent years.
Take Oracle as Exhibit A. When the database maker posted its financial results in mid-June, the single biggest factor cited as offsetting its slow-moving application sales was rapidly growing revenue from those fat fees for software maintenance. That revenue is increasing nearly twice as fast as new license revenue, CEO Larry Ellison said.
But it's not just the high cost of applications and their hefty annual fees that are driving development of homegrown applications. Ranking high as reasons for this approach are dissatisfaction with complacent vendors that don't respond quickly enough to user needs, and dismay over software suites overloaded with features and fiendish complexity. At Reinsurance Group of America, for example, a $35 million global enterprise administration system that was developed in-house not only fueled a competitive leap past the company's rivals but also was vastly preferable to the nightmare alternative of integrating more than a half-dozen commercial packages to provide similar capabilities.
Yet the greatest reason of all to roll your own is the ability to tailor IT to your business, to control the fate of applications too vital to trust to outside developers. It's about enabling (may Nicholas Carr forgive us here) a competitive edge that really does matter.
At Reliant Pharmaceuticals, for example, CIO Ron Calderone wisely heeded user resistance to complicated sales force automation tools and built a relatively simple system using speech recognition technology for the field agents. A packaged SFA system would have cost $4 million to $6 million, Calderone reckoned, but he delivered just what his business comrades needed for about 15% of that.
"Simple and inexpensive" are often the magic words associated with the best in-house application projects. We're hearing that mantra more often these days, particularly as open-source software carves inroads at the enterprise level. As Orbitz CTO Chris Hjelm put it in our story, "We are largely an open-source shop, so when we think about buying software, there's a general aversion to it."
The "buy vs. build" debate will no doubt go on forever. But the combination of open-source software with sophisticated development tools and standardized Web services is dramatically changing the face of that argument. When companies go looking for technical creativity, innovation and a competitive edge, they won't be buying that off anybody's shelf but their own.
One day, the political windstorm around offshore outsourcing will blow over. One day, the inflated numbers on both sides of the debate will be debunked. One day, the last angry letter from a displaced American IT worker will be published.
Unfortunately for IT managers everywhere, that day is not today.
The emotional backlash against any plans to outsource technology jobs overseas -- regardless of how economically or competitively driven -- is a force to be reckoned with in today's IT workplace. It dampens the morale of even the most valuable, talented employees, as we saw recently in our Best Places to Work in IT survey [QuickLink a4610]. One reader sent us a note last week suggesting that we include "foreign outsourcing statistics" in future Best Places reports, thereby revealing how many U.S. citizens are part of the IT head count of the companies on our list.
Negative reactions can blast back from customers as well as from affected employees, as Dell and Lehman Brothers discovered when they had to pull customer service operations out of India. Despite a few other widely publicized retreats, the majority of Fortune 1,000 companies are forging relentlessly ahead with offshoring plans -- albeit with greater stealth, in hopes of avoiding bad publicity.
The bottom line driving what Gartner calls an "irreversible megatrend" is always the same: cost savings too compelling to ignore in an open, interconnected global marketplace. "To outsource offshore is not a political decision on the part of the company. It's an economic decision with political ramifications," says Mike Hoyt, CEO of Paradigm Works. He's one of our sources in "Damage Control" [QuickLink 47609], a story about how IT managers can cope with the offshore backlash.
One impressive example of a company dealing effectively with the backlash problem is Union Bank of California, which created a "sourcing management office" to handle any concerns that might harm its reputation with customers. The office's duties include handling all communications about the bank's offshore plans.
The preventive measures we discuss in our story basically boil down to having honest, frequent, candid communication with everyone involved. CFO magazine gave similar advice last month in its cover story about offshoring, noting that the majority of the 275 financial executives surveyed had no intention of canceling their offshoring plans, despite the backlash. Some 42% of those CFOs said they were realizing net savings of more than 20% from their offshore projects, and 64% were planning to increase offshoring levels.
So where do companies go wrong in communicating their outsourcing plans? Let us count the ways. They overlook a basic communications plan for internal or external consumption (the offshoring version of a "don't ask, don't tell" policy). They fail to explain why a given project is going overseas or how such decisions are made. They try to downplay the negatives about workforce changes. They hide their plans for as long as possible, then look guilty and act defensive when the news leaks.
Some analysts are predicting that the backlash will fade away by next year, and I hope they're right. But in the meantime, IT managers must brace for the backlash and deal with it decisively.
"You don't want rumor to overtake reality," says Michael Treacy, co-founder of Gen3 Partners, an outsourcing consultancy. "In the end, you can only politicize so long, and then the facts will prevail."
Maryfran Johnson is editor in chief of Computerworld. You can contact her at email@example.com.
You've seen it a hundred times before. The proposed system is crucial. The pros, cons, upsides, and downsides are clear. Benefits are believable, costs manageable, and resources ready. Yet decision procrastination rears at every turn, making it tough to get the project underway. Before demoralization devastates your team as they wait for the final go-ahead, begin mastering the ancient art of "delay" slaying. Here are some tips to get you started.
1. Vocalize time's tyranny. IT time delays can seed enterprise failure. Look at Kmart's loss of industry leadership and market share when Wal-Mart initiated clever, IT-based business strategies based on faster, more accurate responses to customer buying habits. Many industry gurus agree that management of time is the number one critical success factor in 21st century enterprises. Use it to your advantage by clearly stating what delay will cost. For example, "for every four months we delay the beginning of this project, earnings per share will decrease by two cents in 1999."
2. Find the real drivers of delay. Decision delay is always a symptom of deeper issues. Typical causes include: fear of failure, resistance to perceived power shifts, missing cost/benefit factors, and lack of buy-in. Unearth the real anxiety source, then backfill it with relevant time-delay consequences, such as those outlined below.
3. Speak the right language. Different decision participants respond to different language. Executives react best to words such as profits, market share gains, customer service, and other top-level payoffs. VP and director-level folks typically speak the language of budgets and people availability. First-level managers best understand issues such as fewer transaction problems and more productivity. Tailor the language of your pitch to the hot buttons of each.
4. Expand your "clever reasons" repertoire. Often overlooked "price of procrastination" factors include:
Loss of "the best" people. The talents and skills of key people can make or break a project. Is critical internal or external staff available now, but not necessarily later? Having average rather than exceptional people can increase complex project costs by more than 20% due to poor task prioritization and mishandled change management.
Avoidance of time-based premium costs. The multibillion dollar overnight letter industry is based on business' willingness to pay a "speed tax" that's 25 times more expensive than traditional USPS delivery. Do you really need it? Another example: Y2K people costs can be two to three times higher this year than last, due to skill shortages. Delayed projects, that later become urgent, can bloat costs to shocking heights.
Loss of budget. If you have the money, take it now and run. Don't make the fatal assumption that systems budgets are forever. Enterprise priorities shift. Supportive executives move on. Funding is inherently fluid and wily. Capture it now.
Cost of pain. Pain is the flip side of benefit. Most decision-makers seek to minimize risk of loss when deciding on systems. Leverage this reality. For example warn them that, instead of proclaiming that the project will "increase market share," restate it as "avoid loss of market share." Turn the benefit--"a new system can improve customer satisfaction by eight percentage points"--into a risk avoidance statement such as, "delaying this system will risk a rise in customer dissatisfaction rise by eight percentage points due to preventable service problems."
5. Dramatize the delay cost. Want an easy way to make the cost of delay more vivid? Jon Gearhart, PeopleSoft's industry director for the public sector, preaches a simple formula: The cost of postponed payoffs equals the net present value (NPV) of the time series of delayed tangible payoffs less the NPV of faster initiation of the same benefits. In other words, every year you wait costs the enterprise the value of the delayed benefits for that year, adjusted for the cost of money. For example, if you delay the beginning of a $10 million stream of benefits until the year 2001 instead of the year 2000, it will cost the enterprise $626,000, assuming an 8% cost of money. A further delay of an additional year--to 2002--penalizes the organization another $580,000.
|Have a good "price of procrastination" experience to share? Delay not! Let me know via e-mail at firstname.lastname@example.org.|
Time is everywhere, and so are the costs of letting it slip away. By sharpening your "delay slayer" skills, you can leave procrastination dragons at your feet instead of at your throat.
Comment 05/11/07: "We seek a newspaper journalist based in India to report on the city government and political scene of Pasadena, California, U.S.A."
http://www.signonsandiego.com/news/state/20070510-1408-outsourcingthenews.html -Sad State of Journalism-
Re:What the hell *is* IBM Global Services? (Score:5, Funny) by bynary (827120) on Friday May 04, @04:29PM (#18994319) Moving forward, they leverage their intellectual capital in conjunction with the synergistic core competencies of a highly mobile workforce of motivated resources to manage global diversification, decentralize initiatives, and reduce inventory turnover in an increasingly risk averse marketplace. They operate on the principles of a paradigm shift away from participative management towards actionable strategic alliances. Quite intuitive, really...
NEW YORK, N.Y. (SatireWire.com) — AT&T will reduce its workforce by an unprecedented 120 percent by the end of 2001, believed to be the first time a major corporation has laid off more employees than it actually has.
AT&T stock soared more than 12 points on the news.
The reduction decision, announced Wednesday, came after a year-long internal review of cost-cutting procedures, said AT&T Chairman C. Michael Armstrong. The initial report concluded the company would save $1.2 billion by eliminating 20 percent of its 108,000 employees.
From there, said Armstrong, "it didn't take a genius to figure out that if we cut 40 percent of our workforce, we'd save $2.4 billion, and if we cut 100 percent of our workforce, we'd save $6 billion. But then we thought, why stop there? Let's cut another 20 percent and save $7 billion.
"We believe in increasing shareholder value, and we believe that by decreasing expenditures, we enhance our competitive cost position and our bottom line," he added.
AT&T plans to achieve the 100 percent internal reduction through layoffs, attrition and early retirement packages. To achieve the 20 percent in external reductions, the company plans to involuntarily downsize 22,000 non-AT&T employees who presently work for other companies.
"We pretty much picked them out of a hat," said Armstrong.
Among firms AT&T has picked as "External Reduction Targets," or ERTs, are Quaker Oats, AMR Corporation, parent of American Airlines, Callaway Golf, and Charles Schwab & Co. AT&T's plan presents a "win-win" for the company and ERTs, said Armstrong, as any savings by ERTs would be passed on to AT&T, while the ERTs themselves would benefit by the increase in stock price that usually accompanies personnel cutback announcements.
"We're also hoping that since, over the years, we've been really helpful to a lot of companies, they'll do this for us kind of as a favor," said Armstrong.
Legally, pink slips sent out by AT&T would have no standing at ERTs unless those companies agreed. While executives at ERTs declined to comment, employees at those companies said they were not inclined to cooperate.
"This is ridiculous. I don't work for AT&T. They can't fire me," said Kaili Blackburn, a flight attendant with American Airlines.
Reactions like that, replied Armstrong, "are not very sporting."
Inspiration for AT&T's plan came from previous cutback initiatives, said company officials. In January of 1998, for instance, the company announced it would trim 18,000 jobs over two years. However, just a year later, AT&T said it had already reached its quota. "We were quite surprised at the number of employees willing to leave AT&T in such a hurry, and we decided to build on that," Armstrong said.
Analysts credited Armstrong's short-term vision, noting that the announcement had the desired effect of immediately increasing AT&T share value. However, the long-term ramifications could be detrimental, said Bear Stearns analyst Beldon McInty.
"It's a little early to tell, but by eliminating all its employees, AT&T may jeopardize its market position and could, at least theoretically, cease to exist," said McInty.
Armstrong, however, urged patience: "To my knowledge, this hasn't been done before, so let's just wait and see what happens."
NEW YORK—Seeking to reduce costs and streamline internal operations, AT&T eliminated 1,500 mid-level employees Tuesday.
"The telecommunications industry is an incredibly competitive one and, unfortunately, it is sometimes necessary to make cuts in order to ensure longterm fiscal viability," said AT&T chief executive C. Michael Armstrong, standing among 10-foot-high piles of former employees. "It's a shame that these people are no longer with us, but the end result should be a leaner, stronger AT&T."
More employee liquidation is planned in the near future, with over $23 million in staff cuts over the next 18 months through buyouts, early-retirement incentive packages and pneumatic bolt guns.
Addressing stockholders at a meeting yesterday, Armstrong said he is "extremely excited about the positive impact these changes will make." The company's stock jumped from 62 1/4 to 72 following the announcement of the personnel cuts, the second-largest terminal layoff in AT&T history.
"After a 15 percent drop in profits over the last two quarters, we knew we had to shake things up," said AT&T vice-president of human resources Harold W. Burlingame. "Once we made the decision to eliminate some personnel, our priority was to do so in the most quick and painless way possible. I believe we accomplished this.''
Burlingame expressed regret that AT&T was unable to provide the employees greater advance notice of their liquidation.
"Whenever we let employees go, we try to let them know well in advance, so they have ample time to say goodbye to co-workers, supervisors and loved ones," Burlingame said. "But in this case, we unfortunately couldn't, because we really needed to have them working hard right up to the minute we assembled them in the cafeteria."
Burlingame said AT&T has no plans to offer the 1,500 departed employees severance pay, claiming it would be "of little use to them." He thanked the employees for their many years of loyal service to AT&T and expressed hope that they ultimately find themselves in an even better place.
September 11, 2011
Nobody expected this to be an ordinary Sunday. Airport security was especially tight on this significant anniversary. The random-pluck programs were turned off today. Every passenger was required to step into the X-ray booth, undress, and place all clothing into the gamma box before being allowed to proceed.
No one will ever know why Austin was the first to be affected, that morning. Perhaps it had something to do with the city having one of the last "Bushvilles," tin shanties clustered near the airport. With the exception of Austin, most of the nation's geeks had been resettled in huge public dormitories on farms run by the National Forfeiture Administration. There (living on land once owned by some farmer accused of smoking a joint, downloading music, violating the new .03 blood-alcohol DUI limit, visiting a prostitute, or returning DVDs late), a computer person could compete for regular contracts on the global market, sustaining himself on a world-average annual income by growing his own food and sharing camp chores with bunkmates.
But Austin still had a cell of active Republicans, with the ear of one recalcitrant state appeals judge. The Austin resettlement colony had been held up on one technicality after another. If you wanted to find a computer maven in this city, you'd do the pretend-you-don't-see-them stroll past the beggars at the Bushville perimeter wire, then prowl the rows of shacks until you found the ragged person whose battered solar-powered laptop produced the E-mail message that had looked so good on your watchtablet. If there was going to be any repeat of the Cupertino food riot of 2005, it was highly likely to happen right here.
A hotel executive from Hearst Dreamland Resort happened to be the first. After stepping off her flight from San Luis Obispo, she pushed her card into the Bank of India ATM near Baggage Claim, and keyed in her PIN. Instead of the usual flood of tiny aluminum dollar coins, the machine flashed ACCOUNT DECLINED. She was too busy to pick up the Help Line receiver and wait the twenty minutes it took to get a fuzzy, accented voice that might or might not have been able to diagnose her problem. After all, California had only just emerged from Chapter 9 reorganization after six years, and was still under martial law. Public resentment simmered over the mass sale of state assets in bankruptcy, even after Gov. Boxer mandated that eBay hire local temps to run the sale servers. When the Soros/Tiger Balm partnership snapped up Hearst on the third day of bidding, the Silicon Valley Geek-Green Alliance had posted anonymized threats to burn the Castle down. A wall of military security kept the GGA out, but all the execs had seen hacker attacks in one form or another. Since the lynching of the Advistron board in 2007, most upper-level corporate folk had found it prudent to stay in their gated compounds and let Trav-L-Temp proxies in stiff white Kevlar suits run all their out-of-town errands.
Up one level in the Austin terminal, there was a commotion at the Southwest Delta United counter. The reservation system seemed to be running, but at 0800 sharp it had stopped accepting locator codes. Every ticket in the system had, apparently, electronically vanished. Passengers were waving e-ticket confirmation printouts that no longer corresponded to reservations.
High above the waiting area, the CNN monitor carried first reports from the airline's check-in counters in New York, Chicago, Zurich, Beijing, Sydney, and Dubai: every ticket query was coming up Not Found. Twenty-three minutes later, a corporate rep at the Guangzhou datacenter came on the air to report an "intrusion" that would require a "software rollback and restore." The airline would be down the rest of the day.
At the same moment in Los Angeles, every one of the electronic signs on the Spielberg Freeway began flashing EMERGENCY! EXIT NOW! Five minutes later, the signs on the Caltrans public freeways followed suit. Traffic surged onto surface streets to form a puzzled mass of weekend drivers wondering where to go, just as tourists shopping for souvenirs at the Chinese Chinese Theater became the first in the nation to discover that their credit cards had just electronically left home without them.
At the "Summer White House" in upstate New York, President Clinton was finishing up a working vacation, polishing her Homecoming Week speech for Wellesley College. Late in her administration, she was looking forward to summing up the country's years of strife and triumph: the California bankruptcy, the National Health Plan, the scandal over the Chinese invasion of Taiwan, and her landmark solution to the outsourcing crisis: the Labor Resettlement Act.
The Labor Resettlement Act had allowed Americans to get back into competition with the Third World -- not by imposing tariffs and embargos, but by competing directly on standard of living. It had almost worked, too: with the American technical wage brought down to the new-dollar equivalent of $5,000 a year, the new "dorm geek army" began winning back software contracts, just in time to boost Clinton's polls enough to hold off Stossel in 2008, gaining a second term. But in the following year, the traditional outsourcing havens began to lose share to Vietnam, Indonesia, and the emerging "Stans" of southwest Asia, where the standard of living remained still lower, and people will work for even less. The world back-office wage dropped to $2,500 per year, and only Federal Reserve Chairman Paul Krugman's program to devalue the dollar kept America in the running. The country was clawing its way back, and by now it was rumored that over ten percent of the latest Windows release was American-made subcontracted code.
Two hours after the first signs of attack, Clinton received a call on the Pentagon secure link. Defense Secretary Ramsey Clark, white-faced, broke the news of a nationwide software meltdown. Virus detectors saw no unusual activity. It was only after the Pentagon, which fortunately still had a back office staff all its own, began to put together the stories of al Qaeda operatives who had trickled out of their caves and gone to computer schools all over the Third World, that the picture began to come into focus.
In the minutes left before the embedded software that tied America's TV networks together failed for good, Clinton went on the air, bit her lip, and began to tell the nation an ancient story of Troy and an outsourced horse.
Computing Center [n] In a University, that organization whose functions are 1) To impede wherever possible the development and usefulness of computing on the campus, 2) To gain the lion's share of funding, spend it largely on obsolete and otherwise inappropriate Solutions, and convince the campuse(s) wherever possible to expend their meager funds on the same, and 3) to oppose vigorously any new, useful and popular technology for ten years or more until nearly everyone on the campus(es) and elsewhere in the world is using it, then to adopt that technology and immediately attempt to gain complete and sole control of it [see MS-DOS, UNIX, ETHERNET, INTERNET].
Lou Dobbs has been paying attention to the outsourcing of American jobs to the detriment of our over-all economy with the result that we are now fighting (unsuccessfully) to keep a middle class in this country. I think we are well on our way to becoming a third world country...jobs in the service sector do not pay a living wage. Manufacturing has been outsourced to the point where we don't even make our own weaponry any more--how stupid is that? Gee, China, can you sell us some widgets for our guns? For our tanks, hummers? Can you sell us some uniforms for our army, navy etc?
Congress today announced that the office of President of the United States
Date: 3/10/2006, 1:53 am, EDT Name: George Bush Email: Number: 55
of America will be outsourced to India as of Mar 9, 2006.
The move is being made to save the President's $400,000 yearly salary, and
also a record $521 billion in deficit expenditures and related overhead the
office has incurred during the last 5 years.
"We believe this is a wise move financially. The cost savings should be
significant," stated Congressman Thomas Reynolds (R-WA). Reynolds, with the
aid of the Government Accounting Office, has studied out-Sourcing of
American jobs extensively. "We cannot expect to remain competitive on the
world stage with the current level of cash outlay," Reynolds noted.
Mr. Bush was informed by email this morning of his termination.
Preparations for the job move have been underway for sometime. Gurvinder
Singh of Indus Teleservices, Mumbai, India, will be assuming the office of
President as of January 30, 2006.
Mr. Singh was born in the United States while his Indian parents were
vacationing at Niagara Falls, thus making him eligible for the position. He
will receive a salary of $320 (USD) a month but with no health coverage or
It is believed that Mr. Singh will be able to handle his job
responsibilities without a support staff. Due to the time difference between
the US and India, he will be working primarily at night, when few offices of
the US Government will be open. "Working nights will allow me to keep my day
job at the American Express call center, "stated Mr. Singh in an exclusive
interview. "I am excited about this position. I always hoped I would be
A Congressional spokesperson noted that while Mr. Singh may not be fully
aware of all the issues involved in the office of President, this should not
be a problem because Bush was not familiar with the issues either. Mr. Singh
will rely upon a script tree that will enable him to respond effectively to
most topics of concern. Using these canned responses, he can address common
concerns without having to understand the underlying issues at all.
"We know these scripting tools work," stated the spokesperson. "President
Bush has used them successfully for years." Mr. Singh may have problems with
the Texas drawl, but lately Bush has abandoned the "down home" persona in
his effort to appear intelligent and on top of the Katrina situation.
Bush will receive health coverage, expenses, and salary until his final day
of employment. Following a two week waiting period, he will be eligible for
$240 a week unemployment for 13 weeks. Unfortunately he will not be eligible
for Medicaid, as his unemployment benefits will exceed the allowed limit.
Mr. Bush has been provided the out-placement services of Manpower, Inc. to
help him write a resume and prepare for his upcoming job transition.
According to Manpower, Mr. Bush may have difficulties in securing a new
position due to limited practical work experience.
Toll-free hotline launched for checking software piracy (Deccan Herald)
SpikeSource CEO Kim Polese lays out bright open source future (InfoWorld via Yahoo! News)
Insecurities over Indian outsourcing
Take these ten flatteners and call me in the morning
Sensitive Data Offshoring: Overcoming Security Concerns
Sidebar: Costco Aims to Avoid Offshore Dependency
Money thefts raise alarm again about security of offshore outsourc
Costco Aims to Avoid Offshore Dependency
Take these ten flatteners and call me in the morning
Venture Capital Survey (San Jose Mercury News)
IT exports from Bangalore cross Rs 22,000-cr mark (Deccan Herald)
Quintek Advances Multi-Year Agreement to Provide BPO Services for Consumer Lender with $20 Billion in Annual Revenues (Primezone via Yahoo! UK & Ireland Finance)
India, China should cooperate on technology, says China's PM (Electronics Supply and Manufacturing)
Ingram Micro to Outsource, Cut 550 Jobs
Tele-SalesForce.com Showcased in New Book, Essentials of Business Process Outsourcing, by Dr. Thomas Duening
SAS 70 Standard Helps Bankers Evaluate Outsourcers
Foreign Affairs - Sinking Globalization - Niall Ferguson [del.icio.us]
National News Channel Interviews Crystal Hues on Globalization, Localization
The Tiger and the Dragon
China-Based Outsourcer Explores Challenges And Opportunities Of Evolving Market
The Hard Road To Outsourcing
State and local officials look to outsourcing
Money thefts raise alarm again about security of offshore outsourcing
Reuters' US scribes protest outsourcing to India
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