Friday, February 24, 2006

Globalization and Offshoring

The ACM released a report today Globalization and Offshoring of Software. The New York Times has coverage. Definitely read over the executive summary of the report that dispels the myth that offshoring is leading to lesser need of information technology workers in the US. The overview has advice for current and future IT professionals.
One might wonder whether IT is still a good career choice for students and workers in countries that offshore software and IT services work. Despite all the publicity in the United States about jobs being lost to India and China, the size of the IT employment market in the United States today is higher than it was at the height of the dot-com boom. Information technology appears as though it will be a growth area at least for the coming decade, and the US government projects that several IT occupations will be among the fastest growing occupations during this time. There are some things that students and workers in this field should do to prepare themselves for the globalized workplace. They should get a good education that will serve as a firm grounding for understanding the rapidly changing field of IT. They should expect to participate in life-long learning. They should hone their "soft skills" involving communication, management, and teamwork. They should become familiar with an application domain, especially in a growth field such as health care, and not just learn core technical computing skills. They should learn about the technologies and management issues that underlie the globalization of software, such as standard technology platforms, methods for re-using software, and tools and methods for distributed work.

Update 3/1: The New York Times now has an editorial based on the report.


  1. As I mentioned during the guest blogger, today's modern equivalent of the Luddite is the protectionist.

    A Luddite was someone who would destroy production machines out of fear that the machines would equal less jobs. As we know today, labor-saving machines have created an explosion of new jobs that are familiar to us that sure would have sounded exotic to them.

    A protectionist is a kind of xenophobe who fears that they will lose their jobs to those who live in other countries (countries where the cost of living is lower, and general demand can be higher, thus making it cheaper to employ someone).

    There is some truth in that some jobs may be affected. Those who design and architect software have less to worry about than those who do implementation-only coding from complete specifications.

    Nevertheless, in the coming age the developing world will be participating in wealth creation at a higher level. The world will have more wealth than it ever had before. This newly created wealth will provide many more new trading opportunities and through that create more jobs for everyone.

    In a highly-changing world with more wealth than ever, those who are affected the most in the developed world will have a soft landing in perhaps a lateral field. Until we reach Star Trek-smart computers, there will be plenty of need for programmers, perhaps so much that the supply of available programmers can't keep up.

    To best protect yourself, improve your skills and tend to all other aspects of your life. When you see people in the developing world get jobs, be happy, because for them it means a better life.

  2. Will we reach Star Trek-smart computers? I mean... even if we reach, won't be always exist the need for programmers? Doesn't G�del or someone say that?

  3. In Star Trek it appears the computer writes all of their programs for them. Like "Picard 1". It likely implies strong AI. If somebody has to be the programmers, and humans and machines are equally capabile, then it'll be whoever can deliver the most benefit for the least cost.

    As for Goedel, that would only be a problem in a world like what Roger Penrose suggests, in which strong AI is not possible (with current machines; though he conceeds some quantum brain could also be intelligent).

  4. "the size of the IT employment market in the United States today is higher than it was at the height of the dot-com boom."

    I don't believe that. My inclination is to think that this is some sort of spin. Back in the dot com days I had recruiters calling me all the time. Not so now.

  5. See
    for BLS statistics on IT employment.

  6. Don't overlook the last sentence of the NUTimes coverage:
    "Mr. Hira, coauthor of "Outsourcing America," said the report took "a feel-good" stance on the outlook for jobs."

  7. And is it particularly surprising that someone who wrote a book titled "Outsourcing America" would say that?

    Overall, open source software is a larger threat to programming jobs than outsourcing is. Why? Because open source software makes it easier to develop new programs, reducing the cost of software development. It's economics 101.

    However, if we get a lot of software, it's entirely possible we'll want to dedicate our resources to produce even more of it. Unlike food--- which in the last century we became so good at producing that few of us today are farmers--- there's no reasonable limit to the amount of software we can consume.

    Given the threats of both open source and offshoring, it's natural to have some fear. However, you will better serve your interests if you get over this fear and focus on how to make yourself a better, more productive, and happy person.

    The winds of economic change can be fierce, but you do have some power: You can make what's good for other countries good for you by investing in international stocks. (Vanguard has many excellent international index funds that can provide you with plenty of diversification.)

    But more than that, just like the farmers in America (which used to be the dominant occupation), you may find yourself doing something even more pleasurable. I have some ideas what that might be, and those of you interested should read Thomas W. Malone's book "The Future of Work".

  8. My comments on the new editorial:

    "Globalization advocates have long contended that everyone benefits from greater growth worldwide." -- I'm not sure that's really the case. Whenever there is change, there are some winners and some losers. It's certainly not the zero-sum world where "good jobs" are replaced with "bad jobs", but it won't make everyone a winner.

    It's best to think of it in terms of competition. Suppose someone in America made a living off of selling CD cases for car visors. These holders were once very handy, because they were easy to reach and didn't get in the way. Now banks are giving them away for free. What changed is that people are using CDs less in their cars, and are using MP3 players and satellite radio more. You don't even need to think of this in terms of trade between countries: Something more desirable for consumers has made the existing product obsolete. It would only make sense to suggest that in the long-term, and on average, everyone benefits. It's likely their children will benefit, but those in positions similar to the CD visor makers will be the first to tell you they haven't benefited (even if you take into account the lower prices of goods and services that increased trade creates).

    "And when a big company slowly adds workers to a new division because, say, the middle class in India is buying more high-priced gadgets, the move garners little attention." -- I don't have as much against this sentence, but I'm affraid the way it's phrased will lead more people into the belief that "spending" alone is what creates economic growth. It's much better to think about it in terms of more wealth being created, and therefore there's more trading opportunities. (And thus, when you increase production, there are more willing buyers.)

    But the public's misunderstanding of monetary issues are severe. It used to be a very common belief to blame inflation on unions, for example, because they asked for higher wages. The book "Rich Dad Poor Dad" suggested that inflation was created by doctors who feared getting sued. Thankfully, neither are the cause of this monetary issue.

    Over all, the "no one notices" issue is important. Much of what makes good economic sense is not apparent until after you've taken everything into consideration. Thinking in terms of zero-sum or only seeing one part of a whole can lead people astray from reality.