Offshore outsourcing: friend or foe?

commentary A necessary evil or one that must be stopped--the debate over offshore outsourcing is hotting up and a conclusion could be near, but what is the right answer?Ã,­Can someone please tell me for once and for all whether outsourcing IT work to overseas companies is a good idea or not.



commentary A necessary evil or one that must be stopped--the debate over offshore outsourcing is hotting up and a conclusion could be near, but what is the right answer?Ã,­

Can someone please tell me for once and for all whether outsourcing IT work to overseas companies is a good idea or not. Is it really going to ruin job prospects for local IT workers, or should they wake up to globalisation and retrain in a different area? Are companies really going to go broke if they don't save money on application development costs or should they stop penny-pinching and get back into the patriotic spirit?

Both sides have been debated, we have heard about the benefits of offshoring, such as taking the grunt work out of Australia and letting local IT workers get on with "real" IT work, and how companies can keep a workforce running around the clock, not to mention the potential for big savings on development costs that can possibly be put back into the industry by funding more research and development. But the other side of the coin: when local IT workers are struggling to find any jobs in IT, should we really be sending jobs overseas?

There has been talk of government legislating against offshore outsourcing, but that is all it is so far, just talk, mainly by unions and interest groups. And it is still unclear whether offshoring should be legislated against.

So far government hasn't intervened, which raises the question of should it intervene at all. For years other industries, particularly manufacturing, have been moving parts of the business overseas where the resources are significantly cheaper, why should the IT industry be any different?

Interestingly, this debate is rearing its head in the US at the moment. With an election nearing, industry groups are forcing offshoring to be an election issue. So far it has been focusing on manufacturing jobs going overseas, but it won't be long before IT offshoring is included. What comes of this will be interesting to watch and could have implications for what happens in Australia.

Certainly our government won't be able to dodge the issue for much longer--it is only a matter of time before federal agencies will themselves be debating whether to farm out application development and other IT work to India. Surely the government should feel obligated to keep Australians employed, but try and tell that to local IT service providers who struggle to get a look in on government contracts.

Causing headlines at the time of writing was Telstra's offshore outsourcing deal with IBM. In a bid to reduce costs by $800 million over the next three years, Telstra has decided to move 450 application maintenance and development jobs to India--a move that is meant to save the telco around $75 million on its outsourcing deal with IBM.

Maybe some of you who own Telstra shares can tell me your opinion of this . . . are you glad Telstra is trying to maximise your return, or are you upset at the side effects it could have on the local IT industry and possibly your employment chances?

With government majority owned Telstra joining in the move to offshoring, Canberra could no longer dodge the issue. Treasurer Peter Costello, of all people, entered the debate, taking a stance against Telstra. Costello is reported as saying on ABC Radio that Telstra should "have a very good reason" why it couldn't find Australians to fill those jobs. Opposition spokesperson for communications Lindsay Tanner is reported as chiming in saying Telstra has a public responsibility to support the local IT industry through employment opportunities. (All of those who are against offshoring, aren't you glad that the remaining 51 percent of Telstra is yet to be sold?)

No mention of legislation yet but it is a tough situation for a government, especially a liberal one, balancing up the rights of the citizen and the ethos of a free, capitalist, and globalised marketplace. Most legislation introduced to assist employess was rallied by business and look at the heat maternity leave is causing. So I can just hear businesses saying that if they don't cut costs and take advantage of offshoring opportunities, they will either go bust or won't be able to afford to innovate. And what is the tech industry without innovation?

The IT industry certainly needs help, but whether prohibiting outsourcing work overseas is the answer needs further debate because so far it is hard to see beyond the FUD coming from both sides.

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