Opinion: Low-cost countries will keep pressure on IT costs.
If you think that pressure on IT budgets is sure to lift soon, think again. The forces creating that cost pressure are likely to prevail for some timesay, a decade. So says Perot Systems Chairman of Consulting and author James Champy, who is working on a new book focusing on how businesses should operate during times of "hyperproductivity." The idea is that companies must deliver greater value rather than just reduce their costswhich all companies will continue to do relentlessly.
"Companies are under tremendous cost pressure due to increased productivity and globalization. Work is shifting pretty dramatically. Costs are being driven down by productivity and competition," Champy told me during a recent phone conversation. "Its the more-with-less environment. I think weve got a good 10 years of it. Some people say 25, and they may be right." Ouch.
It seems certain that international outsourcing will play a key role in this era.
Belief in the continuing wave of globalization was fueled recently by a visit to Boston by former Soviet Union President Mikhail Gorbachev to address the Massachusetts Software Council. His appearance was sponsored by RusSoft, a group of software development companiesin other words, outsourcersin Russia, Ukraine and Belarus.
"Russian society is ready to make a breakthrough. The high level of education and the potential of our science enable us to take our place in the post-industrial economy," Gorbachev said, noting that construction continues apace to build new technology parks near St. Petersburg and Moscow. "We are following India closely. India today is the leader. So we will support outsourcing." The man who facilitated his countrys escape from Communism noted that last year, the former Soviet Union republics of Russia, Belarus and Ukraine had nearly $1 billion worth of IT exports.
Click here to read more about Gorbachevs visit.
Its hard to find a direct comparison, but Indias National Association of Software and Service Companies estimates that Indias IT services and software exports will be $12.2 billion this year.
David Tapper, an analyst at IDC, said at the recent IDC Directions conference in Boston that international outsourcing will get us to the point where we wont know where in the world our IT services are coming from but that it wont matter. Today, Tapper said, IT work is siloed and done either onshore or offshore. Tomorrow, things will be integrated and done either onshore or offshoreyou wont know where the work is done.
Tapper told me his vision coincides with that of Nicholas Carrauthor of the book "Does IT Matter?" and the article "IT Doesnt Matter"in that he believes IT is becoming like electricity, a commodity utility to which we simply plug in. We dont know where the electricity is coming from; we just get it, somehow. He says well be there by the year 2015.
Follow this line of reasoning to its logical conclusion, and the word "offshoring," charged as it is, will wither in relevance and eventually disappear.
Champy said he doesnt believe trends like this diminish ITs value or competitive advantage. Indeed, the thesis of his book tends to indicate that those companies that can differentiate themselves in an era of commoditized IT will emerge as winners. "I think were just at the beginning of productivity improvements. Most companies have realized just 10 percent of potential process changes so far, due to IT," he said.
Champy said that IT is more important now than when he wrote his best-selling book with Michael Hammer, "Reengineering the Corporation: A Manifesto for Business Revolution," more than a decade ago. "What technology enables today is more important than it was 10 to 15 years ago."
Strategic edge or commodity, IT is global. Get used to it.
Out and about
For another take on globalization, H-1B visas and their impact on the American programmer, you might want to read "Jobless Recovery," by L.C. Evans. The author writes that her husband was laid off and replaced by H-1B workers, an outrage that prompted her to take pen in hand to create a satirical novel exposing the whole sordid process: www.llumina.com/store/joblessrecovery.htm
Till next eWEEK, send your comments to me at firstname.lastname@example.org.
To read more Stan Gibson, subscribe to eWEEK magazine.
Check out eWEEK.coms for the latest news, views and analysis on outsourcing.