The offshoring blues -

The offshoring blues

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“Stop whining and concentrate on technical issues.”

“You're the voice of doom; it's not really that bad.”

“Jack Ganssle is a moron.”

Readers respond passionately to this column. When I touch on the subject of offshoring, H1-B visas, or the future of software development the e-mail is divided into two camps. Many share my concern that engineering in the first world is in for a rough time, with major structural changes likely to surface.

Others respond with comments like the above. Our industry is clearly divided about the state of engineering in this new offshoring world.

The U.S. is divided as well. While CNN Anchor Lou Dobbs nightly exposes companies sending jobs abroad, Secretary of State Colin Powell last week reassured workers that the U.S. anti-offshoring clamor won't in fact have any negative impact on employment. Of course, he was reassuring workers in India, not in the U.S. where job creation in all nongovernment sectors remains stagnant.

This election season escalates the usual partisan politics to wearisome levels. The Democrats will harp on the President's vulnerability on job creation till even the unemployed are sick of the chatter. The Republicans continue to promise that Keynesian economics will triumph. Real soon now.

As near as I can tell the neither of the candidates offer a credible “solution” to the offshoring issue. Both advocate, among other measures, enhancing adult education to make displaced persons competitive again. Yet in an poll 41% of respondents felt college was irrelevant to their jobs. Another 30% essentially compared their higher education to that of a trade school: “they taught me to crank code.” A great educational system is surely a critical component of a successful economic policy. But even polymaths need a job when they graduate.

Kerry proposes using only local workers on all government contracts. At first blush that's an admirable idea–hey, I don't want my tax dollars going overseas when so many engineers here are unemployed! On the other hand, doesn't this imply we're demanding that the Feds behave even less efficiently than today? Won't that require higher taxes? And, since government spending represents only (only!) 20% of the GDP the impact of such a program won't be huge.

Yet, as Tevye would say, on the other hand, for the last 40 years the people of the U.S. have underwritten welfare and other programs that are inherently inefficient, in a belief that doing good for people is important.

It's a complicated issue.

Others call for new tariffs and other trading restrictions. I've yet to see a protectionist argument that looks practical. Today's transnational corporations can easily skirt legal strictures using offshore subsidiaries. Without such regulation we rely on the kindness of corporate officers, hoping they'll “do the right thing” and hire locally.

CEOs have a fiduciary responsibility to maximize shareholder value. Like it or not, that's their job. I kick myself for saying this but can't deny the truth: minimizing costs, even when that means exporting jobs, is simply part of the deal for the boss. The stockholders demand it. And a lot of us are the stockholders.

Jobs and goods flow around the world at light speed, the better to maximize profits. People are replaceable cogs, tossed to the wind when there's a chance to increase returns by a microscopic amount. Capitalism is a wonderful thing but perhaps it's now too perfect.

A century ago Lenin observed that a capitalist will sell you the rope with which to hang himself. We embedded systems people built the communications infrastructure–the rope–that's now strangling our careers.

The offshoring issue will go away when a new balance levels salaries around the world. When a Cupertino developer's salary matches those in Bangalore engineering jobs will be plentiful here.

Readers frequently ask me to speak up about the offshoring trends. I wish I had a solution to propose. What are your ideas?

If you find this topic worth exploring further, two things:

(1) You can compare this week's poll to a similar one from 2001 (during the dot-com bust) . It'll be interesting to see the shifts.

(2) Join me at the Embedded Systems Conference at the dreadful hour of 7:15 a.m. Tuesday morning, March 30th, for a Shop Talk where we'll discuss “The Future of Engineering in an Offshoring Economy.”)

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 .

Reader Response

I have one word for the offshoring of ee's………..UNION!!!!!!!!!!!!

(a future unemployed enginner)

– fred barnes

Hey I really thought that “RantACoder” was a website where coders went to rant about offshoring.

Ok, here is how I see it. A typical 4 year degree in the US runs upwards of $60,000. By Sergey's own account, he made a cool $4000 last year.

From a the perspective of teh graduating class of 2004 a T bill is paying around 3.84%. Taxfree (fededral taxes)and Guranteed. So what would one do. Work really hard for 4 years for

a $4000 /yr job or hang up your gloves and buy that T-bill.

The point I was trying to make is that is no longer perceived as necessary to have a degree to develop software.

Education is not that cheap even in India. An average 4 year degree can cost upwards of $10000 per year.

Perhaps it is cheaper in other places. Perhaps the governments subsidize the education … what ever…even still, there is outlay required for the software and hardware. $4000 does not go very far in India.

Unless, they have started to hand out caviar and vodka in the street corners of Moscow, $4000 does not go very far,not counting the cost of graduating from the Bolshoi polytechnik akademy

Like someone said, we are all educated blue collar workers. Geez, for that I will not even bother to spell check.

– slow_poke

After reading the article, I just happend to remember bit of history.

Even till upto three centures ago, India used to hold up to 25%-30% of world Economy/GDP, and considered to therichest.

This has attracted invaders/asylum seekers from every part of the world all through its history.

Today in the place of India is USA and equalization is taking place through other routes.

Well, living in isolation and in the island of wealth sounds cool, but that is what China did four-five centuriesago and new world came crashing in !

And more importantly, I guess it is time for US worker to get ready to migrate to India/ China/ Ireland /Philippines/ Israel, so he doesnot have to be worried of being “replaced”.

But yes, his standard of living equals to the country where he is going.

Who knows the concept of world citizen is about emerge from the new world economy.

– RaghavMalladi

Why are we, as alleged shareholders, so worried about the stock returns that we are helping to driveoffshoring? Most engineers derive most of their income and satisfaction from their career, not their portfolio. Besides, absent astronomical returns on an ongoing basis, when you lose your job (to offshoring or any othersituation) and your new career option is slinging burgers and fries in our “service economy” how long will youremain a stockholder? Generally you will need to disinvest everything to maintain your house and car, bought whenyou still had a career and not a bridge job.

In my own case, I've been out since June 2003. My only source of income, since my unemployment benefits are nowexhausted, has been working as an adjunct college instructor and disinvesting (drawing down) my IRA. I've seen verylittle in the way of any relevant software engineering in the Dallas, Texas area – and nothing in the way ofembedded software engineering (I don't have a security clearance, so the defense contractors aren't interested). Sofar, the rest of the country doesn't look much better.

– Thomas Zabel

Well, I am a foreigner, who would like to take part in American embbeded working system, but I realy donot know how.I tried to send my CV to different job hunters, but no answer.So, I can see, it is not so easy to get American job for SW embbeded programmer.

I think, that U.S. should not protect their job market, because U.S. SW is soled over the world then with profit.

– Bronislav Kantor

I recently took my 10-year-old son out to breakfast on his birthday. When I asked him what he wanted to do whenhe grew up, he said he wanted to work with me. I told him I was glad he wanted to work with me, but I didn't thinkjobs like mine would exist when he graduated from college (~ 2016). My advice to him was to get through collegefirst. Who knows what jobs will be available then?

– Bob Lee

Jack Replies – Bob, I've been visiting colleges and exploring career choices with my 16 year old, who is a natural engineer. He's leaning towards physics or engineering and I find myself, much to my chagrin, steering him away from this career.

I have seen a number of discussions regarding off-shoring. Many people whine and complain about how it isnot fair to them.

As you point out, the CEO is looking out for the stockholder. The CEO does what they believe is best for thecompany.

Developers should stop thinking about how this affects them and look for how it will negatively affect the company.

Some ammunition:

The time difference between the US and India means that we are asleep when they are working and vice versa. If thereis a problem it is often difficult and time consuming to resolve. The general way problems are resolved would be,the US finds a problem, they email India, ~12 hours later India responds, they need more information, ~12 hourslater the US responds, et cetera. A week later one issue, which would have normally been resolved in 2 hours, isresolved.

How much money does this cost the company? Time is money.

Additionally, we off-shore work to India. We had suspected that something didn't sound right in their reports to us.To my manager the India manager would say they have done X, Y and Z. A few days later one of the contributingindividuals in India would call me asking, “How do I do X?” If he doesn't know how to do X then how can they claimthey did X? See the problem.

Recently, my manager took a trip to India. Not being technical he is asking me things like, “Is it is bad thing thatthey are walking about with silicon in bare hands on carpeted floors with low humidity?” or “Should they have itemsA, B and C in the ESD workstations… on the mats?” where A, B and C are metal objects, things that generate RF,things obviously not at the same potential as the development board, et cetera.

Finally, now that my manager is there and looking for demostrated proof they did what they claimed, they areadmitting they have never completed anything they claimed to have completed.

Hard to monitor what people ~12 hours away are doing.

P.S. we have a full time employee (who is from India) over there monitoring what is going on. He was part of thedeception.

– Anonymous

For many of us it is the constant harping from a host of people from Fed Chief Greenspan to Micrsoft CEOBalmer that the problem is with science/engineering education. Balmer is at least honest enough to say that weshould educate enough people to push wages to Inidan levels. Like anyones going to go to the trouble to study someof the most difficult subjects there are in order to make Wallmart wages! Greenspan and his sort seem to believethat the problem is just programming jobs and all we have to do is educate more people in different technologies.The truth is that All engineering jobs are under seige. Virtually all design jobs can be moved offshore. If you arerigt (and I think you are), then we should be talking about decreasing the size of our engineering schools.

– Alwyn Goodloe

I am the CEO of an embedded software company. Unlike IT projects, every embedded project is custom and very tricky.This is especially true during the end of the project. We currently have no intention of off-shoring. Not because weare nationalistic. Not because we don't think other countries have talent. It's because we need our people righthere, right now — sitting in the same office building. And we need to tightly control quality. As a CEO responsiblefor shareholder value, I know that the proximity and quality advantage is worth at least 3X in salary cost.PS. We also need to hire American citizens because the Defense industry requires it (for security reasons). Ifanything, that will be the biggest effect the government will have on quelling the off-shoring of embeddedprogramming jobs.

– Michael Juran

Outsourcing is a temporal phenomenom, viewed in the short term in most discussions. In the specific caseof software/firmware development it is temporary. Routine software to implement well-defined specifications will beproduced by computers, a form of automation. People who are trained to implement such stuff are doomed, whetherthey now live in the USA or India. For an historic parallel, remember what happened to the cottage weaving industrywhen the Industrial Revolution occurred about 2 centuries ago. It was a pretty rough adjustment, as noted byDickens (see Hard Times for example). Let's hope we do better, though the current trend in the USA is to weaken thesafety net.

– Anthony Robbi

Thanks for the recent article on job exporting. Almost everythingI've read looks at the issue from a purely American perspective. Does jobexporting help or hurt the U.S.? Another question is how the internationaleconomy affects workers worldwide. I fail to see why driving the mile overthe US/Mexico border should result in such a contrast in standard ofliving. International trade evens out the standard of living worldwide.Bringing up the standard of living of those throughout the world who livein poverty is a good thing. Ideally this can be done without a decrease inthe US standard ofliving. It sort of depends on where the “center of gravity” of worldwidestandard of living is. I don't think we can force the rest of the world tocontinue to live in poverty, however.

– Harold Hallikainen

The real outsourcing issue is not human replacing human but human being replaced with a more productive agent. Thatproductive agent is now someone in India or China willing to work for less money in the global scheme of things.What point many people seem miss is the influence of productivity gains have had on the distribution of job growthand job security. Outsourcing increases productivity.

A successful trend in the early 1900's was to replace farm labor with machinery. A successful trend in the 90's wasto use technology (personal computers) to increase productivity of knowledge workers. In the early 2000's, knowledgework is shifting overseas in an effort to increase productivity. A confluence of many technological achievements ischanging forever the work lifecycle for humans .Many of the technological advances maturing today, a reliable andcomprehensive communication infrastructure, miniaturization, and raw computational power will lead to thereplacement of humans with robots workers.

In the near future, 10-15 years, it is a real possibility that labor and knowledge work will be done by robotsworkers. Even the people in India and China will be replaced by a non-human knowledge workers. The trend has alreadystarted with the interest in replacing human health care workers (assistants) with robot aids. Robots can walk andtalk to humans now. When the long term reliable power issure is resolved, robots will begin to replace humans inselected areas. Then eventually in many traditional job situations just like the PC replaced people in the 90's toincrease productivity.

So I see this outsourcing issue as a short term one for many because the greatest risk will be having your joboutsourced to a robot worker. The perfect outsourcing agent that will work anywhere, anytime, 24 – 7, and mostimportantly, not complain.

– Thomas M. O'Toole

I think there are three significant factors contributing to this phenomenon today that were not presentin the past:

1) Jack hit the nail on the head about making our own noose. The telecommunications and Internet boom of the lastdecade created the environment for off shoring of engineering jobs, not government policy or lack thereof. Corporations would have off shored engineering jobs 30, 50, 100 years ago if the means were available. It would nothave been practical to ship reels of magnetic tape or mechanical drawings by ship from half way around the worldonly to find the software didn't boot up properly or someone made a typo on an I-beam dimension. Now shipping datais essentially free and instantaneous (even if no one is going to look at it for 12 hours).

2) The Internet boom created enormous wealth for an under trained, undisciplined work force. The priority was toget something, anything, up and running as soon as possible. Quality was not a priority. It created a brand newmarketing media and it's convenience to the consumer created a vacuum for developers. Now the void is filled. Onlythe good ones are in demand and for a far cheaper price. I can't blame corporations for their unwillingness to payridiculous salaries for relatively simple yet sloppy work. This is an IT issue rather than embedded, but it's a bigpart of the overall phenomenon.

3) The benefit of the end of the Cold War has run its course. Just as West Germany had to absorb East Germany'sbackward economy in the early 90s, so too will the USA have to absorb the poor of the new 'world economy'. The USreaped the benefits in the 90s as the rest of the world re-tuned and re-aligned, as was the case in Europe with theEU. We will eventually have to take our place along side everyone else. Good old-fashioned American greed willoverpower national pride to the benefit of the world economy. Unfortunately for us engineers, America will be theworld's financial capital. So best go get your MBA if you want to remain here. But, remember, as the quality oflife in other countries improves, it may not be so bad going there.

– Dan Wilson

I will tell you an experience of mine while teaching at a US university in 2002. The students of BS(EE)were asked to calculate something in class, which required continued fraction. Surprisingly, the students (now Icall them dumbos) failed to apprehend and asked me “what is a continued fraction and how to do that?”. And note it,yes note it, in India the concept of continued fraction is a course work at 10 standard school. What a pitty I saidto myself, these poor students of US just wasting the national resources and later crying hopelessly that some othermore efficient and knowledgeable people are taking away the job. I request, better you people ask yourself “Do youhave the capability to compete in terms of knowledge and efficiency?”. Don't tell me stories, I have seen myself thestandard of education in US, a substandard system in truth.

– Dr. S. Pillai

I left the Los Angeles area toward the beginning of the 80's,to come to the beautiful PacificNorthwest,only to find the recession hit hard in the electronic field. An engineer was lucky to find a short termcontract position at wages about what a good R&D Tech in LA would make. I ended up losing everything, and soonbecame homeless. Yeh!One of those bums you see hanging around the streets of the big cities.But,i guess it was myown fault i chose the wrong area of expertise in a field where you're likely to become obsolete before you pay foryour education and first house.My friends and family(who are all well employed in other fields) tell me that ishould not have so much pride, and go for the Burger flipping job. Just try getting one of those,especially ifyou're an Old Geezer, Vietnam veteran,ex patriot from the aerospace industry.They are really not impressed if youtell them you worked on the Hubble Space Telescope (even now considered for the ax), or the Space Shuttle(HO Hum).Ihave probably sent out 50 resumes, and collected as many reject letters, if any response at all.I am not an Embedded Systems developer, so can't comment much about this specialty, but the last “real Job” i had inLA was with a company that exported it's manufacturing to Hong Kong, or Mexico.I saw the “writing on the wall”,andbailed out for greener pasteurs, that soon dried up.

Now i think i understand why it takes so long to process my VISA card–it goes to India. And now i'm told that someIndian gets to see my financial situation via my tax statements.

I haven't checked the Chinese Peoples' Official WalMart outlet in a while(been too broke), but are there any US Madeproducts of any kind ,anywhere? None in way of electronic products that i know of.

I agree that it's a nice thought to help other countries achieve a higher standard of living, but the way i seethings going here in the US,we're going to have to live on their level, not the other way around!

– Floyd E. Rasmussen

This is in response to Dr. Pillai's comments about 'dumbo' engineers. I too did not recognize the term 'continued fraction' and needed to look it up. It's not a technique I've seen in any of my math books, but it is a way to represent a rational number as a sequence of integers. Now I've seen THAT in freshman calculus. I think the saving grace of American engineers is our understanding that there is more than one way to skin a cat and I suspect strongly there would have been multiple ways to solve the problem Dr. Pillai was illustrating to his students. I didn't appreciate Dr. Pillai's comments but I greatly appreciate that the Indian professors I've had over the years did not share his narrow view of mathematics and the world as a whole.

– Sean Thomson

While loss of jobs is disheartening, the bigger problem is looming on the horizon. I am worried aboutyoungsters not going into science (yes, software engineering is not unique in regards to off-shoring) because theysee no future in it… that is – financial one. Of course, those who cannot imagine themselves doing anything elsein life will go there anywhere, but most would think more than twice.

Now, this robs USA of critical mass necessary to sustain development.And for those who maintain that we all simply move up the “food chain” – how far could you go up the food chain?Where would all these freshly minted software engineers cut their teeth, if all entry level positionsare gone – while paying off all these impressive student loans?

How long can you rely on the imported brains – given the fact that USA will be MUCH less attractive a destinationwithout the jobs(and competing with Europe and emerging economies like Argentina)? As Senior Scientist @ BoeingCompany, Richard Meisenholder put it in his letter to Software Development magazine: “Can we survive based on theeconomy of selling hamburgers to one another?”

– Alex

After reading Dr Pillai's comments I am compelled to respond. To set things in perspective I am fromIndia. I have to admit I came here in 1991 as an “economic refugee” in the guise of pursuing a Masters in EE. WhenI left India, the economy was in shambles, the exchequer was about three months from being bankrupt and the Worldbank was talking of de-valuing the currency unless plans for the economic reforms were put into motion. From the myperspective, I had graduated at the top of my class, but could not land a job.

Many educators and politicians would wring their hands and claim that the education system did not prepare me todeal with real world problems, because as students we supposedly learnt by “rote” and did not know how to applyknowledge to solving real world problems Most employers rejected my application, with the implicit notionthat my education had prepared me to be a “writer” or a “clerk” (a term that was widely used during British India)and they would have to re-train me. Sure India has the IIT's, not everyone is able or capable of obtaining an IITeducation.

Statistically given that India has over a billion people, all things being equal the number of really brightindividuals is certainly going to be high. But all things are not equal are they. A very small segment of thepopulation (over 65% is still agrarian) takes advantage of the education. The only game in town is the off shoringbusiness. So I would like to pose a question to Dr Pillai. So what exactly have all the bright people who can factorcontinuous fractions done to create jobs in India ?

I have worked in this country for over 10 years and it has been a great experience. Many in my graduating class wenton to start small businesses. They hired people like me, not because they were “dumbos” they had a vision and wantedtalented engineers to fulfill their vision.

Recently my career hit the outsourcing wall. Our Fortune 500, one of the 100 best places to work for Technologycompany decided to offshore one of its products. To be fair the product was not part of the core businessstrategy.Thoug the popular press had you beleive that the product was projected to provide earnings growth. Over 70%of the employees of the division were impacted immediately. 20% were retained to train their replacements. The restof us were kept as insurance if the plan to outsource failed. I worked with the offshore teams for over a year andhalf and recently departed voluntarily.

The difference between an US trained engineer and the offshore labor is that the US engineer thinks outside the box.He comes up with innovative ways to solve problems and understands the customers needs. Profiting in the bargain. Ithink Dr Pillai's comments are seminal in proving this point. He (Dr Pillai) failed not only to deliver to thecustomer, but failed to capitalize on the opportunity to take on the challenge of educating the students oncontinuous fractions. Perhaps it explains why he was not extended for another year.

My experience with the offshore team is mixed. The really bright ones learnt the domain and now work for thecompetition who promptly set up shop in India. Those who did not leave have attitudes as bad or worse than that ofDr Pillai. Oh, and our experience with deliverables and problem resolution was exactly like anonymous posterdescribed.

– Iqbal Ram

In response to Dr. S. Pillai and Sean Thomson and 'dumbo” engineers. I remember having an Indian assistant professor of physics circa 1966 in engineeing school. I remember he graded my answer wrong on a test question because my procedure did not exactly follow the method the primary professor used, even though it produced the correct answer. I could not convince him that I was right.

– Gene Smith

Jack replies: To be fair, this isn't a cultural or even an educational issue. It's everywhere. When I took transistor theory the (American) prof wrote the transfer function of a linear amp. It had a decaying exponential in it. The students madly scribbled notes. I asked, “Does that mean the output of my stereo will go to zero over time?” The prof looked at the equation, scratched his head, and said, “I guess so.” He then continued on.

Jack, it's been interesting to read your editorials about the engineering offshoring issue. But I really think its time to debunk the myth that the fate of techdom in this country is completely at the mercy of global capitalism and free trade. Today, our government imposes trade restrictions and provides subsidies to select groups (such as loggers and farmers), totally against the doctrine of free trade and open markets. How come CEOs in the US typically receive 50x the compensation of European and Asian CEOs? And why don't you hear about accounting jobs being lost to other countries? After all its as easily done across the internet as software or heardware design. The reason? In a word, influence. These groups know how to lobby and finance campains of the power brokers in congress to get what they want and protect their livelyhood. How long will it take us techies to see the picture and get organized to promote OUR interests. We need more than the IEEE or ACM for professional societies. They focus entirely too much on technical interests and are way too in bed with large corporations. We need to launch a new organization, perhaps the “American Engineering Society”, with the responsibility of ensuring that the technical prowess of American Engineers is not sold out from under us.

– Mark Small

I would like to mention that there are other costs of outsouring that go beyond the technical & economic issuesalone. My group recently saw about a 70% lay off due to outsourcing to India – the people who remain are now allpretty good to expert level in the team. Yet, our pay raises and responsibilities are tied to our rating/rankingrelative to each other. The team is torn apart – the spirit of co-operation has suffered greatly as people fearingthe next layoff/ranking have become less helpful and opportunistic. There is a lot of work but no one wants to takeeven the slightest risk because it could reflect negatively on them. People are working 60-70 hr weeks regularlywith only a few people doing 90% of the actual work, the rest pointing out what was missed by the few who do thework *sigh*

Now add to this the dilema that there is another team that has about 40x-50x number of people who are trying to graball the remaining work on no better reason than sheer manpower (they work on a completely different system). Wetried bringing a few onboard but the effort to train them (read: spoon feed them) was so exhaustive that it cost usseveral deadlines.

Yeah, I know, you may say there are a lot of issues going on here but I think the manner in which the team got'downsized' was too extreme and the corresponding benchmarks (such as for ranking/rating) did not change – all ofwhich combine to stress the entire team.

The sorrow is that these are all fine folks who work hard but are now struggling to keep their jobs rather than dotheir jobs. Which problem do we fix first?

– John Adams

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