The 2006 ACM report on Globalization and Offshoring of Software—a report to which Andriole contributed—finds no evidence to support this view. If anything, the opening of the offshore labor market in computing seems to have increased the number of computing jobs in the U.S., as illustrated by the following paragraph from the Executive Summary: “The economic theory of comparative advantage argues that if countries specialize in areas where they have a comparative advantage and they freely trade goods and services over the long run, all nations involved will gain greater wealth.…This theory is supported to some extent by data from the U.S. Bureau of Labor Statistics (BLS). According to BLS reports, despite a significant increase in offshoring over the past five years, more IT jobs are available today in the U.S. than at the height of the dot-com boom. Moreover, IT jobs are predicted to be among the fastest-growing occupations over the next decade.”

The reality is that the shortage of people with the expertise industry needs is so severe that companies will go anywhere in the world that can provide workers with the necessary skills. If those people exist in Bangalore, Moscow, or Shanghai, then companies will hire them there. And if those people exist in the U.S., those same companies will hire them here.

Unfortunately, all too many people seem to believe that companies always seek to minimize labor costs, typically by employing workers at the lower salaries that prevail in developing countries. That view, however, represents a fundamental misunderstanding of labor economics. Companies are not primarily concerned with minimizing costs; after all, they could accomplish that goal by shutting down. Companies are in the business of maximizing return.

A simple thought experiment will make this difference clear. Suppose you are Microsoft and are looking to hire people with stellar software development skills. One of the candidates you

 

u.S. degree production and annual employment projections.

Ph.D.
Master’s
Bachelor’s
Projected job openings

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0

engineering

Physical sciences Biological sciences Computer sciences

source: Adapted from a presentation by John sargent, senior Policy Analyst, Department of Commerce, at the CRA Computing Research summit, February 23, 2004. original sources listed as national science Foundation/ Division of science Resources statistics; degree data from Department of education/national Center for education statistics: Integrated Postsecondary education Data system Completions survey; and nsF/sRs; survey of earned Doctorates; and Projected Annual Average Job openings derived from Department of Commerce (office of Technology Policy) analysis of Bureau of Labor statistics 2002–2012 projections. see www.cra.org/govaffairs/content.php?cid= 22.

even though the statistics in the figure are derived from surveys taken several years ago, there is no reason to believe the situation has changed in any qualitative way. Comparing the 2002 and 2006 reports from the Bureau of Labor statistics suggests that employment demand may have shifted by as much as 10% percent in certain categories. The fundamental message of the figure would not change even if the numbers were off by a factor of two.

are considering is a recent graduate from a top-notch Silicon Valley university; given current salaries in the U.S., the cost of hiring this candidate might be, considering benefits and structural costs, approximately $200,000 a year. You have another candidate in Bangalore who will cost you only $75,000. Both candidates seem extraordinarily well qualified and show every sign of being extremely productive software engineers, capable of generating perhaps $1,000,000 in annual revenue. What do you do?

The answer, of course, is that Microsoft hires them both. Although the software engineer in Bangalore might be more cost-effective, what possible reason could there be for throwing away $800,000 a year? As long as qualified candidates are scarce and capital is plentiful, companies will hire anyone for whom the marginal value exceeds the marginal cost. The value that a company can recognize from the services of talented software developers vastly exceeds their costs, irrespective of in which country they reside or in what currency they are paid.

The only way software development jobs will move entirely overseas is if the U.S. abandons the playing field by failing to produce students with the necessary skills. As the New York Times editorial page observed on March 1, 2006, shortly after the publication of the ACM globalization report: “Perhaps that explains what the report says is declining interest in computer science among American college students. Students may think, Why bother if all the jobs are in India? But the computer sector is booming, while the number of students interested in going into the field is falling. The industry isn’t gone, but it will be if we don’t start generating the necessary dynamic work force.” Andriole’s failure to understand that the computing industry extends far beyond enterprise software and his perpetuation of the myths that drive students away can only make it more difficult to generate the dynamic work force the U.S. needs to remain competitive in the global marketplace.

 

Eric Roberts ( eroberts@cs.stanford.edu) is a professor of computer science at Stanford University, co-chair and principal author of the computer science volume produced by the joint ACM/IEEE-CS Task Force on Computing Curricula 2001, and past chair of the ACM Education Board.