Once again the national conversation is drifting toward regulations around restricting the hiring of offshore talent. I used to be all for this: limit a company's ability to hire offshore engineering talent and force those companies to hire locally. After nearly three decades as a software developer and many years as an entrepreneur, I now understand this is a nuanced topic and my initial thinking was all wrong and it started with Brad Keywell.
Kiwi Internet Group, RIP, was my first company. We started Kiwi during the U.S. economic recession of 2000, when tech outsourcing started to gain significant traction. Being a Chicago company there was no way we could financially compete with offshore prices. The average hourly rate of a developer in Chicago in 2000 was $60-$75. The average outsourced hourly rate was $15-$20. As the bottom dropped out of the tech market and the bubble burst, rates plummeted in Chicago. My response was natural, visceral, and uninformed. Let’s legislate offshore outsourcing. Put a stop to it and save our jobs.
Eight Bit Studios was my 3rd company. We started Eight Bit, wait for it, during the recession of 2008. The startup frenzy was about to hit Chicago and we were serendipitously very well positioned for the mobile revolution. Again, a Chicago based company, I was heartened by entrepreneurial magnates like Brad Keywell espousing sourcing this great city for it’s amazing talent. Then we actually got to pitch to Mr. Keywell only to find out that, yeah, not so much. Lightbank companies were encouraged to nearshore: hire far enough outside the city to push resource costs down, but close enough to match the rhetoric. Ok, good feeling gone.
So, this brings us to our current familiar political rhetoric and potential legislation aimed to stem the flow of outsourcing of jobs out of the U.S.
Let’s talk Startups and Capital. In the current economy and global resource pool, an entrepreneur can choose to capitalize their business on credit cards hiring cheap offshore talent. This often gives a new company an MVP (Minimum Viable Product) they can take to market. Is it going to be well engineered? Most likely not. I say that with certain authority. I often get hired to assess the code-bases of offshored work for product risk. I’d put your odds at 30% likey to get a modern, maintainable code-base. BUT, and this is what I’ve come to understand, that doesn’t matter!
Knowing your outsourcing risks is important. Check out this very well written article by my co-founder John Ostler on the subject. As long as you know your offshoring risks , you can get a “good enough” product to vet your idea in the classic Lean Startup sense. These risks are not fixed and vary widely with the business domain, but that’s another conversation. The main point here: that substandard code-base eventually makes it back into the U.S. market. We get hired all the time to take that 0.9 beta version to a 1.0 product. If not us, local or nearshore talent for sure.
Take away the opportunity for that entrepreneur to hire offshore and it’s likely we, the local companies, will never see that work. The local talent is just too expensive for the process to even start. The idea dies on the vine. If you look at the possible numbers, jobs created in offshore scenario: The entrepreneur and any partner, the team they create after going to market for maintenance could be upwards of 10 jobs after about a year. Jobs created in the non-offshore scenario: 0.
The work will come home eventually, if it’s good. If it’s not a good idea, or a good product, it is likely to die quickly and cheaply if it’s offshored. If the product’s got legs, a local team will undoubtedly be hired if only for the purposes of mollifying investors. I’ve been living in the offshore world for the better part of my career and I’ve learned a lot watching, dealing with, and being a part of offshore teams. Mostly I’ve learned to relax, calm down, and be patient.