The Coming Wave of IT Outsourcing

by Kevin Bedell

In an article on CNN/Money last week, a recent Gartner report was quoted as saying, "By 2004, more than 80 percent of U.S. executive boardrooms will have discussed offshore sourcing, and more than 40 percent of U.S. enterprises will have completed some type of pilot or will be sourcing IT (information technology) services".

In addition,
Forrester analyst John McCarthy recently predicted, "Over the next 15 years, 3.3 million U.S. service industry jobs and $136 billion in wages will move offshore to countries like India, Russia, China and the Philippines", and that "The IT industry will lead the initial overseas exodus."

Wow. Those are big numbers. How can you be sure that your job isn't one of those outsourced? Here are some ideas:

1. Constantly update your skills.

In another weblog entry, Uche Ogbuji asked, "Are XML, Web Services, CORBA and such for Joe Codeloader?". Let me answer that - "No, unless they want to make sure they stay employable!".

Letting your skills go rusty while technology changes around you gives upper management a reason to shop around. Faced with the prospect of sending you through training at their expense (which takes time, costs more and pushes out project end-dates), they may just make the choice to outsource to cheap off-shore labor that already has the skills they need.

2. Get to know the business.

One thing that you have over any outsourcing company is specific, domain-knowledge on your particular company. You can learn to speak the business users' language. You know about the other systems you need to integrate with. You understand the history of why the old systems didn't work. This knowledge can't be replicated.

(By the way, this also means staying in one place long enough to gain that knowledge!)

3. Make your customers need you.

This comes through being competent as well as getting along. You need your users to like you so much, that they ask for you by name. You want your users to tell their management how valuable you are and how they need you on the team.

4. Learn technologies that integrate other technologies.

It's much easier to outsource development of a specific project than to outsouce the work of getting it integrated with the other systems you already have. This is why you need to know CORBA, SOAP, Web Services, MQ Series and whatever other technologies and middleware your company uses.

I'm finding that almost all my new projects have at least some level of effort associated with integration to other existing systems. Do what you can to move into those parts of the projects.

5. Learn a lot of technologies. Learn *base* technologies.

I had a friend in Engineering school that got a job with Ford after college and became a carburetor test engineer. He knew carburetors better than anyone! This, of course, did him absolutely no good when Ford switched everything over to fuel injection systems.

He was able to stay with them and switched into 'metal forming'. He said, "I don't care how many composite materials there are, they will *always* have metal in cars."

Looking at your skills from this perspective, are you the computer-equivalent of a "carburetor test engineer"?

You need to learn as many different technologies as you can to make sure you're safe if one is discontinued. You also need to learn *base* technologies - those that are used all over the place (like http, xml, web services, etc.).

Of course, nothing can make you safe from every possible circumstance. After all, as The Clash are often quoted as saying, "The future is unwritten"!

In the end, you are your own best safety net. Take control of your skill set and write your own future.


2003-03-19 04:00:22
I agree
I think points 3 and 4 are particularly valid. All the points are well taken, but I particularly liked these. I think they're absolutely spot on.

I also believe that there is an advantage to physical presence - managers really do like to see the people who they are dealing with, and not just on NetMeeting either. I suspect the growing outsourcing trend is being driven by the highest levels of management, who understand dollars but don't understand software development. But I think there will be a backlash as they realise that you really need to have folks on site, whether they are employees or contractors.

Apart from the other point (of these 2 I singled out) there is also the very real fact that there are cultural factors. I am not the first person to comment on this, obviously. Societies that we are likely to heavily outsource to, have authoritarian and/or hierarchical backgrounds that impact a manager in the US. To wit, it makes life difficult.

2003-03-20 21:30:04
Desperate companies outsource
Only desperate companies outsource IT development overseas. They are cutting costs because of poor or mediocre management got them into dire financial situations. These companies are not worth working for anyways because they will disappear withing a few years. They have not addressed the core problem of mismanagement so their problems will only grow worse.

My advice for programmers is to abandon corporate life because corporations are morally bankrupt. Start your own company and run circles around the corporations.

2003-03-21 13:03:01
Managers Make a Name
I agree with everything the author here has said. As an over 50 IT person, I spend an average of 15 hours a week at home learning and keeping up with new technologies; expanding my skills. I know many who haven't and are now laid off.

HOWEVER Many managers make a name by Outsourcing Overseas. It doesn't matter whether you have an excelent skill set. They initially show that they "save" the company a large amount of money, so they get promoted and then the project fails.

I have several friends who work for Bank of America who have worked for the compay over 20 years who were replaced by overseas outsourcing AND THEN HAD TO TRAIN THEIR REPLACMENTS to get their severance....

This is not the action of a company that cares about the employee, but cares about the "bottom line" and the promotions of Executives.

I have been laid off before; and it was my broad skillset, and agressive attitude that found me a job after only 3 months (during the IT downturn). But, as more and more IT jobs go oversease (to the lowest bidder), those opportunities will become fewer and fewer. Recent Corporate Ethics have demonstrated (Enron, WorldCom..etc etc) that the Upper Level management that makes those "bottom line" decisions to make themselves look good don't really care about the employee.

2003-03-24 08:11:22
But look where they're outsourcing to ...
*deleted due to duplicate post*
2003-03-24 22:24:45
Moral bankruptcy is a valid issue
Workers should care about moral bankruptcy. What has been demonstrated with the failures of Enron, WorldCom, etc. is that management don't care about their workers. They only care about enriching themselves even to the point of breaking the law. The wave of outsourcing to overseas is an expression of the same moral bankruptcy.

Don't put up with corrupt corporations. Fight back by forming your own smaller, agile, nimble company and run them out of business. Since they have to deal with managing an entity overseas, they can't move as fast as a company that develops locally.

And since the executives are a bunch or morons, your intelligence will allow you to out flank them.

2003-03-25 07:30:09
How are you gonna feed your family
You talk about moral bancrupcy, managers making name and other irrelevant issues. What IS relevant is that today VERY hard to find anything. And instead of much expected upturn we will see IT job market only getting worse. In only last month i saw 2 small companies that have HALF of their employees oversees (India and Russia). That's the reality. How going to drive them out of business when senior developer costs up to $400 a month. How?
BTW, how about moral bancrupcy of RadioShack CircuitCity and many others that don't sell one thing made here?
2003-03-26 10:05:48
Is outsourcing worth it? -- Not in my opinion
Maybe you save a couple of thousands of dollars on the quoted project cost, but the true costs run much higher. Those true costs include:

lack of architecture -- the project is built but likely has no architectural foundation to evolve and adapt over time

time lost to coordination, time lost to clarification of basic issues, and failure to pass acceptibility tests. I have seen it happen, where a now-defunct company tried to outsource the switch from MSSQL to Oracle for the whole enterprise. Big mistake -- they are now out of business, and that project never made any of the promised deadlines.

Bugs. Not just in the program, but in the functionality. I can assure you that offshore developers produce just as many if not more bugs than domestic developers. Compound this with the language barrier, the translation of specs and requirements, the translation of business processes -- I HAVE NEVER SEEN AN OFFSHORE PROJECT DELIVER WHAT WAS PROMISED -- EVER. Not even for outsourced testing projects.

Companies that choose to outsource offshore take on many risks. Risks to the project include lack of training and lack of a proven methodology. The business risks are arguably greater: lack of contract enforcability, lack of real accountability (before the lawyers are called in), and geopolitical risks including political, currency, terrorist, and military action risks, among others.

IT is a stategic assest. Look at the war in Iraq -- what if the US Army outsourced it's IT? Do you honestly think it would be half as effective a force with an outsourced IT operation?

Also, look at what happened to the airline industry from outsourcing offshore what became a strategic requirement -- airport security. They are still hurting because they took what appeared to them to be the easy road, with disasterous results. The only thing that saved them is that Congress deemed the industry as too important to the US Economy to let it go under. Is your company going to be bailed out by Congress if you make a similar mistake?

Bottom line: Outsourcing offshore can't cover up bad management. Companies considering outsourcing offshore should also consider management changes within their IT departments. That might be where the real cost cutting should take place.

2003-03-26 11:39:15
reverse migration
Just for your information, a project I worked before in A??T, it got outsourced to I?M and I?M finished the off-shore process after laying off 95% of the work force.

Now due to the 911 and then the Ind?a team can't handle the task (due to a lot of bussiness interation needed to continue the project), I?M flew all of the people from Ind?a to USA and kept them working here for about 1 year. Now, it's going through a "reverse migration" process to move all the development tasks back to another I?B team in the USA and all those people from Ind?a are going to be sent back.

During the process, all the most experienced System Engineers and Developers are gone and the new team is going to pick up everything from scrach, AGAIN!

Now, guess who are paying for all the extra cost? And those big corporations in WallStreet still keep sending their IT team to be under the I?M management like crazy....

Guess who will be laughing at the end?

2003-03-27 09:19:15
Not even the author can ride the wave forever
It seems to me that the author of this article takes a tone that suggests he has found a way to stay on top of the 'wave'. And possibly, by following his advice you can protect yourself from this 'wave'. In reality, he makes a living in the IT industry and is subject to the same forces that anyone else is. I am sure many unemployed IT people can demonstrate that they have followed all of the what the author suggests and yet they are still unemployed.
When the author loses his job to someone overseas, will he still feel that he should stand up and happily preach such shallow nonsense to his peers in the IT community?
Let's see where this author is when the smoke clears in a few years...
2003-04-15 06:26:50
Equating outsourcing with off-shore is a tragedy.
Management has to first determine if the system needs to be outsourced for whatever the reasons may be - costs, time, lack of resources & skills, business relationships, etc. Then and only then, determine if the development should go to New Jersey or New Delhi. Equating outsourcing with off-shore is a tragedy. These are two completely different things. Unfortunately, what was a business & engineering logistical issue is now a political one.
2003-07-21 12:48:19
Not even the author can ride the wave forever
The author's advice is so shallow as to be almost silly, or he is working for the IT organizations that want to keep the employees cool as their jobs disapear.

People are not losing their jobs because their skill sets are out of date, they are losing their jobs because some one in India will do the job for 10 dollars an hour.

2003-08-11 09:10:53
outsource/offshore all IT writers
Given the lack of content, companies like O'Reilly could save millions of dollars by outsourcing their "creative content" to a random word generator. The advice would be just as useful.
2003-08-26 22:03:10
outsourcing views and experience
We've recently begun discussion threads on some key outsourcing issues. For example, "will your profession be outsourced?" and "are we now seeing the rise of the virtual corporation?"

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