A new outsourcing business model

Bo Cowgill was kind enough to e-mail me a link to this Computerworld story by Patrick Thibodeau about an entirely novel outsourcing venture: What San Diego-based start-up SeaCode Inc. plans to do is nothing if not novel: anchor a cruise ship three miles off the coast of Los Angeles, fill it with up to 600 ...

By , a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and co-host of the Space the Nation podcast.

Bo Cowgill was kind enough to e-mail me a link to this Computerworld story by Patrick Thibodeau about an entirely novel outsourcing venture:

Bo Cowgill was kind enough to e-mail me a link to this Computerworld story by Patrick Thibodeau about an entirely novel outsourcing venture:

What San Diego-based start-up SeaCode Inc. plans to do is nothing if not novel: anchor a cruise ship three miles off the coast of Los Angeles, fill it with up to 600 programmers from around the world, eliminate visa restrictions and make it easy for customers to visit the site via water taxi. The two men behind the venture — Roger Green, who describes himself as an IT and outsourcing veteran, and IT consultant David Cook, whose job history includes a stint as a ship captain — recently discussed their plan in an interview with Computerworld. What is the business model? Green: The promise of the benefits of outsourcing in distant lands doesn’t come free. Most of the gotchas are related to the geography and to the cultural difference…. Green: The model is based on making a platform, if you will, to house these engineers, this workforce, which is very close to the U.S. but which is in fact not in the U.S. We can pull programmers and engineers from anywhere in the world. A fact of life is there are different skills that are stronger in one country versus another…. Does U.S. labor law apply? Cook: U.S. labor law does not apply except on a U.S. flagship. The flag of the ship will provide the labor law — more than likely [the ship will be registered in] Vanuatu, the Bahamas or Marshall Islands. Their intellectual property laws, as well as the laws governing seamen, are very similar to the United States’. What will life be like for your employees? Cook: The pay is about three times what they earn in India today…. What is the salary? Cook: Approximately $1,800 a month. What is your pricing going to be relative to India? Green: We will be approximately the same price as the distant-shore companies. We will take a little less margin than they do. Do you expect U.S. residents to apply? Cook: Absolutely. Approximately 50% of the resumes that we’ve received are from U.S. residents.

There are a lot of things that don’t make sense to me about this business model:

1) How can they pay three times the Indian wage but maintain similar pricing levels? 2) How are cultural differences eliminated by moving developing country programmers from their country of origin to a ship three miles off the U.S.? 3) Is evading U.S. regulatory strictures (payroll taxes, health insurance, labor standards) the only thing that makes this venture even close to profitable? If so, what does that say about U.S. regulations?

Daniel W. Drezner is a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and co-host of the Space the Nation podcast. Twitter: @dandrezner

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