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Seems like this article ignores the gigantic wave of out-sourcing throughout IT that already happened in previous decades and in many cases returned to near-sho

• vcanales 6y ago
  In my totally unscientific assessment of remote job boards, US companies seem to be the only ones requesting US-only applicants, and I have no insight as to why this happens. In my -South American- country the trend is to look outwards if you're hiring remotely; European countries seem to fit this description too.
  • hopia 6y ago
    I've made the same observation. Does it have something to do with US tax or other regulations?
    • gamblor956 6y ago
      Yes, recent changes in the tax code made it less enticing for US companies to offshore US jobs. The company can potentially end up losing a lot of (otherwise legitimately acquired) tax benefits. With respect to R&D, for example, the US no longer allows foreign R&D activities to qualify for the R&D tax credit.
      • phkahler 6y ago
        >> With respect to R&D, for example, the US no longer allows foreign R&D activities to qualify for the R&D tax credit. From what I've seen, many companies will shoehorn regular product development into the R&D category. I'm not sure if it's supposed to cover next iteration of existing products that most company should be doing anyway.
        • deleted 6y ago
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        • jkaplowitz 6y ago
          If there's anything innovative in the new version of the product, I don't see why not.
        • tonyedgecombe 6y ago
          That would be the development part of R&D.
        • gamblor956 6y ago
          That's fine, as long as the R&D work is done in the US. R&D doesn't require something to be socially innovative; it's evaluated at a per-company level. It's intended to incentivize companies to recreate wheels in-house (if it is otherwise financially reasonable to do so).
          • phkahler 6y ago
            Companies should not need a financial incentive to develop new products. They already have an existential incentive to do so. This also creates a barrier to entry for small companies that don't have the resources to ensure compliance and claim the benefit. It also subsidises product development engineers - a profession that is doing well already. I'm an engineer so I appreciate the artificial wage inflation, but if I take that hat off I don't think it's appropriate for the government to subsidize us.
            • gamblor956 6y ago
              You're missing the context. The point of the R&D credit is for companies to engage in R&D activities in the US as opposed to other countries. Additionally, it was introduced in reaction to other countries introducing R&D credits to steal R&D work from the US. It does not create a barrier to small companies. If you're not big enough to handle the paperwork for the R&D credit, you're not spending enough to derive meaningful benefit from the credit anyways. And generally, there exist plenty of accounting firms that will prepare the R&D documentation on a % basis (of the allowable R&D credit identified). It also subsidises product development engineers - a profession that is doing well already In the software world, sure. There are plenty of industries where product development staff (many of whom aren't engineers) don't make anywhere close to 6 figures.
      • exclusiv 6y ago
        I did the R&D tax credit this last year and it seems to me the savings for offshoring would drastically make up for the loss in R&D tax credits in most cases. Also, some states, like CA, are very unfriendly which regard to the extra costs required for employees in terms of benefits, wages (salary exempt) and classification of employees with the ABC test [1], so the wins that states make for employees incentivizes many employers to look elsewhere instead. In a more remote work culture, even ignoring offshoring/nearshoring, this is going to be really bad for people in certain states. And it will be bad for those states themselves. The increased competition among states to attract higher income workers will be interesting. States like Tennessee, North Carolina, etc have a massive opportunity in front of them as they were already pretty well poised to attract younger professionals. [1] https://www.labor.ca.gov/employmentstatus/abctest/ https://www.labor.ca.gov/employmentstatus/abctest/
        • subhobroto 6y ago
          > Also, some states, like CA, are very unfriendly which regard to the extra costs required for employees in terms of benefits, wages (salary exempt) and classification of employees with the ABC test [1], so the wins that states make for employees incentivizes many employers to look elsewhere instead. This is exactly right. People seem to think all these regulations are doing them a favor and increasing their freedom but what's actually happening in reality is pretty much the opposite. It's now literally cheaper even after accounting for delivery risks to hire people from Tennessee, North Carolina, etc.
        • gamblor956 6y ago
          Also, some states, like CA, are very unfriendly which regard to the extra costs required for employees in terms of benefits, wages (salary exempt) and classification of employees with the ABC test [1], so the wins that states make for employees incentivizes many employers to look elsewhere instead. This explains why so much R&D happens in CA. Because it's too expensive to do it in this state... The reason R&D happens in CA is because any company that wants to sell to CA is already going to be subject to CA taxation anyway, however they try to apportion their state income. If you develop R&D in another state and use that to sell to CA, you've just added an additional state to your tax compliance burden. Moreover, if you generate the R&D in say, Nevada, but the overwhelming majority of your income is CA sales, CA can (edit: changed from will) simply disregard your chosen allocation as fraudulent. I did the R&D tax credit this last year and it seems to me the savings for offshoring would drastically make up for the loss in R&D tax credits in most cases. This was true...before GILTI and BEAT were passed in the TCJA in 2017. It's no longer true. And as a downside, you must also contend with transfer pricing requiring your offshored entity to show a profit, and thus pay foreign taxes which likely would not be recoverable in the US under the GILTI regime.
    • tomg 6y ago
      It's my understanding that if a US company wants to hire someone outside of the US to work remotely from outside of the US; they must treat the employee as an independent contractor. Additionally, the US company would have to abide by any local labor laws / tax laws in the country they are hiring in.
      • ghaff 6y ago
        >It's my understanding that if a US company wants to hire someone outside of the US to work remotely from outside of the US; they must treat the employee as an independent contractor. Depends on what legal structure they've established within the country where the employee resides (and the laws regarding such things).
        • deleted 6y ago
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  • dudul 6y ago
    European countries are outliers due to EU regulations. Any EU "citizen" can work anywhere in the EU, so pragmatically speaking, why would you only want to hire Spanish people instead of opening the door to French, Italian or German candidates? It comes at literally zero cost to the company. Some industries are heavily regulated in the US and having non-US based employees can become a real headache for US companies. A lot of US companies have background check as part of their hiring process, pretty hard to do for someone not US-based. Also, if you target only the continental US you're already talking about companies that may be spread across 4 major timezones. If you start including Europe you're now dealing with people that are gonna be more than 6 hours removed from your HQ's timezone.
    • hocuspocus 6y ago
      > European countries are outliers due to EU regulations. Any EU "citizen" can work anywhere in the EU, so pragmatically speaking, why would you only want to hire Spanish people instead of opening the door to French, Italian or German candidates? It comes at literally zero cost to the company. The employer needs to pay social contributions in the employee's residence country. And more often than not, the employee cannot just become a freelancer or incorporate a single-person company and bill only one customer, as this is considered disguised employment. So no, it's not necessarily trivial for an EU company to hire a remote worker somewhere else in the EU, unless they have a local presence already.
      • jedberg 6y ago
        It’s the same in the US to hire someone in a different state. Every state has their own tax scheme. Every new employee in a new state is a big set up cost and ongoing maintenance.
        • deleted 6y ago
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        • betaby 6y ago
          Why so? I though all payroll/tax details are outsourced to the accounting firms and very straightforward in fact.
  • adventured 6y ago
    The US has 330m people, you generally (emphasis, as there are certainly exceptions) don't need to look beyond its labor base to find what you're looking for. If you're in Estonia and looking to hire a software engineer for remote work, maybe you end up hiring someone from Poland or Spain. That's still EU hiring in the EU, more akin to what you're referring to with the US. On average the smaller the country, it probably increases the odds that more of the labor you're looking for is going to be outside of your own borders.
    • conanbatt 6y ago
      Its about finding it cheapest, not about finding it. The argument you are making can be said for doing imports of any kind as well.
  • ianwalter 6y ago
    From what I've seen, European countries often require applicants to be in European time zones.
  • deleted 6y ago
    [deleted]
  • nthj 6y ago
    A lot of software companies’ customer contracts specify that only U.S. employees can access customer data, also. Ops, customer support engineering, and many kinds of bug fixes all require that access.
  • dominotw 6y ago
    > European countries seem to fit this description too. No I don't think so. They look with within EU.
• dudul 6y ago
  Agreed. Sometimes, when reading articles/comments about out-sourcing, I question my own sanity. We've done it before, am I the only one remembering it? It failed miserably. If companies want to relocate work to India, or China, or Eastern Europe, they can already do it.
  • babesh 6y ago
    It actually worked in manufacturing but it had some negative externalized long term negatives for the US. The long term negative is that the country lost innovation ability in those areas. The countries that manufacturing was outsourced to are gradually or have become the innovators in those areas. For higher end companies, it wasn’t outsourcing. It was remote offices. The expertise still does move to those countries.
• mc32 6y ago
  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.
  • crispyambulance 6y ago
    > [...] 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.
    • dannypgh 6y ago
      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.
• rb808 6y ago
  > in many cases returned to near-shore / onsite work Do you have any examples? I dont see this at all.
  • babesh 6y ago
    What happened is that most IT never returned but the work that IT was doing is now done by cloud service providers. Because of immense software scaling, it made sense to pay for quality workers. You can sell each additional software product at very high margins so it makes sense to spend a bit more on the worker for a slightly better product that will result in many more high margin sales. Sometimes they found that it was more effective to do low cost work in cheaper US locations (American South, etc...) than India.
  • davedx 6y ago
    A large telco I worked for (owns a significant % of global cable TV assets and programming) used to outsource all hardware and software development. While I worked there as a contractor from 2013-2018 I saw them replace this with large onsite teams in their HQ in the EU and nearshore teams in Belarus and Ukraine. I've encountered some of these nearshore companies in E. Europe multiple times over the last decade, business is booming for them.
• yusufnb 6y ago
  Remote work is not the same as out-sourcing. Out-sourcing was a necessary evil and only worked for large/mature companies with carved out business processes that could be offloaded. These companies were never remote-first. With companies being forced to modify their internal processes to be remote-first, what they will realize is that remote does work once they align to it. And once they realize that, there is no stopping them. Since the benefits of having a remote first company well aligned to working efficiently far out-weigh the benefits of a co-located team.
  • hellisothers 6y ago
    Can you provide an example where this worked for a large scale company? I’ve heard this at smaller companies but nowhere big
    • lostinroutine 6y ago
      One business process that is generally carved out well is customer support. Many large corps have offshore support centers. A sector that comes to mind is mobile-comm companies (e.g. T-Mobile).
  • ghaff 6y ago
    And it's not really the same as a globally distributed company either. Plenty of companies have large software development offices in places like Eastern Europe which is a very different situation from outsourced call centers (cost is still one of the drivers, though not the only one).
  • davedx 6y ago
    I think that's splitting hairs. For example a few years ago I worked with a programmer from India who was part of a "remote consulting company" based in the Netherlands. The experience of working with her was identical to working with the larger offshore companies based in India. As in, time zone, cultural and communication barriers were substantial and disruptive to our productivity.
• rclayton 6y ago
  Communication and cultural differences become significant drags on velocity. Time zone differences exacerbate resolving issues. More importantly, it’s tough communicating technical issues in your non-native language. It’s also hard to build an engineering culture when you don’t engage with your coworkers often. You have to build credibility so you can work through difficult issues - that’s hard to do when your primary medium of communication is Slack.
  • davedx 6y ago
    Couldn't have said it better myself.
• wayoutthere 6y ago
  We're in what I'll call the third wave of offshoring now. There are pockets of offshore developers who are actually interchangeable with US-based teams; but the cost difference is more like 25-50% less than the previous waves that were promising 90% cost savings. My last company ended up outsourcing from Mexico, Colombia, Uruguay and Argentina with good results. We often didn't tell clients they were offshore and billed US rates for them and pocketed the difference. Over the course of about 5 years we had let go our US-based teams because they were just too difficult to hire and retain for the marginal increase in quality.
  • frockington1 6y ago
    How did you decide which clients could use offshore labor? If you did that in financial or defense industries you could be opening yourself up to significant legal liability
    • novok 6y ago
      Fortunately, the vast majority of clients are not in those industries!
    • wayoutthere 6y ago
      It's usually spelled out in the terms of an MSA. You're right, there are plenty of companies you can't offshore work for, and they'll make sure that language is in your MSA. Bill rates adjust accordingly.
• slantaclaus 6y ago
  Have been using Upwork for years, even when it was called something else...I forget the name. Useful for CERTAIN types of jobs, especially recurring ones
  • 29athrowaway 6y ago
    It was called Odesk.
  • zanmat0 6y ago
    Elance
• vmchale 6y ago
  Also, companies will realize that doing business in new jurisdictions (possibly with less sophisticated legal systems) has a cost.
• Melting_Harps 6y ago
  > Seems like this article ignores the gigantic wave of out-sourcing throughout IT that already happened in previous decades and in many cases returned to near-shore / onsite work. Agreed. > What you actually see if you look at remote work job boards is many (if not most) companies in say, the USA, want remote people from the USA (or at least the same timezone as the USA). I think this is what will happen in other countries too. Which realistically they cannot enforce, merely incentivize; I'm pro-remote work, mainly because it can free up roads and reduce emissions for more critical infrastructure and needs in the Market, all while offering people the ability to re-locate to less populated areas and ideally help under development, and boost there local economies there. That includes International/Non-US based countries. Seems like a win-win to me.