In defence of outsourcing

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.

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TOPICS: Outsourcing, China, India
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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: Outsourcing, China, India

John Carroll

About John Carroll

John Carroll has delivered his opinion on ZDNet since the last millennium. Since May 2008, he is no longer a Microsoft employee. He is currently working at a unified messaging-related startup.

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8 comments
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  • John Carroll really should be defending the job rights of Western workers and not the benefits of outsourcing! Outsourcing, on Global scale undermines these rights, and makes thousands of people unemployed in the developed nations while crates a handful of jobs for a few lucky survivors! His argument that the displaced Western programmers should look towards satisfying custom programming needs of their decimated job market, is flawed! It fails to appreciate that profitability always comes from the mass market, the very same market that global outsourcing destroys! Chinese and Indian programmers are more then capable of satisfying the emerging needs of both local and foreign markets. What we are witnessing is the global economic wealth upheaval. The major, and most populous, developing countries are growing at a faster rate then the developed countries. This economic growth attracts global investment and produces globally competitive software products. Having absolutely no national loyalties, and motivated by pure bottom line, the multinational companies will sell the Chinese and Indian software to anybody that is wealthy enough to buy their products. And here lies the bitter truth! The unemployed do not have the wealth to effectively participate in a consumer economy, causing global companies to abandon unprofitable markets! This wealth contraction trend, which will accelerate in the developed countries, will eventually create third world Western economies and big boys on Wall Street will happily savour the alluring views of Shanghai or Bangalore, rubbing their hands with glee, without the care in the world regarding the fate of third world western workers! Why should they, greed is good! Isn
    anonymous
  • When Asian developing countries 'outsourced' the projects to western corporations who charged an arm,leg and an occasional head, everything was fine and dandy. No cries of losing jobs to 'foreigners' were entertained.

    Now when the situation is reversed, the ugly 'western hypocracy' rears its head.

    You want the developing countries to open up its borders to compete 'fairly' yet, are unwilling to do so yourselves.

    There is one thing certain. You can run, and you can hide, heck you can even sink your head into the sand pit. But you are not going to stop the Indian and Chinese technology professionals.

    Suddenly, this line springs to my mind - 'resistance is futile, you will be assimilated...'

    Aah... karma can be such a wonderful thing...
    anonymous
  • Azizi Khan and John Carroll are really talking about two different things here! When the Asian developing countries were
    anonymous
  • Azizi Khan and John Carroll are really talking about two different things here! When the Asian developing countries were
    anonymous
  • Not as naive as one might think. I am a firm believer that what goes around comes around.

    How many times have we seen high paying jobs and projects awarded to foreigners because it was assumed that local talents were not good enough! Like in your own words, that professionals like us did not exist in your eyes. Now when organisations and countries are giving us acknowledgement, i am sure it feels like hitting a brick wall for you. Perhaps its a lesson well learnt from the western world - when in business, play to win.

    And that is exactly what we are doing. Playing to win! Do you actually believe that the developed countries can actually do anything to stop India and China. You would be foolish ( and naive ) if you thought so.

    IT jobs is going the same place where manufacturing and agriculture - where its cheaper.

    Seems to me that, when 'mericans play "hardball" its ok and the rest of the world has to just bear it, but when it comes to some serious competition, well 'yer all go singing like pansies. And that is what is happening here.

    Asia is coming up so fast and so hard, its sending chills down your spine. Living in Australia, i feel it too. But I embrace it because its inevitable. Perhaps you lot should spend some of the free time to hunt for some missing WMDs ;-)
    anonymous
  • Not as naive as one might think. I am a firm believer that what goes around comes around.

    How many times have we seen high paying jobs and projects awarded to foreigners because it was assumed that local talents were not good enough! Like in your own words, that professionals like us did not exist in your eyes. Now when organisations and countries are giving us acknowledgement, i am sure it feels like hitting a brick wall for you. Perhaps its a lesson well learnt from the western world - when in business, play to win.

    And that is exactly what we are doing. Playing to win! Do you actually believe that the developed countries can actually do anything to stop India and China. You would be foolish ( and naive ) if you thought so.

    IT jobs is going the same place where manufacturing and agriculture - where its cheaper.

    Seems to me that, when 'mericans play "hardball" its ok and the rest of the world has to just bear it, but when it comes to some serious competition, well 'yer all go singing like pansies. And that is what is happening here.

    Asia is coming up so fast and so hard, its sending chills down your spine. Living in Australia, i feel it too. But I embrace it because its inevitable. Perhaps you lot should spend some of the free time to hunt for some missing WMDs ;-)
    anonymous
  • I remember in the 80's when Japan was going to eat our lunch and we were going to become a second class nation ... well I'm still waiting. Let the companies who want to outsource do so, I believe those companies so will lose in the long run.
    anonymous
  • Defence IT outsourcing

    There are casualties of outsourcing and it is always the customers on the ground. Defence IT outsourcing is nothing other than a hope to deliver a better quality service at a lower price. Observers will note that it just doesn't happen and the person on the ground suffers the most. In house IT staff work for Defence as it offers job security but most also have a passion for Defence. That passion negates the abuse given by customers to all IT staff (regardless of your employer) and drives them to work diligently and often after hours without pay. An outsourcer is only concerned with profit motive which is inherited by the staff. The end result is a short service and more complaints. Ironically, in Australia at least, the entity where complaints are reported is also outsource, guess how many complaints go upstairs.
    anonymous