Thursday, February 05, 2004

OUTSOURCING IS A GOOD THING

Sounds like a cross between Martha Stewart and Tom Peters, right?

I don't know where the hell everyone's been. For the past 5-6 years, many jobs have been outsourced offshore. In the past, those jobs tended to be manufacturing (assembly) jobs, or very low-skilled administrative jobs (like accounting and compiling all the discount coupons you give to your local grocer -- most of those are "processed" in Jamaica).

A few years ago, however, more and more highly skilled jobs began to be outsourced. Many folks are now very upset that most software companies have offices in Delhi or Mumbai (Bombay), where they pay programmers 1/5 of what they would be paid if they were US employees.

Here's the deal: Many of those Indian employees would otherwise be here in the US, but most would actually rather be "home" than in the San Francisco Bay area. At 1/5 the income, they have a higher standard of living in India than in Los Gatos, and that's the point; because in this example (which seems to be the favorite "horror story" of anyone who thinks about the "massive loss of US jobs") the real reason this has occurred is that Indian programmers living in India have a "comparative advantage" over any programmer living and working in the US. India is very good at training programmers. They would rather stay home than move to the US. Get over it.

They (Indian programmers) should be able to do what they do best (write code) where they want to do it ("home"). At the same time, don't expect any company based in India to become the next Microsoft, Oracle, or Dell. Why? Because the US has a comparative advantage over India in venture capital and innovation.

Read this and then read more on the subject.


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