Volume 15, Number 9 -- February 27, 2006

Monster ACM Report Says Offshoring Ain't So Bad

Published: February 27, 2006

by Timothy Prickett Morgan

For the past several years, globalization, as expressed through H-1B visas and offshoring, has been the bugaboo of some regional and national IT communities and the savior for others. The race to the bottom and the ever-present need to slash costs while increasing the number of business functions that get automated and boosting the connectivity and collaboration between employees, partners, and suppliers, has put tremendous pressure on companies to get the cheapest IT labor and support they can.

Much has been written about offshoring, but now the Association for Computing Machinery has weighed in with a big study that was put together by academic and research members of the ACM in an effort to present a non-biased overview of the effect of offshoring on the IT industry that, to put it bluntly, the ACM has helped to steer over the past six decades. And, to its credit, the ACM has put together one very thorough study, which, ironically, does nothing to clear up the issue. Offshoring is one of those issues that cannot be easily cleared up.

If you want to see a very detailed overview of the data concerning and thoughts about offshoring and the effects of globalization on the IT industry, then you should check out the ACM report, called Globalization and Offshoring of Software, which you can read by clicking here.

The basic gist of the report comes down to this for the United States, which has the most to lose from offshoring since it is the most expensive place in the world to do IT and it is where the vast majority of the IT jobs are in the world. First, the U.S. economy is resilient, destroying and creating roughly 30 million jobs a year, and the presumption is that even if IT jobs are lost overseas, people here will find something to do to make money. With a declining interest in computer science in the United States and an increasing emphasis on IT as a career opportunity that pays hard, cold cash to computer scientists in emerging economies in India, China, Indonesia, Eastern Europe, and elsewhere, the ACM report predicts that somewhere between 2 and 3 percent of IT jobs per year will be lost to offshoring, and says that the prediction that 12 million to 14 million total jobs lost by 2020 is an "upper limit."

David Patterson, an uber-nerd from the University of California at Berkeley who helped create the RISC chip architecture and RAID disk arrays and who is president of the ACM, reminded everyone in the report that according to the U.S. Bureau of Labor Statistics, there were more people working in the IT field in the United States in 2004 than were working in 1999--even after the dot-com bust and the downdraft in the IT economy that followed in 2001 and 2002. In fact, in May 2004, there were 3,156,440 people employed in the IT trade, which was 17 percent higher than in 1999 (when Y2K and the dot-com boom were roaring) and 5 percent higher than the peak employment in the U.S. IT industry in 2000. Of course, the counter argument to all this is that if there were no outsourcing, these numbers would be higher, the tax rolls might be larger, and the U.S. trade deficit might be lower.

The executive summary ended on this note, which pretty much says offshoring: get used to it:

"Globalization of, and offshoring within, the software industry will continue and, in fact, increase. This increase will be fueled by information technology itself as well as government action and economic factors and will result in more global competition in both lower-end software skills and higher-end endeavors such as research. Current data and economic theory suggest that despite offshoring, career opportunities in IT will remain strong in the countries where they have been strong in the past even as they grow in the countries that are targets of offshoring. The future, however, is one in which the individual will be situated in a more global competition. The brightness of the future for individuals, companies, or countries is centered on their ability to invest in building the foundations that foster innovation and invention."

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Editor: Timothy Prickett Morgan
Contributing Editors: Dan Burger, Joe Hertvik, Shannon O'Donnell,
Mary Lou Roberts, Victor Rozek, Kevin Vandever, Hesh Wiener, Alex Woodie
Publisher and Advertising Director: Jenny Thomas
Advertising Sales Representative: Kim Reed
Contact the Editors: To contact anyone on the IT Jungle Team
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