August 29, 2003

Why offshore IT outsourcing can't be stopped

- By Robin 'Roblimo' Miller -
I have many friends who have lost high IT industry paychecks and are struggling financially because their jobs are now being done in lower-cost countries. But none of the legal remedies currently proposed are going to stop this problem -- assuming it really is a problem in the long run.

First of all, I want to point out that American programmers and other IT people were outstandingly unsympathetic when factory workers' jobs started going overseas 30 or 40 years ago, and I don't recall a single peep out of anyone in the IT industry when taxi companies in many American cities managed to get regulations requiring cabbies to pass local knowledge tests removed so that they could hire new-immigrant drivers instead of treating their "American" drivers well enough that at least some of them would stick with the business and make it a career.

Like it or not, programmers and others in the IT industry are considered overpaid and underworked by many Americans who work in less-glorious industries. Few restaurant workers or hotel employees are going to get worked up by $60,000-a-year IT guys losing their jobs. Plumbers and auto mechanics, along with many other skilled tradespeople, tend to be slightly scornful of white collar workers in general, and may have trouble seeing why a programmer should earn any more than an accountant -- and many skilled tradespeople consider accountants overpaid, too.

At the other end of the scale, corporate biggies outside of software companies tend to consider their IT people as somewhat ... strange ... more often than not. This is not a new phenomenon. I remember a guy who worked as a mainframe tech for a bank back in the late '60s who went by the name "Paul the Prophet," and had a dyed-green mustache. He was the only employee of that bank other than janitors and loading dock people who didn't wear a tie to work, but he had unique skills his bosses needed, so they put up with him.

A major reason many corporate managers jumped onto the Microsoft-fueled PC bandwagon was to free themselves from dependence on weirdos like Paul, and the idea of a server admin interface that non-technical managers can understand without help from the Pauls of the world is probably one of the major driving forces behind Microsoft's ability to sell servers today.

Movies like Jurassic Park haven't helped the image of the "IT genius," either. While the programmers and sysadmins I know personally tend to be responsible citizens even if some of them think sandals and a clean T-shirt are formal clothing, there is a lurking fear in many people's eyes when they meet someone who is comfortable with the arcane commands it takes to truly communicate with a computer.

Then there's the "Gates factor." This man is often held up as an IT genius, the programmer of programmers, the king-daddy of the software industry. And he is rich! Rich beyond the entire Bush family's dreams, so rich that he can afford to feed the entire population of India and still fly anywhere he wants in a corporate jet instead of taking commercial flights. You and I know that most programmers are never going to make as much money as Gates, and that (despite some public perception to the contrary) most Microsoft employees will never become stock option millionaires, but that image is still out there -- of programmer as hugely wealthy or at least with the chance of becoming hugely wealthy -- and until it goes away, not many administrative assistants are going to cry over lost programming jobs. (Unless they are married to programmers who have lost their jobs, of course.)

The upshot: Except in California's Silicon Valley and a few other centers of the IT industry, don't expect a great deal of political support for laws to help keep programming jobs in the U.S. The image of programmers many people (including Members of Congress) have may be neither fair nor balanced, but perception is often more important than reality.

The enforcement problem

Let's assume millions of voters suddenly call their representatives and demand a 500% duty on all IT work done overseas for U.S. companies.

Does this apply only to contracted services or also to packaged software sold at retail, like (German) SuSE and (French) Mandrake Linux?

What about customization of free software?

Where do we draw the line between software-as-product and software-as-service? Do we levy import duties on applications we use over the Internet that are hosted on servers in other countries in order to protect home-grown ASPs (application service providers) like salesforce.com?

Then comes the big question: Is the federal government going to monitor all my Internet traffic to see if I download software from a foreign source, so it can charge me duty on it?

Aside from the ethical and First Amendment questions this would raise, the task of monitoring all Net traffic in and out of the U.S. would be a ferocious and expensive task. It is doubtful that the revenue raised from even a huge tax on software downloaded from non-U.S. servers would be enough to pay for the task of collecting that money.

And then comes the issue of collaboratively developed software. How do you decide how much of its value came from U.S. programmers and how much came from their associates in India, China, Russia or Canada? And what about free-as-in-beer open source software? It would be exempt from software import taxes, wouldn't it?

The upshot: Even if the U.S. decides to tax the bleep out of imported software and IT services, as a practical matter the cost of collecting that tax would be so high that it wouldn't generate any revenue, and it would take an extraordinarily stupid government to levy a tax that loses, rather than raises, money.


Government purchases are different

Government entities can and should try to buy from local vendors whenever possible. The People's Republic of China, New Jersey, and other jurisdictions try to make as many service and software purchases as possible from their homies. This is fine. Why shouldn't tax money be spent where it'll do the taxpayers some good -- and why shouldn't local taxpayers have first crack at their own government's business?

It's only when governments try to get their corporate and individual citizens to only buy locally, even if they think globally, that things get sticky -- and that's when they also risk violating free trade treaties.

Come to think of it, wouldn't government preferences for local purchasing possibly violate some of those treaties? If the People's Republic of China refuses to buy fine office software like Microsoft Office or StarOffice, which are both sold by U.S. companies, shouldn't we stop buying the many Chinese-made items sold at Wal-Mart? Or at least place heavy duties on them? Or at least make sure our government doesn't buy anything from China?

The upshot: When you decide to boycott another country's products or services, they might decide to boycott yours in return. The whole concept of free trade collapses. If the U.S. decides to stop buying clothes and toys from China because China decides to stop buying software from us, we would be forced to reopen a lot of closed factories and pay a lot of spoiled Americans to make things we need instead of buying them from eager Chinese. Just think! The cost of items like sports shoes might shoot up by a buck or two, and the companies that sell them might have their profits cut by 2% or 20%, and that would knock out some of their executives' bonuses, and we can't have that, can we?


"In the long run...

... we are all dead," said economist John Maynard Keynes. And in the long run, perhaps spreading the IT industry worldwide will raise living standards everywhere, and make us all better off. This is a moralist's approach to the concept of exporting jobs.

Libertarian IT workers who watch their jobs go overseas should derive joy from geographic shifts in employment. Their "dog eat dog" creed requires them to be happy whenever the marketplace finds a way to pay workers less and increase business owners' profits.

Another school of thought might say that the only truly important human endeavors are providing food, clothing, and housing, and that computers -- like movies, Caribbean cruises, and video games -- are frills we can do without; that as long as the U.S. can handle the three basics, nothing else really matters. There is no question about this country's ability to provide food, housing, clothes, and even basic medical services to all of its citizens, even though inefficiencies in distribution may sometimes make it seem like there aren't enough of these basic necessities to go around, and many people here may not be willing to accept "minumum quality" housing and food even if the U.S. idea of "minimum quality" would be considered total luxury by a majority of the world's population.

But what we think about moving U.S. programming jobs offshore doesn't matter very much. As stated earlier, in the Internet age there is no practical method of regulating the international movement of digital information.

Perhaps the only effective way to "bring back IT jobs" is to encourage more domestic production of physical goods by means of import quotas or punitive duties. This would still cause trade treaty problems, but is more likely to succeed than trying to regulate software imports, if only because it is easier to track and control the movement of things than the movement of electrical impulses.

More U.S. factories would not only mean more blue-collar jobs, but also jobs for computer hardware installers and maintainers, plus more jobs for programmers and systems administrators, often in fast-reaction positions that can be done more efficiently on site than by workers half a globe away.

But the chance of protectionism becoming law is nearly nil in the current U.S. political climate, and even if it did, the harm it might do -- by raising the U.S. sales prices of goods ranging from RAM to baby shoes -- might easily kill any economic gains from an increased number of U.S. manufacturing sector paychecks.

In the end, like it or not, we here in the U.S. are going to have to learn how to deal with a truly worldwide IT economy. Some IT workers here may be forced to leave the "computer industry" and move into non-offshorable jobs, but this may not mean they give up doing computer work, because as our economy continues to shift away from manufacturing and toward services, we may see just as many non-portable IT "support" jobs created as we would if we decided our economic future was best served by trying to turn our economy back to its traditional dependence on manufacturing.

The upshot: Even though hundreds of thousands of programming and other IT jobs are likely to leave the U.S. over the next few decades, the vast majority of U.S. IT workers will survive, and possibly even prosper in the end, although they may have new employers and work in new fields. As trucking companies expand and become increasingly computerized, for example, new jobs maintaining mobile data systems will be created.

The trick to staying gainfully employed in the IT industry -- and to breaking into it -- is, as always, a matter of spotting growth areas and moving toward them. This doesn't just mean learning new programming languages or how to build, install, and repair new types of hardware, but also keeping up with business news to see what industries may offer the greatest future opportunities.

And those industries will probably not be "computer" industries in the traditional sense. As computing devices become more common in places they weren't traditionally a major factor -- which can be anywhere from a tomato packing plant to a ready-mix cement distributor -- so will computing jobs.

Your next "IT job" may be in an industry you didn't even think about a few years ago. It may be in a place you never thought of as an "IT mecca." But if you have solid skills, whether as an entry level programmer or sysadmin or as a top-level IT manager or CIO, some company out there almost certainly needs someone just like you. The trick is finding that company -- but that's another article for another day.

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