Wednesday, July 26, 2006

Commerce Department Releases Oppressed Offshoring Study

The Commerce Department has finally released an offshoring study that it originally refused to release publicly. FOIA petitions were even denied and now career researchers are being layed off as reward for releasing non-biased research on the matter.

The Commerce Department's Office of Technology Policy (OTP), while under the last president Phil Bond, refused to release the report and instead released a 12 page executive summary that even the report's researchers dispute the accuracy of.

This summary glossed over the problems of offshoring and focused on the positive things. Phil Bond has since become the President of the ITAA - an now works for the largest IT lobbyist firm in the United States. That is his reward for betraying American technology workers and pushing his political agenda while heading the Office of Technology Policy.

According to Professor Norman Matloff in his newsletter:

Through both the Clinton and Bush administrations, the Dept. of Commercehas been remarkably even-handed in issues relating the the industry'sclaims of a tech labor shortage, and the offshoring issue. Remarkably, this is largely due to two career researchers in DOC, and their principled insistence on doing objective analyses. Even more remarkably, their political appointee bosses have usually stood by them,albeit with occasional blips. You can read the history of this at

According to

The 360-page version of the report describes the types of IT services and software jobs that are being outsourced. It states the obvious: that Indian outsourcing companies "are expanding staff annually by the thousands." The report describes the reasons for the trend including the fact that "venture capitalists are now encouraging U.S. IT start-ups to use lower-cost offshore destinations for software development to reduce the 'cash burn rate.' "

That document is quite different from the original 12-page summary, and it is apparent why Bush's political appointees so vehemently refused its release. The administration "was scared of anything having to do with outsourcing," says one source who is familiar with the report's travails. The Bush team "could not afford even a discussion" of the outsourcing issue.

"The report speaks for itself," said Ben Wu, who was in charge of the report's demise while at the Commerce Department's Technology Administration. Wu now works in the state of Maryland's economic development organization. Phil Bond, who was in charge of the Technology Administration at the time, said he had nothing to do with re-writing the report. He has since been named president and CEO of the Information Technology Association of America (ITAA), an organization that took the lead in Washington in defending the practice of offshore outsourcing of IT jobs.

I am forced to call a spade a spade. This is none other than corruption at the highest levels of our government. The OTP has been infiltrated by corporate lobbyists and even worse will be firing the career DOC researchers responsible for reporting the facts:

"what was produced and provided by the Commerce Department in September 2005 was a 12-page document bearing a July 2004 publication date that bore little resemblance to the work done by analysts at the Technology Administration, all of whom have recently been told they will be laid off due to severe budget cuts for the agency and the issuance of a reduction in force (RIF)." (

We must demand an investigation into this matter. These honest career researchers should not lose their jobs because of corruption. More on this as news unfolds.

Monday, July 24, 2006

Mumbai news reports: Weaker rupee benefits IT firms

Clearly the weakening value of the Rupee is benefiting companies in India while harming American technology workers and domestic businesses. The following article from an Indian news outlet,, details the windfall for Indian companies.

What response should the United States have to this problem?

Weaker rupee benefits (Indian) IT firms

Infotech companies are making the most of a depreciating rupee and have systems in place to hedge the risk inherent in forex earnings.

With over 90 per cent of the revenues of Indian IT companies coming from clients abroad, the rupee's downward trend over the past few quarters is boosting the power-packed results of the sector.

Since IT companies derive a bulk of their revenues in dollars, rupee depreciation adds to their bottom line.

Taking into account the expenses incurred in dollars owing to on-site operations, a one per cent fall in the rupee usually results in a 0.3-0.4 per cent gain in the operating margins of most IT companies, and vice-versa.

Sunday, July 23, 2006

Indian Council For Research On International Economic Relations: "Rupee to USD is highly managed"

According to the Indian Council for Research on International Economic Relations in a 2003 working paper, the Rupee is essentially pegged to the US Dollar. They describe it as a "highly managed" currency that is subject to intervention by the Reserve Bank of India (RBI).

According to the paper "India has been in a homogeneous regime of low exchange rate flexibility from 1979 onwards."

American economists have long said that India manipulates its currency to one degree or another, however Indian economists appear to say the same thing. Given that there is no dispute regarding the artificially low value of the Indian Rupee - as the Indian economy has grown double digit percentage points while the Rupee remains flat - we should demand one of two things immediately:

The President of the United States should demand that India stop manipulating their currency. Action will be seen in a rapid rise in the regime once it is freely traded. If India does not stop their unfair currency practices, resulting in the loss of American high tech jobs, we should impose a temporary duty of 35% that increases at the rate of economic growth of the Indian economy - until such time that India stops manipulating their currency.

According to many IT trade magazines the savings gained by sending software development to India is around 20-30%. A fair trading regime would balance the playing field and the best company would get the business - not the company most able to exploit an unfair currency regime.

The United States' lack of intervention in this clearly unfair relationship is causing millions of high-value jobs to be be created offshore. President Bush should not allow India to continue this unfair manipulation of the Rupee; to do so expedites the offshoring of American jobs.

If you believe in free trade, you should also believe in fair trade. Manipulating a currency is no different than dumping and is an unfair trading relationship by definition. Is it too much to ask that our trading partners play by the rules? And if they don't play by the rules, is it too much to ask that our own government intervene on our behalf?

Saturday, July 22, 2006

Should my child become a software developer?

My sons aren't quite old enough to ponder this question, but if they were what would I tell them? As things stand right now, I would encourage them not to pursue Computer Sciences. I have several reasons:

1) Software employment has stagnated the past five years and appears to have slow growth and higher unemployment than other professions like accounting and healthcare
2) Corporations have increased offshoring of software jobs and plan to continue this pattern
3) Software jobs that remain in the United States are often given to lower paid and exploited foreign workers on H-1b or L1 visas; Americans face foreign competition here and abroad
4) Politicians seem inclined to reduce trade barriers with third world countries which will make it even easier and more cost effective to move production overseas
5) Politicians have rolled back labor protections for software developers; they are specifically exempt from overtime laws and the vast majority are not represented by organized labor

If I were entering college now I would be more inclined to pursue an occupation with a brighter future. If you are considering a Computer Science degree, you should first ask your Congress person what they will do to protect the occupation.

Fresh college graduates are finding it increasingly difficult to gain entry-level employment in software occupations. Our unsustainable trade, immigration, and labor policies are to blame.

ITAA: "Raise small business size standards"

And ITAA press release expresses their desire to raise size standards for the classification of small businesses. This federal government offers incentives for contracts to go to smaller companies as the vast majority of contracts go to larger corporations as it stands. The ITAA wishes to more than double size standards for small businesses - from the current standard of $23 million to $50 million USD.

The government currently sets aside contracts for small businesses. I don't think the government should raise the number of small business contracts awarded by relaxing the standards. The ITAA is wrong on this issue and such a measure will harm truly small businesses who need protections from the goliaths dominating this market.

Instead of relaxing standards, the government should require even more contracts be set aside for small business. The ITAA is hardly representative of such a group.

Are programmers entitled to overtime?

Electronic Arts (EA) settled for $14.9 million USD with programmers of various experience levels. This would suggest that yes, programmers are entitled to overtime and most especially in California where their rights to overtime are explicitly protected in state law.

Many programmers in the United States are not paid overtime - lawyers for United Employees Law Group are now asking American programmers to submit claims if they are not being paid overtime. Even though federal law may not protect overtime rights, many state laws do. According to this lawfirm, most states require overtime to be paid and do not classify programmers as management staff (thus exempting them from overtime).

What do you think - are programmers entitled to overtime?

Thursday, July 06, 2006

Great cartoon on offshoring...

Below is a really funny cartoon from Speaks about outsourcing American jobs and the state of our profession...

Wednesday, July 05, 2006

Ken Lay Escapes Justice

OK, so this has nothing to do with technology. I know.

Ken Lay, the former Enron CEO and convicted felon who was pivotal in robbing Enron employees of billions died while vacationing in Aspen Colorado. There is no justice in this world. Before spending a single day in prison, Ken Lay checked out permanently escaping justice.

Anything left in the Lay estate should be siezed and awarded to Enron retirees. Entirely illegal, but that would be justice. Please feel free to vent here. In this case it looks like Lay got off scott free and there is nothing we can do about it.