Training could counter offshoring, says analyst

By John Ribeiro Protectionist barriers such as visa restrictions may only accelerate the trend of U.S. companies outsourcing...

Protectionist barriers such as visa restrictions may accelerate the trend of US companies to outsource software development work offshore, according to IT market analyst Edward Yourdon in a book on outsourcing.

In an earlier book, Decline and Fall of the American Programmer, Yourdon, a co-founder of IT advisory firm the Cutter Consortium, had forecast more than a decade ago that software development jobs would move to countries such as India, that could deliver similar or better quality software at lower costs.

That forecast was largely accurate, though the dotcom boom helped cushion the impact on American workers. Although the American programmer is far from extinction, tens of thousands of US software jobs are being moved to countries such as India and Russia.
In Yourdon's new book, Outsource: Competing in the Global Productivity Race, the new threat is not only to US software development jobs, but to all kinds of knowledge work ranging from call centres and helpdesk operations to legal services, and clinical research operations in the pharmaceutical industry.

Knowledge work of all kinds is more and more likely to be a global commodity, and companies striving to compete in a global economy will continue looking for opportunities to use the lowest cost, highest quality providers of products and services, wherever they are located, according to Yourdon.

However, the business decision to outsource offshore is predicated not only on the comparatively lower cost of workers in offshore locations, but also on their relative productivity and quality as well. The productivity argument can be used effectively  to justify keeping some knowledge-based work in the US, according to Yourdon. Some software companies, for example, prefer to hire in the US because the productivity of the US staff is far higher than in India for the kind of work they are doing.

Although India has emerged as the archetypical example of an offshore outsourcing location, because of its cheap, well-educated and English-speaking workforce, China may not be far behind, according to Yourdon. The country can offer cheaper staff than India, and as well-educated.

It might take another generation to produce a core of Chinese knowledge workers who can speak English "comfortably and effectively", according to Yourdon. But the consensus among executives in the Indian IT industry is that it might be less than a decade before China reaches the same level of knowledge-based exports that India has taken 15 to 20 years to achieve, Yourdon added.

China's emerging knowledge-based outsourcing industry will not only have an impact on American jobs at the low end, but also probably on product developers. An announcement last year that China, Japan and South Korea agreed to collaborate on the development of a new computer operating system, most likely based on Linux, as an alternative to Microsoft Windows, should have Bill Gates worried, according to Yourdon.

Yourdon added that consumer demand for lower prices will continue to drive competitive suppliers to shift their knowledge-based work to wherever it can be obtained least expensively.

The US government, however, could employ strategies such as greater investment and reform of the education system and investments in "lifelong education", particularly for adults who find that their university training is no longer relevant, according to Yourdon, who also recommended a change in US tax and accounting rules to encourage long-term corporate investment in workers and productivity improvement.

John Ribeiro writes for IDG News Service


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