Offshoring goes both ways.

There has been a lot of debate in the U.S. about the advantages and disadvantages of offshoring. Proponents say that companies should be able to tap the global talent pool and take advantage of lower production costs in other countries. Opponents claim that offshoring takes jobs away from Americans and allows companies to take advantage or even abuse lower paid workers in other countries. Something that doesn’t get talked about as much here in the U.S. is reverse-offshorting (from a U.S. point of view): foreign companies hiring Americans to work for them remotely.

The NY Times published exceprts from an interview with Henning Kagermannm, CEO of SAP, arguably the largest enterprise software producer in the world. SAP is a German company. Kagermannm talks about how they do about a third of their engineering work offshore, i.e. outside Germany. One of the places where they offshore from is Palo Alto, CA (India, China, and Israel are the other three). The other interesting thing he talks about is how they specialize their offshoring activities depending on the talent pool and capabilities at each location:

Q. How does the global division of labor work? For example, what stays in Germany?

A. If it comes to deep application integration, we go to Germany. It’s where we have many people with deep knowledge of finance, manufacturing, human relations — those kinds of things, and knowledge of those functions in specific industries, the domain specific knowledge. That kind of deep knowledge is essential to platform work, designing the basic architecture of the core product.

Q. How about Silicon Valley?

A. In Palo Alto, we leverage the kind of innovation and creativity that is in Silicon Valley. It’s a place where a lot of new companies and technologies pop up and you can more easily integrate those new things into your thinking and your products. A lot of the Internet work has been done there, the technologies that open our products to others.

Q. And India?

A. India is mixed. But we do a lot of implementation of the design work in India. Our intent was to go there for the large talent pool. But we’ve been in Bangalore for seven years and we’ve grown somewhat gradually there. You cannot go in and hire 2,000 in a year and believe they are going to be ready to develop high-quality integrated software applications.

I think that offshoring can have its own problems but overall, it’s a practice that no company that dares call itself global can avoid. The fact that offshoring happens in and by many countries means that the U.S. shouldn’t be pursuing an isolationist policy of discouragin U.S. companies from offshoring. Instead, it should be competing by providing the best talent in the world, enticing foreign companies to offshore their operations here.

Which of course brings us to education and training which is another huge topic for another time.

On crowdsourcing and why people contribute content online.

Wetpaint is a website for user-created wikis. You can search the site on a certain subject and if you find an existing wiki on that subject you can join it. Otherwise you can create your own. The CEO of Wetpaint, Ben Elowitz, was interviewed at Assignment Zero where he talked about Wetpaint as well as crowdsourcing in general. One of the more interesting parts of the interview dealt with the concept of “the wisdom of crowds”:

Q: Do you really think there’s wisdom in crowds? If so, what’s the clearest example you know of? What projects in particular are you impressed by?

A: I’m a big fan of “The Wisdom of Crowds.” I think some of the best examples of the Wisdom of Crowds in action were provided by James Surowiecki in his book. Having been a city dweller for much of my life, I was particularly fascinated by his example of how walking down a busy sidewalk was a picture perfect example of how we navigate together to help each other get where we’re going as quickly as possible. Other examples I find fascinating – I think you need look only to the capital markets to find the best example of where collective knowledge quickly and constantly comes together to create markets for stocks and bonds. From a Wetpaint perspective, my favorite crowdsourcing project is the CSI wiki where fans of the show have built the definitive guide to the series. The amount of creativity and detail that has been quickly assembled could not have happened were it not for the collective efforts of the show’s fan base.

I haven’t read Surowiecki’s book yet but I would like to. At another point in the interview, Ben Elowitz talks about why people contribute for free:

Q: Is there money to be made with crowdsourcing? If so, why will some people work for free so that others can profit?

A:No question – there is money to be made with crowdsourcing. Crowdsourcing is a basic human attribute – by nature we like to work together to produce things of value. This type of behavior has happened offline for millenniums and now it’s taking shape online. The business opportunity comes when entrepreneurs make the human process of collaboration quicker, easier and more rewarding than before.

In terms of why people work for free so others can profit, we have to remember that the value equation on crowdsourcing is not only measured in dollars and cents. As long as the participant feels like they are getting compensation commensurate with their input, the incentive to continue participating is rather high.

I think he missed the chance to elaborate on this. I agree that the value equation isn’t only measured in money. The research project I am currently running with my colleagues at Baruch College looks at exactly that question. If there are no external motivating factors (such as money) then there must be internal or intrinsic motivating factors. These can be reputation, efficacy (the ability to make an impact), attachment to the online community, and so on.

We are in the process of analyzing data we collected from users of participatory websites that should give us an idea on exactly what those motivating factors are. Stay tuned.