Offshore Outsourcing: Current Conditions & Diagnosis Ernest Ferguson
Clifton Kussmaul (Moderator)
Dept of Comp Science / Info Systems Northwest Missouri State University Maryville, MO 64468-6001 660-562-1551
Mathematical Sciences Dept Muhlenberg College Allentown, PA 18104-5586 484-664-3352
[email protected]
[email protected]
Daniel D. McCracken
Mary Ann Robbert
Computer Science Dept City College of New York New York, NY 10031 212-650-6162
Computer Information Systems Dept Bentley College Waltham, MA 02452 781-891-2175
[email protected]
[email protected] offshore over the course of the next 15 years [4]. For computer scientists between 2000 and 2001, the jobless rate jumped from 2% to 5% [8]. Programming and general software development is no longer a specialized or rare skill. IT unemployment has resulted in decreased computer science / information systems enrollments throughout the United States.
Categories and Subject Descriptors K.3.2 [Computers and Education]: Computer and Information Science Education – computer science education, information systems education. K.4.2 [Computers and Society]: Social Issues – employment.
What is happening in computer science and information systems is analogous to what happened to manufacturing in the 1970’s and 80’s only at a much faster rate. Businesses are not going to pay a premium to assemble generic software. The transitioning to offshoring for “code jockeys” means IT professionals that remain in the US need project management skills that include the ability to manage remote teams of developers, and be able to deal with cultural differences. It places a premium on communication skills both oral and written and on the ability to tailor a technical solution to efficiently solve a business problem. Allan Hoffman with Monster.com advises IT professionals “to avoid being sidelined by offshoring [they] must be top-notch technologists and stellar communicators, adept at maneuvering in the world of business and willing to work with offshore personnel” [6].
General Terms: Management, Measurement, Economics. Keywords:
curriculum, employment, enrollment, offshore outsourcing, offshoring.
1. SUMMARY Many companies are exploring or actively engaged in outsourcing software development and other IT-related operations. There is increasing interest in outsourcing to overseas companies, particularly in countries like Ireland, India, and China [9][10][12]. Such “offshoring” is typically motivated by: 1.
Reduced cost due to lower hourly wages; overseas IT salaries are as low as $15,000 per year.
2.
Flexibility to add and reduce staffing as needed.
3.
Access to specialized skills and/or processes (e.g. CMM).
4.
“Round-the-clock” development; offshore teams can work while their US counterparts are asleep.
Computer science has increased the productivity of most other disciplines. Can research make software developers more productive and keep IT jobs in the United States? What changes should the computer science / information systems curriculum make to better equip graduates to work in this new environment? Is academia adaptable and can it make these adjustments soon enough? These are the questions that need answers.
This panel will explore the current state of offshoring, how it is likely to change in the future, the impact on educational institutions, and possible reactions.
3. CLIFTON KUSSMAUL For the last 3 years I have worked with development teams in southern India. I believe that IT work will continue migrating offshore; US policy might slow the trend but is unlikely to stop it. At the same time, I expect that there will continue to be IT opportunities in the US, and that computer science and related topics have a valuable role to play in post-secondary education.
2. ERNEST FERGUSON Shock waves still resonate after the widely cited 2002 Forrester Research report predicted at least 3.3 million white-collar jobs and $136 billion in wages are expected to shift overseas by 2015 [8]. The report predicts nearly 1 million IT-related jobs will move
Characteristics of successful offshoring projects: • Project is large enough to amortize the fixed costs.
Copyright is held by the author/owner(s). SIGCSE’04, March 3-7, 2004, Norfolk, Virginia, USA. ACM 1-58113-798-2/04/0003.
•
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Requirements and design are clear and succinct.
•
India began operating call centers and programming modules for US companies. Now they are doing more sophisticated offshore developing work and China is vying for the low cost outsourced software jobs. In each case the distribution of work and the supporting organizational structure of the US company is changing. A manager from a large financial institution indicated that they plan to do requirement analysis locally and outsource all development. The final system would then be integrated and tested on site here.
There is frequent and effective communication.
Common problems encountered in offshoring: •
Cultural differences across distributed teams.
•
Micromanagement of remote resources.
•
Change management.
Reasons that offshoring is likely to grow: • •
Communication technology continues to improve, shrinking effective distances.
As this offshore model becomes more mature with companies expanding the depth and breadth of work outsourced plus new companies and countries competing for the more sophisticated projects, the impact on the IT profession in the US and on the IT professional’s education is becoming noticeable. Students are more cautious in selecting CS as a major, fearing a lack of employment, yet companies require a persistent supply of well educated resources. The question then becomes what education will best prepare a student to succeed as an IT professional in the new global structure?
It looks like a disruptive innovation [1]; as companies gain experience with outsourcing, models and processes will improve, and outsourcing will move into higher value areas.
Reasons to expect limits on offshoring: •
Increasing costs overseas [5].
•
Client access is essential for activities such as analysis, some design, integration, and testing; these activities comprise a significant fraction of most projects [7].
•
Highly productive people can continue to be competitive [3].
6. REFERENCES [1] Christensen, Clayton. The innovator’s dilemma. Harvard
4. DANIEL MCCRACKEN
Business School Press, 1997.
Enrollment in undergraduate United States computer science programs is declining rapidly. Schools that have had a cap on CS enrollments don’t see this, but others do. In 2000, 3.7% of entering freshmen said they planned to study CS; in 2001 it was 3.3%; in 2002, 2.2%. That is a 40% drop in only two years [2].
[2] CRA Bulletin. Computing Research Association, April 11,
At my school the headcount of students in computer science courses is down 10% from last year. The decline would be greater without the infusion of students from the newly-formed computer engineering program. Enrollments in our sophomore courses in Fall 2003 are down by more than a third from two years ago. This obviously predicts major drops in junior and senior course enrollments in a few years.
[4] Gaudin, Sharon. Nearly 1 million IT jobs moving offshore.
2003. http://www.cra.org/bulletin/2003/4.11.html#fre
[3] DeMarco, Tom, and Lister, Timothy. Peopleware: Productive projects and teams. Dorset House, 1999. November 19, 2002. http://itmanagement.earthweb.com/career/article.php/150341
[5] Hall, Mark. IT salaries are soaring 12% to 15% a year in … ComputerWorld, August 18, 2003.
[6] Hoffman, Allan. If offshoring, then what’s next for techies? http://featuredreports.monster.com/it/offshoring.
One response is to place greater emphasis on any part of the software development process that involves direct interaction with the client: specifications, prototyping, planning for product enhancements, user testing, etc. This suggests that we require more practice in oral and written communication, more project courses, and some introduction to business needs and methods.
[7] Jones, Capers. Software assessments, benchmarks, and best practices. Addison-Wesley, 2000.
[8] McManes, Chris. H-1B and L-1 visas accelerate offshore outsourcing. July 7, 2003. http://www.ieeeusa.org/newspubs/features/070703.htm
The need for the kind of graduates we have been producing is evaporating. Those jobs are not coming back. We must find some way to educate people to do the parts of the job that cannot be exported, which seems to mean the person-to-person parts.
[9] Overby, Stephanie. Inside outsourcing in India. CIO
5. MARY ANN ROBBERT
[11] Terdiman, R. and Iyengar, P. Assess if your ESP has an
Magazine, June 1, 2003.
[10] Tanner, Steve. Heavyweights sending R&D overseas. Silicon Valley Business Ink, August 29, 2003. effective global delivery model, Research Note M-19-0594, Gartner Group 2003.
Outsourcing is evolving from the procurement of lower-cost IT services toward a global delivery model [11]. I have visited Ireland and studied Irish firms as they have climbed the value chain and become a model for offshore development. These companies are now looking to outsource to the less expensive countries entering the European Union, such as the Czech Republic and Poland.
[12] Weinberger, Joshua. Overseas will always require oversight. Baseline, June 1, 2003.
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