Editor’s Note: This is the first of a four-part series on the history, current state, and moral implications of outsourcing for tech companies. Look for the next issue, Where and Why Tech Firms Are Hiring Globally, tomorrow.
Meet three tech workers who recently accepted jobs at software companies.
- Teddy He lives in Nigeria, and his 75-person company is completely remote; The founder-CEO lives in Philadelphia.
- Sarah She was living in Brazil when the pandemic hit, but plans to return to Pittsburgh to make semi-regular trips to her company’s New York headquarters.
- Jessica She’s been promoted at the company where she lives in Silicon Valley, but plans to spend the next year working remotely for months at a time in locations around the world.
Let’s assume they all have similar titles, experience, and skill levels. How much should they be paid? Equal pay for equal work? Or is compensation better understood as a means of quality of life that varies as widely as geography?
All three are sketches of real people, a combination of real-world examples to illustrate what this story aims to accomplish: Expanding remote work presents increasingly complex questions of logistical, cultural, and moral compensation, but there are answers to help you navigate them. Thorny issues. They have implications for rich-country economies, but US tech companies are facing them most urgently, so we’ll focus on that perspective.
“Technology moves fast, but many of these decisions can only be made slowly.” Brian BurkeProfessor of Business Ethics The Wharton School of the University of PennsylvaniaHe told me.
Over the past several months, I’ve spoken to 10 CEOs who have recruited internationally, two more who are considering doing so, a few analysts and ethics experts, and a few professionals who have recruited overseas. Together, this data paints a picture: global hiring is entering a new phase of how to do it well, especially for small and startup tech companies that are joining the trend shaken by the pandemic.
What should tech companies consider when hiring directly or outsourced IT companies abroad?
The question has implications for startup founders facing global hiring at ever-increasing levels of business, tech workers entering the golden age of digital nomads, and policymakers facing the great convergence of expertise from where they live.
What is the history of foreign trade?
In the 17th century, the creation of corporations was an effort to unite resources around the world. Although the East India Company and its successors laid the foundation for exploration, international recruitment began after World War II.
In the latter half of the 20th century, outside of large corporations, the only practical way for most organizations to work with workers in countries outside their own was by contracting with another company. The use of “foreign resources” is known as outsourcing – influenced by the British economist Ronald Coys Influential 1937 essay “The Nature of the Company”
For a simple definition, outsourcing is the business process of hiring a different company to provide goods and services that can be provided internally. In common usage, outsourcing often (but not always) refers to sourcing from different countries, especially when a company from a rich country is working with a low-cost company.
“A lot of people have a negative connotation of ‘outsourcing’ and it doesn’t come from call centers or technology jobs,” he said. Mike DershowitzCEO and founder Fair trade outsourcing. “This comes from manufacturing, specifically the idea of ’good jobs.’ [automobile manufacturing] Going overseas”
Dershowitz says it helps to consider the three waves of outsourcing that got us to where we are today.
- Foreign production – Since the 1960s, the modern global supply chain has been built through a complex network of specialized facilities for the production of physical goods. Think consumer electronics.
- Business Process Outsourcing (BPO) – In the 1970s, rapidly growing, formal and/or non-core business activities were subsequently outsourced. Think call centers.
- IT outsourcing – In the year In the 1990s, increasingly high-skilled jobs were filled by labor force developed in low-cost markets. Consider IT staffing firms.
In most cases, firms specialized in one of these activities and sold their assets to other firms – for example, Foxconn In manufacturing, call center giant Concentrics For BPO and EPAM systems For this.
The trend was clear, as outsourcing became crowded with acronyms and increasingly specialized categories. Over the past 70 years, business leaders have followed a famous management consultant Peter Drucker An overjoyed read: “Do your best and use the rest.”
Drucker, who died in 2005, is said to have coined the term “knowledge worker,” a trend that moved from heavy industry to knowledge work.
In today’s startup circles, “outsourcing” takes on a slightly more polarized meaning than the freelance wars that have come to define the term. That’s for at least two reasons: Tech outsourcing is new and affects the most privileged class.
Quietly, outsourcing has become an increasingly common debate in technology firms of every size. If software is eating the world, does this mean that in order to be successful, every company has to make technology better, leaving a small part of the “rest” to be outsourced? This may be one of the reasons why many global technology companies hire third-party outsourcing companies themselves.
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Look for part two of tomorrow’s series answering the questions: Why are tech companies hiring more globally, and Where are tech companies hiring globally?
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