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The IT Market: Cyclical Downturn or New World Order? 1119

Posted by michael
from the giant-sucking-noise dept.
An anonymous reader wrote: "CNN.com is running an interesting story on the heels of a Forrester Research report concerning the shift of high tech jobs from the U.S. to places like China, India, and Russia for cheaper labor and got me thinking about the nature of the current downtrend in programmer demand in the U.S (as opposed to the "morality" of such a shift). While I'm sure the causes for this downtrend are variable, the more important question in my mind is this -- Is software guru Bruce Eckel correct in saying that the current downturn represents a temporary blip in the business cycle as jobs are shifted from large and medium companies to smaller companies, or are Andy Hunt and Dave Thomas correct in recognizing this as a new reality. Personally I tend to agree with Hunt and Thomas's view (which is not completely opposed to Bruce's opinion, btw) and I also agree with their viewpoint that protectionist policies like H1B quotas and tariffs won't work to change anything for the better. So what do you think? Is this just another business cycle or is this a New World Order in IT?"
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The IT Market: Cyclical Downturn or New World Order?

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  • Market adjustment (Score:5, Informative)

    by b-baggins (610215) on Tuesday July 15, 2003 @02:46PM (#6444938) Journal
    The cold, unpleasant truth here, is that 90% of IT isn't worth its salary.

    Globalization is the great leveler (assuming free markets). It takes time, but eventually, everyone gets paid what they're actually worth as opposed to what they think they're worth.

    The secret is to make yourself worth more. Probably a meaningless admonition to most slashdotters who think that the world owes them a living so they can spend all their time downloading files from Kazaa.
  • by mrlpz (605212) on Tuesday July 15, 2003 @02:53PM (#6445009)
    Are you nuts ? Have you ever tried using tech support call centers outside the country for anything of useful purpose ? Consider that DELL does this now, and there is nothing but discontent among customers ( and I'm not just talking about US customers, so that dispels the "US consumer as whiner" myths ).

    And it's not just level 1 support, either.

  • by Anonymous Coward on Tuesday July 15, 2003 @02:54PM (#6445023)
    Nice going, cut-and-paste the 8th (9th?) paragraph from the Eckel link without attribution, get a nice (5, Insightful) for your trouble.

    Sweet. (I would've modded you down, but how can I go against a tide of clueless moderators?)
  • Sad Truth (Score:5, Informative)

    by kenp2002 (545495) on Tuesday July 15, 2003 @02:55PM (#6445049) Homepage Journal
    The sad truth is that the H1B Visa is no longer an issue. It is easier and cheaper to outsource your entire support staff to a foreign country. With the maturing of high speed communications the ability to work with staff across the world is forcing labor costs down. Any law passed is easily circumvented as the support center ( consulting shop outside the US) is not part of the business entity. The only way that this behavior could be deterred is by putting a tarriff on foreign services which would too broadly impact other industries that arn't "abusing" (relative term here) this business option. P.S> Thank Clinton for raising the H1B visa cap his last day of executive power. 3 days later 2000 IT staff nation wide (US) were given notice. 700 here in Minnesota. Where I was at the time EVERY person that was laid off was replaced by H1B staff the following month (That totalled 22 people). One of my co-worker at $33/hr was replaced by a H1B @ $9.50/hr. NY Times was applauding Bill for helping create a 5 BILLION dollar IT industry in India. That's 5 billion that American Workers lost. That's 5 billion directly gone from the US economy.
  • by pvdl (621000) on Tuesday July 15, 2003 @02:56PM (#6445058)
    > they are only outsourcing the call centers and
    > other jobs for which no skill is required.

    That is just completely misinformed and inaccurate.
    Much software development work has already gone overseas to India and Russia. They work at about 50% of the rate you have to pay a programmer in the US.

    That work is never coming back to the US economy. New software development and QA jobs are going overseas faster than they are being developed here. The skills you learned in college don't help with this.

    It is not unusual to see ads in the Silicon Valley paper (Mercury News) for software management jobs in Bangalore. They are trying to lure home Indian expats.

    Things are ugly in the world right now.
  • by blunte (183182) on Tuesday July 15, 2003 @02:58PM (#6445092)
    Many development jobs may be leaving the US, but there are many other tech related jobs that will exist (and don't currently).

    From my consulting experience (large and small companies), I've seen two areas that need major improvement: workflow and training.

    They're actually strongly related. Many companies are just now basing a significant part of their business processes on technology. They've been gradually moving this way for some time, but it's at the point now where a tech catastrophy would seriously hurt them. However, they're still only taking advantage of perhaps 10 to 40% of what's technically feasible and also practical. There's still quite a lot of double entry of data and shuffling of papers.

    So the workflow side should see a continued increase in technical development for years to come, and this will require services of "experts" of both the problem domain and technology solutions.

    Training is the other area that should see continued and hopefully increased rate focus from businesses. Most users (and their bosses) approach computers and software as they approach a rental vehicle. They don't typically get much or any formal training, and they don't spend much time with books or manuals.

    They're just scratching the surface of what much of their tools could do for them. Many people need broad and specific training to really make their technology work. An example of this is MS Exchange and Outlook. (I'm no fan of these, but I use them as example since they're ubiquitous.) Most business users can send and receive email, possibly with attachments. But most never touch their calendars, public folders, etc.

    So maybe development is moving away, but there exists a big vacuum for other tech-related services, and those are going to stay right here in the US, if only because they often require personal contact.

  • by SlashChick (544252) <ericaNO@SPAMerica.biz> on Tuesday July 15, 2003 @03:04PM (#6445169) Homepage Journal
    The parent post was copied directly from this link [mindview.net] (originally linked in the article summary as Bruce Eckel's viewpoint.) Please do not mod the parent post up, as it is not an original post and does not identify the original source.
  • People are People (Score:2, Informative)

    by ThulsaDoom (574868) on Tuesday July 15, 2003 @03:10PM (#6445246)

    Wired just ran an interesting article last week about Indian IT workers falling apart after long hours. IT Sweatshops Breaking Indians [wired.com]

    Everyone has thier breaking point I guess.

  • Re:Fundamental shift (Score:1, Informative)

    by Anonymous Coward on Tuesday July 15, 2003 @03:11PM (#6445255)
    Companies that have sent work offshore will have very mixed results -- just as they have had with American workers, but much worse.

    Exactly... I have seen this happen first-hand. Offshored projects require the design to be explicitly spelled out in extreme detail, otherwise you get something that is not only broken, but it doesn't even try to do what you wanted in the first place...

  • by doinky (633328) on Tuesday July 15, 2003 @03:28PM (#6445436)
    The H1B program is an instance of government interference in the market - at the behest of big business, who did not like the idea that labor (programmers) were making more money than managers in many instances.

    The EU is a good example - they simply don't allow guest workers in anywhere near the scale that H1B allowed. And just try to immigrate to Germany and see how far you get.

  • Biting The IT Bullet (Score:3, Informative)

    by Foofoobar (318279) on Tuesday July 15, 2003 @03:31PM (#6445494)
    Companies are going to pay in the long run and many already are figuring out the folly in this. Though tech workers in foreign companies are cheaper, unless you are actualy willing to have a presence over there, this is not a viable solution. Communication barriers and cultural differences create too many miscommunications and problems and something that could have been done stateside takes twice as long.

    My wife who is a QA tester, had to work for a company that moved all there QA to India and it became increasingly more and more difficult for the developers who were Indian to work with the developers who were American. Aside from that, they didn't understand goals and expectations for the product and ended up giving them something much different that what was asked for.

    I think tech support, customer support and other low-tech things like that can be moved but in the long run, if you are willing to commit to a presence in a foreign country, you are better off sticking stateside... or trying Canada. :)

  • by zpiderz (646360) on Tuesday July 15, 2003 @03:44PM (#6445643)
    I currently work for $7.25 / hour doing small time web development for a department while I'm in school. It's not that much, but I don't do much either. A friend visiting from India says that a middle class person makes about 1,000-1,500 rupies a month (and that's full time out of college) You get about 46 rupees per dollar now. So, if I work 4 hours I've already made enough to live decently for a month in India. If I worked fulltime (8 hrs / day) I'd be filthy rich for 1 days work. They work long hours all month long and make what I (a cheap college web developer) make in 2 days. How can we compete with this?
  • by Michael.Forman (169981) * on Tuesday July 15, 2003 @04:02PM (#6445840) Homepage Journal
    Below is a link to the article referenced in the parent post.

    The Economics of Empire [mindfully.org]

    Michael. [michael-forman.com]
  • reality strikes (Score:5, Informative)

    by rutledjw (447990) on Tuesday July 15, 2003 @04:04PM (#6445867) Homepage
    C++ may be C++ to some, but there are other stories as well. I have cousins who own a company which is NOT IT based but has moderate-to-heavy IT requirements. They've had trouble with goofy contractors writing poor software. Then again, they're in a small town far from a bigger one with better people.

    Solution? Use an Indian company to do the job! C++ IS C++, after all. Within a year, they were back at square one. I have another friend that is interviewing and testing Indian developers for a proposed India-based development lab. Result? Very few were able to answer half the questions correctly (mid-level Java developer-type questions).

    So, quality does kick in at some point. India is NOT the IT panacea some have hoped for. I still think we'll see some more outsourcing, but it isn't the end of IT as we know it. Not every company can do this kind of thing.

    On the executive point, yes and no. There are a LOT of execs who are part of the good-ol-boy system. Those who are good, do a great deal more. But the squids...

    Anywho, my opinion...

  • by w4rma (457213) on Tuesday July 15, 2003 @04:21PM (#6446091)
    IMHO, it's a national security issue. We don't need to be exporting our expertise, we need home grown expertise that will stay in America.

    Big buisness uses H1-B and L-1 visas to hire employees that they can pay well under the going rate for U.S. citizens. Small buisness doesn't have the overseas connections to hire folks with this so it only serves to give big buisness even more power over the start-ups.

    Additional information on H1-B and L-1 visas:

    Washtech.org [washtech.org]

    L1s Slip Past H-1B Curbs [eweek.com]

    Re: H1B and L1 visa influence US unemployment [swanh.org]

    After H1-B visa, L1 now bytes IT [mid-day.com]
  • Outsourcing Trend (Score:1, Informative)

    by Anonymous Coward on Tuesday July 15, 2003 @04:58PM (#6446541)
    Normally I don't respond to these things, but really. Let us at least admit that there is a problem here if you are an American in almost ANY industry. IT is just the current victim of a larger trend.

    As for credibility, I cite personal interaction with a representative sample of people making these decisions. Several of my customers who are Director and EVP level types at large companies that employ technology workers. The discussion happening here has happened with them over many dinners and lunches for the last couple of years.

    All my customers are outsourcing or plan to outsource 90%+ of their IT workforce to foreign companies over the near term. Each is a Fortune 1000 company. There will always be those critical projects that require home grown talent, but they are few and far between.

    The arguments that "americans are innovative" seems to imply that the majority of IT work has a need for innovation. Instead, the vast majority of IT work involves applying existing technologies to new or not so new challenges. Can you really argue otherwise?

    I have strongly advised family members not to follow the IT career path I followed in my life for exactly this reason. To date the majority of wealth transfer involving IT was to Americans. In the future it will be to non-Americans. As there are more non-Americans receiving the wealth than there were Americans, the individual recepient will not receive an equal amount. (Incidentally, many believe that India is going to become a relatively expensive place to outsource to because, just like anywhere there is a booming industry, Indian companies are showing signs of wanting to raise prices.)

    Free trade only works when participant plays by the same rulebook. In the world marketplace this is clearly not true. The rational decision for the American government, if they were really concerned for the common good of their populace, would be to move further towards protectionism in order to protect the common good of their own population. You can get a fairly decent summary of this idea from reading the end of Lee Iacocca's autobiography.

    I realize this pre-supposes the greed of the American people who are unwilling to drop their standard of living in order that the standards of others will rise. We can agree that this is exactly how Americans feel, can't we? I would even state that that is just how anyone would feel if they were in the same shoes as Americans.

    Most likely companies in the United States will slit their throats long term by engaging in globalization. There will be a primarily one direction flow of wealth out of the United States to other countries. The standard of living will drop in the United States and rise in other parts of the world. The United States will give away its position as an economic superpower before the EU and China even have a chance to try and take it away. Ironically the executives outsourcing American jobs today will see the opportunities for their children dry up.

    I am just jotting this down quickly (busy at the moment) but I think that IT is just feeling an overall trend that continues to work itself throughout the entire American economy. When it is over it will be a different world. America will be alot poorer, and countless other countries will be a bit richer.

    - AC

    p.s.: This does come from a scarcity mentality, which is a short term view of things. Over generations I think this situation will be corrected as technological innovation continues to raise the standards of living for the world as a whole. But unlike the decline the recovery will happen after I, and many of you, are dead.
  • by doinky (633328) on Tuesday July 15, 2003 @06:02PM (#6447238)
    What a load of crap. Yes, sponsorship costs dollars. A few thousand, in fact. When you can get an Indian to perform a 70K job for 35K, though, that extra few thousand for sponsorship is meaningless.

    The reason not everybody uses it is that you have to have a fairly large HR department in order to handle the paperwork; or outsource to somebody who does.

  • Re:again? (Score:3, Informative)

    by MasteroftheVoxel (162902) on Tuesday July 15, 2003 @06:09PM (#6447316)
    wrong. The point is the is the tech jobs ARE being significantly outsourced. Look at the developer jobs AOL is moving to India. Look at i2. Look at dozens and dozens of other companies.

    Yes, you can outsource integration and consultation and they are doing just that. i2 has all its internal and external tech support in India. The call centers are there. The sysadmins are there. The programmers are there. Soon all the servers will be moved there. The local tech people were laid-off and more in Bangalore were hired. Companies are offering relocation packages at 1/4 the pay to move to Bangalore. Some Indians who have immigrated to the US are taking them and moving back gome.

    Its exactly what you are saying WON'T happen that IS happening and that is why many are upset and think it is a bad idea. Read the articles and look at the data out there.
  • by argoff (142580) on Tuesday July 15, 2003 @10:20PM (#6449240)

    You'll note that globalism only seems to work one way. Why can't I buy shoes directly from Indonesia for $5? Why can't I get a PC from China for $100? If American companies really want to compete globally then let's open the door both ways and see how they fare when I can buy a DVD player online for a fiver + shipping.

    actually, why cant you? not a flame, I just don't see why you cant. Are there any regulations that prevent you? If it's not that way, then it's not free trade.

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