Add value in an outsourcing economy
By Tim Landgrave
In the boom of the late '90s, our economy grew so quickly that many industries found themselves in a perplexing situation. For large companies, the cost of hiring domestic employees for almost any blue-collar job became so prohibitive that they moved large numbers of manufacturing jobs, not only in textiles but also in electronics and other high-tech industries, into areas such as Mexico and Southeast Asia.
The other effect of the '90s economic boom is starting to hit now. Many foreign nationals—encouraged by the increased availability of H1-B work visas—came to America and learned the trades and skills of the blue-collar and white-collar workforce.
The "impossible" begins
I’ve sat in rooms with groups of programmers and network engineers who sympathized with the workers who lost their jobs as manufacturing moved overseas, but were confident that their jobs were impossible to outsource. Interestingly enough, many of these technical experts were themselves H1-B visitors who had come to this country to learn high-tech skills. They had hoped to improve their economic circumstances by coming to America.
What they’re finding now is that they can return home with a very valuable set of skills, a large number of American contacts, and a significantly lower cost of living without a corresponding drop in their quality of life. They use these assets to compete for work (very favorably) with their former American colleagues. This puts our technology workers at a significant disadvantage as long as the recession continues because there’s enormous pressure on most CIOs to reduce costs, and outsourcing key positions has become one of the easiest ways to do so.
It IS rocket science
Combine the outflow of the H1-B workforce and the increased number of technical professionals being produced by countries such as Russia, India, China, Korea, and Hong Kong, and the technical workforce overseas dwarfs that of the United States. Moreover, you can really hire a full-fledged rocket scientist—recently released from Russia’s space program—for less than $40,000 per year.
India has huge technology centers where well-trained, articulate programmers can be contracted for $1,000 to $5,000 per month without the overhead associated with U.S. workers (health care costs, insurance, hiring and firing costs, etc.). And major companies, including GE, IBM, and Microsoft, are all setting up "development factories" in emerging countries such as India. They do this not only to reduce their software development costs, but also to be in a position to take advantage of opportunities in those countries as their economies grow from the resulting influx of new capital.
It’s not just the big companies that are taking advantage of this phenomenon. I get at least two calls per week from companies offering to outsource the design and development of large business software systems for a third to half of what it would cost me to contract or employ the same resources here. Many consulting firms have begun replacing their development teams with high-level product and program management resources and contracts with offshore development groups to actually produce the final product.
The types of jobs being outsourced have begun to change as well. It used to be just software developers, but with the ubiquity of high-speed network access and the ability to move a packet of data or voice from anywhere to anywhere, companies are finding that they can outsource jobs that can be done at the other end of a piece of wire. The first jobs to move have been the help desk and customer support services for large manufacturing and technology companies. Companies have found that they can cut their cost per call by 50 to 90 percent by letting someone from India—who speaks better English than most Americans—take the customer support calls from their customers.
And as more Internet systems are configured to run remotely in large hosting facilities, why does it matter if the support engineers are located in the same city? The support can be just as efficient and much more cost-effective by having it monitored by highly trained and highly motivated engineering professionals from other countries who have access to the same high-speed connections (minus a few milliseconds) as their domestic competitors.
How do CIOs respond?
As a CIO, you’re in a difficult position. You have to find ways to continue to reduce your cost but do so without losing influence or control. You also have to assume that at some point your competitor will find ways to take advantage of the cheaper technical labor pool. Now is the time to begin focusing on the two things that are the most difficult to outsource: business analysis and pattern development. You should create an environment where everyone on your staff is encouraged to know the business first and the technology second. Understanding the business processes that can most efficiently deliver your company’s products and services is the most important skill that a technology professional—from the CIO to the existing help desk staff—can offer.
And even though much of the actual development and support can be moved to lower-cost providers, the ability to break business requirements down into repeatable and replicated technology elements is not so easy to move outside of the building. You can begin encouraging your staff to be intimately involved in the movement toward patterns-based systems and software development. In the next 10 years, it’s highly likely that most U.S. technology professionals will consider themselves business analysts and system designers only and will embrace the opportunity to have the “grunt programming and support work” moved overseas. But during the next 10 years, corporate information managers will have to either retrain their workers to think this way or replace them with people who do.
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Stickymedia: An Outsource Company
Re; Buy Smart
I consider myself a Republican and believe that corporations do have the right to choose how to run their business, but if they are really going to undermine and sell-out the American Workforce in the name of higher profits, then by God I'll vote for whomever (Democrat, Green, Independent, Communist, etc.) that actually has the guts to put a stop to it, whether by imposing stiff tarrifs or by cancelling all those H1 visas.
We need politicians that truly represent our interests and not some vague concept of "globalization"... I'd love to see an "America First" political organization rise to the challenge and save our country from the ash-heap of history. You can be sure they'd get my vote...
Reply to Tim Landgrave
I take serious exception to the premise and many of the assertions in your article. I speak from direct experience with outsourcing companies, which have replaced 90% of the application developers in my company, as well as all the major companies in our area. The replacement workers, who by and large are decent, hard-working people, nevertheless are emphatically NOT 'well-trained, articulate programmers', as you so naively stated. Communication problems due to lack of English language skills or dialect are the norm. The technical skills these people bring are significantly lower than the American workers they replaced. The business knowledge that left with them is gone, at least for 6 months to a year until someone else learns it, if ever.
In the meantime, the same level of client demand is there, fewer people are available to do the work, the work environment is less friendly and cooperative, and response levels are down because it takes 24 hours to get a response from India, which then has to be interpreted, and as often as not the cycle is repeated.
All of this frustrating inefficiency is contributing to a greater drop in productivity than I have seen in my 30 years in the IT industry. And for what? A chance at a short-term quarterly quick hit to the bottom line. Management concludes that because our costs are less, the outsourcing is a success, oblivious to the greater loss. Our customers are being served poorly, some will no doubt spend less with us or go elsewhere. And when our American college graduates look for jobs in the IT industry, they will need to move to India or some other third-world nation to find them, because the only IT jobs here will be 'business analysts and systems designers'. But no one will have the chance to develop those skills as we did by working their way up from basic programming.
I apologize for the rant, but our corporate and government 'leaders' have sold us out in the name of greed.
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