Guild Companies

If you've been in the IT industry for a while, you've been subjected to companies--particularly in the manufacturing and distribution sectors--picking up and moving from the former industrial capitals to new industrial areas where labor is cheaper. You've watched as two waves of mergers and acquisitions slammed companies together in the 1970s and 1980s because people thought that bigger is better. You've been downsized, rightsized, and in some cases outsourced as companies tried to figure out how to rein in the people slice of the IT budget pie, which still utterly dwarfs the cost of hardware and software at most companies and probably always will. You've kept your job through the dot-com era--by keeping your head out of the clouds and your feet firmly planted on terra firma--or, if you were one of those dot-commers, you've landed a new job in a real company and have a regular pay check. And now, after surviving all that, you have to cope with offshoring.

Offshoring, which has been all the rage in the financial services industry for years, is arguably the biggest threat to indigenous IT careers in America and Europe, and it is going to make a lot of people crazy. This is going to make the H1-B visa issue in the United States look like a practice run, which it was. Just in case you don't peek over the edge of your cubicle much, offshoring is when companies in the established Western economies--predominantly the US, Europe and Japan--move professional and services jobs out of their own countries to areas where labor is cheaper and the technology is available to link them back to the companies in their home markets where they actually sell their products. Some call this progress, some call this colonialism. The intrepid, decent, educated, hard-working people (just like yourselves) from India, China, Singapore, South Africa, Malaysia who are going to try to steal your IT jobs are just going to call it a job that they desperately need to take care of themselves and their families. There's nothing personal here--except when you get that pink slip and have to tell your family--it's just business.

There is hardly a week that goes by when one of the big IT players like Microsoft, Intel, IBM, Dell, Sun Microsystems, Hewlett-Packard, and Cisco doesn't announce that they are setting up a hardware or software engineering center in a popular offshoring region. Tech support and call center functions have also been moved offshore in an effort to cut costs. But the thing to remember is that thanks to the proliferation of English as a common business and IT language and the reach of the Internet as a communication and collaboration medium that can go to wherever a phone line reaches, offshoring is not just about big IT players. Small companies working on tight budgets to get IT projects done are doing it, too. And as companies test the waters with one project, if they are successful, they will do it with more and more projects for this very simple reason: It will save them bundles of money, even if the grief factors due to time zones, language barriers, and security can be challenging.

According to a posting on the Washington Alliance of Technology Workers, an IT union set up under the Communications Workers of America to organize technology workers in Microsoft's stomping ground, the top brass at Microsoft have asked its project managers to look for ways to offshore work to India. WashTech posted a presentation purportedly made by Brian Valentine, senior vice president of the Windows division, who explained that offshoring means that a company can extend beyond the 16 to 128 hour effective corporate workday across several time zones to working virtually around the clock in all parts of the globe. This can shorten time to market, particularly if offshored programmers are checking code that is written in the home market. Code is written one day and validated before the start of the next day.

But the real issue with offshoring is the cost savings it can bring to all types and sizes of companies. IT organizations can tap into the vast engineering resources in India--Valentine said that there are 450,000 software engineers in India, with another 70,000 added every year. He said further in his presentation that Indian programmers can deliver quality work for 50 to 60 percent of the cost of a programmer back in the States. Because of the lack of indigenous jobs in their own countries, those working in offshoring operations in India, China, and so forth are happy to take short-term jobs. What choice do they have?

And what choice will IT organizations have to fight the temptation to offshore? The availability of cheap, deep IT talent is something that they will all want to take advantage of. Workers in the IT industry will want to organize to try to stop this, but the pursuit of the almighty profit will probably prevail in the end, as it usually does. Millions of jobs and hundreds of billions of dollars in lost wages over the next decade in the Western economies hang in the balance. But remember, it's just business.

Then again, maybe it is unjust business, or taking a linger view, just plain bad business. Even Henry Ford--one of the founders of modern manufacturing, a capitalist titan, and not exactly known for socialistic tendencies--was smart enough to figure out that if you paid employees a high living wage, they could afford to buy a car. And most Ford employees did because of the freedom a car gives and--this is the important part--because they had the money that came from that Ford paycheck.

All I know for sure is that my first cardinal rule for capitalism is that those who can employ must employ. This is a very profound responsibility, and speaking from personal experience, it is a responsibility that cannot be borne lightly. Employing is a heavy burden. But employment is the very foundation of a democratic, capitalistic society. Keeping people working is what industry should be about. I believe in hard work, being smart, global marketing, and making profits, but not to the detriment of the society I live in or the one that ends up being nothing more than an exploited colony. The executives of the Fortune 500 and the Global 2000, who have fattened their bank accounts in the past two decades while sacrificing tens of millions of employees to oblivion rather than take a longer view toward redeploying those workers, should be ashamed. If the CEOs had sacrificed, too, then maybe all of those firings, many of which were probably necessary, would have been more palatable. But that didn't happen. Even Sun Microsystems, which has been bucking Wall Street by saying it would work through the IT downturn by firing as few people as possible is one of the worst offenders in the use of H1-B and offshore workers.

I don't know what good writing your representative politician will do to help sort out this offshoring dilemma. Politicians were complicit with the IT industry in the whole H1-B visa debacle, and I can't imagine they would behave any differently with the offshoring issue unless millions of white-collar workers bombarded them with threats of not voting for them. I don't know what good organizing IT workers into unions will do. It may cause more harm than good, as unions often do.

What I do know is that there is very little information about offshoring and no discussion of the effects on the Western economies excepting the benefits to the bottom line. This is why Western economies do not make anything anymore, and it is death for any economy to stop being a producer of products for its own as well as foreign markets. Intelligent discourse concerning the long term effects of offshoring so many jobs is absolutely necessary. When business decisions such as widespread offshoring so directly affect the life, liberty, and pursuit of happiness for so many millions of people, the argument cannot be reduced to a 15 or 20 percent improvement in net profits over five years or ten years. With only 5 percent or so of big companies (with 1,000 employees or more) in the West surveyed by Gartner in early 2002 offshoring some IT projects, there seems to be time to consider the effects of offshoring and try to figure out an intelligent way to balance the needs of local jobs back home with the desire to tap into the vast, low-cost IT resources in the countries that are being set up as offshoring centers and whose people deserve employment, too.

Tell me what you think about offshoring at tpm@itjungle.com . I would be very interested in hearing your thoughts.