Is there a future in near offshoring?
By bnitz on Apr 21, 2005
When someone told me about this plan to float an IT company a few miles off the U.S. shore, I didn't know what to think. Quite a few questions crossed my mind. Why? Seacode seems to be attempting to take advantage of low offshore labor rates while dodging immigration law by a scant 3 miles. Isn't the U.N. recognized limit now 12 miles, with a 200 mile economic exclusion zone claimed by many nations? I certainly don't want to get bogged down in maritime law.1 According to the sourcingmag article, SeaCode's captain says the advantage is that when "
You want to collaborate with your engineers, it won't mean a three-week trip to India. If you're in LA, it means a 30 minute boat ride..."
Where I come from we do that kind of collaboration with a newfangled gadget called The Internet. Yes, offshore communication and collaboration must be carefully managed, but I can only think of a couple of practical reason why you would want to create an artificial corporate colony so near to the U.S. The first reason would be to avoid the tangle of draconian U.S. laws which are choking the IT industry. I once asked a small business owner how he handles tax, liability, patents, export restrictions, labor and environmental laws. He said that it is a mess and no one will do anything to simplify it until Microsoft moves its headquarters a few miles north to Canada. For example, employees of U.S. based companies can't necessarily freely upload a patch for a bug and link to it without expensive legal review and "proof" that the patch can't be downloaded by citizens of certain nations. Employees of most non U.S. based corporations have no such restriction. SeaCode's founder's are primarily focused on sidestepping immigration law. Ironically this is the one area of law where the U.S. is actually less restrictive than many outsource recipient nations.
The second advantage I see is that, if SeaCode is well designed, it could be the kind of weird manmade environment a few of us geeks might actually enjoy, though some of us might prefer an underwater colony, or a base hovering at one of the moon's Legrange points.
SeaCode's captain Cook and Mr. Green have an interesting idea, but it seems to be based on some false assumptions. That U.S. labor, tax and immigration laws are easily evaded, and that imported labor can magically defy the laws of economics. The founders seem to have overlooked the possibility that one reason Indian engineers can work for lower wages is that the cost of living in India is considerably less than it is in L.A. If a ship 3 miles from Los Angeles can be supplied in such a way that employee/residents can have a comfortable life on 1/5 L.A. wages, well then why doesn't all of L.A. move out there too? Some L.A. residents might actually prefer living on a barge just upwind from L.A. Like many offshore enthusiasts, Mr. Cook and Mr. Green also overlook the "flyover country" between L.A. and New York City, which also has substantially lower cost of living and therefore lower labor costs than either coastal megalopolis. This labor pool could become even more cost competitive if it could operate under the same tax and legal framework as the offshore IT shop.
If there is a need to get outside of the complex U.S. legal system without going too far, SeaCode should consider that the U.S. shares long borders with two large nations and has within its borders territories which fall under an alternative legal framework.
If SeaCode is a success, its founders might want to consider the weight, size, power usage and other advantages of Sun Ray which has made it popular in similar environments. I wish them luck, but for now, all I ask is for a small ship and a GPS constellation to steer her by, and I'll work from three miles offshore.
1I was once told that, by maritime law, the only sailing craft I ever fully owned (a sailboard) is classified as "Floating debris."