Offshore Outsourcing: Should You be Worried Yet?

Commentary: Judging by data presented at a conference on business process outsourcing within the financial services industry, it's high time to be frightened of losing your job to offshore outsourcing.

Nowadays, IT professionals who are not angry about offshore outsourcing of IT work are likely a) still employed and b) not scared enough about the imminent loss of their jobs.

Judging by data presented at a conference on business process outsourcing within the financial services industry in Boston last week, it is high time to be frightened of the prospect of losing your job to offshore outsourcing. According to Forrester Research Analyst John McCarthy, the total number of U.S. jobs moving offshore will reach 3.3 million by 2015. Of that number, about 472,632 will be computer-related jobs.

Many IT people think whats being outsourced are low-skill, entry-level positions such as data entry—or what Shuhbro Sen, president and CEO of financial services company PowerShare Inc., referred to as the provenance of "the high-school dropouts of the United States." University of California/Davis Professor Norm Matloff, long an outspoken critic of the H-1B visa program and ageism in the IT industry, is of this mindset, recently citing in his e-newsletter various reasons why the United States will never outsource a substantial number of highly skilled IT positions such as that of software developer or software engineer. Most of the arguments against offshore outsourcing posing a serious threat to highly skilled IT workers boil down to difficulties in communication and project management in the offshore model.

Those are valid issues, but they are by no means stemming the flow of highly skilled IT work from our shores. Forrester research shows that 70 percent of enterprises that are turning to offshore outsourcing are sending out custom application development work. Sixteen percent are sending system analysis and architecture planning offshore. Thirty-two percent are using offshore outsourcing for system administration and support.

And just because many companies are still meekly adhering to the cautious route of moving offshore only low-skill work doesnt mean they dont have ambitions of getting more courageous. Affiliated Computer Services Inc. of Dallas, a business processing services outfit that sends work to countries including Ghana, is certainly counting on its clients moving up the food chain. Regional Sales Manager Charles Lavine, attending the recent conference, boasted that offshore IT labor costs can be as cheap as $1 per day. Lavine said ACS has plans to expand beyond business process outsourcing—activities such as order entry—to more highly skilled work. And hes confident that the supply of skills overseas will be adequate to meet the task at hand.

In the meantime, IT labor groups such as WashTech, or the Washington Alliance of Technology Workers, a Seattle-based organization of high-tech workers and the local affiliate of the Communications Workers of America, are mounting campaigns to raise awareness of the growing threat to IT workers posed by offshore outsourcing. The group on Jan. 24 put up a page on its Web site where concerned citizens can e-mail elected officials to prod them into launching a study of the IT offshore outsourcing trend.

WashTechs initiative makes sense. But WashTech and groups like it must bear in mind that money talks, and it now has a vice grip on the ears of decision makers. As ACS Lavine said when he was recently asked about the State of New Jerseys recent attempts to outlaw offshore outsourcing of government contracts, "If we run into problems [with local decision makers], we hire them and make them into vice presidents."