Offshore outsourcing will affect everyone

Nic · Nov 9, 2003

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Offshore outsourcing will affect everyone - IT folk should consider becoming plumbers

IT IS RARE that a day goes by without US and UK reports of yet another company retrenching local staff and sending the work offshore. It could be in computing or in call-centres but the flow of work continues. Indeed, the recent announcement of an uptick in IT spending in the UK and US has been received in India with some delight because it should lead to even more outsourcing work.

The flood of work and the loss of jobs has many people questioning what is happening and there are signs that offshore outsourcing is starting to become a heated political issue in more than one country.

In India a call centre worker can expect a monthly salary five times the national average and more than twice as high as other openings for university graduates; a software worker with two years experience can expect a salary more than 13 times the national average but still way below US salaries for their counterparts. Is it any wonder that they are keen to take the work and are opposed to any attempt to limit it?

On the other hand, those workers in the countries signing up for outsourcing are seeing their livelihoods drastically altered. They often have loans for their education to be repaid and their lifestyles have been created on the basis of a certain level of income, but now their financial circumstances are changing, with many forced to draw on their savings or other assets. The impact is on them is also felt by partners, families and local communities. Even if you have not been retrenched or are not at risk of being retrenched by outsourcing, this phenomenon will probably not leave you unscathed because there has been a flow-on effect right across the industry.

One of the most interesting aspects of offshore outsourcing is the role played by the various governments.

There was a time when a government supported its people either through favourable employment laws or through the support of businesses which in turn created employment for its citizens. This no longer applies in many countries because big business calls the shots and employing local citizens is not high on their agenda.

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Supporters of offshore outsourcing say that exporting jobs is nothing new and they point to the car industry and other industries where jobs have been transferred to other countries. Without exception these earlier jobs were in blue-collar trades, such as manufacturing, where the employees did not have several years of university education behind them and where their re-training for a new and financially comparable role was relatively easy, but the export of high-tech jobs is a different ballgame with different impact.

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Even for displaced IT workers in the USA willing to accept any job in any industry the situation is not good. Official unemployment is about 6% but it is unclear how many more people have slipped out of view after exhausting the nine months of welfare benefits available to them. A study of the figures in September has shown that of the number of unemployed who moved onto federally funded benefits for the last three of those nine months, 75% were reaching the end of that period without finding a job.

Much has been said about the impact of offshore outsourcing, how it is not damaging the economy and how it will lead to better things, but most statements are either based on wishful thinking or ignore some fundamental truths.

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There have also been assertions that the displaced IT workers will become information workers but no-one has defined this role any more precisely or produced some clear examples of this happening. It is hard to imagine that all of the IT workers who have lost their jobs through outsourcing will find places in this rather nebulous field.

In similar fashion predictions have been made that the IT business will rebound and that there will be jobs for all but these predictions have given no hint as to why such work will remain at home and not also be exported to low-cost countries, assuming of course that such work materialises.

Others have declared that displaced IT workers will find higher roles in the IT departments of their companies but this is a fallacy because without the lower levels in that department there is little need for team leaders, section leaders. At a lower level, recent graduates will have no roles in which to develop their skills. There is also a lack of confidence about higher roles because even the role of the CIO is diminishing with many now reporting to their Chief Financial Officer (CFO) and not the CEO. One consequence of offshore outsourcing is that students are shunning courses in IT for others with better job security. In Australia the number of university students in 2003 selecting information technology courses as their first choice dropped by 25% by comparison to 2002. They certainly understood the message when their own government encouraged offshore outsourcing.

It has been predicted that only about 500,000 U.S. IT jobs, roughly 5% of the workforce, will move offshore by 2015. It is difficult to know who to believe when others are saying that 10% or even 20% of IT jobs could disappear from the US in the next five years. Whichever figure is correct, it still means a double-whammy because the number of unemployed IT professionals will increase and there will be fewer jobs to employ them.

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Information technology is becoming another utility, much like electricity or water, and like with most utilities, the cost is seen as more important that the quality, at least until something serious goes wrong. It is cost more than anything that is driving the jobs offshore to countries where the knowledge is comparable or even better t certain levels. The simple truth is that any almost job that can be done solely by telephone or data link is a candidate for offshore outsourcing.

There seems little doubt that offshore outsourcing will continue to grow and it is difficult to argue with the costs and logic offered by those performing the work even if one should wish to.

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Many former IT professionals have moved into the skilled trades and retraining as plumbers, electricians, painters, decorators or heating engineers. They have identified that the shortage of these skills in many English-speaking countries has meant that the money is quite good. In the US especially some IT professionals have moved into nursing because of its growing demand as the population ages and safety from outsourcing, although it is perhaps entirely safe from H1-B visas for foreign workers.

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The offshore outsourcing of IT and call centre functions has been just the thin edge of the wedge because similar operations for legal, medical and business activities are already starting. The skilling of labour markets in low cost countries is causing a major shift in global work patterns. Some of this is undoubtedly good but there are major consequences for those whose jobs disappear and those people need to critically look to their future.
- By €uromole

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Offshore outsourcing will affect everyone

Nic TechSpot Paladin