The effect of outsourcing on tech jobs

Note: This is a reaction to a post on LinkedIn. To get the full context, read the story here.

Let’s talk about local engineering jobs being replaced by cheaper locations.

I hired well over 100 developers in the past 15 years. While in Switzerland, I hired in Zurich, Belgrade, and in Bucharest. Before that, I worked in outsourcing in Romania and hired in Cluj and Chisinau.

My guess about AI replacing jobs is as good as yours, but I do have experience with “jobs moving to more economically efficient locations”.

This is not to brag, but real-world experience matters when discussing industry trends. I don’t feel confident to predict the future, but I can say what I’ve seen so far.

For simplicity, let’s name the two camps Western and Eastern countries.

The nearshoring trend over the past 20 years resulted in the tech market in Eastern countries booming.

The salary gap between West and East was significant.
This resulted in many projects being outsourced.
Salaries doubled, tripled, quadrupled.
This attracted even more people to tech jobs.
Which resulted in more expertise.
More expertise = more projects being outsourced.

A classical flywheel effect.

At the same time, Western salaries were not affected, as these countries continued to develop & attract top talent from all around the world. There’s more software to be written (and maintained) than ever before.

The gap between Western and Eastern salaries got to a level where economically it did not make a huge difference anymore. Plus, do you hire at nearshore locations through an agency (total costs close to local), or directly and deal with all the bureaucracy?

We arrived to a point where you choose nearshoring primarily because of the vast amount of experienced people available at these locations.

Now that the market cooled off, another interesting thing happened. The exact opposite of jobs moving East.

I hear from friends that, when push comes to shove, and companies need to shed weight, they save money by reducing nearshoring budgets, not local headcount. It is the easier call to stomach on the short run.

Because of this, the job market in the East seems to be affected worse than in the West.

To summarize: don’t believe the fearmongering. Nobody can predict the future. What’s clear is that AI is creating many opportunities today.

Let’s build, not panic.