Comment by roncesvalles
1 day ago
Outsourcing of knowledge workers didn't work out because at large enough scales, the geographic arbitrage disappeared. Companies mostly always got what they paid for.
The determinant of success was only whether the task needed American-tier labor or could make do with sub-American quality labor.
I am not sure this feels right. I agree that the US currently has leading minds in terms of tech, but I am not sure it is too big of difference with the EU knowledge workers. EU is still a lot cheaper then US in terms of wages you would need to pay.
EU workers themselves get a lot less, but the EU is expensive because of 1) the huge payroll tax (45% in France) and 2) the challenges with hiring and firing mean you are carrying people that aren’t contributing.
Sure is an interesting thought. None of this is sarcasm: why do US companies deal with the time zone differences and language barriers they won’t need to bother with so much by outsourcing to say, Ireland?
The mechanism is often that they'll actually outsource to someone like Accenture, who have teams everywhere, and whose contract managers will try to get their cheapest viable team onto the contract to maximise their margin. If the buyer can't judge the quality of what they're buying, or doesn't know why the resulting hand-offs, delays, mistakes and rework will cost them more than keeping everything in-house ever would have, they're going to have a bad time.
Ireland isn't that much cheaper than, say, Oklahoma. And the cultural differences with Ireland are not a lot smaller than those with India or the Philippines or what have you, once you try to actually start working together.
(Yes, all the good developers from Oklahoma move out, but the same is true of Ireland)
Er, US companies do outsource to Ireland.
Basically every big tech has large offices and employ a lot of people there.
The limitation is that Ireland is a relatively small country, and most Irish developers are already employed (which is why Ireland end up being one of the main destinations for tech workers being hired from abroad).
That's certainly part of it. But the other part that I've heard time and time again is that in order for outsourcing to be successful you basically needed an american engineer in the mix hand holding everything, clarifying requirements, and vetoing bad code.
That part of dev work, the requirements gathering, attention to details, clarifying requirements, is something AI also struggles with. A lot of companies basically waste time and money on outsourced devs because without a clear path forward they effectively will sit and do nothing, waiting for a prompt.
I would not agree on that point. It really depends on company's structure. I mean it also depends with people that makes the team. I would say there are a lot of unknowns but I would certainly not generalize.
How I find your argument is that one distinguished engineer from US could do the same with the use of AI.
I worked with both and I know great and bad engineers from both sides. Only thing is that US has a bigger pool of great engineers.
I think the mechanism here isn't that American engineers are magic. It's that you need that contextual knowledge really close to where the work is actually being done, so that the turnaround for questions, blockages, clarifications, "we've got no work to do", quality level-setting and so on is on the scale of minutes, not time-zones.
It doesn’t have to be an American but it does have to be a direct employee of the company ideally working in the same time zone as management and the people defining the requirements.
Outsourcing of knowledge workers is still ramping up. The issue in the past was the skills were few and far between internationally. Facilities were also not built. That has changed now in a lot of fields. New campuses have been built in places like Bangalore and Hyderabad, even Singapore. The skills are there now, the training is decent, and you can see that the hiring is going on for very skilled titles in these cities. It is a different animal than just 10 years ago in this.
The “American tier” labor of course is distributed across the world and the top performers in every nation find ways to get paid at something approaching American salary levels. Look at all the international FAANG offices paying high salaries, in purchase pricing parity terms.