Offshore Outsourcings Hidden Costs

You want to lower costs. You will be managing projects globally. But the move of programming and other top jobs abroad has implications for national security. And you just might be creating your next rival. (Baseline)

Chris Heim knows hell have to eventually send some of his product development work to India, China or some other country.
The chief executive of HighJump Software, a supplier of supply-chain software based in Eden Prairie, Minn., has a rival that already has 200 developers in India, getting paid about $10,000 a year each. He has 80 developers in the U.S., where those skills are worth an average pay of about $80,000. "At some point well have to do it," says Heim. "I just dont see the spread stopping."Heim, like other heads of U.S. information technology firms, has his reservations about hiring or renting talent in other countries that are not on his direct payroll. He worries about protecting HighJumps intellectual property, if he provides source code to "outsourcing" companies that he hires at cheap wages to enhance his products. He worries about the morale of employees at home, who will worry whether their jobs are the next to disappear overseas. Hes even worried about whether he will be seeding the undoing of his own company, by giving a new set of smart outsiders the keys to his companys intellectual property. "Are we training our future competitors?" asks Heim.
He doesnt have the answers. But there are plenty of questions about the burgeoning practice of using inexpensive foreign labor to develop software; and its effect not just on the suppliers and users of information technology, but the U.S. economy itself and its tax base. If high-value jobs disappear, so also could the funding and the brains that will bolster homeland security. What happens if the U.S. winds up losing its technological edge? Will the tax base be gutted as well-compensated technology professionals lose their jobs? How long will it take for a displaced worker to get back to par with the salary lost? What will that worker do? Whats the impact on education? Or on national security?


Despite those worries, how can you not consider employing offshore software programmers and stay in the game with cost-conscious competitors? Can companies offshore every piece of their businesses? How, as a technology project leader, do you manage, when not only the pieces of your network, but your people—in different disciplines—are spread globally?
No one knows all the answers. But, by the time better understanding emerges, it may not matter. Few executives are stopping long enough to ask questions because they have to cut costs to keep their jobs.

Next page: Economic effects of offshore outsourcing.