In defence of outsourcing

Summary:COMMENTARY--The knee-jerk reaction to outsourcing is that it is a bad thing - but this doesn't acknowledge that it can have benefits, and that it is probably here to stay Few topics are as controversial as outsourcing. This is understandable.

COMMENTARY-- The knee-jerk reaction to outsourcing is that it is a bad thing - but this doesn't acknowledge that it can have benefits, and that it is probably here to stay

Few topics are as controversial as outsourcing. This is understandable. To state the obvious, jobs are a fundamental part of our ability to lead a happy and productive life.

Unfortunately, jobs exist within the context of volatile global markets. The growth of outsourcing is the result of developing nations reaching a point in their economic evolution where they have the skills to compete in higher-skill domains traditionally served by rich country workers. The same cost advantages offered to lower-level manufacturing are now being brought up the value chain to software development.

In the United States, a number of congressmen have proposed bills which would protect American IT workers from foreign labour competition. Furthermore, though few are as overtly anti-trade as Dick Gephardt or Dennis Kucinich, it is increasingly clear that Democratic party contenders for the US presidency view foreign competition as a potential winning issue in the 2004 race.

I don't deny that Western IT workers will have to make adjustments to accommodate the new global reality. However, as I explain in this article, outsourcing is not the jobs catastrophe its opponents make it out to be. Furthermore, there are a number of practical reasons to maintain an open market position which have ramifications for the future health of Western economies. In short, like it or not, Western nations need outsourcing.

Don't overestimate the threat
My first job as a programmer was with Price Waterhouse. My memory of that time includes a frightening amount of airplane food, as I made weekly round-trip flights to client destinations from my home "base" (at the time, Dallas, Texas).

The reason for this was that Price Waterhouse assisted clients in creating custom software -- and this required close interaction with the client. Whole teams of developers would be flown to the site to gather requirements, generate prototypes and write code. Real-world custom development is often a trial and error process, something that works best when developers on-site can respond instantly.

Maintenance work, however, does not require such close interaction since the broad outlines of the application have already been laid out. This development was often performed off-site, therefore, saving the client airfare and housing costs.

Custom software, even under the best conditions, often must contend with "fuzzy" requirements. Likewise, most software is of the ad-hoc variety, and often is "temporary" in that the actual code written has a short life span. This means that most software will need the kind of close client interactions Price Waterhouse provided to its customers. Such interaction can't occur when the consultants are sitting in an office in Hyderabad.

Furthermore, the people best qualified to work with American or European clients will be other Americans or Europeans, given the shared cultural context co-nationals share with their fellow citizens. In other words, most custom development will call upon local citizens, because their ingrained "skill" at dealing with local clients cannot be replicated.

Maintenance, however, can be performed off-site, including at offshore locations. This was central to the arguments made by Rahul Sood and George Gilbert in their recent article. They noted that one of the best way to use outsourced labour is as a place to offload maintenance tasks, freeing up the domestic labour force for higher-value new software development.

Even so, this doesn't mean that domestic IT staff won't face jobs pressure. In the long term, however, it pays not to underestimate the power of the software industry to create new jobs.

The rise in demand for software developers in the 1990s was the result of the industry's attempt to digest the changes introduced by the spread of the Internet. Technology continues to advance, however, and it is my opinion that we have only seen the tip of the iceberg in terms of the integration of computing power into our daily lives. I spoke of the software opportunities created by the adoption of RFID technology in a previous article, but also consider the advent of smart phone technology, or even the growth of wearable processing power (SPOT watches being a good example) to be areas for future growth and jobs.

Technological advances in these and other areas will drive demand for new categories of software, and that demand will pick up any slack that results from the expansion of the global pool of developers to include citizens of developing nations.

Topics: CXO, China, India


John Carroll has programmed in a wide variety of computing domains, including servers, client PCs, mobile phones and even mainframes. His current specialties are C#, .NET, Java, WIN32/COM and C++, and he has applied those skills in everything from distributed web-based systems to embedded devices. In his spare time, he enjoys the world... Full Bio

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