Offshoring doesn

Programming has traditionally been considered a fairly lucrative career, at least in North America. Skilled developers were once in high demand and during the heyday of the dot-com craze, could command hefty salaries and inviting perks.

But with the economy in a slump, many in IT are finding it difficult to find a job. At the same time, programmers in places such as India and Russia are proving that they can produce the same quality of work at significantly lower salaries.

Still, many remain hopeful for the future of developers in Canada.

John Reid, president of the Canadian Advanced Technology Alliance (CATA Alliance) in Ottawa, said it’s important to distinguish between commodity programming and more advanced programming.

“If you’re a business, you definitely want to preserve your advanced skills set in Canada,” he said. At the same time, however, it helps the bottom line to ship the straightforward programming jobs offshore. “It makes business sense,” he said. “So I’m not alarmed by this because I think the industry is by its nature, international.”

There’s a plus side to programming becoming more international in nature, said Bob Fabian, a Toronto-based independent consultant. While it may be attractive for Canadian companies to export jobs, it’s equally attractive for U.S. companies to ship their jobs here. Our favourable exchange rate and lower salaries make Canada an attractive choice for outsourcing development. And because Canadians are next door and share a common culture, some of the traditional issues that arise with offshore development aren’t a factor, he said.

dotBlox Inc. is one Canadian company that’s trying to use the favourable exchange rate and lower salaries to its advantage by winning U.S. contracts. Programmers here can be well paid and still charge less than their U.S. counterparts, said Nickolas Landry, the chief software architect of the Montreal-based software consulting firm.

“So in a way we do benefit from this outsourcing thing,” he said.

But Fabian said it’s hard to tell whether more jobs are going offshore than coming in from other countries.

What concerns him more is the popularity of packaged programs such as enterprise resource planning and customer resource management suites. There was a time when companies would build such packages in-house. Now they buy software packages from vendors and customize them. This, Fabian said, is a bigger threat to programming jobs than offshore development.

Offshoring can also be problematic because of synchronization issues, he said. Fabian recently finished working on a project that was headquartered in London, and said having only three hours of overlapping time to communicate during business hours made communication difficult. With projects in India or Eastern Europe, finding a mutually convenient time to talk is even more difficult.

Cultural differences also come into play, he said. Fabian has worked on projects in which much of the work was done in Russia and said what was expected wasn’t always what was developed because cultural differences caused misunderstandings.

Dmitri Buterin, the president of BonaSource, a Russian offshore development company with offices in Toronto, admits that such problems do arise.

The Moscow-based company felt that it was necessary to set up offices in Toronto in order to be close to its Canadian clients, since project management is one of the biggest challenges when it comes to offshore development. While it makes sense to ship the “dirty work” – the straightforward programming – offshore, the high-level design and system architecture has to remain in Canada, he said.

And while high-level programmers in Russia get paid only the equivalent of $15,000 to $20,000, their salaries have already increased significantly over the past few years, Buterin said. And other costs, such as renting office space, are much more expensive in Russia than in Canada. BonaSource considered moving its Russian offices from Moscow to a smaller, cheaper city, but couldn’t because the infrastructure wasn’t there, Buterin said.

Although overhead costs are higher, salaries are significantly lower for programmers in Russia than in North America. This means that in large projects, Canadian companies using offshore development can expect to pay about half as much as they would if development were done here. On medium-sized projects, the savings would be lower, he said.

It doesn’t make sense to ship all projects offshore, he said. While jobs that aren’t very technically sophisticated but which require a lot of attention to detail, such as moving to a different platform or database, are better done offshore, Web development platforms that require a lot of interaction are better kept closer to home, Buterin said.

A recent Information Technology Association of Canada (ITAC) study showed that there will be an increased demand for IT workers who have business skills, such as business analysts and project managers, said Julie Kaufman, a research manager of skills research at IDC Canada Ltd. in Toronto. Business demands mean that in the future, there will likely be a need for people who can offer a combination of IT and business skills, she said.

Fabian agreed. In the future, programmers who want to remain competitive will have to understand the business context, he said. “So clean and simple technical training is going to be less and less a ticket to a comfortable life,” he said.

And the changing landscape doesn’t necessarily mean that salaries for programmers in North America will drop, Kaufman said. Roles will change and so what we consider to be a programming job today may look different five years from now. Programmers might be more specialized and have more business skills, which might justify paying them at a similar level, she said.

Because the supply-demand curve has changed, there has been a halt in salary increases, Reid said, adding that when compared to other occupations, it’s still a pretty good paying profession.