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Current Facts about offshoring  RSS feed

 
Greenhorn
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Globalization is going to be a way of life whether the Americans or for that matter the Indians like it or not.
Current offshoring of work to India is infact helping scores of American companies to remain competitive and give better ROI to their shareholders.
Also I can say with great amount of confidence that no Indian Programmer considers his job as secure.
If tomorrow the IT companies feel Thailand is cheaper than India then the Americans can forget about getting their job back and the Indians can start looking out for a new job.
 
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Originally posted by Helen Thomas:
Jeroen,

You really should stop upsetting people, bringing out their worst characteristics and thus proving your point.



I am not sure what point he is proving, except ranting about Indians who are trying to survive in this competitive world.
 
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Er, I was having a little dig at the manner of your response, Kishore.
 
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You really should stop upsetting people, bringing out their worst characteristics and thus proving your point.



Sure would be nice, if you could be nice.
 
Helen Thomas
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I'll be nice. No more double-edged swords!
 
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Hello,

Here is what perplexes me. On one hand, many testimonials from Javaranch members and other IT professionals, point out to a reversal in offshoring. They speak of how pioneers of offshoring are learning the truths of offshoring. As a result, many are claiming that there are more job offers. On the other hand, news articles, TV news media (particularly Lou Dobbs from CNN), paint a bleaker outlook for the IT employment industry in America. They refer to offshoring in proportions that can be only equaled to a biblical devastation.

What is the more accurate current state of the IT employment industry in America? Is there really a present reversal or are we really doomed?

Thanks,
 
Homer Phillips
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Up there in S. Chicago ( Gary ) how did things for the steel workers turn out?
 
Bartender
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Lou Dobbs is widely perceived as having an agenda. Mind you, a lot of the perceivers themselves have an agenda, but if you want fair and balanced, you can't depend on getting your news fed to you, you have to dig it out for yourself from everywhere you can and try and allow for the fact that to a greater or lesser degree, it's all biased.

Like they say, figures don't lie, but liars can figure.

We are allegedly down 400,000 IT jobs in the US from the year 2000. However, while I haven't heard anyone actually dispute the number itself, the number came from a report given by an agency commissioned by a labor union (WashTech) which has a lot to benefit by making offshoring an issue. Other groups ague that all we've done is shed the dot-commers who weren't "real" employees anyway.

We actually seem to be pretty impoverished in our data sources. The other widely quoted stats on shrinkage in the industry come from Forrester Research. The bulk of what I know outside these few sources comes from hearing lots of people complain and news publications reheating the same old news reports over and over again. Not my favorite kind of science, but it's all I can get. Well, that plus factoring in the indirect stats like P&Ls from US and Indian corporate reports (well, if you can't beat 'em, invest in 'em!), GNP and trade figures (Spin City) and so forth. Unemployment figures are probably the worst, because if you're so severely unemployed that your benefits have run out, you no longer exist by their logic.

I did hear something interesting on NPR this morning, China's beginning to look at a manufacturing labor shortage. Yup, China. 1.3 <Carl-Sagan>BILLyun</Carl-Sagan> people. And a labor shortage. Factories are actually starting to have to introduce safety procedures and higher wages in order to get people to work for them.

Now it's true that neither China not India hold a monopoly on low-wage workers, but between them they hold about half the world's population (+/-). When a labor pool that big fills up, the little countries like Kenya and Uzbekistan aren't likely to stay low-wage very long. Even Indonesia is "only" about as populous as the U.S.

So the bottom may be in sight, though it's a deep well.


Is there really a present reversal or are we really doomed?


The two aren't mutually exclusive. In manufacturing, it was more like the tide rushed in, the tide rolled back, then the tide rushed in again even higher. It's too soon to tell in IT. Maybe despite appearances and common sense, IT is actually less offshorable than manufacturing. Maybe not
[ September 24, 2004: Message edited by: Tim Holloway ]
 
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When it comes to technology, the media is quite often behind the times.

I won't deny that some companies are still moving to offshoring and venture capitalists are probably looking at off-shoring for cost control because venture capitalists, in general, aren't very smart. Basically they are generally high-stakes gamblers and their constant quest for the "hundred-bagger" from the dotcom days largely contributed to the job slumps of the past two years.

(A hundred-bagger was a company that produced a 100 times return on investment. It was nearly impossible to predict a hundred-bagger, but once some companies pulled it off, it became the only thing venture capitalists cared about)

One of the people mentioned in the article he was setting up some Indian workers just for attracting venture capitalists, not that he actually wanted to do so. It also sounded, not so subtlely, that he was not looking at off-shoring as anything more than raising money. Indeed, I'd spend $100,000 offshore to receive several million dollars!

The reality is though, that early adopters are coming back. Companies are dropping their offshoring and outsourcing pursuits and bringing everything back in-house or at least domestically. We're in the beginning of the trend reversal. However, we are not at the end, so we're still seeing some late bloomers and people who have read enough articles that they now want to get in on this "offshore thing". These are the same people funding every dotcom in existence in the late 90's so they could get in on the "Internet thing".

We are NOT over the hump yet.

Interestingly enough, when my own company opened an Indian office (3000 strong), it created around 100 jobs here in the US. Had we not opened that office, the money would probably not have been spent for ANY jobs in the US aside from filling vacancies.

I was rather amused to see the Boston Globe quoting statistics that technology rags have stopped using. I think the massive offshoring efforts that will replace all domestic operations by 2015 isn't going to happen anymore.

On a personal note, I'm always wary of predictions from businesses that extend beyond 5 years. There are just too many things that can change in the span of a mere 6 months, let alone 10 years!
 
Jesse Torres
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Originally posted by Homer Phillips:
Up there in S. Chicago ( Gary ) how did things for the steel workers turn out?



Do you believe that the IT industry in America will have the same fate as the steel industry of America?

Gary is only 30 miles from Chicago, if you take the Skyway. On my way to Michigan or Canada, I have passed through Gary and it looks as if civilization succumbed to utter misery. Literally, businesses are long gone; houses have wooden boards on the windows, no businesses, abandoned burned homes, burned cars, and so on and so forth. It looks similar to a scene from the British movie, 13 Days Later.
 
Homer Phillips
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Do you believe that the IT industry in America will have the same fate as the steel industry of America?



I think I agree with Holloway, it will be worse. Gambling, booze and credit cards don't support much of a civilization.
 
Jesse Torres
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It is inaccurate how the Labor Department�s statistics don�t really reflect reality. For example, they claim that "Computer software engineers are projected to be one of the fastest growing occupations over the 2002-12 period."

Here is the Link:
 
blacksmith
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Jeroen Wenting:

What I do mind is Indians who come here basically asking "I want to take your job away, how do I go about it" and then are offended when people are less than helpful to them.

I wouldn't even mind that so much if it weren't for the fact that they always seem to be looking for a quick fix, instead of learning what they actually need to learn to do their jobs, sometimes even specifically asking for code or a pat answer to an interview question.

That, plus the fact that I've personally heard of half a dozen failures involving offshoring to India and of no successes, is what makes me skeptical. The Indians whom I've personally worked with in the U.S. seem reasonably competent, so I can only surmise that the competent ones move to the U.S....
 
Helen Thomas
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Some extremely competent ones move back fromthe US to India / China.
Newsweek and The Economist.

Perhaps offshoring is an insurance scam, er scheme spreading risk wide.
Like everyone pays �100 to be able to afford �20,000 of medical care
regardless of whether they are most or least at risk.

That or there are plenty of mentally ill people in charge.
[ September 24, 2004: Message edited by: Helen Thomas ]
 
Jesse Torres
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If indeed there is a reversal trend in offshoring, why do we hear in the news about more American companies opening or expanding R&D centers in India and China? Instead of cost saving reasons, maybe companies are anticipating China�s foreseen prosperous future.
 
Jesse Torres
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I was too young to remember the troubles encountered by workers when their manufacturing jobs went abroad in the 80s and 90s. However, some of my elder friends claim that congress didn�t do much to protect these jobs because most workers weren�t college educated or affluent. However, since most White collar job workers are affluent and / or college educated, then congress is now paying attention.

Are these statements true?
 
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If you want to validate the impact of off-shoring, look at entry-level IT jobs. In the US, they no longer exist. In several Indian and Chinese cities, anyone with a good IT degree gets at least a serious interview.

I think that the reasons that some off-shore ventures don't work out are language/cultural barriers and teams that are are bottom-heavy with less experienced programmers. The off-shore programmers will gain experience and better mastery of English. The on-shore Business Analyst role wil cover the cultural issues.

At that point, average programming jobs in the US will go the way of steel and garment jobs. Of course, the brilliant, innovative software creators and technical gurus will have a place, but programming will become a niche market in the US.
 
Warren Dew
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Jesse Torres:

If indeed there is a reversal trend in offshoring, why do we hear in the news about more American companies opening or expanding R&D centers in India and China?

It's possible that projects that are offshored but not outsourced - for example, an R&D center that's still under the direct management of the U.S. company - is less likely to fail than individual projects that are both offshored and outsourced. For example, furniture companies who moved their manufacturing to China also moved their (U.S. born) managers to China, and they've been successful. By this theory, the offshore software project failures we know about personally aren't because of a lack of competent programming, but instead because of a lack of competent project management.

The other possibility is that the really big offshored projects just take more time to fail.

I was too young to remember the troubles encountered by workers when their manufacturing jobs went abroad in the 80s and 90s. However, some of my elder friends claim that congress didn�t do much to protect these jobs because most workers weren�t college educated or affluent.

The loss of manufacturing jobs happened in a slightly different way. U.S. companies didn't offshore/outsource much; labor unions kept GM from opening manufacturing plants in Japan, and US Steel from replacing their aging ore plants with more efficient minimills that would only employ a tenth as many people. Instead, competing companies appeared overseas. In some cases Congress did protect the domestic jobs by imposing import tariffs, but eventually consumers who wanted cheap Toyotas and Hondas voted for Congressmen that would let them have what they wanted.

Mike Gershman:

If you want to validate the impact of off-shoring, look at entry-level IT jobs. In the US, they no longer exist. In several Indian and Chinese cities, anyone with a good IT degree gets at least a serious interview.

That can also be explained by the dot com bust. With plenty of experienced people around in the U.S. over the last two years, there's no reason to hire an entry level programmer. In contrast, the number of programmers with five or ten years experience is not high in India or China. As you note, that might be another explanation for why offshored projects don't tend to be successful.

At that point, average programming jobs in the US will go the way of steel and garment jobs. Of course, the brilliant, innovative software creators and technical gurus will have a place, but programming will become a niche market in the US.

In manufacturing, Japan eventually gained even more of an advantage over the U.S. in innovation and technical guruship than in the grunt work of assembly on the line. It's a conceit that only the U.S. can do these things.

Eventually, the living standards will improve in India and China to the point where they won't have a price advantage any more. Then it will be a level playing field for everyone.
[ September 25, 2004: Message edited by: Warren Dew ]
 
Jesse Torres
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Originally posted by Warren Dew:

The loss of manufacturing jobs happened in a slightly different way. U.S. companies didn't offshore/outsource much; labor unions kept GM from opening manufacturing plants in Japan, and US Steel from replacing their aging ore plants with more efficient minimills that would only employ a tenth as many people. Instead, competing companies appeared overseas. In some cases Congress did protect the domestic jobs by imposing import tariffs, but eventually consumers who wanted cheap Toyotas and Hondas voted for Congressmen that would let them have what they wanted.



So congress did protect manufacturing jobs. Thanks for that input.
 
Greenhorn
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No Indian programmer ever thinks with the mindframe "I want to take your job".Whenever someone is onsite for whatever reason,they are just doing their job,as anybody would do.

I studied and then worked in America for 4 years before starting to work as an onsite worker for an Indian company.As far as failure of projects is concerened,this primarily happens due to lack of communication between the management and the engineers.Some companies really cut the corners and go for cheap Indian companies(apart from the well known ones),what I observed is that management in these companies is poor and a choice of a lesser known brand can expose you to them(though the quality of software engineers in more or less the same).The Indian coder is always caught between what the client asks for and what his own boss wants him to do.Thats why the sucess rate at product companies like Oracle India,Adobe India is higher and the employees just love working there, as compared to project based companies.

I have also seen some great project successes in offshore and have seen the project size grow from 1 to 100.It all depends in how you go about implementing it.I dont see this trend decreasing in the short term.But I must admit that I am skeptical that this is assuming dangerous propotions, now anyone who can say "IT" in India has a job and calls himself a software engineer.Not that they are all poor workers, but they lack the kind of creativity thats needed.There was a time when you needed a computer science degree and real experiance to get a job , but not anymore.This reminds me of the dot-com boom days in the silicon valley.

What I do want to point out is that outsourcing done correctly at a measured pace can be a success,but that doesnt seem to be the scenario. You can tell with the companies in India hiring in thousands....

------
Change, before you have to...
------
 
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I think China will be great destination.China has superior infrastrcture than many Asian countries.Also growth is uniform across the country unlike India where Govt. concentrates only on British legacy cities.
 
Jesse Torres
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Originally posted by Arjun Shastry:
I think China will be great destination.China has superior infrastrcture than many Asian countries.Also growth is uniform across the country unlike India where Govt. concentrates only on British legacy cities.



Do you mean that China is a great destination for offshoring or great in general?
 
Arjun Shastry
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In next 5 years,majority IT jobs may be moved to China once programmers there become fluent in English.Also we can see Chinese software products too dominating IT industry in future.
{
China Starts Mass Production of Nami Materials
China Develops New Maglev Train
IC Cards Application Develops Rapidly in China
China to Issue New Intelligent ID Cards
China: Top Spot for R&D Investment
Chips:China made to China created
China develops high definition video chip
}
I doubt any Asian/European country could compete with China,the rate at which they are progressing.
[ September 26, 2004: Message edited by: Arjun Shastry ]
 
Jesse Torres
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Many say that China will be in the 21st Century what USA was during the 20th Century. No doubt that now that China has embraced Capitalism, it will be only a matter of time before China surpasses US in terms of prosperity in all aspects.
 
Arjun Shastry
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I don't know overall growth but in technology/IT China could surpass many countries.
Juniper opens R&D center
SAP opens Global Support Center
IBM to give training to 40,000 students.
{
There is some potential overlap between capabilities in China and IT services from India. It is for this reason that Indian tech services companies like Infosys and Wipro are all making heavy investments in building up Chinese programming and software integration. Global outsourcing providers like Hewlett Packard, IBM, BearingPoint and Accenture are also building up their China operations for purposes beyond serving the China market.

Investments made in software development and business-process outsourcing that might overlap India's competitive advantage are being done to spread risk around the globe. Cultural difficulties, rising wage rates, currency fluctuations and changing telecoms technology will change the costs of operating in a certain country. Demand for outsourcing now comes from Japan, Korea, Australia, Taiwan and Hong Kong as well as the traditional markets of Europe and America.
China's opportunities as an outsourcing provider will be guided by the way in which the modern corporation is evolving, the efficiencies to be gained behind improvements in business processes, the extension of manufacturing towards engineering and globalization in the service economy. The relative pay-packets of the workers involved are only the beginning to this story.
}
Source
For regular update on technology ,read China Tech news
 
Mike Gershman
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Many say that China will be in the 21st Century what USA was during the 20th Century. No doubt that now that China has embraced Capitalism, it will be only a matter of time before China surpasses US in terms of prosperity in all aspects.


I doubt whether our planet could support a billion Chinese people with a middle class American lifestyle (think SUV's).

In addition, there are issues that China has to work through that took centuries in Anglo-American culture, including a government of laws, not men, including opening positions of real power to talented people whose ancestors did not lead the Long March, including balancing consumption with production to reduce the overwhelming dependency on exports to more developed countries.

I also understand that businessmen operate at the pleasure of the government and contacts are essential. This would have let in Bill Gates (a "fortunate son") but not Michael Dell.

With that said, China is already a major player in IT but not a dominant player. The big product ideas still originate in the US and the big Computer Science ideas seem to start in Europe. The rate at which China makes the necessary cultural changes to compete at that level, or even whether the Chinese believes it's worth it, remains to be seen.

By way of analogy, Japan, a major industrial power, has relatively few native-born senior programmers but many thousands of great engineers. Global peace and prosperity is more likely to result from each culture doing what it does best rather than everyone trying to eat everyone else's lunch.
 
Warren Dew
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Arjun Shastry:

In next 5 years,majority IT jobs may be moved to China once programmers there become fluent in English.

I don't think it's that easy for a large number of people to become fluent in English. Who teaches them? India got a real leg up in this regard from leftover British influence.

I think China may start exporting some software services, but it may have to work differently than in India.

Mike Gershman:

I doubt whether our planet could support a billion Chinese people with a middle class American lifestyle (think SUV's).

Unfortunately, that seems to be where they are headed right now, based on traffic in Beijing when I visited earlier this year. Hopefully their government will come to their senses and slap some big import tariffs on oil soon, like Europe has, to encourage their economy to grow in a more sustainable direction. It's a big enough market that major manufacturers would probably be willing to design smaller, more efficient cars for it.

In addition, there are issues that China has to work through that took centuries in Anglo-American culture, including a government of laws, not men, including opening positions of real power to talented people whose ancestors did not lead the Long March

China has a much longer tradition of giving positions of power to talented people - the whole neoconfucian examination system developed over the last couple of millenia is based on making sure that government positions are filled by the most competent, with checks and balances to restrain corruption and power grabs. Use of this philosophy was interrupted by Mao, but it seems to me the current leaders are moving back towards it. Just because the western model works does not mean it is the only model that can work.

, including balancing consumption with production to reduce the overwhelming dependency on exports to more developed countries.

China was running a trade deficit for this year until August - they do in fact consume as much as they produce. Just because they don't import that much from us doesn't mean they don't import. China has no domestic reserves of petroleum to speak of, so much of the money from exports to the developed world goes to petroleum imports to power their economy (and more recently, their SUVs).

I also understand that businessmen operate at the pleasure of the government and contacts are essential.

Not really any more true than in the U.S. - once you reach a certain size, you start having to deal with the government.

The big product ideas still originate in the US and the big Computer Science ideas seem to start in Europe.

Huh? That isn't my impression - could you clarify?

The rate at which China makes the necessary cultural changes to compete at that level, or even whether the Chinese believes it's worth it, remains to be seen.

Agreed on that.
 
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I heard from a friend of mine from Goa that the wages there for programmers have doubled in the last couple of years and that kids coming straight out of high school are now getting multiple job offers as programmers.
 
Jesse Torres
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Originally posted by peter wooster:
I heard from a friend of mine from Goa that the wages there for programmers have doubled in the last couple of years and that kids coming straight out of high school are now getting multiple job offers as programmers.



I thought that all IT workers in India had at least a BS. A High school diploma, that's all?
 
Jesse Torres
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Originally posted by Mike Gershman:

I doubt whether our planet could support a billion Chinese people with a middle class American lifestyle (think SUV's).



What I meant is that China is currently a robust industrial powerhouse. They are flourishing at a very rapid pace.
 
Jesse Torres
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Originally posted by Pradeep Bhat:
China will be the new super power. Chinese people are more hard working than others.



Anyone can be a hard worker and / or intelligent. The world is filled with hard workers from all countries, not just China.
 
Kishore Dandu
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Originally posted by Jesse Torres:
Many say that China will be in the 21st Century what USA was during the 20th Century. No doubt that now that China has embraced Capitalism, it will be only a matter of time before China surpasses US in terms of prosperity in all aspects.



I don't see that happening due to many reasons.

In general China is not a melting pot of foreign born enterpreneurs(I might have spelt it wrong). Its all home grown or chinese speaking. It may become a good destination for more services jobs once chinese figure out the english part of the missing piece. But that is long ways to go.
Also, they are not as open-minded as Americans to be a attractive propostion for good talent to endup there and supplement the needs.
 
Jesse Torres
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Originally posted by Kishore Dandu:


I don't see that happening due to many reasons.

In general China is not a melting pot of foreign born enterpreneurs(I might have spelt it wrong). Its all home grown or chinese speaking. It may become a good destination for more services jobs once chinese figure out the english part of the missing piece. But that is long ways to go.
Also, they are not as open-minded as Americans to be a attractive propostion for good talent to endup there and supplement the needs.



I actually agree with you.

The news media spends a lot of time emphasizing on how China is rapidly growing and how they will surpass America soon, in all aspects of prosperity. The news media points out to the fact that China is now driving Crude oil prices through the roof because of their increased appetite. The media also points out to how China is buying steel, cement, and other goods at a very rapid pace. Finally, the media also speaks a lot of China�s new emerging middle-class.

I guess I was compelled to make the wrong assessment of China, based on the media.
 
Jesse Torres
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Originally posted by peter wooster:
I heard from a friend of mine from Goa that the wages there for programmers have doubled in the last couple of years and that kids coming straight out of high school are now getting multiple job offers as programmers.



If wages continue to rise in India, will companies commence to seek a cheaper alternative?
 
Mike Gershman
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If wages continue to rise in India, will companies commence to seek a cheaper alternative?



Of course not. US companies that are supporting US operations by replacing US programmers making 60-100K/year with programmers in India making 10-20K/year would never think of replacing the Indian programmers with people making 8K/year as soon as they learn a little English. That would be just so disloyal.

It's just a coincidence that my MS-CS classes were full of bright Chinese students who take every opportunity to practice their English.

As far as I can tell, the raw aptitude to be a good programmer is evenly distributed among humans. The capital investment for a contract programming shop is about 2k/seat. The human investment is about 60K to send one future trainer to the US for two years and 20K/person for a two year learning curve (less billable hours). And if the ongoing salary expense doesn't stay low, the jobs just move to the next low wage city.

Pogo:

We have seen the enemy ... and he is us

 
Jesse Torres
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How much is the average pay of an average programmer in India w/ 3 yrs of experience? Do most in India work in permanent positions, or do some work as contractors as well?

Thanks,
[ September 27, 2004: Message edited by: Jesse Torres ]
 
Warren Dew
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Kishore Dandu:

In general China is not a melting pot of foreign born enterpreneurs(I might have spelt it wrong). Its all home grown or chinese speaking. It may become a good destination for more services jobs once chinese figure out the english part of the missing piece. But that is long ways to go.

True.

Also, it seems more Chinese are learning European languages like German and French (put together) than English. Given that China is physically closer to Europe as well, Europe may be a more natural trading partner for them.

In the long run, I'd rather see them aligned with the U.S., but that's just a personal preference.
 
Jesse Torres
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Originally posted by Warren Dew:



In the long run, I'd rather see them aligned with the U.S., but that's just a personal preference.



Please shed some light on this:
[ September 27, 2004: Message edited by: Jesse Torres ]
 
peter wooster
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Another point that few mention in the "mega populous competitor country will crush us" debate is that China has a totalitarian government that spent many years training its people in the theory of Marxism and has recently abandoned that theory to practice 18th century Capitalism. Given that over 90% of the huge populous is extremely poor and can barely afford a bicycle, the presence of a tiny minority driving Hummers may remind them of their eariler training. I suspect this dynasty's days are numbered and the breakup will make Yugoslavia look like a garden party.

I think India has a much brighter future, its government is more democratic and it has the advantage of using English as a liguafranca. One of the 1970s yogis stated that he saw India as a great economic power in the future and America as a great spiritual power, seemed strange at the time, but it may actaully be happening. The one thing to watch in the Indian equation is that the expatriots don't start looking too much like the old British Raj.
 
Ugly Redneck
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Originally posted by Mike Gershman:
If you want to validate the impact of off-shoring, look at entry-level IT jobs. In the US, they no longer exist. In several Indian and Chinese cities, anyone with a good IT degree gets at least a serious interview.



Part of the problem with that is US management is reluctant to hire and train freshers. Sometimes, a fresher can write just as good code as a person with 4-5 years experience. Example; it doesnt take experience to write a function that adds numbers. This is one of the basics that any college graduate would learn.

Instead US management believes in this false notion that experience can deliver superior results. True to a certain extent.. but not always. I have worked with some brilliant freshers and some duffer veterans to realize that experience doesnt always count.
 
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