I recently had the opportunity to visit Delhi on a business trip for a couple of weeks. It was an eye opening experience for me to say the least. It is shocking to see just how different the two cultures are. The extreme poverty next to the extreme wealth. It’s inspiring to see the opportunities in India that the globalization of the world has made available to them. The fact remains that just a few years ago this was considered a third world country, and you can see why. Much of the city has no running water or sewage. What water is available is contaminated with hundreds of different types of potentially deadly bacteria. What sewage is available is dumped straight into the Yamuna river, which coincidently happens to also be their only source of water. The air is full of heavy pollution, and you can’t see more than a few hundred yards away because of the dense haze. Your eyes and lungs burn from inhaling it, and the smells are overwhelming. The floors are all marble because things get so dirty, it’s nearly impossible to keep carpet clean. The drains are filled with moth-balls to keep bugs from crawling up them. There are scarce traffic controls, and where those traffic controls exist they are completely ignored. The streets are filled with cars, buses, trucks, motorcycles, auto-rickshaws. It would take some serious courage just to drive in Delhi. The hotel had a large nine foot wall around it, with armed guards. We had a private car and driver take us to the outsourcing facilities, where we were again surrounded by a nine foot wall with armed guards. On the outsides of these walls were beggars, looking to get money off the very affluent workers. For comparison, one of the software developers on our team just starting out makes around Rs 175,000 or $4,074.39 USD per year. This is the entry level salary and can go up quickly with experience. In Delhi, the richest city in the country, the average salary according to the Times of India is Rs 53,976 which is $1,256.68 USD (As of April 5, 2007), compared to the rest of the country which is Rs 23,241, or $541.10 USD.
Globalization and outsourcing are all over the news we read. Everyone has their opinion on how sending American jobs to foreign countries is bad for our economy. You can’t escape from this mindset. It’s drilled into us by the media, our friends, and our co-workers. Just yesterday I was confronted with the subject by a technician who was visiting my house to install a new Satellite TV dish. He cursed in frustration about the call center being located in India and complained about how the equipment he was installing was made in Mexico or China. What frustrates me when I hear these claims is how little information people have to back them up. They are just regurgitating broad generalized claims that they have previously heard, or worse, they are just speaking based on emotion instead of facts.
The truth of the matter is that outsourcing, be it call centers, software development, or manufacturing, all help the United States economy. We live in a capitalist country. Capitalism finds its roots in our currency, the mighty dollar. A dollar is used only as a representation of effort. If I work my 40 hour per week job and get paid my salary, my salary is just a representation of the amount of effort I gave my company, and in turn the value they placed on that effort and were willing to pay me. How I spend that money translates into the amount of effort it takes to produce a product, and what I am willing to pay for that effort. That makes the dollar our purest expression of effort, and therefore resource.
Now it is well established that outsourcing jobs to other countries is significantly cheaper than having them performed here in the United States, otherwise there would be no incentive to do it. The money, or resource, saved by having these jobs done overseas can be reinvested into our economy to make it stronger. A dollar saved is a dollar that can be spent elsewhere. The end result is that a company can do one of two things with the money saved. Either they reinvest it into the company or they lower the cost of their product to gain an edge against their competitors. In either case, again the United States economy is the beneficiary.
If the decision is to reinvest the money into the company, this typically translates into research and development. Americans have always been good at innovating, and it’s a perpetual cycle that as we innovate we create new work for ourselves to do. These jobs, because of their complexity in nature, are things that can’t be easily outsourced, and so the cycle continues.
If the decision is to lower the cost of your product, then that means the value of our dollar has increased. We can now purchase something with fewer dollars than it would have previously taken. Thus, a dollar saved is a dollar that can be spent elsewhere by consumers. If you are a business, you go back to step one and decide how you are going to use this money you just saved because of the lower purchase price. Lower the cost of your own product, or reinvest in innovation. If you are a consumer, your quality of living just went up because now you can get more with the same amount of money that you previously had.
If I asked you fifty years ago what a software developer was, you wouldn’t have heard of such a thing. Now as the efficiencies of software development are solved, we have the ability to move some of these jobs overseas to reduce cost and save those American dollars. In fifty years what jobs will be common place enough to justify outsourcing? Perhaps we might be outsourcing our “genetics engineers”.
My personal experience with outsourcing comes in the software development area. There are a lot of American companies who have found great cost savings in doing simple software development “off-shore”. When I say simple software development I mean mundane things. In our case, that is the implementation of our customers’ business systems on a pre-built platform. I used to be a software developer for the company I work for, then several years ago our development jobs were outsourced to India. Instead of losing my job, I moved into a project manager role and now supervise the efforts of our off-shore development team. During my time working with our Indian developers, I have learned a lot about the differences in our work ethic, our culture, and our abilities.
I’m often asked, “What is the most difficult thing you have had to deal with in terms of outsourcing?”, and the answer might surprise you. The problem we have with our developers is not their ability, not their language (India is the largest English speaking country in the world), not even the time-zone differences (which do cause us a number of problems). The biggest issue we have is the fact that they are generally not “out of the box” thinkers, or if they are, they aren’t capable of communicating their ideas to us. They prefer to be treated in a very literal fashion. They need to be told exactly what to do, and how to do it. They rarely offer suggestions as to how changes in process could improve their performance. They need to be told exactly how the code should work, what it should do, and how to test to make sure it does what it is supposed to do. This goes back to my earlier point about innovation. The literal attitude, the cultural differences, and their lack of understanding our “business reasons”, makes it very hard to communicate their original ideas to us. I don’t want to undermine their ability, they are very skilled. They know and do their jobs with great competence, as long as you are telling them what it is they need to be doing. Several of the members on our team over there even have their PhD in computer science. They can’t get much more skilled.
The other difference that was hard to overcome initially is working styles. When we first started using the offshore team, they were very impersonal. There was a clear hierarchy in India that was followed, and we were only able to communicate with them at certain levels of the hierarchy. It created a “black box” of resource for us that was very difficult to manage. We had no direct contact with the individual contributors on our team. We were left in the dark quite a bit about progress on a given project, questions they might have, and issues they might be facing. We handed over a specification to the black box, we were given back a “delivery date” and then we sat around waiting until our delivery showed up. The delivery was ALWAYS on the day it was promised, never early, never late. The delivery took much longer than if we had done the same project on-shore, and was of poorer quality. After months and months of discussions, and changing the process around to better fit our “American” working style, we were able to open up the lines of communication and establish the direct contact with our developers and encourage them to ask us questions when they needed direction. We’ve been able to establish with them that delivery dates are meant to be targets, that if you get the work done early, it is ok to delivery it early. Conversely if the project is taking longer than expected, sometimes it is ok to be late. We discovered that our team had been working long overtime hours on some at risk projects in order to try and meet promised delivery dates, which in turn significantly impacted quality. Thankfully those days are behind us.
This picture of a couple members of our team, my boss, and I is a tribute to this mentality. When we first went offshore, we asked them for a team picture so we could put faces to the names of those we were working with. They sent us a photo, with everyone in the team looking very stern with their arms crossed for the camera. We got a kick out of this, but in reality it underscores the cultural differences. At this point in our relationship with them, they were unable to be friendly and open with us, and were therefore very reserved. When we were over in India we decided that we would all pose in the same manner as sort of an inside joke to show how the team has changed.
Initially we had very high turnover on our team. Again, looking at it from a black box model, the management in India was quick to replace one member of our team with another, assuming it would be transparent to us and we wouldn’t mind. This contributed to the above problems because we were then constantly building relationships from scratch, and re-training them on our processes and technology. Thankfully we were able to solve some of these problems and ended up with a highly competent team, which has had very minimal turnover. We now have a group of guys that we would call our friends. We’ve had some of them over for visits here to our office in the United States, and I’ve had the privilege of spending time with them in India.
After we got past the initial intimidation that they seemed to have towards us, they really opened up. They are super nice, warm, friendly, caring individuals who really enjoy what they do. They of course all have dreams of getting an H1B visa and moving to the United States at first opportunity. They participate in the lottery ever year in hopes that they might be selected. It is a shame that our immigration policy is the way it is, and that we don’t have truly open borders. These guys deserve the opportunities that America has to offer more than a lot of its own citizens. A man should be judged not on his country of origin, his race, his language, but on his ability to produce. These guys are good at what they do, and are hard workers. They can produce, which is what this country is all about. An individual’s ability to produce.
In summary, globalization is good for all who are involved. We are creating opportunities for those who previously had none, and we are saving American’s money so that we can continue to innovate. We can continue to be the global leader in technology. There will always be small scale negative impacts of globalization, when a group of individuals lose their jobs to outsourcing. This is the price that we have to pay in an every changing society. They will have to adapt and find new jobs, jobs that can make better use of their skill sets. I don’t have any fear of globalization, I encourage it and look forward to living in a truly global society.
There are a few books on Amazon that I recommend reading on this topic. These are:
The World is Flat – By Thomas Friedman
The Lexus and the Olive Tree – By Thomas Friedman
