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Las Vegas Business Press, October 22, 2004

Outsourcing doesn't eliminate American jobs

by Michael Marriott

The trend of offshore-developed technology is nothing new, but the election has brought new light and new controversy to the idea of overseas jobs. Offshore development of software, however, poses no real threat, although it has often been portrayed that way.

The movement of technology development outsourced to overseas companies has been around for years. India, Russia, the Philippines and Singapore have established solid technology bases, expanding development of quality software products.

The notion of offshoring tech jobs is nothing new. Technology-rich areas have been around for the past 20 years. Additionally, outsourcing has accelerated over the past decade by the Internet, which cuts costs and allows for the rapid transfer of source code back and forth. As a result of the World Wide Web, the cost of doing business with offshore developers has fallen. In fact, utilizing offshore companies for custom software development can save businesses up to 60 percent.

Although many argue that American jobs are lost to oversea firms, consider two important facts. First, offshore development targets companies that are not currently developing software. It is not a matter of taking development jobs and giving them to offshore companies. In fact, offshore software creates business where none exists. That is, companies that have for years found custom software applications cost prohibitive now have an affordable choice. Off-site development of software solutions allows smaller, more diverse businesses to utilize custom software to increase productivity.

Second, as more businesses implement custom software, the number of local jobs for consulting, project management and installation increases. Development may take place out of the country, but project planning, implementation and testing generally take place locally, boosting the demand for American consultants and project managers. Again, offshore software development creates work and generates revenue that didn't exist before.

The jobs that are going to countries like India involve redundant tasks like coding. Taking those technology tasks and shipping them to low-cost, offshore providers has and will most likely continue to increase. As long as the quality is there, American businesses benefit from low cost, high quality software developed internationally.

Businesses in the United States, however, now require good communications and careful division of technical resources. In other words, these companies are now placing higher-level project planning and management jobs in high esteem. American companies that previously did not utilize custom software are now taking advantage of high quality, affordable products from foreign nations. These organizations are now offering systems analysts, project leaders, quality assurance specialists, business analysts and documentation specialists higher paying technology jobs that were not in demand before outsourcing.

Despite the growing trend, some software will continue to be developed within the United States. Bigger companies that frequently budget for custom technology solutions will continue to utilize American companies. Outsourcing will not likely prompt them to change their IT plan.

As far as the job pool in the nation, coders will still have jobs, and programmers are already short on employment opportunities. For those Americans with programming jobs, outsourcing probably won't have a great impact. Software systems for small- to mid-size companies are not richly developed now, so whatever jobs those professionals have, they will continue with. What local companies will demand more of are planning, implementation, testing and management executives. As more businesses take advantage of custom software, more of these jobs will become available.

Another important factor to consider is the concern of lost jobs in failing businesses. Sending technology development to a lower priced offshore organization to improve business operations is a far better option than laying off employees to cut costs or closing the business and eliminating employment positions altogether.

For those who worry that thousands of technology jobs will be lost to overseas software developers, their fears are unfounded. The jobs generated by offshore software companies are generally for work that was not previously being done. From a consultant perspective, outsourcing software development creates new work for the growing number of new custom software projects.

While it is certainly true that an election year has put the spotlight on outsourcing work, the overall picture in the technology industry is fairly clear. The companies that have initiated or considered using an offshore company for technology products had not initiated or considered that investment previously.

Many companies simply did not consider using these technology products before because they were cost prohibitive. Outsourcing technology development allows these enterprises to view new technology options they could not consider in the past. Overseas technology firms are not replacing, but rather, adding to the technology services available to these businesses.

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