High Oil Prices Means Off-shoring in Reverse?!
Posted by ThePaladin on July 1st, 2008
Greetings Citizens of the Realm!
Today’s story is a few days old (the Paladin is just catching up on things) and comes to us courtesy of ABC News. The reason the Paladin brings this up is because the Paladin has worked for over 2 decades in the computer industry and his was the the industry most recently effected by the off-shoring craze.
Yes, the Paladin knows that manufacturing was one of the first industries to really take a hit in this manner, and his heart goes out to all of those who lost their jobs. The Paladin feels that pushing manufacturing overseas, along with other industries, is bad for America.
Of course, when the accountants, managers, and CEO’s of the Western Hemisphere found out that through the Internet they could hire foreign programmers and system developers for just pennies on the dollar, they immediately began to offshore every programming task that they could.
But they did not stop there!
They figured if “some” was good then “a lot” was better, so they began to off-shore anything they could find on their spreadsheets. No longer was it sufficient to off-shore only programmers. Now entire projects were going overseas as well. Who cared about the language barriers, the time zone differences, the lack of domain knowledge by the developers, and the need for fast turnaround? Every possible objection was met with the same response: A smug smirk and a finger pointed at the labor costs of just pennies on the dollar.
CEO’s and other senior software staff were getting HUGE bonuses, stock options, etc. based upon what percentage of their business they could send overseas each and every quarter.
And now? These same companies are quietly trying to bring a lot of these projects back. In large part, because of the same things they had been warned about by the software developer community way back in the beginning.
You see, in the Paladin’s field, there *are* a lot of tasks that make sense to send overseas…but not everything!!! What any software developer or system designer worth their salt has known for a long time (and this has been supported by industry research for a very long time) is that the overwhelming factor in cost for a project has less to do with the hourly rate of your developers and more to do with defects found in the system AFTER it has been delivered.
And guess what? The nature of the way these projects were being sent overseas pretty much guaranteed that there were going to be a higher number of defects introduced into the product earlier in the development process (and again research shows that the earlier a defect is introduced into a project, the more expensive it is to fix…when we are talking about defects that have not been discovered until after the system was delivered).
But the Paladin digresses…
The story that piqued his curiosity was published by ABC news (you can read the original story by clicking here).. It tells of how high oil prices are driving up the cost of shipping goods, and this rising cost of shipping is making it more profitable for companies to pull back their overseas operations into the United States. Or stated another way, the cost of the higher shipping is offsetting the savings of hiring workers for pennies on the dollar.
Who would have thought?
The Paladin is glad to see some benefit coming from the higher oil prices, and salutes all those who will be getting a decent job out of the deal.
A global market is a wonderful thing…so long as the playing field is level…