Outsourcing: Come Sail Away With IT

Like it or not, more U.S. tech jobs seem to be moving overseas to India, China and other countries where the labor is cheaper.

Forrester Research today said 3.4 million U.S. services jobs will move offshore by 2015. That's just above the 3.3 million that Forrester projected two years ago.

While Forrester charges for the full report, the company already spilled the beans on its most important findings: In addition to its prediction that more than 3 million jobs will sail away, "The number of US services jobs moving offshore by the end of 2005 will grow to 830,000 compared with its original projection of 588,000 -- an increase of 40 percent." Forrester said a change in base-level numbers from the U.S. Bureau of Labor Statistics is part of the reason for the climb, but also noted that Fortune 1,000 firms that are already offshoring will increase their reliance on the trend.

Meanwhile, Indian outsourcing firms Satyam, Wipro, and Infosys are offering more IT services to U.S.-based companies, including cybersecurity tasks that give them a bigger piece of the funding pie, the study indicated.

And more reasons why outsourcing isn't going away, according to Forrester. "Customer and competitive pressure have caused services and technology vendors like IBM and Accenture to expand operations in India, China, and the Philippines. These two companies alone plan to add close to 9,000 jobs in India by the end of 2005," the study found. The study also noted that India will have new outsourcing competitors, including Vietnam and North Africa (Forrester lists China too, though it seems China is already well entrenched on the outsourcing bandwagon). Forrester has planned a morning press conference on its outsourcing findings.

CNET's News.com put the new numbers in perspective. "Forrester also increases its near-term estimate of lost jobs by 240,000 in its new report, projecting that a cumulative total of 830,000 positions will have moved offshore by 2005. The research reinforces earlier Forrester findings that were cited by Sen. John Kerry, before he became the all-but-official Democratic presidential nominee, in introducing legislation last year to regulate the call-center industry. Ironically, the new report said, vocal opposition and other attention has helped accelerate the shift of jobs overseas by making businesses aware of the trend. It concluded that the media's focus on so-called offshoring--which defenders call healthy for the economy and critics blast as a threat to workers and U.S. technology leadership--has led companies to look more closely at it. 'While the press visibility has spurred offshoring's emergence as a political third rail, it has also fostered an increase in overall offshore initiatives,' wrote John McCarthy, author of the report."

That sounds like the moral of the story is the ever-popular "blame the media." But it seems that much of the coverage has been on the sheer fact that firms including Dell, Siemens and others have been engaging in outsourcing for some time and increasingly ramping up their efforts. And politicians have been happy to latch onto or fight against outsourcing, depending on their political persuasion (President Bush has largely supported the trend, while Kerry has railed against "Benedict Arnold CEOs.")

The News.com article also explained how Forrester is downplaying the severity of the report's findings: "[Forrester] noted that it represents less than 7 percent of jobs in the categories covered by the study, which include 'management,' 'computer' and 'legal.' What's more, a separate Forrester survey of 139 North American firms in April found that 58 percent are not using--or planning to use--offshore information technology service providers"
• CNET's News.com: Study Supports Controversial Offshore Numbers

Forrester rival Gartner has some of its own outsourcing-related findings. "Calling for caution in outsourcing to low-cost countries, IT analyst firm Gartner has said companies must identify and manage the security risks before signing any offshoring agreement. The key to successful and secure outsourcing agreements is understanding the security and privacy risks for a business process, application or technology function early in the outsourcing decision process, said senior analysts at Gartner Inc.," press service United News of India reported. Gartner plans a global IT security summit next month in Washington.
• UNI via deepikagloba.com: Gartner Warns of Security Risks In Outsourcing

That's Memphis, Tennessee, Not Egypt

Tennessee is the latest entrant into the anti-offshoring fray. "Gov. Phil Bredesen has signed a law that may have made Tennessee the first state to give businesses an incentive for not outsourcing data-entry and call-center work to cheaper offshore locales. The new law asks state procurement officials to give preference in bids for such services to contractors employing workers only in the United States. It was approved overwhelmingly by lawmakers last month and signed into law last week," The Associated Press reported. "The bill was introduced in response to the growing controversy over outsourcing of white-collar jobs to India and other countries with large populations of educated English speakers willing to work for significantly less money. Legislatures in 35 states have introduced bills seeking to address the issue, usually by banning the state from contracting with companies planning to employ offshore workers. Intense lobbying by business groups has helped prevent passage of those bills in other states. Business groups say a ban would be illegal and could prompt other countries to retaliate by preventing U.S. companies from doing business with foreign governments."
• The Associated Press via The Los Angeles Times: Tennessee Targets Outsourcing (Registration required)