One of my favorite authors and bloggers is Bob Lewis — as evidenced by the fact that he is on my very short blogroll, off to the right of this post. He has had some things to say recently about off-shoring, a topic which I have tackled as part of the larger issue of what I call the cheapening of software development. I chose to focus on freelance exchanges on the web, but the truth is, by far the primary reason that prices have been driven so low in these exchanges is because of offshore labor in countries with very low cost of living.
In his post, Bob uncharacteristically makes some statements about job losses due to offshoring that I can only agree with as far as they go, which isn’t terribly far. To wit:
[Job loss is] a very real worry. It’s also a worry with precious little evidence to support it. Employment in the United States is quite high at the moment, including employment in among IT professionals.
Fair enough, but employment figures say nothing about whether those employees are under-employed or not. One hears far too many tales these days from people who have been forced to take contracts at rates I recall earning a generation ago, back at the start of my own career; people who have taken jobs beneath their skill levels; people who have changed careers altogether; people who have had to accept poor working conditions they would not otherwise have entertained. Those folks are all employed — but at what? Outright unemployment is only one of the many miseries that it’s possible to experience.
Bob tackles the matter of rates of pay thusly:
I imagine IBM and Compaq felt much the same way about Dell when it got started. [Dell] was willing to live with a simpler lifestyle – a leaner management structure and thinner margins.
Ah, but there is a big difference: Michael Dell did not found his company out of a desire to live a monastic lifestyle. It was, at the time, wildly successful and made his company a ton of money. In the beginning he did not achieve what he did by paying his people less or buying inferior materials; he achieved it through economy of scale, a unique new distribution method, and by providing customers what they wanted. Dell differentiated itself on something more than just price, and the price still allowed for profits. Now of course they are a victim of their own success and are offshoring some of their people too, but that’s a story for another day.
In the end, though, while I think Bob Lewis’ analysis of what is going on is said from the perspective of someone who has not had to personally deal with the economic downsides of offshore software development, Bob still manages to come through with good advice:
Take a clear-eyed view of the competitive landscape and figure out what you have to offer that your offshore competitors don’t, that justifies the higher price you want to charge.
It’s the only effective thing you can do. There is no way to make the problem go away. The government isn’t of a protectionist mindset; protectionism doesn’t really work anyway. In truth, the government is totally under the influence of corporations who can’t see anything but the superficial savings in labor costs and wouldn’t know how to evaluate the quality or success of a software development project if it smacked ’em in the head with a two-by-four. Besides, companies, despite rhetoric to the contrary, by and large don’t value their people.
Consider Microsoft chairman Bill Gates, going hat in hand to Congress recently trying to get the H1B visa quotas raised nearly five-fold. He claims the economic future of our country is at stake unless this is done. This is the most egregious promotion I’ve yet seen of the imaginary IT labor shortage. As Ephraim Schwartz points out, the only shortage is a shortage of people willing to work for low wages. It’s all about saving money in the short run, not about a real labor shortage. As Ephraim suggests, it’s doubtful folks like Gates could list the specific projects that are on hold because of lack of developers; there will be a new version of Office in a few years with or without a higher H1B quota.
So, the situation is what it is, at least until the list of hapless third-world countries is exhausted sometime a couple of decades down the road, as one after another realizes they are being manipulated and cheated. Or until some new technology creates a gold rush type of environment like the dot-boom.
Meantime at least in the realm of independent software development, there are still companies willing to make software development worth your while. It’s just a lot more effort to differentiate yourself than it was during and before the dot-boom. And it’s a lot harder to locate the right contracts. But it can still be done, in part because amazingly the competition is not that fierce. Most developers are passively languishing, waiting for a job board to offer them an interview with some bone-headed headhunter for a six month contract with an empty promise to convert to employment. They move from one death-march project to the next, never quite figuring out that they are not correctly positioned.
What is your true product? Software? Or solutions to business needs and concerns? Do you even know what your prospect’s concerns are? How do you find out? Those are the real questions, and there is reward for you if you can answer them to the satisfaction of your customers.
