Market Wire recently posted an article presenting the IT outsourcing trends for 2009, according to the IAOP (International Association of Outsourcing Professionals) predictions.

While most points come at no surprise, I have a harder time agreeing with the first one: Outsourcing will stay closer to home.

“With available labor from layoffs in many industries and tightened risk profiles of companies, especially in the financial services industry, companies won’t have to go far offshore to find talent. Planned initiatives by Barack Obama and increased government spending on infrastructure projects could lead to more domestic outsourcing, particularly for construction, real estate and technology, IAOP predicts. Outsourcing destinations such as India and China will be challenged by the closer-to-home locations.”

There are 3 different reasons given here:

1. The massive lay-offs in the financial services are creating available qualified manpower, hence reducing the shortage of talents

2. The new Administration is likely to create incentive programs for keeping jobs inshore

3. Nearshore destinations (Mexico, Costa Rica, etc.) are to gain momentum on offshore destinations (China, India, Eastern Europe, etc.).

Let’s address these reasons from an IT industry’s perspective.

• First, it is obviously clear that lay-offs mean more people on the market. The real question is though: do these people have the technical expertise most hiring companies are looking for? The shortage observed in the USA is mostly for developers with in-depth experience in advanced techniques, like RoR, Lamp, WEB 2.0 platforms, multi-media, etc. I am not too sure how much of this required knowledge a developer coming from a large financial institution possesses.

• Second, I am an avid supporter of president elect Obama, and I obviously agree that it makes sense to keep jobs inshore when possible; but I have to go back again to my point regarding the shortage of talents. A company, especially a SMB, can only hire a person if she/he already possesses the profile they are looking for. The new Administration might come with strong incentives to hire local resources, but I doubt SMBs have the luxury of hire people who do not already have the required technical experience, especially this year.

• And finally, I do not even understand the debate nearshore vs. offshore. China and India have become popular destinations not only because they are less expensive than the USA, but mostly because it is easier to find talents there. Bear in mind that the US produce 70,000 engineering graduates per year, when India graduates 450,000 and China 600,000.

From our company’s standpoint, we offer resources located in both China and Mexico, so my opinion is not dictated by corporate interest. We actually tap into our nearshore resources when our clients need to communicate many times a day with their remote team. Other than that, China seems a much better choice, thanks to the number of talents and the variety of profiles available.

Let me hammer this again: if we want to reverse the nearshore/offshore process in the IT industry, there is only one thing we can do: change our education system.

Education is among the major challenges of the New Administration. However I am now confident that many of the much needed changes can finally take place. “no child left behind” must become a reality, not only low-level propaganda from the soon previous Administration.

Yes we can, indeed!

Read the full Market Wire article here

Remi
www.vsisoft.com

Business | 3 Comments »

That’s it. The dark years of the Bush Administration are getting to an end. In January, we will finally have a driver in the driver’s seat!

First and foremost, it is good news for US small businesses. What we need is a wealthy economy, not an economy geared exclusively towards the wealthy. President-elect Obama’s vision goes beyond tax cuts to stimulate the economy, and that is good.

Regarding the impact on outsourcing, it is important to differentiate between the various industries. As NASSCOM rightfully noted, “when Obama was referring to outsourcing in context of migration of jobs, he was mostly referring to the manufacturing sector. Information Technology is different, since there is a shortage of talents in the USA. By providing US companies with much needed resources at affordable cost, offshore destinations can contribute to the growth of US economy.”

Yes, we can!

Business, China | 7 Comments »

An Indian newspaper (the India Times) recently reported on Obama’s position on job outsourcing.

More generally, what do the Presidential candidates say regarding employment in the USA?

There is a little to say about McCain’s position, for it does not differ from the traditional position of the Republican party: the best stimulus to a wealthy economy is a reduction in corporate income taxes; job creation will follow as a side effect of a wealthy economy. The basic assumption is that corporations are likely to reinvest a large percentage of the money saved in the US economy, thus creating jobs. Even if a part of these new jobs are created abroad, the vast majority is likely to happen in the USA.

Barack Obama has a different approach. First, I found his acknowledgment of the situation very realistic. During a speech in Raleigh, he said, “We live in a competitive world, and that is a fact that cannot be reversed.” […] Revolutions in communications and technology have sent jobs wherever there is an Internet connection, that has forced children in Raleigh or Boston to compete for those jobs with children in Bangalore or Beijing.”

It might sound like stating the obvious, but based on the comments I receive on this blog, not all people yet realize that we cannot reverse a process we have created.

And the Democratic candidate to elaborate on his ideas to help job creation: “We need to invest in the research and innovation necessary to create jobs and industries of the future right here in the US.” […] “And one place where that investment would make an enormous difference is in a renewable energy policy that ends our addiction on foreign oil, provides real, long-term relief from high gas prices and high fuel costs, and builds a green economy that could create up to five million well-paying jobs that can’t be outsourced.”

Obama believes that the US “can also create millions of new jobs by rebuilding our schools, roads, bridges, and other critical infrastructure that needs repair.”

While I understand McCain’s reasoning, I believe it is going to take more than another tax cut to stimulate job creation here in the USA. In the IT industry, for instance, the shortage of talents is a more important reason to go offshore, certainly more than the cost savings, and I assume there are many industries facing the same challenge.

The USA need to recreate the conditions for creating jobs inshore. It includes a renovated infrastructure, more graduate engineers, and a focus on renewable energies, as Obama rightly pointed out.

“This nation has faced such fundamental change before. And each time, we’ve kept our economy strong and competitive by making the decision to expand opportunity outward, to grow our middle class, to invest in innovation, and most importantly, to invest in the education and well-being of our workers.”

A beautiful conclusion for this post.

The full article from the India Times is accessible online.

Remi
www.outsourcing-vsc.com

Business | 9 Comments »