Tuesday, May 24, 2005

Some Cold, Hard Numbers On Outsourcing

Again a very interesting post submitted by one of our readers, from Richard HoffmanEditor, Developer Pipeline, showing the state of mind of US IT professionals.

Please note the "Better Job security and increased wages" ... We're on the same line from both sides of the Ocean...

Editor's Note: Some Cold, Hard Numbers On Outsourcing

Greetings, colleagues!
The final numbers are in for our offshore outsourcing poll, and it's pretty much as grim as we reported last week. One out of 20 of you (5%) say "bring it on," another 5% say outsourcing actually benefits you, and a few, 3%, say if you can't beat 'em, join 'em—you said, whether tongue-in-cheek or not, that you're going to relocate yourself offshore. Another 20% say you're worried, but not too much—it hasn't directly affected your working life yet. However, a large majority, 59% of you, say that offshoring is a big, big problem, right now. And in an echo of the previous poll on IT workplace conditions, almost one out of ten of you who responded said that you're bailing out of IT entirely.

So bottom-line, 13% of you are pretty positive about offshore outsourcing in one way or another, 20% are worried but neutral, and 68% have already been burned. Wow. With numbers like that, it's hard to put a positive spin on it. Almost seven out of ten of you don't like what's happening out there at all. So now that we have the results, what do you think about them?

One of our recent articles is a refrain of the song you're clearly singing here, suggesting that the pressures and challenges of outsourcing-centric development, including the move towards 24-hour development cycles, is already causing serious strain and difficulties.

Could these difficulties have contributed to Sears recently bailing out of a huge, $1.6 billion outsourcing deal with Computer Sciences Corporation only months into the project? So far, nobody is saying anything about the cause of the split, but if you have an opinion, or even better, an inside scoop, let us know - we'd love to hear what you have to say.

Speaking of opinions, many of you continued to chime in over the past weeks with strong, clear thoughts on the topic. Here are a few of them:

Terry R. notes a potential cause and effect between outsourcing and a shortage in Computer Science graduates in the Unites States:

Now that outsourcing has caused a significant reduction in Computer Science enrollment some leaders are saying that we need to boost enrollment or lose our lead in IT. Of course no one has suggested the obvious solution, better job security and increased wages.

In a nutshell, it is foolish to think the US can send our high tech jobs overseas to lower costs and still maintain our lead. Engineers and programmers are bright people, if they can't make a good living in IT they will go to a field where they can.

Of course a significant shortage of U.S. programmers will, due to the basic laws of supply and demand, tend to boost wages for at least some of those who are left. Another way of looking at that, though, is that extremely scarce and expensive U.S. programmers makes bean-counters more likely to want to move development to lower-cost offshore centers, as well as bring in more H1-B workers . What about it? Are we just creating a vicious cycle here?

Phil B. notes an even more ominous trend, speculating that other overriding market forces will put a natural limit on outsourcing of IT:

Surely I've been affected by the outsourcing, however in my opinion that trend has no future. Never mind all the quality problems, missed deadlines etc plaguing the outsourcers. The key factor that will undermine the outsourcers is the US dollar which despite short term fluctuations is in the slow motion collapse because of the astronomical US trade deficit. The outsourcers only add to that deficit thereby hastening the dollar's decline.

According to India Daily at 37 rupees to the dollar the indian software sector will be breaking even—at 35 rupees to the dollar they will be closing down; rate has already declined to 43. Any economist will tell you that the dollar has nowhere to go but down given the disastrous US trade situation. Here's the New York University study predicting a collapse no later than 2006.

That situation has now become structural as the US simply does not produce much of the stuff anymore and must import. The outsourcing will die within the next few years at the very most. I think that situation needs to be made widely known

Is this all a moot point, then? If the dollar continues to slide against other currencies, does that make offshore outsourcing impractical? And will that have any impact on other first-world but non-U.S. outsourcing trends? Let us know what you think.

Richard Hoffman
Editor, Developer Pipeline

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