Gartner predicts that Outsourcing Prices Could Fall 10%. It is hard to judge the accuracy of these reports because they cover several different categories of outsourced IT services – datacenter, helpdesk and network services – besides just software development. But there is no question that business is less than booming these days and buyers are in a position of strength when it comes to negotiating prices.

If it made sense to outsource your software development globally to save money in the past, then it is even truer today. That is, if American companies are not too afraid to develop anything these days!

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“Outsourcing is no longer just about cheap labor. … It’s also no longer just about India and China.”  That’s the beginning of a recent article in Forbes that describes global Outsourcing’s Big Picture.

Of course. Doesn’t everyone know this already?

Maybe not. The article suggests there are five key drivers to the growth of the global outsourcing of services. However, it mentions only these three:
1. Tremendously lower cost of labor in multiple global locations
2. The digitization of business processes
3. There is a global pool of educated talent such as engineers and programmers.

Again there are no surprises here.

Is there anything to slow or stop the trend? Maybe government regulation. But the recent warnings of a possible trade war and the downside of protectionism in the so-called Buy America Act by President Obama are likely to be heeded.

This article is a good summary of the global outsourcing trend, but most business people probably know about this already. Accelerance has over 40 partners in a dozen countries. I don’t think it’s a question of if you should outsource, but where.

“A decade ago, if you wanted to cut costs it was an India story. We identified 30 countries that have policies in place to promote service exports. … It won’t be one country that will knock India off the top. It will be a lot of small countries.”

I agree.

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I saw this short article about students in the UK outsourcing their IT homework assignments to India.  Thomas Lancaster, a Birmingham City University computing lecturer, has led the effort to catch these cheaters.

I first hear about this last October when Fred Looft, head of the ECE department at WPI told me he received an email from a professor in the UK saying he suspected a WPI student might be cheating this way. Allegedly a WPI student had posted a project inquiry on one of the job boards and his academic email address was the tip off.

I think that email Fred received must have been from Lancaster.  Fred said he had “a talk” with the student and the project inquiry was withdrawn. 

Clearly cheating should not be tolerated.  But I also shared a different opinion with Fred. 

What if students posted programming projects online, not to have them implemented, but to get an estimate of the cost and effort required if they were implemented?  Actually, that’s not completely fair to the freelancers and vendors that might respond. So why not have them manage small projects for a few hundred dollars with global programmers? 

I think we ought to start teaching our students how to manage programming projects as well as coding them.    

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When I first heard about Ruby programming language a few years ago I thought, just what we need, another web site scripting language!

But Ruby is catching on.

More and more Accelerance Global Partners are supporting the Ruby programming language and especially Ruby on Rails. The partners that specialize in Web 2.0 development can develop your application in Ruby.

A recent article quotes a Gartner analyst as saying there are a million Ruby developers now with a 4x growth expected in the next 5 years.

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Just saw a press release for a new book Debugging Your Information Technology™ Career published by Elegant Fix Press and written by career consultant Janice Weinberg. I haven’t read the book yet but the press release has some detail that makes the book look interesting.

Whether you believe there is an IT job shortage or not, it is clear employees are being displaced by offshoring. More and more companies are offshoring these days and this book promises to be a valuable resource for those directly impacted by the changes and job loss.

The job loss issue comes up with Accelerance clients when they have an existing software development team that they need to expand with resources offshore. The question is what to do with the programmers you already have in-house? Instead of coding, these U.S.-based employees often become project or product managers if they stay at the company.

This book promises to offer additional choice of career change and growth.

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More details on how many and which jobs are being offshored from the U.S. are in a report called “Jobs Beyond Borders” just issued by the Wharton School and CareerBuilder.com.

The report has lots of statistics from a survey of more than 3,000 HR professionals and 6,700 workers in the U.S.

13% of companies surveyed outsourced to third-party vendors in 2007 and 7% say they moved job functions to offshore affiliates or subsidiaries.

The main reason is cost.

64% of companies are offshoring to save money. 32% of companies surveyed are offshoring software development work.

No doubt there are many ways to spin the numbers. One blog focused on the statistic that 27% of companies went offshore to find skilled workers, implying a shortage here in the U.S.

For me the handwriting is on the wall. American companies are offshoring for a number of reasons. And if your job is in the list of those most likely to be offshored, then it’s time to adapt to this reality.

If you are a company joining the ranks of those taking advantage of offshore software development then Accelerance global partners have the skills you need.

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Today I ran across this article in Baseline magazine that questions if there really is an IT labor shortage. It reports that the idea of a shortage is popularized by lobbying groups trying to convince congress to increase the number of H1-B visas.  I mentioned a looming IT talent crunch back in January.

This newer article quotes several experts and reports that state there are plenty of IT jobs available, just not high paying ones that Americans are willing to take. Instead companies are bringing in low-paid workers or just sending the work offshore.

I think this new article is closer to the truth based on the large number of comments from people that have actually lost their jobs due to outsourcing or offshoring.

But companies will always want to save money. It’s the main reason we don’t make shoes in New England, steel in Pittsburgh and grow apricots in Silicon Valley anymore. If you are running a company, how would you handle IT? If you are starting a software company with your own money, where would you do your programming?

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Last year a 25-page study Getting the Numbers Right: International Engineering Education in the United States, China, and India was published by several professors from Duke University (abstract & more download links available here).

This report is grasped at by both advocates and detractors of the H1-B visa as proof that we Americans are not doing so bad after all and that the specter of soon being overrun by hoards of qualified foreign software engineers is not a reality.   Notice my emphasis on the word qualified. That’s the main point of the study – yes, there may be a large number of IT workers being graduated in India and China (10 times the U.S. or more) but they are not at the same level of skill as software engineering and computer science graduates earning a Bachelors degree from a college or university in the U.S.

Hoards of Asian Programmers?

But here is the (incorrect) logic being used in applying the results of this study:

• Tech company executives (like Bill Gates) claim there are not enough skilled programmers in the U.S.
• The study says there are not as many qualified programmers in India and China as previously estimated
• Therefore, there is no shortage of qualified programmers in the U.S.

Wrong!

But this past April 1st or H1-B Visa day, an NPR interview says there is a 10 to 1 demand to supply ratio for talented programmers and software architects in the U.S.

Listen to another NPR interview with Vivek Wadwha one of the Duke professors and you will hear him say that most American companies are outsourcing offshore to save money NOT just to get hard-to-find talent.

I think it is for both.

But here’s the thing. American companies are offshoring even if they have to take a hit in quality of the programmers. The study discusses how much of a hit and why it exists to begin with.

The study draws on the previous 2005 McKinsey study that predicts a shortage of IT workers because only about 10% of graduates in Brazil, China and Russia and 25% in India are globally competitive programmers.

The study further characterizes these graduates as either dynamic or transactional engineers. Here’s a brief definition:

Dynamic Engineers

• Capable of abstract thinking
• High-level problem solving
• Using scientific knowledge

Transactional Engineers

• Solid technical training, but
• No experience to apply knowledge to larger domains
• Responsible for routine tasks in workplace

If 80% to 90% of the offshore engineers are transactional you have to wonder who’s going to be working on your software when you go offshore. That’s why it’s important to select a vendor that knows how to recruit the right kind of “dynamic” engineers up to American standards of excellence.

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It’s April 1st and no joke, it’s H1-B Visa day. This is the day that companies apply to the U.S. government to receive visas for foreign workers. There is a limit of 65,000 and they are issues within the first 24 hours.

NPR interviewed a software company CEO about his challenge in hiring a software architect here in the U.S.

This is a controversial issue that really strikes a nerve with those Americans that think companies (like Microsoft) are selling out by hiring cheaper foreigners instead of paying Americans what they are worth.

Even if it is true, there is reported shortage of IT talent in the U.S. that may drive up salaries anyway.

Mentioned in this interview was a study done by professors at Duke University that showed the quality of offshore workers is not. One of the professors is Vivek Wadhwa who was interviewed on NPR last year when the study was published.

I am going to post a blog about this interesting study of offshore talent very soon.

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I just read a recent article titled Bottom of the Barrel in Newsweek about the problem of forced labor in Asian countries where many computer products are made. Poor people are being duped into taking manufacturing jobs in wretched conditions with little pay. It’s basically slavery.

The criticism that “low rates = slavery” is sometimes leveled at offshore software development too. Displaced American programmers may feel that to work at the rates that some offshore vendors must mean their offshore programmer replacements must be earning only slave wages.

But it’s not true. Rising salaries in India are the evidence.

Anyway, software development is a creative process. You can’t get it done with an uncooperative and unmotivated programmer chained to a computer.

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