The Pros and Cons of Offshoring
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Three years ago thousands of tech industry workers lived in daily fear that their jobs would vanish as quickly as the Internet stock bubble had popped.
While it was a stressful time in IT shops, industry veterans who had been through previous down cycles could at least take comfort in knowing that a vigorous shakeout was healthy for the tech sector. The bad business models would vanish, investors would fund new companies and technologies, and new IT jobs would regenerate.
But how do you reassure nervous - or worse, unemployed - IT pros these days when they read every week about more tech jobs migrating to cheaper labor markets overseas?
Just last Tuesday it was reported that IBM executives argued in a recorded global conference call four months ago that the company must accelerate its transfer of professional jobs overseas in order to reduce costs.
"Our competitors are doing it and we have to do it," Tom Lynch, IBM's director for global employee relations, is reported in the New York Times to have said during the call with other Big Blue execs.
The Times got its copy of the recording from the Washington Alliance of Technology Workers (WATW), a union that lobbies on behalf of high-tech professionals. The WATW said it was given the recording by a distraught IBM employee.
The Times said the recording "provides a revealing look at how companies are grappling with a growing trend that many economists call off-shoring." But other than some unseemly "inside" color (IBM execs fretting about bad PR, political fallout and unionizing efforts), there are no revelations here. Everyone knows that U.S. corporations are shifting thousands and thousands of jobs to China, Russia, India, Sri Lanka and other countries where tech and service workers come at a fraction of the price. Indeed, a Forrester Research report forecasts that 472,000 U.S. technology jobs will move overseas by 2015, up from 27,000 just three years ago.
And it's not just IBM and its competitors - Microsoft, Sun Microsystems, HP, Oracle - that are ramping up offshore job efforts. Based on its survey of executives from 51 software companies, the investment and research firm Sand Hill Group says 63 percent of software companies are now offshoring work, with another 21 percent planning to do so within the next year.
The offshoring trend is driven primarily by the desire of corporations to cut costs. In a tight economy, that's certainly a strong desire. But the offshoring trend is creating tremendous anxiety and anger in the industry, especially among those IT pros in the U.S. who were laid off in the past two or three years and still haven't found new jobs.
Jupitermedia's Datamation Web site on Monday published an article in which it quoted the CEO of an international outplacement firm warning that the controversy over offshore job outsourcing "will likely intensify in the years to come as a shortage of skilled workers becomes more and more pronounced."
This assertion -- that there's a shortage of skilled tech workers in the U.S. -- prompted one jobless Datamation reader to accuse the article's author of writing "a collection of deceptions, distortions, spin, lies and anti-American treachery."
Over-the-top as his email was (he speculated that the article's author uses a pseudonym), it reflected a genuine frustration and anger felt by displaced tech workers who are watching their chances for regaining full-time employment in their chosen field drift overseas, perhaps never to return. It's hard not to empathize with them.
Offshoring technology jobs to cut costs seems terribly short-sighted. It doesn't account for the negative effects of ill will on existing employees. In fact, IBM officials expressed that very concern in the recorded conference call, worrying that Big Blue's U.S.-based tech employees would be outraged over having to train foreign workers who soon could replace them.
Further, development jobs require a teamwork ethic and shared values that are difficult to maintain when the team is dispersed around the world.
The globalization of the tech workforce may be an irreversible trend. But companies that fail to account for the human costs associated with offshoring jobs will pay a price that eventually will be reflected in the balance sheet.