Gartner targets offshoring 'myths'

Gartner targets offshoring 'myths'

Summary: Gartner shows offshoring 'myths'

IT research and analysis provider Gartner has questioned the negative coverage about offshoring in a report presented during its sourcing and IT services summit.

The Myths and Realities of Offshoring report by Gartner analyst Bob Hayward discusses the better side of offshoring and disputes the common negative beliefs of people in the industry regarding the issue.

Hayward said he admits that some people in service-oriented roles in developed economies will lose their jobs to offshore services and that offshoring may not always be the best option to reduce costs or gain efficiencies in service-oriented processes.

He added that because of this, government and businesses need to provide safety nets and assistance to workers who are displaced.

The report pointed out common offshoring "myths", such as that offshoring has caused the loss of over 3 million jobs in the US during the past three years; that lost jobs are never replaced; and that offshore services are the reason it took so long for new jobs to be created in the current US economic recovery.

Hayward's report also claimed that offshore services "do not create downward pressures on local wages, that a nation's competitive advantage is not eroded by exporting skilled jobs and that protecting local jobs and restricting offshore services will not be good for the nation's economy."

"Job losses to date from offshore services has been grossly exaggerated," Hayward said. Delayed job creation in the US recovery had nothing to do with offshore services and more on governance reform, investor competition pressure on costs, global economic and geopolitical conditions."

Hayward pointed out that the offshoring of local application development work represents only 2 percent of the Australian market and that the government should not be protecting old jobs, but instead should support the creation of new ones.

Hayward also advised companies not to put "all their eggs into the Indian basket" since eventually, wages will increase in India and it will not be so cost effective as "an emerging economy doesn't stay emerging forever."

Many of the jobs that are being offshored now are jobs that will eventually end up being automated in the future, Hayward said. He added that although these low-level IT jobs, like coding, that are being offshored will mean lesser jobs and lesser experience for graduates, these "will soon be automated and what is considered graduate work will change as the IT industry evolves."

Hayward suggested in his report that the government and businesses should craft policies and programs to create new jobs rather than to protect old jobs. He also suggested that the government and institutions assist people who have been displaced by offshore service to return to the workforce quickly through training programs and welfare assistance.

Hayward also raised the question of changing the immigration policy since it would attract the "best and the brightest globally." Taxation and education reforms, Hayward said, will reward entrepreneurs, encourage innovators and promote free and fair trade.

"Regulations like imposing a special tax on companies that use offshore services will drive business away. Highly regulated locations have higher unemployment rate," Hayward said.

Jobs most at risk of being sent offshore include lower-level services work like certain types of computer programming, technical writers, and contact centre operators for non sensitive and non-critical functions.

Certain high-end business process outsourcing services such as network consulting and management services, market research and competitive intelligence, and product development are also at risk, according to Hayward.

Topics: CXO, IT Priorities, Tech Industry

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  • Why is Gartner always coming to the defence of offshoring? Can we trust them on this? Do they have the Australian ICT industry's best interests at heart?

    Managers, rather than send your project work offshore, choose to use existing open source solution frameworks, which can reduce your project cost and timelines by 50%. This is more savings than you can make by offshoring. Whilst producing quality outcomes.

    To keep jobs local, choose the open source path.
  • What's open source got to do with outsourcing? If you "...can reduce your project cost and timelines by 50%", it follows that even greater savings could be had if your open source development was outsourced to, say, India.

    Face the facts - coding is a commodity these days and it makes sense to outsource it to cheaper resources. It also makes sense to keep the higher level/higher return, design/architechture roles onshore, where companies can retain their IP and actually make decent returns.
  • To 'anonymous'

    You ask: 'What's open source got to do with outsourcing?'


    Most offshoring happens for two reasons.

    1) High local development costs

    2) High likelihood of local development going awry

    Open source solution frameworks have been shown by Accenture to reduce 1) by 50%. Call them and ask for their research. Such a saving should be enough to keep the work costs down whilst still allowing the work to do be locally.

    Open source solution frameworks also reduce the likelihood that you will fsck-up your development with poor or faulty design, and poor security, by allowing you to leverage existing, viable solotions, which are known to work.

    Have you actually done any development dude?
  • Just because Gartner sells offshoring services and seminars doesn't mean they're biased. No.