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Are Tech Jobs Headed Offshore?

  Allan Hoffman - Monster Tech Jobs Expert

Who will be working on tomorrow's IT projects: US-based tech professionals, or techies based in India, Russia or other countries?

That's the crux of an increasingly heated debate among coders, CEOs and others with a stake in US and global information technology projects. Hiring overseas technical talent -- sometimes called "offshoring" -- is seen as a disturbing trend by many North American techies, while technology executives see it as a way to get more results from shrinking IT budgets.

Why Move Tech Work Offshore?

Companies choose offshoring for a simple reason: They want to save money. Marc Herbet, executive vice president of Sierra Atlantic, an application management firm with headquarters in Fremont, California, and a global development center in Hyderabad, India, says it is possible to "achieve pretty dramatic cost savings, in the one-third to two-thirds range" with offshore projects.

Executives cite other reasons for moving tech work overseas:

•  Software development projects can run around the clock, with teams in the US handing off work to colleagues in India or elsewhere. Parts of India are 11.5 hours ahead of the US, says Sean Chou, CTO of Fieldglass, a software technology company with 15 developers working in India. "We can do nonstop development, and we don't collide with each other's schedules," he says. "Bug fixes can be resolved with handoffs."

•  Specific expertise may be more readily available overseas. "We outsourced, because we had skills over there we couldn't find in the US," says Vivek Wadhwa, CEO of Relativity Technologies, a Cary, North Carolina, firm with clients such as FedEx and Morgan Stanley. According to Wadhwa, the particular combination of mathematics and computer science skills needed for his company led him to hire programmers in Russia, where 50 of the company's 110 employees are located.

Programmer attitudes are another issue, adds Chou. Some US programmers have an "I'm too good for that" attitude about some types of work. "You don't really have that jaded attitude in India," he says.

Which Tasks Get Moved?

Technology leaders characterize the bulk of the work sent overseas, typically to India, as being maintenance, data conversion and other "grunt work," according to one CEO.

But offshoring is evolving quickly. "We're at the point where there's a much broader set of projects that can be accomplished offshore," says Herbet, including custom development and technical support. With three-quarters of its 300-person workforce in Hyderabad, Sierra Atlantic has worked on a variety of projects, including the latest releases of Oracle Process Manufacturing.

"There's a significant piece that stays in North America," says Andre Nadeau, executive vice president and chief strategy officer for CGI Group, an IT services firm with 14,600 employees, 500 of them in India. In a typical project, 20 to 50 percent of the work stays in North America. "If it's maintenance, you can send 80 percent to India," he says.

Of course, not all projects are seen as appropriate for offshoring. Asiff Hirji, formerly the CTO of Netfolio and currently a vice president with consulting firm Bain & Company in New York, points out: "It's less likely that high-design, high-touch, high-creativity projects will be moved offshore."

Logistics

According to Hirji, companies have several options if they choose to send work offshore:

•  A company-owned center in India or elsewhere.

•  A joint venture with a firm in another country.

•  An outsourcing model, where the work is performed by a vendor overseas or with overseas operations.

In turn, these options influence the way work is handled on projects. For instance, Chou sees his workers in India as "an integrated part of the development process." Other firms use overseas centers as a way to execute projects against detailed specs.

The Future of Offshoring

Where will this trend lead? And how quickly? According to a survey conducted in early 2002 by Gartner Dataquest, demand for offshore outsourcing remains "immature" in the US, but growth will be steady. The survey of US-based companies with 1,000 or more employees found 5 percent were currently using offshoring or planned to do so in the next 12 months.

"Up until September 11, the trend was accelerating very quickly," says Nadeau. "There was a pause, a hesitation, because of that." But, he says, "in our discussions with clients, it doesn't seem to be an issue anymore."

"We're just at the beginning of a long-term trend," says Herbet. "It's all supply-and-demand, and it's on a global basis. Labor movement across the world has become freer and freer. Even if you don't import the labor, you can export the work. The trend is irreversible."

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