Outsourcing angst

Vivek Paul is worried, and he has reason to be. He figures the clock is ticking on the software engineers who work for him today. Paul told a reporter last week that in as little as two years, it may be possible for much of that programming to be done in another country for a lot less money. In other words, Paul is facing the same offshore outsourcing threat as many U.S. programmers.

But Vivek Paul runs Wipro Ltd., one of India’s biggest software development outfits. And he’s looking over his shoulder at offshore programmers in Vietnam, China and the Philippines.

Paul told the AFP news service that salary costs in India are going up and that the seriously undervalued rupee could gain 20 per cent to 30 per cent against the dollar. That would eat away at the cost advantages of offshoring programming work to India.

Meanwhile, programming companies in other lower-wage countries figure they can move into the vacuum as Indian costs rise. They’re building their own armies of C++ and Java programmers and aiming to do to the Indian software business what India is doing to us.

All of which is good news for U.S. IT department budgets. And it’s actually not such bad news for U.S. programmers, either.

It’s good news for IT budgets because competition will drive down the price of offshore software development. Right now, a typical big project costs 30 per cent less in India than it would using U.S. outsourcers. That’s largely because a typical Indian software engineer makes 88 per cent less than a U.S. programmer. (Long-distance development adds other costs that reduce the potential savings.)

If programming shops in the Far East can mimic the Indian approach – which they’re busy trying to do right now – the number of alternatives for an IT shop that’s offshoring a big project will go way up. Competitive bidding will cut offshoring prices to the bone. Lean-and-hungry newcomers will keep the old-guard offshorers honest and on their toes.

That means we’ll spend less and get more for the money we do spend. And who knows, maybe we’ll even get to plow the savings into interesting new technologies.

On the other hand, for U.S. programmers facing an uncertain future, this may sound like the worst possible news: one more nail in the coffin for code jockeys who see their jobs evaporating as projects are shipped overseas. But don’t kid yourself. There wasn’t that much left to lose.

Look, we can’t compete for projects that can be shifted offshore – not without some kind of programming fairy dust. Cutting an American programmer’s salary by 30 per cent to match offshoring prices isn’t a viable option. Nor can U.S. companies simply decide not to send any projects offshore. No business can stay in the game while competitors get lower costs and greater flexibility on a key commodity, which is what big-project programming has become.

Offshoring is real, it’s going on, and it’s going to get bigger. There’s a glut of generic programming talent worldwide, and the Internet makes it possible to tap that glut for big projects that need generic programmers. Within a few years, if a project can be offshored, it will be – whether it’s to India or Russia or China or the Philippines.

So if you’re a programmer in a U.S. IT shop, the future isn’t really uncertain at all. It’s a dead certainty that generic, big-project coding no longer has a future for you. And it’s certain that you’ll need to shift away from a pure coding focus, and toward smaller projects that require faster turnaround, specialized skills or an intimate knowledge of your organization – in short, the things offshore code shops can’t compete with.

That way, you’ll be able to add more IT value than ever. And you won’t have to look over your shoulder anymore.

You can let the offshorers do that.

Frank Hayes, Computerworld (U.S.)’s senior news columnist, has covered IT for more than 20 years. Contact him at [email protected].

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