globalization and the offshore outsourcing of software work william aspray school of informatics...
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Globalization and the Offshore Outsourcing of Software Work
William Aspray
School of Informatics
Indiana University, Bloomington
ACM Job Migration Task Force
• Moshe Vardi and Frank Mayadas, co-chairs• John White, ACM, ex officio• William Aspray, executive consultant• 30 members from US, UK, India, Germany,
Sweden, Israel, Japan, China • computer scientists, social scientists• Delivery January 2006• International perspective, analysis not
recommendation, no new research, expert testimony, lit review, expert members
ACM Report
• Executive summary• Big picture• Economics• Countries• Firm case studies• Research
• IP, privacy, security• Education• Policy
• Condensed version• Annotated
bibliography
Some Definitions
• Outsource
• Offshore
• Multinational or national/local
• Captive or independent
• Export or domestic market
• Globalization
Work We Include
• programming, software testing, and software maintenance
• IT research and development• high-end jobs such as software
architect, product designer, project manager, IT consultant, and business strategist
Work We Exclude
• physical product manufacturing: semiconductors, computer components, computers
• business process outsourcing/IT enabled services/knowledge process outsourcing (e.g. processing insurance claims, reading X-rays)
• call centers and telemarketing
Countries Doing Work
• Cost and capacity• Language skills• Nearsourcing• High-end niche
• India, China• Phillipines• Canada, Czech R.• Israel
Drivers of Offshoring
• Telecommunications• Standardized IT• Pace of innovation• Downsized corp.• Champions• Venture capital• Forced re-engnring
• Intermediaries • Work process• Higher ed• Free market• Immigration• English language• Aging population
Economics of Offshoring
• Theory of Comparative Advantage
• Critics
• Long-term harm to innovative structure
• Saftey net for workers and communities
Data Issues
• Problems with definitions• Problems knowing which metrics• Problems with sources
– Government– Trade association– Consulting firms
• Projections v. current/past data• Vulnerability projections
data
• US – 12-14M vulnerable– 2 to 3% loss per year maximum– BLS ten-year projection
• India– 10 to 40% increases per year
• UK and Germany• Global
US IT Jobs 1999/2003 (BLS)
Programmers ********* 529 403
SE applications 289 410
SE systems 209 293
Computer support 463 481
Computer systems analysts 428 486
Database administrators ******** 101 97
Network and systems admin 205 245
Network & data communications analysts 98 156
Computer systems managers ******** 281 257
Hardware engineers 60 70
Total 2688 2922
Country Perspective
• Relationships– US-India– Western-Eastern Europe– Japan-China
• India v. China– Infrastructure, policy experience, industry maturity– Research– Domestic v. export market– Education
• Private, access, quality control• Central planning, academic-industry relationship
Firm Perspective
• Developing Entrepreneurial (TCS, Softtek)• Developed Software Package (Adobe, SAP)• Developed Software Service (IBM Global
Services, Siemens Business Services)• Developed High-Tech Startup (Hellosoft,
Netscaler, Ketera)• Developed Established Non-IT (Agilent,
Citicorp)
Why Companies Offshore
• Reduced Costs• Access to skills• Experience• Time Shifting• Time to Market
• Market access• Ramping Up/Down• Capital burn rate• Process
improvement
Reasons not to Offshore Work
• Job process is not routinized.• Job cannot be done at a distance.• The infrastructure is too weak in the vendor
country.• The offshoring impacts negatively on the client
firm’s workplace.• There are risks to the client company in offshoring
the work.• There are not workers in the offshore company
with the requisite knowledge.• Cost of opening or maintaining the offshore
operation is prohibitive.
Research
• Globalization, not offshoring• Close relation between PPP GDP and IT
Research - some countries high (Sweden, Israel), some low (Mexico, Indonesia)
• Rapid growth in globalization• Home country vs. satellite• Winners and losers• Inventor migration healthy - even if net loss
Risks and Exposures
• Heightened risk - longer chains, legal systems, COTS
• Vulnerability to governments– IT-enabled systems (power, telephone), citizen
confidence
• Vulnerability to companies– Data privacy, IP and other trade secrets, business
continuity
• Vulnerability to individuals– Identity theft
• Business opportunities
Policy: High-Wage Country
• Protectionist rules and tariffs• Safety net for workers and communities• Level playing field (tax, currency)• Visa• Innovation
– Foreign students and workers– Enhance education system– Promote indigenous careers– R&D funding