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About a year ago I attended an Interop IT trade show in New York City, and I was struck by the difference between the main show upstairs and the Outsource World show downstairs.
Upstairs was the classic tech trade show in all its gaudy glory: big flashy booths by brand name vendors, noisy constant-loop videos, middle-aged guys singing Karaoke, promotional giveaways, and copious booth babes (thats not me being sexist, its an industry term; and no, Im not sure what young women in hot pants have to do with routers and enterprise security).
Downstairs was Outsource World, and I almost missed it. The hall was almost completely quiet, excerpt for casual conversation. The booths were sober and spare, little video, no Karaoke. The giveaways were mostly company brochures. The sixty or so booths were IT outsourcers from everywhere: many from India, of course, but also Israel, Eastern Europe, South Africa, Ireland, Malaysia, Canada, Chile. Their pitch, though delivered modestly, was compelling: if you want to save money, let us know. Were eager to please and we work cheap.
I left the Interop conference in stronger agreement with a widely held opinion, that offshoring poses a huge challenge to domestic IT vendors, especially in software. I wish that werent true I have a sentimental fondness for the US vendors (and I want my neighbors and colleagues to have jobs). But Im afraid it is.
So I was happy to see the new IT Trends Survey from the Society for Information Management (SIM) that suggests depending on how you read it that offshoring is merely a minor factor in IT.
Jerry Luftman, the SIM VP of academic affairs and a professor at Stevens Institute of Technology, says the extent of offshoring is greatly exaggerated. Various parties have stoked fears of offshoring for their own purposes.
Its basically politicians run their campaigns on some of those fears. Certainly news people have grabbed on to that, he tells me. And unfortunately, parents hear that. K-12 advisors know that, and theyre veering their kids toward other majors.
Its gotten better in the last year or so, but a lot of schools have closed down.
He points to the following chart from the SIM 2008 IT Trends Survey:
As noted in the chart above, the budget allocated to internal staff (33.7%) and outsourced domestic staff (6.2%) far outweighs the allocation for offshoring (5.6%). The domestic budget looks like a full-grown tree next to offshorings little sapling.
Yet this chart from the SIM 2008 survey seems to paint a different picture:
Even professor Luftman concedes the projected offshoring increase is noticeable.
Clearly, the [offshoring] projection for next year is taking a larger bump than one might have expected, he says. Larger than what has appeared in previous years.
Yes, I note, the projected jump in 2009 certainly shows a trend toward greater offshoring.
Its not a trend, its a one year projection, you cant call it a trend yet, he says. He points out that in the last few years offshoring has gone down.
But, I respond, ever pessimistic, if you look at the larger trend line from '05 to '09, fluctuations aside, the trend is clearly toward more overseas activity.
Not as professor Luftman sees it. But its still relatively not a large number, he says.
So apparently we interpret the data differently, but we agree on one fact: IT offshoring is a highly controversial topic. Emotions run high on the topic, especially among workers whose livelihood is threatened by offshoring.
As if to invite more controversy, the professor states what he believes is one of the reasons for offshoring:
There are not enough people with the appropriate skills in the [domestic] marketplace, he says. So to me, if youre an IS executive and you have demand for resources and they dont exist here, youve got to get it from someplace.
His statement defines one side of the core disagreement. On one hand, Ive heard numerous execs say they cant find the talent here, and conversely, Ive heard countless tech workers says this is just an excuse to undercut wages, that the talent is here, its just cheaper to hire it from India.
Luftman is well aware that IT workers dont want to hear that sufficient talent cant be found among US ranks.
Thats controversial because youre going to have people say, Gee, Ive been in IT for 10-15 years and Ive been out of work for a year. And the answer is: What have they done, what are the skills they offer? Those people might have very good technical skills, but those skills might not be the specific technical skills that a company is looking for.
More and more, he says in a view strongly correlated by tech hiring agents IT department want workers who are well rounded. They want business and interpersonal skills.
If you look at the skills that companies are looking for, for entry level positions as well as mid level positions, technical skills arent high on the list. Its as if technical skills are a given, and now, according to the SIM survey, employers want strong written and oral communication, critical thinking, creativity and innovation, project leadership, and good collaborative skills.
But this list of skills muddies the core argument about offshoring. The US customers who buy IT services from overseas arent looking for creative problem solving or good oral communication. Theyre looking for the lowest possible price for competent work. Inarguably, US buyers are willing to put up with weak communication skills and cultural cluelessness to shave 25 percent off the price of a development job.
So the debate rages. The offshoring of IT is driven either by 1) the lack of talent in the US, or 2) profit-driven execs who are eager to look overseas to save money.
Or, depending on how you look at the SIM 2008 survey, perhaps offshoring is essentially insignificant, a fledging trend thats too small to be concerned about.
Whats your view? Comment below.