Outsourcing Paranoia
I've wanted to rant about the paranoia associated with outsourcing for some time now. I finally found a catalyst in the form of an article entitled "Study says U.S. tech hiring grows" (Link-http://money.cnn.com/2006/02/23/news/economy/jobs_it_offshoring/index.htm). I'll quote a lot from that article in black italics throughout this diatribe. For those that don't know me, I'm a lead software developer for a fairly large company. I therefore work with a lot of fellow information technology (IT) professionals. Programmers, database administrators, server administrators, testers, support staff, you name it. I also meet a lot of other IT types at nerdy events like Microsoft product launches and software conferences. Not surprisingly, a number of my friends work in the IT field as well. The topic of outsourcing comes up quite a bit, well I never bring it up but others feel compelled to. The attitude on the subject ranges somewhere between angry paranoia and abject panic. I'm regularly treated to theories about how we'll all be working at Wal-Mart "any day now". Of course I've been hearing this talk for about five years and I still don't work at a Wal-Mart. These would-be prophets are about as accurate as Nostradamus. Usually when they speak of "outsourcing", what they really mean is "Indian outsourcing". At least I never hear the names of any other countries pop-up in these conversations. Something about the country of India terrifies a lot of IT types. For some I suspect it's subtle racism, for most I suspect it's that Indian companies are the primary recipient of outsourced jobs. 

The first time I ever heard about Indian outsourcing it was in reference to call-center work. This was not the least bit surprising. I worked as a telemarketer when I was 17. That says an awful lot. It was so hard to find people willing to do telemarketing that they resorted to hiring teenagers who would normally be working at, well, Wal-Mart. It was the second worst job I ever had. The staff turnover was tremendous. I only lasted three months. When I left there was nobody remaining from the day I started, except the managers. That's right, with three months under my belt I was the most experienced staff member there. The summer I spent packing heavy boxes of books in a poorly ventilated warehouse with Metallica cranking at a deafening level was 100 times better than telemarketing. It is incredibly difficult to find Americans willing to do any kind of call-center work. I bet that if you went to the busiest intersection in the country and put up a sign that said "Help Wanted: 3rd Shift Call-Center. $15 an hour. Call xxx-xxx-xxxx for Details" you wouldn't get a single call. Not one. I'd love to try an experiment like that someday. Logically these jobs got sent to a country with high unemployment and a large English-speaking base. 

The trend of moving IT jobs to India followed shortly thereafter. Also a sensible decision. Again, it's a country with hundreds of millions of English speakers. More importantly, English readers. An Indian accent, which I'm quite acquainted with, is often an issue for Americans unfamiliar with it. However, one's accent doesn't make a difference in how well he or she can read technical requirements. India's also a country that produces a ton of engineers. If you work in IT or majored in an engineering field you already know that. The rise of the internet made it a lot cheaper to send work to India instead of sending Indians to the United States. No one should be astonished that IT jobs starting migrating east at a rapid pace. 

This Indian outsourcing trend led to a huge amount of paranoia among IT workers, but is it a founded concern? I never thought so. I see it as a sign of progress, IT is growing at a faster pace than US staffing can keep up with. I can personally attest that it's incredibly difficult to recruit skilled programmers. This places me in a tiny minority among my peers. At the risk of gloating, it turns out I was correct in my interpretation. On to the article..

Demand for technology workers in the United States continues to grow in spite of American companies shifting more technology work overseas, according to a new study.

I might change "in spite of" to "because of". If Clinton was still president I suspect that's how the article would have been worded. It's strange that from 2/1993-1/2001 every article about the economy was glowing. Suddenly on January 21st 2001 the tone changed to overwhelmingly negative. Last time I checked the unemployment rate was under 5% and the economy was growing at a steady pace yet every article is still negative. Quite a puzzle..

The Association for Computing Machinery, a professional development organization that includes academic, government and industry officials from the information technology field, released a study Thursday that said that shifting IT jobs to countries like India or China is not nearly the threat to workers here that is commonly believed.

The study cites estimates that between two to three percent of IT jobs will be lost annually to lower-wage developing countries through the process known as offshoring. But it said the U.S. IT sector's overall growth should outpace that loss of jobs, expanding opportunities for those trained in fields such as software architecture, product design, project management and IT consulting.


*gasp* Again, if Clinton was president this would be spun more positively. Notice that they don't mention the actual pace of IT job growth in the US. Anyway, this is a fancy way of saying that lower-skilled jobs are going overseas. Highly-skilled IT workers in the US are moving up to better positions while lower-skilled ones are moving on to a different career (just like a lot of them did in 2001 after the dot-com implosion). I don't want to talk about my personal workplace too much (because writing about your job online is a great way to get fired) so I'll just say that the people I hear griping about IT outsourcing are the ones that really should be in a different career. I've known many people who weren't particularly good at IT related work but found great success in other fields.

"Despite all the publicity in the United States about jobs being lost to India and China, the size of the IT employment market in the United States today is higher than it was at the height of the dot.com boom," said the report. "Information technology appears as though it will be a growth area at least for the coming decade, and the U.S. government projects that several IT occupations will be among the fastest growing occupations during this time."

And even with greater globalization, the report argues that the lower wage scales in India and China are not pushing down pay for U.S. IT workers. Citing information from the U.S. Bureau of Labor Statistics, it said that IT workers have seen steady gains in average annual wages for different fields in the sector of between about two to five percent a year.


Not too shocking, if American IT professionals are filling higher-skilled positions it only makes sense that their compensation would increase. 2-5 percent wage growth isn't anything to write home about but I suspect the soaring cost of healthcare insurance is a factor in this. If your employer has to spend an extra $1000 a year for your insurance that's $1000 you won't be getting as a raise. 

The study suggests that there are several factors in the continued growth in demand for IT workers here. The report said part of it is due to the use of offshoring by U.S. companies, including start-up firms, to limit their costs and thus grow their businesses. That, in turn, creates more opportunities here even as an increasing amount of work is done overseas.
The study also said that companies from a variety of sectors in the economy continue to discover greater efficiency and more competitive operations through investment in IT. The study therefore argues there will be continued growing demand for IT as underserved fields such as health care, retail trade, construction, and certain services make greater investment in technology.

I recently became acquainted with someone who runs a small offshore consulting business. He helps small start-up companies establish IT operations in India. This, as the article reinforces, helps them invest their money in their core business. Let me make up an arbitrary example.. let's say you run a business detailing cars. Your main expenses are paint, facilities, and manpower. You're not running an IT shop and shouldn't have to shell out big bucks on IT expenses (no more than an IT shop should shell out for paint). Still, to grow your business you'd like to setup a web site where customers can make appointments and check the status of their car. This web site will bring you some new business, but not enough to justify hiring a fancy consulting company at $250 an hour. So you could either (a) not build the site or (b) find someone who manages offshore development that can build the site for $25 an hour. Which one makes more sense for your company? Why is it a bad thing if you go with plan (b)? With plan (a) you don't get a web site and therefore do less business. The fancy consulting company wasn't going to get $250 an hour out of you either way so how are they hurt? Let's take it a step further.. imagine a wealthier competitor sees your site and decides to hire the fancy consulting company because they think they'll get a better quality site. In this case, outsourcing actually produced new IT business in America. Look, I've only taken one business class in my life. It was at a junior college and I got an F. Yet somehow I can manage to comprehend how outsourcing creates new business.

One of the greater threats to IT growth in the United States is the belief by many parents and young people that the field does not have good job prospects, which has resulted in a decline in students choosing to study various IT fields. It also sees tighter visa restrictions forcing more IT work offshore because fewer foreign students will be able to come here to study and provide the skill workers companies are looking for. "In the past, one of the great advantages of the United States has been its higher education system. The United States still holds some significant advantages over India in the higher educational system," said the study. "For many years, the United States has been considered the place of choice for advanced degrees for people throughout the world, but this seems to be changing. Because of visa tightening and attitudes towards the United States in the post-9/11 era, the number of foreign students applying to graduate school in the United States has plummeted."

This is the only troubling part of the story. To keep pace with countries churning out millions of engineers we're going to churn out more history and phys-ed majors. Brilliant. When I was in graduate school (I'm one of the few people who flunked out of junior college but now has a Master's degree) nearly every student was foreign. Not "born in the US to foreign parents" but "in the US on a student visa". Many of us Americans think we can rest on our laurels and not pursue higher education. Big mistake.

Maybe I'll be proven wrong someday and write a counter-point to this while on my 30-minute lunch break at Wal-Mart. The funny thing about the IT outsourcing debate is that my side can never be proven "right" while the paranoid programmers can continue to preach about impending doom. Rather than working at Wal-Mart, I suspect that in 5 years I'll still be listening to them tell me how I'll be out of work "any day now". Do me a favor, if it's too stressful to work in IT because of your irrational fear of outsourcing then quit. There's a huge demand for nurses and pharmacists and they make great money (especially the latter). I can't fathom how those jobs could ever be outsourced (although I'm sure someone will try) so please go into one of those fields and shut up.  




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