Outsourcing software development to India has become more and more popular over the last few years, and picked up even more momentum lately. Corporations in the USA has followed this path because a technology worker costs some five times less in India than in the USA.
Motivation for Outsourcing
Corporate executives started seeing software development and support, and the whole of Information Technology as a cost, and not as a strength, nor a differentiator. So they started thinking of it as something they can subcontract, just like security guards, janitorial, landscaping and snow removal.
Objections to Outsourcing
However, this is not always the case, and there are hidden costs, and some pitfalls, such as difference in work culture, communication styles, and time zones, not to mention the long term safety and security concerns of giving everything to a foreign country, and a foreign jurisdicition.
The analogy of janitorial and landscaping is not an accurate one though. The reason being these services, although they are outside the company, they are still within the city or the country. This gives some soft of control, being under the same jurisdiction, and there is no danger of political tensions, wars, or the international scene affecting the service. Moreover, janotorial is a low skill, low risk, and not core to the business. Software and Information Systems in general contain many functions that are vital to the company doing business, and in many cases it is part of the "Intellectual Capital" of the company.
Moreover, it seems that there is little evidence for the huge cost savings that are the main motivation for outsourcing. For example, a Deloitte & Touche study says that 70% of companies had negative experience with outsourcing. Moreover, 44% of companies got no cost savings from doing it.
This may be caused by the fact that growth of outsourcing in India is slowing down, mainly due to labor shortage and wage inflation as a research report by Gartner puts it.
Security and Privacy Issues
An example of security and privacy issues in outsourcing, is that your data is not under your control. Here is an example where data was leaked on the web, from a US outsourcer by an American. While in America local law enforcement can handle such cases fairly quickly, what happens if this is overseas under a foreign jurisdiction? Or if political issues come between USA and India?
A recent case was when a British tabloid newspaper was able to buy customer data from an Indian IT worker, as reported in the BBC. While there are criminals in every country, the difference is that if a crime occurs in the USA, law enforcement can and will act because it is within the jurisdiction. If a crime involving a country's citizens is committed abroad, they can only file a complain and wait! This was discussed on Slashdot too.
Here are some more cases where there was black mail, and the company preferred to pay the programmer, because the PR cost will be less!
Historical Analogies and Differences
Many see an analogy between manufacturing jobs going offshore over the last few decades, where lots of blue collar jobs were lost to Mexico and South East Asia, and see the software offshoring trend as the pendulum now hitting the white collar sector.
There are some differences though. In the case of Mexico for example, Maquilladoras in the border twin cities were set up to take advantage of the cheap labor. With NAFTA, there is free movement of goods and people across the border in both directions. So an American who is willing to relocate for a job, can do so if they like. However, in the India case, an American cannot go to India, since in one direction, it is free trade, and in the other there is protectionism, where Indian government rules prevent such job seekers from applying (unless their skill is needed).
Canada as an Outsourcing Destination
Surprisingly, Canada is a near shore outsourcing country for the USA. While it cannot compete with cost and salaries of India, it has several advantages, including proximity, closeness in culture and language, stability, quality, and skills.
A PriceWaterhouseCoopers report titled A Fine Balance: The Impact of Offshore IT Services on Canada's IT Landscape details why Canada is a better alternative. Some companies realize this advantage and refuse to do offshore outsourcing to India, as discussed in the IT Manager's Journal article Is Canada the solution for offshore outsourcing-wary U.S. companies?. You can read a discussion on Slashdot of this article, titled: "Why Offshore when Canada is next door?"
What Can Employees Do?
So, what is the solution for people who presently work in technology, and are in the process of phasing out to outsourcers? Here are a few alternatives:
- While this is not for everyone, some suggest that you start your own company.
- Change careers if you can. Either within the field (get out of programming, and go into management, design or such), or outside the Software development field altogether.
- Unionize! Although this has drawbacks, there are some merits to collective bargaining. Employers though are quick to spot this trend and eliminate the proponents among their ranks, and even inform other employers in the industry to effectively blacklist those proposing unionization.
- Retire (if you can afford it!)
Books on Outsourcing
- Ed Yourdon, a reknown author in the IT field, has written a book called Outsource: Competing in the Global Productivity Race. You can read the book review and comments on Slashdot.
Articles on Outsourcing
The following is a compilation of some articles and discussions of these articles by the technology community on Slashdot.org.
Slashdot discussions tend to be lively, and heated. Lots of the comments can be childish or off topic, but many comments are really useful and provide a good perspective on the topic discussed. If you find that the number of comments is overwhelming, then change the "threshold" to a higher number that would give a more reasonable number of higher rated comments.
- The Economist has an article titled The Next Wave. They forecast that India's outsourcing sector will experience a slow down due to a the skilled labour pool not keeping up with the demand. Here is the Slashdot discussion.
- Testimony to the Committee on International Relations by Sona Shah, Former Programmer Analyst, Wilco Systems, New York. She .
- High-Tech Worker Myra Bronstein, Forced to Train Her Own Overseas Replacement featured in a TV ad.
- Project Outsourced :( is a documentary film by an Indian about the outsourcing phenomenon. It interviews economists, CEOs, advocacy groups, activists, entrepreneurs and policy makers. Among them are Noam Chomsky. It was discussed on Slashdot.
- The IEEE USA has published a position paper on outsourcing. This paper was discussed in a lengthy interview with the Washington Post.
- A finance professor argues against putting blind faith in outsourcing on CNN Money.
- Intel CEO Craig Barrett downplays the arguments against outsourcing. As usual, and extensive and heated Slashdot discussion ensued.
- College Seniors find that jobs are in Financial and Healthcare sectors and not hi-tech anymore.
- Reuters article on how U.S. Tech workers help companies export their own jobs.
- An Associated Press article saying there is "more interest than ever from corporate America in moving jobs abroad".
- Wired Magazine has an extensive article titled How India became the capital of the computing revolution with interviews of techies working in Indian outsourcing companies. Check the pretty heated discussion on Slashdot which contains lots of valid points from both sides of the argument. Yet another discussion a week later on the same article.
- New York Times has an article by Thomas Friedman in which he leans towards outsourcing being good because it is part of free trade. As usual, a heated Slashdot discussion ensued.
- List of companies outsourcing to India, from an Indian newspaper.
- Robert Cringly of PBS has written a few articles on the issue. U.S. Leaders Either Don't Understand or Prefer Not to Understand the IT Outsourcing Crisis and It is all our damned fault, we Did It to Ourselves.
- Article in New York Times, and International Herald Tribune (IHT) about The Calculus of Outsourcing. Check the discussion of the article on Slashdot.
- BusinessWeek ran a couple of articles on Outsourcing: one is Corporate America's silent partner: India, and the other is The Rise of India. As usual for such an explosive topic, it was heavily discussed on Slashdot.
- Dell outsourced their call center to Bangalore, India then took it back after customer complaints. Here is the Slashdot discussion.
- Andy Grove, co-founder of Intel talks about Outsourcing in Forbes Magazine. Again, here is the Slashdot discussion.
- An American programmer lost his job to outsourcing, and was willing to relocate to India, however he was refused. Needless to say, this does not rest well with American programmers.
- For executives in Western countries though, it is a different story, they are now seeking jobs in India and several head hunting firms now cater for Western top and mid-level executives. Again, a lively discussion on Slashdot.
- Some in the programming community are concerned that outsourced software could contain hidden malware.
- Two Technology hubs, Silicon Glen in Scotland, and Chandigarh in India.
- Discussions of programmers salaries' in America and does outsourcing save that much money for corporations?
- The ACM Queue has an article titled Culture Surprises in Remote Software Development. This article was discussed in Slashdot.
- In a strange twist, the Bush administration is touting offshore outsourcing as a means for creating jobs in the USA. What is interesting, is Kerry's response where he says if this economic data was concocted by the same people who worked on the Iraq Weapons of Mass Destruction intelligence reports!
- An article in the Economic Times of India claiming that outsourcing adds 22 million jobs in the USA. And yet another article there on how outsourcing is a Win-Win for the USA and India. Seems that someone forgot to tell the US high tech workers! or more likely, they do not buy this spin.
- CNN is reporting that some US developers are moving to India. And as usual, a Slashdot discussion ensued.
- BusinessWeek has an article on some US software professionals accepting jobs for near-India pay.
- Cringley of PBS writes an article about his attempts to contact the India embassy for him immigrating to India.
- Thomas Friedman of the New York Times, writes an article on the Secret of India's success.
- In yet another strange twist, it seems that an Indian Telecom company has chosen IBM, a US company as its IT outsourcer!. Can you say "reverse outsourcing"?
- The Computing Research Association have a study saying that US students are steering away from Computer Science. Also, some reports have blamed the US education system. As usual, the heated Slashdot discussion on the above.
- Salon magazine has published a series of articles on outsourcing. Much of it is apologetic, touting how outsourcing saved "some" jobs in the USA that would have been lost completely if the company went out of business. Of course, there was a heated Slashdot discussion, giving mostly an alternate perspective.
- Since his articles mentioned above were published, Thomas Friedman has published many articles in the New York Times (also published on the International Herald Tribune. He is obviously an advocate of outsourcing, seeing it all in a positive light.
- In many cases, workers are asked to train their foreign replacement. Of course, vigorously discussed on Slashdot.
- In June 2004, the US Labor Department issued a report that effectively downplays the effect of offshor outsourcing on jobs in the USA. Here is the resulting Slashdot discussion
- Bush's Economic Advisor, Greg Mankiw, says outsourcing is OK. Needless to say, this was not well received in this Slashdot discussion.
- A Senate hearing titled: Shipping American Jobs Overseas: A Hearing on the Bush Administration’s Claim That Outsourcing is Good for the U.S. Economy (PDF).
- IEEE-USA Today's Engineer article on how IEEE partially pushed Congress to act. The result is that Congress Approves Comprehensive Study of Effects of Offshoring.
- Nobel Prize winner and longtime MIT professor, Paul A. Samuelson, wrote an article against outsourcing. He was interviewed by the New York Times. Here is the Slashdot discussion.
- Some companies in the USA started touting Rural Sourcing. For example, RuralSource is one such company. Read a News.com.com article about them, and the Slashdot discussion.
- A huge collection of outsourcing articles from various web site (including this article!) by Tatva Soft, an Indian outsourcing company.l
- Gartner has a study speculating that 70% of Indian outsourcing companies will die in the next few months.