Training can counter offshoring: book

Protectionist barriers such as visa restrictions may only accelerate the trend of U.S. companies outsourcing software development work offshore, according to IT market analyst Edward Yourdon in a book on outsourcing, scheduled for release in October.

Yourdon, a co-founder and fellow of the Cutter Consortium, an IT advisory firm in Arlington, Mass., had in his earlier book, Decline and Fall of the American Programmer, forecast over a decade ago that software development jobs would move offshore to countries like India that could deliver similar or better quality of software at lower costs.

That forecast was largely accurate, though the dot-com boom helped cushion the impact on American workers. Although the American programmer is far from extinction, tens of thousands of U.S. software jobs are getting moved to countries like India and Russia.

In Yourdon’s new book Outsource: Competing in the Global Productivity Race, the new threat is not only to U.S. software development jobs but to all kinds of knowledge work ranging from call centres and help desk 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 may be 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 U.S., according to Yourdon. Some software companies, for example, prefer to hire in the U.S. because the productivity of the U.S. 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 Corp.’s Windows, should have Bill Gates worried, according to Yourdon.

Yourdon added that consumer demand for lower prices, referred to as the “Wal-Mart factor,” will continue to drive competitive suppliers to shift their knowledge-based work to wherever it can be obtained least expensively. The Wal-Mart Stores Inc. retail chain has expanded rapidly in the U.S., due in large part to its low prices on a variety of consumer goods.

The U.S. government, however, could employ at the local, state and federal level strategies such as greater investment in education, combined with reform of the public school educational system, and investments in “lifelong education,” particularly for adults who find that the university training they received is no longer relevant, according to Yourdon, who also recommended a change in U.S. tax and accounting rules to encourage long-term corporate investment in workers and productivity improvement.

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