Software Outsourcing and Salaries

[xrunner]

Presumably the lower paid developers are as good?

The Register

Your job was probably outsourced for exactly the reason you suspected

It costs relatively next to nothing to hire devs on the other side of the planet

Sat 23 Jul 2022

Wondering where software developers are – or aren't – earning top dollar? Just look at a list of the leading outsourcers and their most popular outsourcing destinations.

That's the data that can be found in a global software engineering salary report this month from CodeSubmit, which develops coding challenges for technical interviews. According to the report, the US leads in developer salaries with an average of $110,140, followed by Switzerland and Israel – the UK comes in at $55,275 (£46,000), just below Australia – while the poorest-paying countries are led by Nigeria, which pays an average of just $7,255 annually to software devs – less than seven percent of the average US salary.

India, one of the most popular destinations for outsourcing technically skilled jobs, pays only $470 more on average than Nigeria. The Philippines, also popular for outsourcing, pays on average only $7,936, while popular eastern European outsourcing destinations Poland and Ukraine pay between $22,000 and $23,000 per year. China, another top outsourcing destination, pays developers an average of $23,790.
Where outsourcing originates ...

In terms of who is outsourcing, the numbers in CodeSubmit's study coincide here, too: America, far and away the highest-paying country for software developers, is also the world's biggest outsourcer, being reportedly responsible for approximately 84 percent of outsourcing deals in the world.

The refrain remains the same from US tech companies: they can't find enough people to fill jobs, and rising salary demands, particularly in the wake of the great resignation, have made filling positions more expensive. Well, until they started pausing or slowing down hiring, with Apple the latest to tap the brakes.

In an interview with Business Insider, Chris Bakke, CEO at tech recruiting platform Laskie, said remote work and high salaries make hiring stateside software engineers less essential. "US tech companies are saying, 'We can hire an engineer in the United States for $300,000 or we can hire somebody great internationally with very similar experience for $75,000,'" Bakke said.
... and where it ends up

That same article quotes statistics from California-based payroll startup Deel, which since launching in 2019 has hired 1,100 people in 75 countries. Only 18 percent of the San Francisco company's staff work in the States; just one percent of the company's US employees work in engineering, data, and product.

Along with China, Poland, Ukraine, the Philippines, India, and Nigeria, Russia, South Africa and Brazil are also leading outsourcing destinations, CodeSubmit's study indicated. While that list doesn't coincide directly with other lists of the most common destinations to outsource software development, there is considerable overlap.

We've reached out to CodeSubmit for additional details.

https://www.theregister.com/2022/07/23/outsourcing_hotspots/?td=rt-3a

[bd139]

Fun fun fun. My day job leaking again

This is all about to change. There are a couple of growing concerns in the software market which break the current outsourcing models completely. It's literally on the tipping point.

1. Regulators in Europe, the US, Australia and Japan consider data tenancy and access as high risk outside of their legislative regions. Even the US and EU aren't getting on in this space which means you end up with very specific regional access to data and that includes source code and debugging capability. This adds a financial risk to doing business with outsourcers which is where the buck stops for investors.

2. People are starting to work out that the ROI for outsourcing is pretty bad. The KPI for a business these days is media reputation and if you employ the lowest bidder then you're trading that for cashflow. There is a whole industry popping up around reputation management and the data fortunately says "don't do stupid things cheap if you don't want to look like a fucking moron". There are certain regions which are politically poisonous to involve in your business.

Outsourcing of software functions will decline in the next 3-5 years. Local salaries will increase. But most importantly software will be of better quality and businesses will be more focused on delivering core business function rather than strapping crap all over their platforms to tick feature sales boxes because it's cheap.

You can see the whole globalisation model falling over at the moment too when TSMC and Samsung are building fabs in the US. Was a bad idea wasn't it?

[bd139]

Biggest problem with outsourcing is staff turnover not skills. No one is around long enough to learn the domain and retain the information.

[tom66]

The other problem with outsourcing is the really good engineers in India, China, and so on get well compensated for their work because it's worth paying and retaining good engineers.  Or they emigrate to the West and get very good salaries. 

The saying goes, pay peanuts, get monkeys, and it is absolutely true for outsourcing.

[tszaboo]

Presumably the lower paid developers are as good?

In an interview with Business Insider, Chris Bakke, CEO at tech recruiting platform Laskie, said remote work and high salaries make hiring stateside software engineers less essential. "US tech companies are saying, 'We can hire an engineer in the United States for $300,000 or we can hire somebody great internationally with very similar experience for $75,000,'" Bakke said.
... and where it ends up
https://www.theregister.com/2022/07/23/outsourcing_hotspots/?td=rt-3a

Good, then hire internationally. Big tech already started opening large offices in the EU, and the salaries have been steadily increasing here. Because they need to be competitive with the local salaries, what happens is that salaries rise in the entire tech sector, you know supply/demand. Plus people realize they can earn a lot more if they move to the USA, so they even have to make globally competitive salaries.
Now please do the same for engineering.

[AndyBeez]

Outsourcing... or as we ask, in which timezone is the developer team who can fix this shit show working in? Answer, the same timezone as the impeccable developer team who caused this shit show because they thought testing meant making an LED blink over wifi. But you have to contact their manager to raise a ticket, and he only speaks to the executive in charge of customer liasons. And she only takes calls in office hours, which is 3am your time. So who do you speak to in your company to speak to her, to speak to him, to raise a ticket on them, at 3am? Feck knows, the IT manager role no longer exists. Try instead speaking to the public relations veep, as she's on Twitter reasuring shareholders that the IT system meltdown will not impact the CEO's shareholder perks plan. Even if you do manage to drill through the corporate platitudes, and raise a ticket, the developer team will declare the fault is because you failed to specify what to do if there was a fault, therefore there cannot be a fault as they delivered to specification; ticket closed. Outsource for penuts and you get monkeys throwing faeces.

[victorb]

I consider that lower-paid developers can be just as good, but it really depends on the individual and the specific tasks you need. That's what I noticed.

[brucehoult]

If they're good, why do they accept so little money?

Sure, US companies would like to pay less than US salaries, but $7k or $10k a YEAR is ridiculous. Something in that range is reasonable per MONTH.

In the last few years I've had outsourcing contracts [1] with companies in both the USA and Russia for ... well ... more than the average US salary listed in the article. And, yes, it's less than my salary when I actually lived in the USA, but it's more than I had left in the paycheck after tax and all the deductions (especially medical insurance).

[1] I consider "remote work" to mean you're a full-time permanent employee on a salary, and indeed my contracts say "outsourcing" on them.

[coppice]

The other problem with outsourcing is the really good engineers in India, China, and so on get well compensated for their work because it's worth paying and retaining good engineers.  Or they emigrate to the West and get very good salaries. 

Quite a few are migrating back to India and China. Western companies with operations in India pay less to the lower ranks in India, but often pay more to the experienced people in India than in the west. There is a greater salary spread by experience and competence in these countries.

[coppice]

2. People are starting to work out that the ROI for outsourcing is pretty bad. The KPI for a business these days is media reputation and if you employ the lowest bidder then you're trading that for cashflow. There is a whole industry popping up around reputation management and the data fortunately says "don't do stupid things cheap if you don't want to look like a fucking moron". There are certain regions which are politically poisonous to involve in your business.

Corporate attitudes to reputation are strange. Many companies spend a fortune building a brand, trying to ensure people keep coming back for more from them on reputation and good experiences. Then suddenly they will blow it all up. Even companies that trade on pure luxury, like Pierre Cardin, just blew themselves up by licensing their name to go on anyone's crap. The big Japanese electronics companies built stellar reputations at high cost, then blew them up competing on price against cheap stuff from Korea and them from China.

The ROI on outsourcing is complex. It can be handled in so many ways, some of which work well, and some of which are a disaster. If you want to see the likely outcome, just put yourself in the position of the people you outsource to, and think how you would react with the incentives they have. Are they getting involved in something with a future where results and reputation matter, or is the best choice to just grab the short term money and run?

[rstofer]

Corporate attitudes to reputation are strange. Many companies spend a fortune building a brand, trying to ensure people keep coming back for more from them on reputation and good experiences. Then suddenly they will blow it all up.

Bud Light comes to mind...

[Infraviolet]

"Many companies spend a fortune building a brand, trying to ensure people keep coming back for more from them on reputation and good experiences. Then suddenly they will blow it all up"

Speculation, lets see if anyone can confirm the following:

Companies which find themselves in such situations are those run by professional managers rather than by founders who established them from the ground up. My guess is that managerial types see everything as being about "brand" and "marketing" and the size of their organisational hierachy and utterly lose sight of the product/service that their company really exists to sell. In doing so they fail to pay attention to the technical requirements of ensuring that the things they sell are of the quality the customer expects. Companies run by the people who established them in the first place would be a lot less likely to fall in to this trap, as founders will usually have started the company because they knew the practicalities of production for their goods/services when they started and even if they've stepped away from the shop floor entirely they'll still regard very highly the opinions of whoever has replaced them in those roles. And the opportunities for this kind of "suddenly blow it all" scenario become more common when a company grows to such a size that its managers stop thinking even about the basic balance of costs versus sales and instead consider everything in terms of "stakeholders" , corporate culture and "purpose*".

*which never has anything to do with the company's actual purpose of selling whatever-product-it-is-they-make

[arjen]

Often, companies led by professional managers might focus heavily on brand and marketing at the expense of product quality. Founders, on the other hand, tend to stay grounded in the practical aspects of their business, ensuring the product or service meets customer expectations. When a company grows too large, there's a risk of losing sight of the core business, prioritizing corporate culture and stakeholder interests over actual product quality. This shift can lead to situations where the brand's reputation is compromised.

[tggzzz]

Often, companies led by professional managers might focus heavily on brand and marketing at the expense of product quality. Founders, on the other hand, tend to stay grounded in the practical aspects of their business, ensuring the product or service meets customer expectations. When a company grows too large, there's a risk of losing sight of the core business, prioritizing corporate culture and stakeholder interests over actual product quality. This shift can lead to situations where the brand's reputation is compromised.

That is something Bill and Dave were very careful to ensure didn't happen at HP.

When setting up a new operation, the new managers were bombarded with "Bill and Dave stories" designed to ensure they knew what made HP great. One that was relevant to this concerned Paul Ely in the mid 70s.

At that time he was the project manager for one of the HP minicomputers. It shipped on time, but there were many customer complaints. Packard investigated, found the complaints to be valid, and sent Ely a memo "Please do not ship products until they meet the advertised specification". In other words, don't play games with our customers; telling the truth is of paramount importance. That was, in HP terms, regarded as a stinging rebuke, i.e. career limiting material. Ely did the right thing. He framed the memo, and hung it in his office. Ely continued to rise through the ranks and had a distinguished career.

Another was Packard saying "If I find anybody saying increasing market share is a valid business objective, I will personally fire them".

When I was there, a standard training course was "building market-focussed organisations" (or similar, I forget). One of the core messages was that HP had to learn about what made their customers successful, and that entailed knowing how the customer made it easy for their suppliers and for their customers. Once that was understood, HP could help HP's customers make it easier to satisfy their customers.

[coppice]

Another was Packard saying "If I find anybody saying increasing market share is a valid business objective, I will personally fire them".

This was a rather odd thing for him to say. If you don't have a good market share in a particular sector, how are you going to generate the kind of revenue needed to do a decent job and offer your products and services at a reasonable price? Well executed, increasing market share is a key objective for being able to finance further development properly.

[tggzzz]

Another was Packard saying "If I find anybody saying increasing market share is a valid business objective, I will personally fire them".

This was a rather odd thing for him to say. If you don't have a good market share in a particular sector, how are you going to generate the kind of revenue needed to do a decent job and offer your products and services at a reasonable price? Well executed, increasing market share is a key objective for being able to finance further development properly.

Not at all...

The necessary requirement is to have a good product and sell it for an acceptable profit.

Market share is a natural consequence of good business practices and good products.

Alternatively: gaining market share is easy, simply make a loss on each item but make up for it in volume

[coppice]

Another was Packard saying "If I find anybody saying increasing market share is a valid business objective, I will personally fire them".

This was a rather odd thing for him to say. If you don't have a good market share in a particular sector, how are you going to generate the kind of revenue needed to do a decent job and offer your products and services at a reasonable price? Well executed, increasing market share is a key objective for being able to finance further development properly.

Not at all...

The necessary requirement is to have a good product and sell it for an acceptable profit.

Market share is a natural consequence of good business practices and good products.

Alternatively: gaining market share is easy, simply make a loss on each item but make up for it in volume

An acceptable profit when you spread your NRE over a small number of units is very different from when you spread that NRE over a large number of units. Volume matters a lot.

[tggzzz]

Another was Packard saying "If I find anybody saying increasing market share is a valid business objective, I will personally fire them".

This was a rather odd thing for him to say. If you don't have a good market share in a particular sector, how are you going to generate the kind of revenue needed to do a decent job and offer your products and services at a reasonable price? Well executed, increasing market share is a key objective for being able to finance further development properly.

Not at all...

The necessary requirement is to have a good product and sell it for an acceptable profit.

Market share is a natural consequence of good business practices and good products.

Alternatively: gaining market share is easy, simply make a loss on each item but make up for it in volume

An acceptable profit when you spread your NRE over a small number of units is very different from when you spread that NRE over a large number of units. Volume matters a lot.

Not at all...

"Acceptable profit" takes all costs of doing business into account. Not doing that is the short road to bankruptcy!

[coppice]

An acceptable profit when you spread your NRE over a small number of units is very different from when you spread that NRE over a large number of units. Volume matters a lot.

Not at all...

"Acceptable profit" takes all costs of doing business into account. Not doing that is the short road to bankruptcy!

Trying competing in a market where you have a small share. You either take a short term loss to build market share, or you under invest in making things more competitive stagnate and go bankrupt, or you sell very little and go directly to bankrupt. Scale is the most basic benefit you can have in operating a stable and sustainable business. Its why so many American companies succeed over Europeans, because their route to a scale large enough to be sustainable is so much easier. The size of the EU should have largely fixed that, but the EU squabbles too much to be effective in achieving scale.

[tggzzz]

An acceptable profit when you spread your NRE over a small number of units is very different from when you spread that NRE over a large number of units. Volume matters a lot.

Not at all...

"Acceptable profit" takes all costs of doing business into account. Not doing that is the short road to bankruptcy!

Trying competing in a market where you have a small share. You either take a short term loss to build market share, or you under invest in making things more competitive stagnate and go bankrupt, or you sell very little and go directly to bankrupt. Scale is the most basic benefit you can have in operating a stable and sustainable business. Its why so many American companies succeed over Europeans, because their route to a scale large enough to be sustainable is so much easier. The size of the EU should have largely fixed that, but the EU squabbles too much to be effective in achieving scale.

That doesn't change the point, and you're beginning to sound like Faringdon/treez 

One of the fundamental decisions a business has to make is what not to do and what customers not to have. That's part of basic SWOT analysis.

Entering a high volume business against established competitors is risky, to the point of being foolhardy. Much better to enter a low volume market with a superior (to customers) offering, and they will pay a premium.

Thn, if that market becomes high volume low margin, reassess whether you want to be in that market.

[coppice]

An acceptable profit when you spread your NRE over a small number of units is very different from when you spread that NRE over a large number of units. Volume matters a lot.

Not at all...

"Acceptable profit" takes all costs of doing business into account. Not doing that is the short road to bankruptcy!

Trying competing in a market where you have a small share. You either take a short term loss to build market share, or you under invest in making things more competitive stagnate and go bankrupt, or you sell very little and go directly to bankrupt. Scale is the most basic benefit you can have in operating a stable and sustainable business. Its why so many American companies succeed over Europeans, because their route to a scale large enough to be sustainable is so much easier. The size of the EU should have largely fixed that, but the EU squabbles too much to be effective in achieving scale.

That doesn't change the point, and you're beginning to sound like Faringdon/treez 

One of the fundamental decisions a business has to make is what not to do and what customers not to have. That's part of basic SWOT analysis.

Entering a high volume business against established competitors is risky, to the point of being foolhardy. Much better to enter a low volume market with a superior (to customers) offering, and they will pay a premium.

Thn, if that market becomes high volume low margin, reassess whether you want to be in that market.

You seem to be trying hard to miss the point. If you don't have a substantial chunk of a market its hard to compete against those who so. HP walked away from many markets where it was hard for it to compete, or it outsourced to others, like Rigol, to ensure it had a more complete offering. It only stayed in market segments where it could sustain a substantial market share, or entered fresh new fields, where it could lay claim to a big share from day one. The snag with the latter is you rapidly gets chased, and if you run away every time things look tough, searching for new opportunities, you find yourself shrinking overall. Its a cycle businesses face a lot. A manager with a run away and find something more profitable attitude does OK for a bit, then runs short of new opportunities. Then a stand and fight manager takes over, and things stabilise. Then a run away and find something more profitiable attitude gets in again. Rinse, repeat, typically aligned to the business cycle.

[tggzzz]

An acceptable profit when you spread your NRE over a small number of units is very different from when you spread that NRE over a large number of units. Volume matters a lot.

Not at all...

"Acceptable profit" takes all costs of doing business into account. Not doing that is the short road to bankruptcy!

Trying competing in a market where you have a small share. You either take a short term loss to build market share, or you under invest in making things more competitive stagnate and go bankrupt, or you sell very little and go directly to bankrupt. Scale is the most basic benefit you can have in operating a stable and sustainable business. Its why so many American companies succeed over Europeans, because their route to a scale large enough to be sustainable is so much easier. The size of the EU should have largely fixed that, but the EU squabbles too much to be effective in achieving scale.

That doesn't change the point, and you're beginning to sound like Faringdon/treez 

One of the fundamental decisions a business has to make is what not to do and what customers not to have. That's part of basic SWOT analysis.

Entering a high volume business against established competitors is risky, to the point of being foolhardy. Much better to enter a low volume market with a superior (to customers) offering, and they will pay a premium.

Thn, if that market becomes high volume low margin, reassess whether you want to be in that market.

You seem to be trying hard to miss the point. If you don't have a substantial chunk of a market its hard to compete against those who so. HP walked away from many markets where it was hard for it to compete, or it outsourced to others, like Rigol, to ensure it had a more complete offering. It only stayed in market segments where it could sustain a substantial market share, or entered fresh new fields, where it could lay claim to a big share from day one. The snag with the latter is you rapidly gets chased, and if you run away every time things look tough, searching for new opportunities, you find yourself shrinking overall. Its a cycle businesses face a lot. A manager with a run away and find something more profitable attitude does OK for a bit, then runs short of new opportunities. Then a stand and fight manager takes over, and things stabilise. Then a run away and find something more profitiable attitude gets in again. Rinse, repeat, typically aligned to the business cycle.

The starting point for this sub-conversation was my stating "Another was Packard saying "If I find anybody saying increasing market share is a valid business objective, I will personally fire them"". You thought that was an odd thing for Packard to say.

Now you are giving examples where Packard acted in accordance with that statement, by not competing and moving to a different market.

I'm afraid I've lost your chain of thought.

[coppice]

The starting point for this sub-conversation was my stating "Another was Packard saying "If I find anybody saying increasing market share is a valid business objective, I will personally fire them"". You thought that was an odd thing for Packard to say.

Now you are giving examples where Packard acted in accordance with that statement, by not competing and moving to a different market.

I'm afraid I've lost your chain of thought.

I guess he thought that way because running away had worked out for him a few times. It doesn't work in general. The runner is usually leaving behind big chunks of business that are hard to replace with something that can be anything like as big in a reasonable time. So, the organisation shrinks, people are laid off, there is less to invest in the next new thing, and so on. I've watched this play out over and over. Often people are running away from the low end of a market segment, to focus on the premium part, but there are very few markets where the premium part is that a big chunk of the total. There is often a lot of arrogance at play, too. "We can do amazing things the low end guys can't", and eventually the feedback arrives that the low end guys are actually offering something superior by many metrics.

[tggzzz]

The starting point for this sub-conversation was my stating "Another was Packard saying "If I find anybody saying increasing market share is a valid business objective, I will personally fire them"". You thought that was an odd thing for Packard to say.

Now you are giving examples where Packard acted in accordance with that statement, by not competing and moving to a different market.

I'm afraid I've lost your chain of thought.

I guess he thought that way because running away had worked out for him a few times. It doesn't work in general. The runner is usually leaving behind big chunks of business that are hard to replace with something that can be anything like as big in a reasonable time. So, the organisation shrinks, people are laid off, there is less to invest in the next new thing, and so on. I've watched this play out over and over. Often people are running away from the low end of a market segment, to focus on the premium part, but there are very few markets where the premium part is that a big chunk of the total. There is often a lot of arrogance at play, too. "We can do amazing things the low end guys can't", and eventually the feedback arrives that the low end guys are actually offering something superior by many metrics.

Um, are you aware of HP's growth record?

Espousing staying in low profit markets when higher profit markets are available would have been given short shrift when I was in HP!

For the avoidance of doubt, that's "profit", not "profit margin".

Analogy: no trucking company in their right mind cares about miles per gallon. They do care about gallons. My car does around 38mpg on trips in town. I could easily get 50mpg, but that would be too expensive.

[coppice]

The starting point for this sub-conversation was my stating "Another was Packard saying "If I find anybody saying increasing market share is a valid business objective, I will personally fire them"". You thought that was an odd thing for Packard to say.

Now you are giving examples where Packard acted in accordance with that statement, by not competing and moving to a different market.

I'm afraid I've lost your chain of thought.

I guess he thought that way because running away had worked out for him a few times. It doesn't work in general. The runner is usually leaving behind big chunks of business that are hard to replace with something that can be anything like as big in a reasonable time. So, the organisation shrinks, people are laid off, there is less to invest in the next new thing, and so on. I've watched this play out over and over. Often people are running away from the low end of a market segment, to focus on the premium part, but there are very few markets where the premium part is that a big chunk of the total. There is often a lot of arrogance at play, too. "We can do amazing things the low end guys can't", and eventually the feedback arrives that the low end guys are actually offering something superior by many metrics.

Um, are you aware of HP's growth record?

Espousing staying in low profit markets when higher profit markets are available would have been given short shrift when I was in HP!

For the avoidance of doubt, that's "profit", not "profit margin".

Analogy: no trucking company in their right mind cares about miles per gallon. They do care about gallons. My car does around 38mpg on trips in town. I could easily get 50mpg, but that would be too expensive.

I suppose you did notice that when this strategy worked well, it worked very well, but when it didn't work the organisation blew itself apart. Like many strategies. it looked great when it was a good fit, but it doesn't generalise.