February 11, 2004

Outsourced Coding

Wired has an article on The New Face of the Silicon Age, about outsourcing programming jobs to India. Worth a read.

I was interested to see that my alma mater was among the US companies and institutions using Hexaware, the featured company, for outsourced programming projects.

While I know these job movements are painful for people and they are sure to be vocal about that pain as the election approaches, it's important to consider two things:

  1. These are highly educated Americans for the most part and if anyone should be able to retrain and shift fields, they should be. Not that they are likely to want to 'cause, come on, coding is fun. (Right?) But they should be up to it – they should be the standard bearers for the flexible American economy. Letting them bend your ear to their plight now is the ultimate hypocrisy for those free-traders that turned their backs on the clamoring of factory workers in the eighties and nineties. But to some of the chattering classes, the jobs currently being shipped away probably seem a lot more real than punching rivets all day long does.

  2. Unlike tangible products, the demand for which is ultimately capped by physical constraints despite the best efforts of Madison Avenue acquisitive-consumerist pushers to convince us that durable goods are disposable, the demand for software and other IT products should be fairly elastic and practically unbounded at least for the foreseeable future. There are an uncountable number of uses for software that can't even be considered today because the going rates are just too expensive.

    One of the things that I get to see in my job is just how bad the software systems and technical infrastructure is at large companies – even in competetive ones that you'd think must do a better job. But it's just too expensive for them to update their old, broken, inflexible systems because it requires thousands of hours of integration, custom coding, tweaking and testing — all of which translates to millions of dollars at US salaries.

    At some price, though, the demand will start to explode and I believe that there's a huge productivity spurt waiting to be unleashed by cheaper access to good, customized, tested software for businesses. Perhaps opening the doors to these gains to the thousands of small businesses that currently make do with ill-fitting off-the-shelf products. Everyone will win because of this – but, of course, the gains will be more diffuse, harder to tally, and make worse copy than the pains.

In the meantime, there's the question of what all of us American code-jockeys will do. Some have argued that we'll all end up in creative jobs. Others, that we'll all just move up the chain to design and project management – all that cheap code isn't going to design itself! Others, including Frederick Turner, say that we're moving to a "charm economy", whatever that means. Still others, pointing to the "lump-of-labor" fallacy, think the increased demand for software and services will make room for everyone in the industry.

I have to confess that I don't know what the next thing is, but it's worth remembering that there probably will be one, no matter how painful it is to get from here to there, and in the meantime some good will come of it too.

Update: Dan Drezner has a post on the related subject of Gregory Mankiw, chairman of the White House Council of Economic Advisers, testimony to the Joint Economic Committee of Congress, during which he defended outsourcing of service jobs. He then has a good round up of Democratic reaction. As expected, they are seizing on this issue for the 2004 election, moving steadily away from the Clintonian free-trade wing and back toward Gephardtian protectionism. Drezner's not pleased with Kerry's comments in particular.

Posted by richard at February 11, 2004 01:01 AM