Offshore Development and the American IT

Is offshore development just a natural evolution of the economy, or is it an example of corporate greed destroying American jobs?

Is offshore development just a natural evolution of the economy, or is it an example of corporate greed destroying American jobs? It depends on whom you ask. American programmers say offshore outsourcing will eventually cripple the U. S. software industry. Corporations say that by going offshore they are just exercising good business sense. In fact, they may both be right.

This trend of outsourcing IT work offshore began when the Y2K threat was realized. Companies needed more work done than there were workers, so they turned to countries like India. It costs an average of $100,000 a year to employ a developer full time in the United States. A developer of comparative training can be hired in India for $25,000 to $35,000 a year. American businesses soon realized that they had found a good thing. Word quickly spread, and more companies followed suit.

Y2K came and went, and companies continued sending work offshore. Now, 2 of every 5 Fortune 500 companies outsource work to other countries. This number is expected to increase by 50 percent during the next two years, and high tech layoffs are steadily on the rise.

Many US programmers are becoming angry. They are watching their jobs disappear to a foreign market that they have little chance of competing with. In India, 73,500 students graduate every year and become IT professionals. In the United States, the number is 35,000. However, India is not the only competition American programmers face. Russia has also recently become a viable contender.

This comes as no great shock to industry professionals. After all, 3,500 of every million people in Russia are mathematicians, scientists, and engineers, making it one of the top three populated technical nations. Russia is beginning to receive its share of outsourced work from the United States, and there seems to be plenty to go around. Forrester Research, Inc., a research firm in Cambridge, Mass., predicts that more than 1 million offshore IT workers will be needed by 2005. But what’s to become of the American programmer?

Predictions are dire. Some U. S. IT workers liken this trend toward offshore outsourcing to what happened to American manufacturing jobs. Paul Hanrahan, a member of the board of directors and one of the founders of the Programmers Guild, expressed this view in a recent email interview. “I think it’s similar to NAFTA and the movement of heavy industry to other nations during the 70’s. We will experience the rust belt of the new millennium,” he said. “I think [this trend] will accelerate because the infrastructure to support the software industry is easier to recreate than a steel mill though the skills perhaps aren’t as easy to match.”

Companies aren’t likely to stop sending contracts offshore anytime soon, so if American programmers want to protect their part of the industry, they must come up with a plan. I asked Hanrahan what, if anything, he would recommend that an American programmer do. He replied, “Beyond political activism I think we need to develop a certification process and become more like the civil engineering profession. I think we need to establish mutually agreed on standards for good software engineering and maintenance. In addition to the standards and certification I think a professional jurisprudence for resolving disputes about software engineering quality should be established. The professional jurisprudence process shouldn’t be owned only by management and implemented by corporate H. R. departments. The professional jurisprudence for the programming profession should be akin to other professional organizations.”

He went on to say, “A programmer can contribute to building a professional organization that represents their interests and good programming practices rather than simply being an employee or independent contractor. Rather than subscribing to personal or corporate values a programmer can subscribe to professional standards and be certified in their field at a given level of competence. Certification shouldn’t be vendor specific but tied to good IT practice and knowledge that’s transferable from product to product or useful in custom software creation.”

Others would like to see the government do something about the situation. Frank Ehlers, of the Missouri IT consulting firm Envision, agrees. “I’d really like to see the U. S. government step in and put some type of tariff on this type of development. It’s really hurting our industry. What happens if all these jobs go overseas? These are jobs that are high-paying and professional and really drive this economy,” he said.

Whatever happens, it isn’t expected that the trend will reverse, as it is unlikely that American workers can compete with foreign markets for cost. Lower cost of living and the science of numbers make that impossible. The answer may be found in quality control, more training, or government regulation, but one thing is almost certain: the American IT industry will never be the same.

About the Author

Deanna J. Jones is a freelance writer, wife, and mother. She is also a self-proclaimed history buff who spends her free time building web sites and working on her first novel.

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