3 ms·

One thing that I haven’t seen widely reported on, but this article highlights is that the reversal is only for US based employees, so outsourcing jobs overseas

One thing that I haven’t seen widely reported on, but this article highlights is that the reversal is only for US based employees, so outsourcing jobs overseas will be more expensive compared to American talent (if salaries are equal). This seems good for the US tech industry, and I’m curious how this form protectionism compares to jobs in other sectors. It’ll also be interesting to watch to see if this has any side-effects on the job market. In my experience in big-tech, a lot of the overseas jobs were historically supporting roles and “keep the lights on” for legacy services. I can imagine these tasks aren’t valuable enough to pay Silicon Valley salaries, and that’s why lower cost talent was used. It’ll be interesting to see if these roles move to low-COL or remote American workers. I can totally imagine that a European or even Indian salary for a senior engineer in big tech would be livable in some parts of the US.

aprilthird2021 1y ago
> It’ll be interesting to see if these roles move to low-COL or remote American workers. I can totally imagine that a European or even Indian salary for a senior engineer in big tech would be livable in some parts of the US. I think they will, Indian salaries for the top top eng are already comparable to decent eng from MCOL or LCOL US, so I could see this happening.
jszymborski 1y ago
> (if salaries are equal) That's rarely the case, right?
- mediaman 1y ago
  He's not saying it's only true when salaries are equal. It makes a significant difference at the margin: if you're an employer debating whether to employ US talent or offshore talent, weighing time zones, skill and other factors against cost, then introducing a tax advantage for domestic hiring will cause those employers who were otherwise indifferent between the two options to now prefer US labor.
  - lowbloodsugar 1y ago
    Only if the tax advantage more than offsets the difference in cost.
    - lazide 1y ago
      5 vs 15 year - debatable. Immediate vs 15 yr? - no where is that cheap.
      - lowbloodsugar 1y ago
        If the foreign team is only half as expensive, that still leaves you with $300k instead of $0 in the example given.
        lazide 1y ago
        Mind breaking out the math?
lbotos 1y ago
> so outsourcing jobs overseas will be more expensive compared to American talent (if salaries are equal). I think this very much depends on how companies are "outsourcing"/hiring. Like, if the devs you are outsourcing to are delivering you a "project-based app with ongoing support". Did you hire "developers" or are you doing business with a development company? For many large tech cos, they also have local entities or PEOs, where people working for Facebook work for Facebook Ireland, or Facebook India. So I'm not sure how much impact it has -- probably mostly for smaller shops that might hire 1 guy directly in a different country?
- vineyardmike 1y ago
  > I think this very much depends on how companies are "outsourcing"/hiring. Yes and no. Obviously there are a million ways to do business and taxes are really complex, but the law doesn't revolve around actual salaries but "cost of software R&D" so this still applies to hiring contractors and other companies if the deliverable is software. From the article: > US companies making foreign software development-related expenditures like hiring staff, or paying for contracts abroad, are still mandated to be expensed over 15 years.
  - majormajor 1y ago
    The big impact here seems to be on new companies, then, yeah? Old established ones can absorb long-term expensing and more likely to be in cost-savings mode anyway. But if you're a startup you are more incentivized to keep your development local. And I have seen a lot of near-shore, in particular, shops adverting aimed startup/medium-sized companies recently, so that might be significant.
  - sokoloff 1y ago
    In this case, is the US company making those foreign software development-related expenditures? Or are they engaging in an arms-length B2B transaction to buy the finished product? I suspect pretty strongly that the latter will be claimed and upheld on the facts.
walterbell 1y ago
https://news.ycombinator.com/item?id=44470230 https://news.ycombinator.com/item?id=44470230 > 15-year amort rule hurts your tax deduction, but 50 %+ lower offshore wages more than make up for it.
- aprilthird2021 1y ago
  Eh, Indian software wages are no longer 50%+ lower then MCOL / LCOL US wages
ChrisMarshallNY 1y ago
> In my experience in big-tech, a lot of the overseas jobs were historically supporting roles and “keep the lights on” for legacy services. I know a couple of tech CEOs (very small services companies), and they use offshore for all development. They don't have a single US engineer; only project managers.
- commandlinefan 1y ago
  > They don't have a single US engineer; only project managers. That's what I never understood... why not outsource the project managers too? What is it about _project management_ that only onshore Americans can do? Whatever you think of programming, project management is much easier than programming.
  - ChrisMarshallNY 1y ago
    ...and usually, cheaper. I think the main reason is because the CEO wants someone that they can grab in-person, at any time.
    - Ancalagon 1y ago
      And - if I'm being honest - the CEO doesn't need to concern themselves with the time differential or language barrier. Those are the PMs' problems.
  - heyjamesknight 1y ago
    PMs in service firms are usually client facing, or at least client oriented. Having them native puts a native face on the team and keeps the language/culture barrier inside the firm.
  - yencabulator 1y ago
    Communicating across language, culture and timezone barriers takes some effort. Having a native, local, PM means you delegate that work to the PM, instead of putting it on everyone who needs to interact with the PM.
- 1y ago

aprilthird2021 1y ago

> It’ll be interesting to see if these roles move to low-COL or remote American workers. I can totally imagine that a European or even Indian salary for a senior engineer in big tech would be livable in some parts of the US. I think they will, Indian salaries for the top top eng are already comparable to decent eng from MCOL or LCOL US, so I could see this happening.

jszymborski 1y ago

> (if salaries are equal) That's rarely the case, right?

mediaman 1y ago
He's not saying it's only true when salaries are equal. It makes a significant difference at the margin: if you're an employer debating whether to employ US talent or offshore talent, weighing time zones, skill and other factors against cost, then introducing a tax advantage for domestic hiring will cause those employers who were otherwise indifferent between the two options to now prefer US labor.
- lowbloodsugar 1y ago
  Only if the tax advantage more than offsets the difference in cost.
  - lazide 1y ago
    5 vs 15 year - debatable. Immediate vs 15 yr? - no where is that cheap.
    - lowbloodsugar 1y ago
      If the foreign team is only half as expensive, that still leaves you with $300k instead of $0 in the example given.
      - lazide 1y ago
        Mind breaking out the math?

lbotos 1y ago

> so outsourcing jobs overseas will be more expensive compared to American talent (if salaries are equal). I think this very much depends on how companies are "outsourcing"/hiring. Like, if the devs you are outsourcing to are delivering you a "project-based app with ongoing support". Did you hire "developers" or are you doing business with a development company? For many large tech cos, they also have local entities or PEOs, where people working for Facebook work for Facebook Ireland, or Facebook India. So I'm not sure how much impact it has -- probably mostly for smaller shops that might hire 1 guy directly in a different country?

vineyardmike 1y ago
> I think this very much depends on how companies are "outsourcing"/hiring. Yes and no. Obviously there are a million ways to do business and taxes are really complex, but the law doesn't revolve around actual salaries but "cost of software R&D" so this still applies to hiring contractors and other companies if the deliverable is software. From the article: > US companies making foreign software development-related expenditures like hiring staff, or paying for contracts abroad, are still mandated to be expensed over 15 years.
- majormajor 1y ago
  The big impact here seems to be on new companies, then, yeah? Old established ones can absorb long-term expensing and more likely to be in cost-savings mode anyway. But if you're a startup you are more incentivized to keep your development local. And I have seen a lot of near-shore, in particular, shops adverting aimed startup/medium-sized companies recently, so that might be significant.
- sokoloff 1y ago
  In this case, is the US company making those foreign software development-related expenditures? Or are they engaging in an arms-length B2B transaction to buy the finished product? I suspect pretty strongly that the latter will be claimed and upheld on the facts.

walterbell 1y ago

https://news.ycombinator.com/item?id=44470230 https://news.ycombinator.com/item?id=44470230 > 15-year amort rule hurts your tax deduction, but 50 %+ lower offshore wages more than make up for it.

aprilthird2021 1y ago
Eh, Indian software wages are no longer 50%+ lower then MCOL / LCOL US wages

ChrisMarshallNY 1y ago

> In my experience in big-tech, a lot of the overseas jobs were historically supporting roles and “keep the lights on” for legacy services. I know a couple of tech CEOs (very small services companies), and they use offshore for all development. They don't have a single US engineer; only project managers.

commandlinefan 1y ago
> They don't have a single US engineer; only project managers. That's what I never understood... why not outsource the project managers too? What is it about _project management_ that only onshore Americans can do? Whatever you think of programming, project management is much easier than programming.
- ChrisMarshallNY 1y ago
  ...and usually, cheaper. I think the main reason is because the CEO wants someone that they can grab in-person, at any time.
  - Ancalagon 1y ago
    And - if I'm being honest - the CEO doesn't need to concern themselves with the time differential or language barrier. Those are the PMs' problems.
- heyjamesknight 1y ago
  PMs in service firms are usually client facing, or at least client oriented. Having them native puts a native face on the team and keeps the language/culture barrier inside the firm.
- yencabulator 1y ago
  Communicating across language, culture and timezone barriers takes some effort. Having a native, local, PM means you delegate that work to the PM, instead of putting it on everyone who needs to interact with the PM.
1y ago