Tuesday, June 27, 2006

The Benefits of Offshore Outsourcing

As more companies transfer programming and call- center jobs offshore, the topic of offshore outsourcing is raging throughout the information technology industry. I understand the frustration of workers whose jobs have moved and of customers who fail to get their technical-support questions answered. But the backlash may be overblown. One of the latest studies indicates that the trend may actually be creating more jobs. At least that's the conclusion of a recent study by Global Insight, sponsored by the Information Technology Association of America (ITAA).

Given our global economy, the globalization of the IT industry is inevitable. Most big IT companies do much of their business overseas and naturally want to have some of their employees in those markets. Lower wages in some countries are also a huge incentive to move operations, especially since high-speed communication removes many of the barriers to dealing with U.S.-based colleagues and customers.

I think that some of the criticism of offshore outsourcing is misplaced. According to the Global Insight study, from 1998 through 2003 offshore IT software and services spending increased from $2.5 billion to $10 billion; the figure could reach $31 billion by 2008. It also estimates that as of 2003 nearly 104,000 IT software and services jobs were displaced. The same study says that 372,000 IT jobs have been lost in this country since 2000, accounting for about 10 percent of the total number of such jobs in the U.S. The main reasons for the loss: the dot-com bust, the recession, and the growth in productivity.

For details read here