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Comment by mc32 | Hacker News Reader

In the first wave of outsourcing, companies saw that the contract organization provided more or less equivalent results at substantially reduced cost.

What they failed to realize is what they outsourced were their bottom tier workers, the unproductive people. They got excited by the reduced cost with minimal reduction in effectiveness.

When they try to outsource their better talent that’s where they failed to recognize good talent is costly everywhere. You might save some salary but it’s offset by lots of other things from time shift to organizational culture.

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> [...] what they outsourced were their bottom tier workers, the unproductive people.

That might be true to some extent, but I think there's a problem with that line of thought.

People are a "moving target". What may be a bottom-tier worker now, could very well be a valuable employee in 5-10 years. Many folks have built their career by starting at a low level and then getting promoted and upskilled over time through hard work and commitment. Starting at a low position and advancing is becoming, sadly, a rare thing.

The "first wave" and subsequent waves of outsourcing have to a large extent eliminated paths of career advancement for many workers. At first it was unskilled laborers and now it has been creeping up to virtually all technical job descriptions. The wet-dream of MBA's who promote this stuff is corporations consisting of a few C-level people and their board, and then a layer of fab-less product and operations people who just manage supply-chain and services stuff with external vendors. It's an ugly picture but that's what the global supply chain people want.

I think this just means employers will still have incentive to hire people to be employees (as then they benefit from the employee's growth), rather than contract out work to firms which may reassign or replace the (now valued, experienced) employee. When you contract out instead of hire, you're giving an incentive to a firm to get the work done as cheaply as possible, and that's not always the right trade-off.

The earlier waves of outsourcing were about shifting things like management responsibility out of the company, and I think that was shown to have unintended negative consequences for a lot of firms. I don't think there's much reason why an employer wouldn't be excited about hiring good, talented people from cheaper labor markets now.

This. Not to mention it has become much easier for anyone motivated to learn valuable skills online-- now there will be more opportunities to apply them.

Someone in the Philippines learning Python on Khan Academy today could very well be competitive for a senior engineering job in 10 years if the career path were possible.

I've met countless skilled technical people who could not a get job at XYZ company simply due to visas, not qualifications. Now working for these companies can be a real possibility.

You forgot to account for domain knowledge. You can be better than me at python, but I know my area and customers. When I'm given a half complete spec I can make good choices for the most part and get done without getting clarification. I can guess what version 2.0 will need well enough that most of the time those features will drop in quickly while major refactoring is required to get them into the better programmers 2.0.

Of course there are tradeoffs. A programmer who is much better than me has advantages in quality (assuming you are much better, in my biased opinion I'm great)

Domain knowledge isn't always valued the same by those writing the checks, whereas 50% cheaper is far easier to quantify.

You're probably right about this, but I'm betting we'll see political parties in countries all over the world start putting up roadblocks to this sort of thing.

It's already happening to a degree. There a number of what you might call "reluctant Trump voters" where I work. The most frequent (and often only) argument you'll hear from them in favor Trump is around immigration and H1-B visas. You'll also notice that the Democrats in the U.S. who are surprisingly quit around Trumps efforts to reduce H1-B issuance.

I'd be willing to bet that unrestricted competition for a limited number of high-paying jobs in the developed world would fuel the Nationalist parties and movements that we've been seeing more of in the U.S. and Europe.

My opinion has been that it's good for US workers if foreigners immigrate and become citizens, because even if they make less than most Americans, they make more than they did in their prior country, which means they are improving the global market for labor, from the point of view of workers.

But having classes of people who live in the country but have special restricted rights and never become full citizens worries me.

I wish we could move away from the idea that citizenship is a reward for following the rules and instead consider that making people citizens is a benefit for (maybe even vital to preserving) society.

Yeah, and the posters thinking that this will help wealth inequality (either among the general population or just among tech workers collectively as a whole) are hopelessly naive. It is practically guaranteed to make wealth inequality worse, and now tech workers will start to feel a lot of pain, more like the general US population has.

This is going to happen faster than other times when offshoring has occurred in various industries historically too. Just think about it. You can bet contract work is going to be commonplace, and you can kiss your benefits goodbye. If you do not think this will happen to you, well, you’re next on the chopping block.

Work will become hyper competitive for benefits and for full time status. A good employee will be someone who answers emails 24/7 and within minutes of it being sent, night or day. The work will never end. Surveillance technologies for remote work will remove any semblance of freedom when you work from home. This is all very unlikely to be made illegal in the US in the foreseeable future. Also. populism uprisings that occur in a respective country last on average for 30 years, so you better be thinking in the very long-term for how bad this could actually be.

I'm confused. Perhaps you could clarify how honing your skills to be valuable as a remote worker is somehow the gateway to the rich eating all of us.

My personal experience with remote work is that it allows me to be present as a father in my children's lives and also to be more productive. I'm not saying everyone will have that experience, but for me it's an excellent fit.

As far as productivity, if we look at productivity increases since 1950, we should be working half as much for the same productivity/pay (https://news.ycombinator.com/item?id=20766443). With voices like Andrew Yang trying to shift social values to valuing the underappreciated like stay-at-home mothers through a UBI, this seems like a positive path forward.

I know things seem dark right now, but in my powerless position, I choose to believe there is a better, more positive path forward, and I put my energy into pursuing it.

Frankly, I've never met a rich guy whose nose I couldn't bloody. I've rarely met one whose spirit I couldn't cut deeply in less than 15 minutes of conversation.

The entrenched economic powers will (as they always do in these economic transitions) capture a disproportionate share of any productivity gains resulting from a mass change to remote work. And their spirits don't care if you win a low stakes battle. They are winning the war. (Just a metaphor, folks!)

They have their hands on the levers. The have the resources to arbitrage or withhold or defect or take hostages (economic!) until they get what they think they can get.

Same thing will happen with self-driving cars.

The peons will capture just enough value so the new life seems a bit better than the old life.

(Long long time remote worker, since before my 17 year-old was born. Love being at home with my kids, love the efficiency and flexibility.

Doesn't change the ultimate macro outcome.)

I hear you. The good will and love of your children is something even death can't take, though. Money can't be banked beyond the grave. No religion. Just Pascal's wager in effect.

I'm hardly an abused slave ready for violent revolution. My life is pretty good if it's just meaningless. Naval gazing at some rich person doesn't help me at all. However, I do believe that guns in the hands of America's peaceful fathers are the best deterrent to the tyranny that everyone here just seems to accept as unavoidable.

An additional problem MBAs sometimes miss is that when you export jobs to contract orgs is that this accumulated institutional knowledge is lost—it’s no longer held in-house. Conversely it contributes to the expertise of the contract org. But not all orgs think long term. Or they get enthralled by “core competency”.

I don't think this is really missed by the MBAs, HN's favorite punching bag. These types of opportunity costs are absolutely a part of the make/buy decision process (but maybe undervalued?). I think it has much more to to with the "enthralled by core competency" aspect.

I'm confused by your use of "enthralled by core competency". I think if an MBA is actively dissembling the structures that brought a successful product together and exerting destructive control over any further research they absolutely deserve some criticism.

There is a huge incentive for the management to find core competency in the cheapest item on the balance sheet.

Some executives stay long term, some build portfolios, guide companies through a given stage and jump to the next. They can then say they “saved” this and that by offshoring. What happens 5 years after they leave is of little consequence.

Institutional knowledge informs why a solution works better than a shiny. The contract org will push through what works best for them, more than what’s best for your org long term. Contract orgs like checking off Hundreds of NIST or CIS controls as if that in and of itself means anything substantive.

And how many companies today are managing costly, legacy software solutions that they built in-house years (decades) ago? Every one I have ever seen.

The same logic could be used to justify duct tape software across the enterprise. There is some point where the cost-benefit leans in favor of outsourcing. Institutional knowledge may be under-priced by today's business execs, that is certainly possible. But we also shouldn't build a homegrown solution for every problem.

> An additional problem MBAs sometimes miss is that when you export jobs to contract orgs is that this accumulated institutional knowledge is lost—it’s no longer held in-house.

This. I have seen consulting companies keeping consulting contract only because the only guy that knew their system inside out was this single consultan that had been there so long that he became the effective sysadmin with the last word on everything related on the subsystem that he had been managing for years.

This is 100% spot on. Organizations build up value over the long-haul by learning things and then building on top of those things, learning some more, building on that, and so on.

Look what happened to G.E. They outsourced everything they possibly could and had a decade or two of unparalleled profitability. But, over time the well of ideas and competencies for products and services dried up and they went from being a powerhouse to a cautionary tale.

Don't export knowledge or know-how to save a few bucks. It always comes back to bite you.

This may well apply to countries as well. Due to the scales involved, it takes longer to notice the deleterious effects, and is much harder to reverse course.

I'd say it's already happened in the U.S. We're just starting to realize that you can't fully divorce the development and design process from the actual manufacturing process and expect to stay competitive for that long.

accumulated knowledge, isn't just applicable to orgs. but to the individual workers too. old school org's such as HP n IBM recognized this early. & had policies in place that they would never lay off anyone ever. some countries from what I heard in Japan that policy is still going on. i.e company man

> People are a "moving target". What may be a bottom-tier worker now, could very well be a valuable employee in 5-10 years. Many folks have built their career by starting at a low level and then getting promoted and upskilled over time through hard work and commitment. Starting at a low position and advancing is becoming, sadly, a rare thing.

I think the validity of this point depends on how you understand "bottom tier". When I read "bottom tier"[1] I tend to read that as a combination of "people who suck at their jobs" and "people who are doing things that are highly commoditized or commoditizable". The former interpretation in particular has nothing to do with seniority.

[1] And I'm reading it this way probably because I'm back-projecting based on experience of working with some outsourced/offshored workers who sucked at their jobs.

People who suck at their job can learn, and become better. Not all, but everyone was bad at something before they leveled up. Highly commoditized positions are also a great way to learn about less commoditized work. How many old rich people used to say they started in the mailroom.

How does one deal with a culture of decreasing vertical mobility within a particular organization. They may suck at their job and be shuffled between the bottom tiers of increasingly flat management structures. If there is no room for growth this model fails, many older people did move vertically but this practice has been almost deliberately been removed from corporate life.

Junior employees must have deliberate exposure to responsibility and challenge in a structured environment that supports them if the are to grow. This is the job of middle management, who are the first target of every MBA driven reorg. Hence the end of development.

My dept is a bunch of Linux Admins, of varying skill level; but all at least mid-grade or higher. There are no junior admins. They are paying top wages so we can do paperwork, create accounts, and manage file permissions.

Then they can't understand why projects fall behind.

I was out of work a couple years ago and I applied to work in a mailroom. It turned out that the company whose mailroom it was, was not the hiring entity - it was outsourced. So, no working your way up anywhere.

Furthermore, the interviewer spent the entire interview complaining about how she mostly couldn't even get people who would show up, let alone act maturely. We discussed the starting date, but within a day or two she reneged, presumably because I had dressed formally for a minimum wage job and was overqualified.

Another thing that comes to mind is the janitorial duties were outsourced in the building I used to work in.

This sort of thing is why I think it's dumb whenever I read something about a progressive company having a minimum wage of whatever for their employees - it's purely a statement about who they keep on their books and who they use indirectly.

The "moving target" problem is significant for countries (or geographic regions in the case of large countries or open borders). However, for an individual company, it is a tragedy of the commons situation.

Why should a company A pay more to train a bottom tier worker into a high tier worker, when said worker will then be able to move to company B who offshore's its low tier workers. In effect, company A is subsidizing company B's training program.

Attrition significantly drops if you treat people right. Many of the ones that leave run right back.

> The "first wave" and subsequent waves of outsourcing have to a large extent eliminated paths of career advancement for many workers. At first it was unskilled laborers and now it has been creeping up to virtually all technical job descriptions. The wet-dream of MBA's who promote this stuff is corporations consisting of a few C-level people and their board, and then a layer of fab-less product and operations people who just manage supply-chain and services stuff with external vendors. It's an ugly picture but that's what the global supply chain people want.

This is how Microsoft operated for a while. Entire support ecosystems were built around Redmond, from non-core competency support (design, boutique marketing, food services, maintenance) to core competency augmentation (vendor, off shore, near shore, local). They still employ that model but to a lesser extent. They've moved away from it based on labor market trends and local competition (more companies have moved to the greater Seattle competing for resources). So I don't know if its a universal doctrine or model that will be employed, but it does seem to have a time and a place.

Yea, it's already happened to some extent in the life science industry. It's part of the reason our biotech industry is in shambles. Many of the companies I work with dream of "going virtual", doing research at an unaffiliated lab, taking credit, moving that research to a massive CMO, then dissolving any physical assets, layoffs, and then there is a just a board, execs and profit. It's totally destructive to actual human progress.

I don't think outsourcing manufacturing is destructive of human progress. You got huge companies like AMD and NVIDIA , who certainly contribute to human progress, who outsource all their manufacturing to TSMC because only a few companies worldwide can make those kinds of semiconductors.

Back then, Commodore had an advantage over the competition because they had MOS Technologies as a subsidiary and could rapidly iterate on hardware design. Same in the life sciences business. Nothing is easier than dreaming up a compound, but then you encounter reality, some compounds may be difficult to access synthetically, there are unexpected interactions, and these issues are best sorted out when synthetic chemistry, crystallographic support and the life sciences people are all in the same building. Fabless just doesn't work well outside semiconductors.

Which is why the trend with Apple is to do everything in-house (SoC, etc). Tight vertical integration facilitates difficult software-hardware technologies.

This reminds me of Standard Oil back in the 19th century. They had so much cash floating around that they could build big integrated refineries, railroad and pipeline infrastructure which contributed heavily to efficiency. The price of Kerosene dropped 80% during the history of the company.

Admittedly there's something to be said for outsourcing MFG to someplace like TSMC. But they still employ engineers to design the chips and maintain deep technical talent.

I was thinking more along the lines of companies that are little more than a layer of product managers and operations folks just managing vendors and service providers that do ALL the work.

Biotech startups are usually formed around a drug or biological to hedge the risk of preclinical and early trial work. These are usually developed with some kind of novel process. Usually you get a small early IPO if things work out at that stage to raise working capital. This happens because most traditional VCs won’t fund this type of biotech. That’s changing somewhat. Then the company sells to a major pharma or biotech if the product works out.

Also sometimes these biotechs, if they have novel approaches, are sought by big pharma because they’re more agile. So they buy them out as their R&D labs or invest in them for their IP.

The "big bet" is on the phase 3.

The day before they graduate, a Harvard college student will work on your research project or startup for $0/mo, if it’s interesting enough. The day after, Facebook is ready to pay them $10,000/mo+.

They’re the same human being before and after graduation day. Just as talented the day before as the day after. It’s the pedigree variable that explains the vast majority of the salary.

You’re saying something similar, it’s just that you’re getting distracted by the red herring of the out sourced worker. You should be analyzing the difference between a Harvard and a UC Irvine student, whose average salary difference is as large as the difference between an average US programmer and Accenture contract off shore programmer. It’s got nothing to do with time shifts and organizational culture. You’re looking at this way too logically, along with many other commenters. Indeed I think hardly anyone, including the people who actually say work for Facebook, understand really why one person is paid more or less than another, at their own companies or elsewhere.

That aside you’re onto something with low skilled workers being replaced. The net result of hoovering up low paying programming jobs and sending them to another statistical group (not in this country) is that programming salaries appear to rise. Which is exactly what happened. So if you are of the opinion that programming salaries rising reflects increase in demand, so you should get into programming boot camp, you’d be like 200% wrong. You’re chasing a low salary programming job that doesn’t exist. Which again, is sort of exactly what happened.

There are plenty of bootcamp grads across the companies I've worked and they all make 100k+ (and some are established senior engineers).

Like you are implying: status signaling from degree mills is pretty useless compared to actual competency.

My subjective experience is that boot camp grads are not as successful in the interview and job acquisition process.

Whether or not that’s due to differences in education or purely signaling behavior is something I have yet to fully make up my mind about.

I've had a similar experience at my job and I think it's actually both things.

On one side you have people that managed to claw their way through the boot camp but didn't actually pick up any of the skills; they memorized enough to get through instead of actually learning stuff. On the other side, you have people that did learn but aren't confident in their skills and so flub the interview when their confidence gives out.

I've watched the latter happen on more than one occasion and I really wish I knew how to handle it as an interviewer.

Some companies pay their Harvard interns >$10k/month, so this is not really true.

The rabbit hole goes deeper: some early stage VCs and angels only invest in Harvard or Stanford dropouts.

It is inviting to believe this. It helps me feel as though I'm too good to be outsourced.

...but it's really just a comfortable lie we tell ourselves.

I am in LA and a friend tells me he can't hire good in house engineers locally. When I suggest Vietnam/etc he indeed mentioned tradeoffs regarding timeshift/culture. I guess you can't have it both ways.

>I am in LA and a friend tells me he can't hire good in house engineers locally.

Presumably he means that he can't hire them for the amount he's willing to pay.

>they outsourced were their bottom tier workers, the unproductive people

I don't think that's correct. They outsourced lower-skill jobs that could be done remotely to regions with lower labor costs.

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