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Offshore Outsourcing: Global Economy Devalues U.S. Developers

U.S. companies are saving lots of money by sending IT jobs overseas. And angry, disillusioned developers are talking about everything from political activism to organized labor in the hopes of stemming the tide of lost jobs.

any professional application developers in the United States believed the U.S. IT industry that hired them would always be in need of skilled programmers and, therefore, assumed that as long as they kept their skills up-to-date with emerging technologies this need would assure them job security. They were half right. U.S. companies are indeed searching for qualified IT labor, but they aren't necessarily looking within U.S. borders to find it.

Offshore outsourcing of application development and IT projects offers these companies significant cost savings by providing access to cheaper skilled IT labor in countries such as India and Russia. Moving this work overseas has meant job loss in the U.S. IT market, leaving many laid-off developers in the States feeling everything from disillusionment to outrage. However, their feelings aren't enough to stem the tide of offshore outsourcing. U.S. companies will not forego a 20-30 percent cost benefit to mollify their anxious or disgruntled IT employees—nor their former employees.

Where does that leave American app developers? How large an impact will offshore outsourcing have on their careers? How can they best guard against being included in a job cut? These questions are being discussed in IT shops and tech worker advocacy groups all over the country—and they soon could become topics that elected representatives will have to address in Washington D.C.

Contractors Are First to Go
Gartner Research predicts that one in 10 IT jobs and one in 20 non-IT jobs will go offshore by 2005. The immediate impact of this trend will be the elimination of outsourced work that formerly went to domestic contractors. Ian Hayes, president of Clarity Consulting, a management-consulting firm that assists organizations with offshore outsourcing, has learned from surveying companies that "they get rid of contractors and they don't replace attrition. For a contract programmer, it's an absolutely horrible time. That's where the job losses are really occurring."

Gartner Vice President and Research Director Diane Morello also sees contractors at the highest risk. "If companies can move [work for which they may have employed domestic outsourcing] to the outsourcing model and take advantage of the lower labor costs in a global market, the communication infrastructure enables them to do that."

Gartner Research Director Diane Morello says companies will move domestic outsourcing offshore.
In particular, the IT work that offers the most seamless transfer overseas according to Morello is stable, well defined, and requires only minimal changes. For example, Gartner primarily has seen application maintenance to legacy applications like ERP get taken over by companies in Southeast Asia. Such tasks are, as Morello puts it, "usually able to get carved out from core business processes, or are almost peripheral to core business processes."

Because this type of work often goes to the most inexperienced programmers in an organization, those just starting out in an IT career face bleak job prospects. Young college graduates with computer science degrees and those who switched to the computer field within the past few years are on shaky ground. Hayes said, "Like any industry that's contracting, it's the people at the lower end that are going to get whacked. So someone who's not an inspired programmer who got into this, say, in 1999 because there was plenty of demand and it looked like an easy way to get a high-paying job, those people are in trouble."

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