Outsourcing the Impact of Outsourcing on Information

Outsourcing

The Impact of Outsourcing on Information Technology in the U.S.

The greatest impact of outsourcing has been the decrease in the number of jobs in U.S. And this is only a continuation of the process that had begun earlier with the contracting of jobs by the large companies to small suppliers. Only now the jobs are going overseas and this is hurting the chances of certain categories of Americans from getting jobs. In the case of Information Technology jobs, this is a recent development, and even in 2003, the state of Ohio had forecast the career of IT as certain to succeed sort of a career. According to the Department of Job and Family Services in that state had said that the number of computer support specialists would grow by a certain 87% or a total of 1,682 persons a year throughout the next ten years. Following this group was supposed to be the software engineers with a growth of 80% or 806 jobs in a year.

The following five categories of jobs also were within the computer functions like network system analysts and database administrators. The only problem is that the jobs are not coming -- instead they are coming up in some other countries like India, Costa Rica and the Philippines. The employers are from Ohio, but the job locations are in those countries. This is combined with the fact that many of the top companies in the state, including General Electric, LexisNexis and Proctor & Gamble has sent many jobs containing different functions even earlier to other countries. These were manufacturing workers and have been happening for decades. It is now time for people in programming, customer services, technical help, transaction processing and finance to face up to the problem that has come up due to global trade, cheaper telecommunication and the availability of cheaper low priced labor speaking English abroad.

The reasons given by the companies are the international sales available abroad and operating efficiencies achieved abroad. This has led to predictions that the trend will continue from the experts in the matter. Forrester Research of Cambridge has said that off-shore jobs will remove as many as 540,000 jobs from the U.S. In 2004 alone, and this is an increase from 315,000 jobs in 2003. The increase will continue and reach a total of 3.4 million by 2015. Other surveys by Deloitte & Touche and Diamond Cluster International also say that there will be more use of the facility of offshore jobs in the years to come in the financial services sector and information technology uses. The subject was viewed with great interest in 2004 before the period of presidential elections. They have been called names by many legislator and politicians, including the Democratic presidential candidate. In 30 states the legislators also introduced legislation to discourage companies from sending their jobs offshore.

The practice of sending jobs exists among all types of companies -- big or small, and in many states. In the factory of Proctor & Gamble there was movement 1000 jobs during the period from 1999 to 2001 and the movement was from Cincinnati to Costa Rica. The positions were in the areas of information technology, accounting, payroll, personnel and call center. General electric cut down 700 of its 1000 jobs in Evendale in information technology. Another major, Convergys employs some 12,000 people abroad and has hired some 8,500 jobs in India from December 2001 and many of the jobs were in call centers as well as software development and client support.

The companies that are engaging themselves in this exercise of shifting jobs offshore are now being asked as to how this is expected to save costs for them. The effect has become so severe that some companies now believe that if they do not have offshore employment, some companies for whom they may be suppliers are not likely to give them their contracts due to the apparent high cost. The costs today are expected to be competitive in every sphere, and in today's highly competitive world, the buyer decides on everything. There is now a clear tendency for shifting jobs to offshore suppliers and some of the suppliers are excellent. An executive in one of the major suppliers from India has said clearly that they are concentrating on their core competency and most companies are concentrating on cost reduction. Thus he feels that in the years to come, the number of jobs that will be sent offshore will only increase. This particular company is in the field for 25 years and they have been recruiting many people in India from different educational institutions, and some of those institutions are comparable to Harvard in the quality of their students.

The result is also a change in the quality of jobs that workers in the Information Technology field in United States also have seen. Five years earlier, the workers were interested in the job due to challenging and rewarding work, good salaries, numerous openings available, the promise of growth in future and a long-term stability of employment. These major career fundamentals are changing due to the shifting of the jobs out of the country. This may make the job as rewarding or totally undesirable depending on the individual. The first of these is that salaries of Information Technology workers will be getting better salaries in the countries where the jobs are being shifted and less in U.S.. Along with this there will be an increase in the total number of jobs in IT in the countries where the jobs are being shifted now, and reduced in the U.S. This means that the maximum growth will happen in those countries and very little in the U.S. The exact position is yet unknown, and will be only known when the situation stabilizes. The impact of outsourcing of IT jobs are already being felt by the workers in U.S., but these impacts will only increase in the next few years and not reduce.

IT Professional Taking Job That Would Not Normally Be Considering

Whenever the U.S. has tried to move closer to the developing countries, many of the U.S. jobs have shifted to these countries, as has been the case when the developing countries trying to move close to the U.S. And thus shifting jobs there. This is a part of globalization which has been strongly advocated by U.S.. The two countries where the jobs are moving, India and China are providing some services to the U.S. The fact is that schools in India can produce Java programmers in a year or so through their vocational schools, and these individuals can compete with the programmers of U.S.. Then the present price of the programmers in U.S. will become open to question. The high price that was being paid earlier was not due to the skills that the person possesses but due to the shortage of such people in the country. Thus the programmers in U.S. must have skills that cannot be duplicated elsewhere, and the jobs in U.S. that are at risk are jobs as chip designers, software developers, and technical user support.

In the case of technical user support personnel who have to go into the design problems to solve certain user problems, whereas others just have to read the instructions that appear on the screen and follow the prescribed procedures. These jobs can be easily filled up others who are not so conversant with the technology. The high end jobs involving cutting edge technology will never be taken away, but that requires knowledge. The high end institutions in India produce excellent engineers, and these are the IITs and the RECs, but those students always prefer to come to the U.S. And do not generally work in India. On the other hand companies of excellence in U.S. do not expect excellence in those countries, but try to take advantage of the cost advantage available in those countries.

Thus the attempt here for the persons in the IT industry should be to develop knowledge that is special and that would stop their loss of jobs. The shifts on the basis of low costs do not last very long, and earlier the shift was to Scotland and Ireland and now the shift is to India and Philippines. The attempt to get extra knowledge should start early, and that is not being done by the Americans in U.S.. Most of the students in the graduate courses here are filled up with foreigners. The research institutions should be funded well, along with increasing infrastructure so that America will continue to develop the next generation technology and global market intelligence. Even the people who are loosing their jobs in the field of Information Technology should try to improve their knowledge base and expertise if they want to continue in the same field.

Some of the experts believe that the workforce that is now being moved out of the IT positions will become a strong, new breed of workers who will be technically innovative, while others believe that the only place that can be employed is by the deli. The increase in workforce is continuing, and in March 2004, the country gained jobs for some 308,000 people. Yet there was not a real increase in the jobs for semi-conductors, electrical engineers or computers even in the manufacturing side. The removal of people in sourcing jobs out is clear. The decrease in labor costs directly add to the bottom line of the companies. This sourcing out of jobs is not only for IT workers but is also seen for legal and Research and development.

The wage differences are tremendous. A telephone operator in the U.S. has to be paid $12.57 an hour, whereas in India, the payment is less than a dollar. However, new jobs in the IT industry are also being created at the same time. While 104,000 IT jobs were lost due to outsourcing in March 2004, as many as 90,000 new jobs were also being created due to the additional savings made by the companies. Whether this is really happening or not, only the concerned companies can say, but certainly it is giving the companies more money for R& D, and this can absorb some workers when they start. The lowering of costs by using labor abroad has been successful in certain cases. Nokia has sold $2 billion worth of cell phones to India and U.S. has increased its exports by $1 billion in one year.

At the same time, some of the organizations are sending the IT work abroad only for financial benefit. One such organization is Sephora which is a beauty retailer with 97 stores in U.S. And 400 stores in Europe. They were facing problems due to the lack of support received from manufacturers for certain parts of their infrastructure. The retailer also needed experts in certain parts of the IT system.

To get this they sent the IT job overseas. Were there no suppliers in the country who could do it? At the same time it is wrong to feel that Americans are getting the bad end, as U.S. has collected $131 billion for private business supplies to the rest of the world, while they have bought or imported about $77 billion worth in 2003. This includes all services including those bought from India and Philippines. Thus U.S. have a surplus of $54 billion. The jobs that are being lost are at the lower end of the spectrum, and most of the fall at the higher end was at a slow level. These have already grown back to the level of 1990s. According to the projections made by the U.S. Department of labor in 2003, the number of jobs in the computer and mathematical sciences occupations are expected to grow from 3 million to 4 million during the next ten years. In terms of contributions to GDP, the group has contributed a total of $621 billion in 2003 and this growth has been achieved from $510 billion that existed in 1999. Thus there is a total growth in the industry in spite of the talk about many jobs being sent abroad or other countries.

It is clear that individuals who have low competence and education in the profession will suffer, but those with adequate training and expertise should not face any problem. This is true for any profession which becomes outdated with development. In India, there are still some persons who were steam locomotive drivers, but they cannot get a job in that occupation. This is the story of development and the persons who cannot keep up have to go to the deli for a job.

Loss of income and Forced Retirement because of outsourcing

One way of looking at the problem is similar to that of many political action groups who claim to fight for the rights of the IT staff In America who have suffered due to the inflow of foreign skilled workers into the country. These organizations come out with posters saying "Are you unemployed and invisible?" They have literature which asks the question "If you are currently working but become unemployed in the future, will you become a non-entity? Stand up and be counted!"

Yet these groups only come up for the presidential election and they disappear after the elections are over. Some of them lead to local violence by they are all against the principle of globalization which is being promoted by United States. On the other side are groups like the Information Technology Association of America. This group has 375 important corporate members including Microsoft and IBM. They have recently studied the subject and come out with a report called "The Impact of Offshore IT Software and Services Outsourcing on the U.S. Economy and the IT Industry." The report was prepared by Global Insight after a complete study. The study was conducted by a research team led by their chief economist, Dr. Nariman Behravesh.

The results of the study show that the total effect of sourcing out work elsewhere does not lead to a reduction in the workforce in United States. They found that as a result the number of jobs in the States increased, the real wages received by the workers in America increased and the overall economy of the United States performed better. First and foremost the effect of sending jobs out all over the world saved money and this effect is what creates the new jobs. The analysis by the organization showed that in 2003 the effect was the creation of 90,000 new jobs within the borders of United States. According to the team, the net salaries of the workers in United States was increased by global sourcing through the control of inflation, controlling of interest rates and increases achieved in productivity. In 2003, the increase in pay affected was estimated to be 0.13% and this was to climb continuously. In 2008, the increase was expected to reach 0.44%.

Yet the overall unemployment in United States is not looking as if it is going down and this becomes clear from the figures of unemployment. There seems to be some improvement, but even in December 2004 the figure was at 5.4% overall. This means a total unemployment of eight million one hundred and forty nine thousand persons. This is in spite of the fact that in this month there is a lot of temporary employment by different companies because of the season, and yet the results showed that there was an overall loss of one hundred and thirty seven thousand jobs. Even according to government committees this seems to be a part of a continuing process and the country is reported to have lost a total of one and a half million jobs for the period between 1989 and 2003 due to the trade that it carried out with China. At the same time, there were exports to that country that increased the number of jobs in United States by 199,000.