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Outsourcing IT jobs: Do U.S. companies and workers stand a chance?

Does outsourcing IT jobs mean that U.S. companies and employees can no longer compete on a global scale?

In researching my pieces from last week on the state of IT outsourcing in 2009 at both the enterprise and midmarket levels, I stumbled across an interesting note in a study by AMR Research Inc.:

“Surprisingly, barely a fifth of companies state that jobs moving outside the country is an important inhibitor to outsourcing, which doesn’t reflect the media spotlight. It appears that while many people can voice protectionist views, when it comes to driving cost from their corporate bottom lines, it’s a different story.”

I asked AMR’s Phil Fersht, a co-author of the study, about this during our interview, and he confirmed that executives often say one thing when it comes to outsourcing IT jobs, then do quite the opposite:

“When we’ve talked to executives, some of them have said, while they have to be shown to play ball and protect U.S. resources, they’ve got to offshore,” Fersht said. “The cost of running a business in the U.S. these days is so unattractive compared to other locations.”

On his outsourcing blog, in a post titled “Who’s looking out for the U.S. business these days?,” Fersht elaborated on this stance, pointing to several factors that he said weigh against multinational companies conducting business in the U.S.:

– The cost of living in business centers such as New York City and Chicago is sky-high more so than many countries’ business centers.

– Health care costs employers a great deal – and Fersht believes that President Barack Obama’s proposed health care reform will increase the tax burden on the U.S. business.

– Other western countries are more corporate friendly – according to Fersht, the cost of hiring qualified graduates in London is half that of New York.

These factors caused Fersht to pose the question: “Why even consider setting up a global business in the U.S. these days in this virtual environment?”

This is obviously a tricky issue, and I’m torn looking at both sides of it. Particularly in this economy, it’s more difficult than ever to watch IT outsourcing jobs migrate offshore because workers in Asia or South America will do the work for less. It’s an example of the free market and cost-cutting at its finest, but it leaves U.S.-based companies and IT workers at a severe disadvantage.

However, don’t people living in Asia or South America have just as much a right to earn a livable wage by putting their IT education and skills to work for them? As we’ve all heard by now, “the world is flat,” and globalization means that, just because a business if U.S.-based, it doesn’t mean U.S. workers are inherently more entitled to first dibs on sought-after IT jobs. It might free up U.S. workers to complete more value-added work, such as positions that require not only technical knowledge but business sense as well. And if U.S. companies are more profitable as a result, that is within their rights, as well.

What are your thoughts on protecting IT jobs in the U.S. vs. outsourcing IT jobs? Are the cost advantages of IT offshoring too big to ignore, or are you committed to preserving these IT jobs in America?

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The hourly wage of a qualified systems engineer in India is 20$ per hour in their home country and about 44$ when they work at client location. I certainly doubt whether this cost difference is ignorable for businesses worldwide. What engineers in countries like India lack are skills that can be taught, they already have the conceptual knowledge. With extremely focused training plans and mentoring plans, companies like TCS and Wipro can churn out engineers who are ready to pick up any project within a period of 6 weeks.