Years ago I heard a rumor (and I have no idea if it's true) that conservative pundit William F. Buckley sailed his yacht 3 miles offshore, into international waters, to try Marihuana. Presumably he inhaled. Being outside of US jurisdiction he was no longer bound by the laws of the nation, so did nothing illegal.
International Sports Link runs an offshore betting service from Port Canaveral, Florida. Gamblers spend the day aboard ship hovering just outside the 3 mile limit where they quite legally engage in behaviors that are quite illegal on the smudge of land that's not even over the horizon.
Now SeaCode has taken this idea to a new extreme. To skirt America's annoying worker-protection and tax laws, SeaCode plans to buy a cruise ship they'll outfit with 600 Indian and Russian programmers. It'll lie at anchor 3.1 miles off Los Angeles. This inexpensive labor will be just a half hour boat ride from shore, sparing their American customers the 14 hour flights to India.
According to Forbes, workers will earn $1800 per month, quite a hefty hike over the $500 they'd get in their own countries but far less than their colleagues ashore.
SeaCode's web site claims that “Another SeaCode benefit is that 90% of revenue comes back to the U.S. instead of flowing out of the U.S. to distant-shore outsourcing locations.” Huh? These people aren't paid enough to live in the USA; their salaries will go back home. It's more likely that 90% of the revenue will head overseas.
The company plans to cleverly disguise the programmers as “seamen” registered in the Bahamas so SeaCode can avoid those pesky payroll taxes.
The offshoring tempest has left me somewhat ambivalent. It's heart-wrenching to see the work flee the country, and I can't see how the trend will benefit us in the long or short term. I fear the burdening trade deficit, accelerated as these offshoring dollars find haven overseas, will make US bonds less attractive to foreign investors who finance a big part of our suicidal deficit.
But this is a trend that cannot be stopped. It's the result of the perfection of capitalism. CEOs have a fiduciary responsibility to reduce costs wherever they can. If they don't we, their stockholders, boot 'em out. Engineers often write that some action should be taken but I've yet to see a viable plan.
At the last two San Francisco ESCs I've moderated a Shop Talk discussion group about offshoring. A year ago people were angry and loud. Last month they were much more subdued and resigned. We're wearily accepting this new business model.
Now SeaCode is bringing offshoring to our own shores.
SeaCode's approach sounds like a great idea to me. Surround the USA with shiploads of migrant workers. Suck away the jobs, don't pay taxes, and funnel money overseas as fast as possible. Come into port once a month to dump sewage. When our economy is finally drained they can steam to another coastal nation that still has a few bucks in the treasury.
There might not be much we can do about offshoring. But I've long wondered what our nuke subs do now that the Cold War has ended. Perhaps a new role for their torpedoes is lurking just about 3.1 miles offshore.
(Before you hit the “flame” button, that last is a bitter joke.)
Jack G. Ganssle is a lecturer and consultant on embedded development issues. He conducts seminars on embedded systems and helps companies with their embedded challenges. Contact him at . His website is .
Under a proclamation made by President Clinton in 1999, U.S. agencies are authorized to enforce U.S. law up to 24 miles offshore (not 3 miles).
A simple further proclamation is all that is required to extend the distance to 200 miles (which is the historical U.S. claim of exclusive economic zone).
I wouldn't invest in this little venture, but hey… fill your boots…
– Rennie Allen
Outsourcing has already been tried!!!
Yes, this is indeed quite true. Before anybody smirks at me; let me remind you that in the late 1980's and early 1990's, there was this massive rush to turnkey all kinds of development to development and build-mfr teams.
The end result of this effort was pretty mixed as I recall. What wound up happening was a mixed bag of results. The most successful projects were those that were well run and managed by the customers. The biggest benefit was derived by customers that had a well developed plan and idea of what was needed for their markets. Also, a well developed plan and vision for what their products were supposed to do.
Who knows? maybe this current outsourcing thing may follow the same pattern of what transpired during these times.
The modern day embedded consulting is generally some Sr. level engineer bringing in some new core-level technology or competence that the client company wishes to have in-house, but does not desire to 'spin-up' by themselves.
Eventually, this in-house consultant will leave for other pastures/clients when the said company grows to the mid-level size and starts building a larger type of organization.
– Ken Wada
I cann't believe this is real !!! I suggested an idea of building offshore hospital to a friend about a year ago as a joke to beat high medical cost here. mY friend is doctor so he did not like the idea…
– Manoj Punamia
Love your articles ( the tech ones anyway )
This latest article seems to indicate that you are are a tribalist xenophobe.
A person unduly fearful or contemptuous of that which is foreign, especially of strangers or foreign peoples.
Of course, we can quibble over “unduly” ……
I , myself , am afraid of foggy bottom which siphons the creative lifeblood out of what once was the most innovative country on earth.
– Gus S Calabrese
Geez, never thought off-shoring was going to be taken so literally.
I understand (sort of) economics and the need for companies to save (some) money (although why not start with the hefty salaries of the higher-ups, but that's for another response). But, my big problem is: Where do I go from here?
I'm stunned, especially considering the comments from some of the higher-ups at the leading technology companies. I recently read Bill Gates' comments about off-shoring and eliminating the H1-B limit altogether. The reason behind this, don't let “too many smart people” come into the country. Wellthat's just plain B.S. I don't think these rules were put in place to prevent intelligence from entering the country. We're trying to prevent the “unreasonably inexpensive” engineers from overtaking our jobs. Sorry, I just can't live on $5000 a year. Maybe Congress can lower the price for a gallon of gas to $0.15, or set a law where the cost of milk is $0.05 a gallon ” until that is done, I can't afford to make $5000 per year.
I was able to witness outsourcing as close as it gets ” the mortar hit right next to my (and my coworkers) foxhole. Embedded developers from India were brought in while I was working as a contractor right in front of full-time workers and us contractors. Slowly but surely the local contractors were not renewed and new, less expensive (as was pointed out to me by the hiring manager) Indian contractors were brought in. Full-timers, seeing the writing on the wall, quickly made their escape as well. Tasks were quickly shuffled around to make sure the Indian contractors had their queues filled with work ” important work, intellectual property work, things you wouldn't want competitors to find out about. Now one or two of these guys were decent engineers ” but they weren't “smarter” than other engineers I have worked with ” sorry Mr. Gates.
So, I can understand that I need to stay ahead of the curve by being a better software engineer, expanding my skills, broadening my technical background, etc. But, then shouldn't that command a higher rate/wage? That's not true in this outsourcing market. The cheaper labor is the ideal candidate for the position.
Does that mean I just wasted my time learning these new skills, enhancing my technical background (and studying for years to earn my BSEE)?
What field do I go into as an embedded software engineer? I thought the skills I had obtained over the decade of work experience were highly technical and very specialized making them somewhat protected from becoming obsolete and outsourced. Not so, I guess. What should I go back to school to retrain and learn? Does this mean I should go back to school to study fast food creation since they can't move the Burger King down the block out of the country?
It seems all, or at least a lot, of the white-collar jobs (lawyers ” well, who cares what happens to them ” Just kidding, nurses, doctors what's next) are in jeopardy of being outsourced from some of the articles I have read. It seems I have to go back to the bottom of the working scale and un-train myself from what I have learned.
– Very concerned, Embedded software engineer
Seacode idea is mind blowing.
I once dreamed up an idea to have Indian doctors/Pharmacies on ships around USA.
It is a good solution as long as the doctors can operate on ship.
Some hospitals in India have health tourism packages. You come here for a medical procedure, and then recuperate in a resort for 15 days at a small percentage of the cost in US/UK. The airfare is the only major expense at $1500 or so. Will be very cost effective for major surgeries.
Consider dental work. I was in US till August 2004. I was quoted $2000 for a dental job; I got done it in India for $170 at the most costly hospital here, by the best dentist. It was the best dental job I have seen. It also included anesthesiologist.
10 years back I went to a government dental clinic in India for a crown. They asked for 4$ for the porcelain and the procedure!!! I chose not to do the procedure there and get a second opinion. I suspect their charges are still at that level.
I was in the US for 5 years; they managed not to me green card in all that time. My wife, also an engineer was not allowed to work during all that time. Finally I decided to come back and brought with me lot of the engineering jobs to India.
Every week 2 to 3 American companies set up their office here in India. Each company hiring a minimum of 50 engineers or so.
I see no respite for American engineers as long as dollar exchange rate is 1:44.
It may be just the start, doctors and lawyers will not stay immune for that long.
Your joke may be harmless. But a bout of xenophobia often starts with loss of jobs.
Who knows if somebody decides to cool off overheated overseas economy with some bird-flu WMD's. SARS was able to cool off overheated east asia a couple of years back.Iraq war got support because of Anthrax scare.
This is a dangerous joke.
What stops americans from thinking beyond borders? A similar onland site could be set up across the Mexican border, the workers need only stay for a year and all wages are tax free. Most programmers would see a 30% increase at their current level and also the exchange rate benefit. A company could go across the border, create a “Cancun” environment and all would benefit without the tubulence at sea. No three mile requiement here.
– Randolph Copeland
May be russians are looking for a revenge, ah? They lost the cold war and ate their tanks, submarines, ICBM etc. as one of US-presidents promised to the nation. But it seems that the tanks finished 😉
Don't forget that everything in the universe strive to reach a normal dispersion. Especially such a liquid matter as money is. Why can't you agree that paytime has come?
P.S. Don't take it so serious. This situation is just a backfire to the pain(t)ball game has been started an years ago.
I can't see that those “cruise ships” are going to be particularly fun places to work. They will need armed guards and dogs to keep the “seamen” from jumping overboard and swimming for shore.
– John Teller
Looking at the big picture, this “offshoring” thing has been happening to many other industries before, most notably manufacturing. If you've paid notice to all those little “freebies” that can be had from all the developer exhibits you've been to you'd find the sticker “Made in China” or “Made in Taiwan” or … you get the picture.
And it's not as if this situation happened to occur accidentally. Countries manipulate their currencies so that their exports are cheaper and more attractive to countries like the U.S.
The offshoring of IT jobs is just another “casualty” in the bigger picture.
Joke or not, that last joke made me laugh after reading such a true but bitter tale engineers in this beautiful country are facing. It wasn't until this began did I truely understand what it meant to take good and services off shore. Your article is accurate, capitalism brought this on.
The problems we face with offshoring are often glossed over.
– Mark Hurley
Jack, Jack, Jack! “Come into port once a month to dump sewage”??? That costs real money! Just go out 12 (or 50) miles and you can pump everything overboard for free! ;^)
– Bob Dowling
Let me first admit that my job is in no danger of being outsourced, and I might feel differently about the situation if it were. That said, it disturbs me how little thought is typically given to the other side of this story, which is that the outsourcing trend has dramatically improved the standard of living of countless technically-gifted workers overseas who would otherwise be just scraping by. America is a very wealthy nation, and it's easy to forget that a seasoned engineer's salary here could support several families in a developing nation.
I'm no more anxious than anyone else to give up my big house and fast cars, and if there comes a time that my job was being threatened by overseas workers, I will do everything in my power to hold onto it (and, consequently, my standard of living). Americans live in a largely egocentric society, and I fit quite well into that mold. But if I were an Indian looking to support my family and enjoy some comforts in life, I would work just as hard to take that job away.
There may not be a right or wrong side to this problem–as the article mentions, it's just becoming a fact of life. Globalization is an inevitable outcome for any capitalist society, given enough time and ambition. Only so many jobs can be moved overseas, and the benefits of locality, experience, and ease of communication will eventually make the lower direct cost of overseas salaries less attractive. (The indirect costs can wreak havoc on your bottom line–there's no telling how many people decided not to make their next computer a Dell based on their inability to understand the technical support representatives.)
I think SeaCode is a brilliant idea, but you can be sure that if it becomes a large enough trend, many of its fiscal benefits will eventually be legislated away. I, too, think 90% is a very optimistic number for revenue returned to the United States, and can only assume that ship resupply and company profits make up a big portion of that.
The best way to keep our jobs is to be more innovative, efficient, and hard working than the alternatives. While we might not like it, it's hard to blame overseas engineers for doing the same thing, or U.S. companies for trying to stay competitive in the market by taking advantage of it. There will be cases of greed and ethics lapses that unfairly shift jobs one way or another, but the guilty parties will always find some way to cheat the system–at least this one is out in the open.
– Scott Winder
as i have seen my engineering consulting projects slow to a dribble, and now hearing of slave labor being ok if it is 3 miles off shore, I QUIT!and i did pretty well for a while. motorola, bell labs, two patents. peak income of around 120k.i guess i am lucky that i stayed in good physical shape as i approach 60. i just took a steady job as a certified personal trainer at $7.50/hr. ( it will grow to around 25% of my old engineering income) yes. that low. some of my phd friends from the labs have taken jobs at target.and how can any ee engineer recommend engineering to a student? oh, i forgot. the students are all foreign.and just try to convince a judge that your settlement payment to x family members should be reduced out of simple fairness. ha! right!i have to sell my little house.i remember the business majors in college. i should have done more drugs and beer like they did. they seem to be doing pretty well today.its good that i have not become bitter….
There are 2 points about offshoring, one serious, one humorous.
Seriously, there are a lot of hidden costs associated with offshoring, including but not limited to communication issues, quality, time to market. Many companies who have jumped into offshoring have discovered them the hard way.
Humorously? If you've been paying attention over the past 20 to 30 years, you'll see that first offshoring went to Japan, then Taiwan, then Singapore, then India, then Russia. A careful plot of the past data followed by a careful projection based on that past data clearly shows that we are directly in the path. Pretty soon, it will be too expensive to offshore to anywhere but the US.
– don clay
“The perfection of capitalism” is a simple game called Monopoly. If you've played it you realize that there is ever only one winner.Objectives such as “CEOs have a fiduciary responsibility to reduce costs wherever they can” are a choice. Some companies (can) choose to demolish the competition or they can choose to carve out a segment that best meets the needs of their employees. Not everyone needs to adopt the WalMart model.
It all good and well to out source, but I'm told frequently that we'll keep leadership and management here – but could someone please tell me where we are growing these folks? When we no longer have the expertise, we will be subject to what the market will bear for the product…
– Moira M. Guffey
Issues like outsourcing are a direct result of globalization, which is itself just a side effect of the technological progress. Certainly, no one likes to loose a job or not being able to get paid as much as one would like. However, complaining about it is like complaining about wind or sunshine, or the month of July. These things are just there and so is globalization.
Now, one can definitely see globalization as a problem, but at the same time one can see it as an opportunity. For instance, one of my friend's father, after failing to find a good enough job as a software developer has started his own company in Ukraine doing software development for US clients. Guys behind Sea Code sure see globalization as an opportunity. It is hard to say if their idea will work, but this is not the point.
Right now the biggest problem with outsourcing and running companies remotely is management. This may be a good opportunity for some embedded developers who are considering working for Burger King :). Another possibility is to work in regional customer support, or so called Applied Engineering supporting customers, troubleshooting installations etc.
Even I find the trend disturbing. Getting the job is so positive, loosing it to another is painful.
But then it seems to do something slowly and not so noticeably is moving towards a global village. More familiarity of culture, languages, best practises( social mostly) and tolerance.
Sometimes the situation reminds me of one of my past engineering teams where I (a high-headed engg from one of the best college etc.) to my pleasant surprise found that all humans are gifted in one or the other way and left to others some jobs got better done, leaving me to focus on the ones I am good at. Basically specialize in highest quality at lowest cost.
And surely it has to do with one factor : cost of living index. Labour will remain cheap and jobs would keep moving from society with high-cost of livings to those which maintain a lower one.
Cost-of-living is the fundamental gradient causing the flow and it will remain in motion till a minimum level of prosperity is reached across globe.
“Sarve bhavantu sukhinah …”
[Sanskrit verse : May all be happy]
I sit on the other shore. I see the situation of my onshore brethren with compassion.
“CEOs have a fiduciary responsibility to reduce costs wherever they can”
Funny, I thought management's PRIMARY responsibility is to provide shareholders a reasonable return (both short and long term) on their money.
– Dave M
Ok, global economy. Remember an experiment in 6th grade – two bottles with different level of water in each, connected with a closed pipe. What happens when the pipe is opened? The liquid flows into a bottle that has lesser volume in it until the levels even out.
Now, the economy does not work like that – simply because it is not a smooth process. China and Russia will not wait until they match the US in technological abilities. China already pays ethnic Chinese living (working) in US to come back and start it there. There is occasional talk in Russian circles
about doing the same thing.
The bottom line – American technological superiority is coming to an end. Outsourcing is only hastens it. With half the country being mortgaged to the Saudis, come on, what kind of a managering elite you are talking about? The best you can hope for is managing a hair salon, where every single piece of equipment will be “MADE IN WHEREVER”.
So sad. I didn't expect it. Unless there is another technological break-through, the US will rapidly become an English-speaking Russia. Don Clay is right: Pretty soon, it will be too expensive to offshore to anywhere but the US.
I would like to reply to Gus S Calabrese: The man who leaves his house to go out looking for someone to hate is a xenophobe. The man who comes home and finds someone rummaging through the silverware and kills said person is not. It is not xenophobic to fear that your job is going overseas because some incompetent manager doesn't want to pay an engineer a decent salary. It doesn't help that our idiot President encourages the practice. It is these bufoons who think that the bottom line is the only important thing that are the problem. It has been my experience that managers in this country don't want to take responsibility for anything anymore. Well, that's their job. If they don't want responsibility, they should go to work at Wendy's. The one's who have MBA's are the worst.
So, no, railing against the system that wants a “better U.S.A.” through flag waving, but insists on sending all of the good jobs overseas is not xenophobia, it's well-placed anger. I hope you would agree–unless you want us to be a nation of illiterate potato farmers in three generations.
– Michael Badillo
I'm replying to Michael Badillo's response:
I'm offended–I'm literate, I'm Irish, and I'm a potato farmer!
My family has farmed potatoes since we came to this great country 7 generations ago. Farming is a noble pursuit –working the land–feeding millions.
Personally, I hope this offshoring thing keeps going so more McDonalds (another Irish financial gift to our culture that you probably hate: did you eat there last week?) open up in more countires so we can make everyone as obese as we are and fill our pockets with more money! YAY! We're a bunch of greedy, fat Irish bastards!!!!!
Why potatoes, Michael? Why not corn or soybeans? Why the slight anti-Irish slur? Are you a – GASP – ANGLOPHOBE?!?!?!
I actually agree with a lot of what you say and Gus is rather misguided. But – cmon – if you're gonna nail someone for being a xenophobe then make sure that there aren't any anti cultural messages in ANY of your rhetoric. Ok?
– James McPharley
I certainly didn't mean to offend anyone's culture. I'm 3/4 Irish myself. The potato farmer is a quote from S.M. Stirling's “Island in the Sea of Time” novel. It was not meant to be construed as an ethnic slur (after all, potatoes are not indigenous to Ireland), and I sincerly apologize to any who've been offended.
– Michael Badillo