July 25th, 2007
The sinking dollar and offshoring
As noted yesterday, the falling value of the dollar is making it more costly to do business with India.
This should be good news to American programmers. If it’s getting more expensive, then the price differential between Indian labor and domestic American labor goes down. This means the advantages of domestic American labor, which include local presence, intangibles such as American cultural skills (which include things like a perfect American accent), personal accountability (derived from local presence), less exchange risk and other benefits grow in prominence. Those benefits never went away, which is why new software development is the least likely candidate for outsourcing - not because Indians can’t do it, but because you need to have constant back and forth interaction between your staff and developers to ensure the success of a new development project. That’s an interaction to which local presence and American cultural skills are well suited, but remote development is not. Maintenance tasks, or enhancements to existing products, have always been the best candidates for outsourcing.
Whatever the case, I am still thankful for Indian competition, however much that competition waxes and wanes in response to changed economic circumstances. Yes, that’s right, I’m an American programmer, and I welcome competition from halfway around the globe that would love to take my job away. That’s because I want a prosperous American future, and to put it simply, we can’t have that if we create protected sinecures for American programmers that throttles American growth by forcing American industry (most of which relies on software these days) to pay more for software product than it would otherwise have to.
I want an American software industry that is GLOBALLY competitive. It can only be that if it is forced to face GLOBAL competition. Proponents of protection claim that allowing software engineering jobs to flow to offshore locations undermines America’s IT future. In other words, only by forcing the market to keep those jobs here do we create an American IT industry. I’m sure United Auto Worker (UAW) members would make a similar argument in favor of domestic automobile manufacturing.
The irony is that if if we protect those jobs because they aren’t globally competitive, we won’t HAVE a bright IT future. That future is only ensured if America’s IT skills are truly competitive on a global stage, as “the globe” is where most of the markets of the future lie (no way around that, as we are “only” 300 million in a world with over 6 billion inhabitants). We only become competitive, in other words, by being forced to face that competition, and figuring out what America does best.
The list of things America does best is miles long. Americans need to trust that more.
Perhaps our fears are the result of the uncertainties we impose on ourselves, uncertainties that are getting a lot of press lately as presidential races gather more stream. The relative lack of social safety nets taken for granted in other developed nations, from simple unemployment benefits through the fact that health care is tied to corporations, means Americans tend to fear global competition even though, paradoxically enough, they are some of its biggest beneficiaries. That’s one of the reasons a lot of economists have come out in favor of some form of national health care system. People who feel they are safe at a basic level are a lot more willing to face the full blast of global competition.
The other reason is that economies are finely tuned machines. That machine would run a lot slower without universal literacy. The same applies to a system where health care is too expensive and not available to everyone.
John Carroll has delivered his opinion on ZDNet since the last millennium. Since May 2008, he is no longer a Microsoft employee. He is currently working at a unified messaging-related startup. See his full profile and disclosure of his industry affiliations.
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| 07/25/07
