Workers, Wages, and H-1B

H-1B visas were designed to bring into the U.S. specialists when companies cannot find an American citizen with equivalent skills.  Or they cannot find sufficient quantities of these specialized skills.  In a recent study, U.S. Citizenship & Immigration Services found that 13% of the requests for H-1B visas were fraudulent and 7% contain technical violations.  The study was based on 246 H-1B petitions. 

Critics of this entire process point out these issues and claim that these visas are used to higher  cheap labor from abroad instead of hiring Americans.  That is only partly true.

As with most government run programs, this one needs better oversight and investigative controls to be put in place.  If the H-1B employee does not have the academic credentials or experience to justify the visa, they should not receive one.  H-1B workers are supposed to be paid the prevailing wages for their positions and geographic location.  If they do not receive this wage, it is a violation of the rules. 

Balancing the issue of more visas being issued and raising the ceiling should be coupled with greater government spending on education, re-tooling displaced workers with other skills that help push down unemployment  and other government spending that sparks longer-term innovation. 

Growth, Debt and Outsourcing

Economic growth in the U.S. has averaged 2.7% over the past years.  Taking out personal consumption, the growth was 1.3% per year in 10 years ending in 2007.  That is the slowest growth rate since the 1950s.  U.S. consumers have run up about $3 trillion in excess borrowing and spending over the same period.  This does not match income growth.  This consumer debt translated into new homes, cars, furniture, and clothing and has pushed U.S. growth.  However, consumer debt is a symptom of a deeper problem.  Without this excess spending the growth would have been considerably lower.  The same applies to a lesser extent on a worldwide basis, but the U.S. still leads in the saving the least amount of money, by the actual individual consumers.  The global growth bubble was fueled by excess borrowing.

Consumer spending is declining, capital spending is declining by corporations, and everyone is girding their belt to tighten up spending.  The way out of this slow growth is for U.S. companies to pay more attention to sustaining productivity growth and innovation at home rather than resorting to outsourcing as their main source of cost savings.  Spending more money with non-U.S. companies does little to spark innovation and productivity within the U.S. 

The financial bailout, like it or not, is somewhat of a reality.  Any other monies spent by the government should be directed towards stimulating investment and innovation rather than consumer spending.  This will have a longer term positive affect.  By longer term—many years not a couple of quarters.

Greater investment of this kind will slowly raise wages.  Another $1,200 to each U.S. citizen sometime next year from the government will NOT invigorate the economy.  Adjusted for inflation, the weekly earnings of a worker with a bachelor’s degree have fallen by 6% since 2003.  Real wages have usually gone up in an economy with rising productivity, but this has not happened.  Outsourcing has oftentimes been seen as the result of productivity gains.  All that did was transfer more money out of the U.S., displace some work number of workers, and lowered the average earnings.

Sourcing’s Hidden Sore Points – India

There is nothing wrong with sourcing selective activities away from your internal staff to an external service provider.  You can use this tool to save money, focus on your core business, spend less management time on non-essential tasks, and possibly redeploy savings towards more strategic initiatives.  This does not automatically translate that you should source to a company out of India.  Danger signals coming out of India point to a bumpy road ahead that will spell trouble for U.S. companies that have automatically gone this route.

Infrastructure within India is poor and sometimes downright non-workable.

Have you ever tried to obtain a high-speed (> than a T-1) circuit from Topeka Kansas to India?  Ever examine the up-time of that circuit versus the cost?  Ever make a trip to your offshore site and had the pleasure of going through the airport in India, riding in a cab to the distant location and staying in a local hotel?  Over the past 10 years what was a dismal situation has not improved and is not likely to improve anytime soon.  Ten years from now, this entire local and technical infrastructure will likely collapse from inattention.  Growth in business has not fueled any investment by India in the basics.

Costs will Adjust.

The value of the Rupee is rising, the dollar will continue to drop or remain low over the next several years, labor costs in India, along with inflation, will continue to rise.  If there are price adjustments in existing contracts, plan on upward adjustments coming out soon. If you finished a business case recently without taking these factors into account, you have an invalid business case.

Distance and Language Does Make a Difference.

Trying to develop software with teams having a 12 hours time makes a process that already has a high failure rate very difficult.  When you examine the historical costs of projects in your company, and the number that were completed on-time, do not delude yourself into thinking things will improve once you add time differences and language accents into the mix.  This may not be a politically correct point to make, but given the fact that individual from the same company at the same location have difficulty communicating effectively, it will certainly not improve matters injecting individuals with English as a second language that are now working during their night time for you.

Conflicting Management Issues.

The Indian vendors are hard at work acquiring, hiring and expanding. In a recent interview, Wipro’s CMO said the IT services provider will add 15,000 new employees in 2007.  TCS has an even larger number.  That type of double digit staff growth is difficult to manage, while keeping the business growth up to par.  Remember the tech boom when anyone that could spell JAVA got hired?  How many of those were later to be determined low quality hires.  Throwing inexpensive warm technical bodies at a problem does not make a recipe for success in the long-term.  Saves you money initially and then you get to increase the internal QA functions and add more management oversight on the receiving end of the sourcing service.

If it is not written, it has not been said.

Working with staff so far removed from the actual business mandates a more formal approach to requirements gathering, sign-off, use cases, and incremental development steps spelled out by the Software Engineering Institute’s Capability Maturity Model (CMM).  If your organization lacks this type of discipline or experience, your business case better take into account on-going education expenses on methodology and the discipline associated with the Project Management Institute. Ad-hoc requirements spelled out over the coffee break area will no longer be acceptable.

Turnover

As with any growth industry concentrated in a small location, staff has the option of moving from organization to organization.  Staff turnover might be driven by the desire to stop working odd hours, better pay, better job or any of the other reasons people change jobs.  Turnover has been rising in India and will become a problem for any long-term support model you might be relying on.  Who gets the tasks of orienting newly acquired staff – you or the outsourcing company?

Political Stability

Pakistan and India have been at odds on a number of issues.  There is terrorism in India and some locals resent that their culture is changing, youth’s outlook on family and values are evolving, and some just do not like the U.S. Sabotage attempts have already taken place and trains have been blown up. Probably do not have to do much to some of the infrastructure as it is likely to crumble with neglect. There are problems between India’s Hindu and Muslim populations and the caste system is alive and well in India. 

Outsourcing Analysis and Avoiding Failure

In today’s economy, businesses face enormous hurdles no matter what their particular business endeavor.  Competition from larger, more established firms, globalization, the looming potential for technological obsolescence and the need to keep costs under control can make management of most companies an extreme challenge. Focusing on the core business can be difficult especially when growth – and success – force management to shift its attention from the market and ‘getting ahead’ to the company’s own, internal structures. A strategic tool for CEOs is business process outsourcing. Through the process of outsourcing, analysts say, companies can regain focus on their particular business, become more efficient and even rival the systems and control level of larger companies in outsourced processes and most importantly focus their efforts on the value-added functions of their business.  According to many respected reports, it certainly can help a company’s bottom line.  However, there are many factors to consider before venturing into the burgeoning world of outsourcing.

Mistakes typically made with outsourcing

•  Trying to outsource a function that has high costs, minimal processes, and is causing considerable management angst; at least try to take the excess costs out before you outsource.  Don’t give someone else your savings margin.

•  Not developing a business case and strategy on what to outsource, thereby making it difficult to assess cost and process improvement proposals from vendors.

• Not establishing a method of performance measurement upfront during the contract phase.

• Failing to consider the long-term relationship dynamics.

• Not planning upfront how the relationship might end.

• Failing to understand and manage this new organization dynamic.

• Failure to explicitly define boundaries, with clearly defined roles and responsibilities.  Never outsource one piece at a time without a master plan.

• Outsourcing imposes discipline on your organization. Adapting to the rigorous processes required by an outsourcer may be difficult in some corporate cultures.

• New laws will essentially make security breaches at your outsourcer equivalent to security breaches at your own company.

Standard Conflict Management Practices and Tools

Outsourcing customers and providers usually enter into agreements with optimistic intentions and expectations.  Customer executives look forward to quality service, new thinking, extraordinary responsiveness, and a vendor that shows both a partner-like caring about the customer’s success and an intuitive understanding of the business.  Making outsourcing relationships work takes a lot more than good faith and committed people, and too few such arrangements actually come anywhere near reaching their desired goals.  Even with the best of intentions, relationships can end up in with diminishing returns for both parties.

Once in this downward spiral, customers and vendors are headed down the spiral to failure.  Both seem to get stuck in negative perceptions and behaviors.Technorati

Offshore Development, Outsourcing, Visas and Adapting a Changing World

SIIA is the principal trade association for the software and digital content industry.  Their recent report issued January 11, 2007 titled “SIIA Report on Global Software Development Shows Importance to Business Growth” was the culmination of a survey with 114 American-based software companies last year.  Sixty-eight respondents had offshore operations while forty-six did not.Software companies are increasing offshore software development efforts.  However, companies are not looking to displace American workers, said David Thomas, executive director of SIIA.  “Global software development is in the process of transforming the nature of the
US software industry,” said Ken Wasch, SIIA President. “Our survey covers many of the influences on and results of this sea change.”   Respondents claim:

·         Attaining 80-100% of their cost savings goals	·         Gains in productivity appear to be less than expected
·         73% of respondents reported a positive impact on profits	·         66% claim the quality of work is above average when compared to onshore staff
·         25% rate the quality as “excellent” or “outstanding”

Two underling points need to be examined:

• H1-B, L-1 and L-2 visa allotments are being discussed by Congress and this report would indicate increasing the allotment should not have a negative impact on unemployment figures.
• Companies surveyed were in the software development industry and not corporate America companies with IT departments, so by inference we should draw the same conclusion and apply across the board. 

The premises behind these two points are fraught with a number of problems.

• Visas should not be increased because the US government cannot keep track of the holders of the visas it has already issued and this just represents a hidden immigration loop hole. 
• Software companies are creating a product to sell and development is a means to that end.  Corporate America use IT as a tool that addresses their own product development and software is an ancillary support tool.   

Our economy is a global economy and outsourcing is not a fad.  US workers must adapt or become marginalized.  Issues for companies to consider: 

• What is the true cost of moving development offsite and how much time and money will be required to develop complete and accurate technical definitions?  
• Does the company have a mature project management track record? 

Issues for US development staff to consider:

• Software languages and tools change continuously and staying an ‘expert’ is always transient.  Business analysis and project management is constant and not a candidate for outsourcing.
• Consumers like to pay the least amount for whatever they usually buy, but that does not always translate into “made in
  America”.  Companies will always look for the least expensive and effective means to create their products.  The research found that some companies underestimate what is needed to succeed and how much effort is necessary for adaptation.  Developers have to adapt and become ‘integrators’ or some other form of the solution.  

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