Californian companies are starting to do the process of insourcing. This is where a company creates satellite offices in nearby cities, such as Phoenix, Denver, Salt Lake City or Portland to do development. One of the reasons is ease of communication; most of those cities are a day flight away from San Francisco. Another concern with outsourcing overseas is that a vendor is intimate with your business logic.

I thought the lower rent and salaries in these cities was a major consideration but it is not. The Californian labor market is tapped out of quality technology candidates and smaller tech companies are having trouble competing with the 'cool' billion dollar companies like Google* for skilled workers.

Apparently the satellite cities have similar quality candidates in the technology labor market to California but the competition over them is not as intense as in the Bay Area. Google is not immune to this process either and has similar satellite offices.

So the Californian technology economy has exhausted the Californian labor market and is now in the process of stressing the labor markets in neighbouring states such as Arizona, Oregan, Utah and Colorado.

The Californian economy is a wonderful mix of technology, entrepreneurism and adventurous capital markets. It is not only the American technology engine, but the globe's technology engine. If its GDP is split out and compared to other nations it has the eighth largest economy on the planet.

So any Australian Diasporans thinking of coming to America to work, you might want to hit California and its labor market first. Your skills will be in demand.

Given the stresses on global labor markets for skilled workers the other thing that needs to be asked is; will a tertiary degree replace the work visa as the document of entry into an overseas economy?

This process is already starting to happen in Australia and Canada.

* Apparently VMWare is currently on a massive employment bent.

According to this article, Steve Ballmer threatened to move more Microsoft jobs offshore if US tax rates increase. The article has how Microsoft tax dodges anyway by transferring their technology through Irish subsidiaries.

I know it is intended as a political threat, but moving jobs offshore isn't an issue. Many of the Bay area companies have great difficulty competing with the likes of Google for talented tech people and as a consequence they end up paying a lot for less talent. The result is that Bay area companies open up near shoring operations in cities like Phoenix, Portland, Denver, Salt Lake City and Texas.

I am sure Washington area software companies have a great deal of trouble competing with Microsoft for talented technologists and software engineers. Microsoft sending more of their labor overseas will only open up the market to Washington area software companies.

Another issue is that what companies can send overseas, they will, and in most cases have done already anyway. The arguments become if it is worthwhile or not, not arguments over whether to do it or not. So as a threat it is really not, though I am sure some nationalist politicians who don't have libertarian economic streaks in them will quiver in their boots at the threat.

A graph of job postings per capita in major US metropolitan areas.

Phoenix comes in at 21, while DC - the area I left to come to Arizona - is an obvious number 1. Washington DC has a good tech community, a strong telecommunications industry, a biotech community in Maryland; and of course the twelve trillion dollar a year US national government inside it.

The Phoenix job market, especially tech, is not particularly strong at the moment. I left DC for many reasons and I don't miss it. Interesting graph though.