“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  Fred said he had “a talk” with the student and the project inquiry was withdrawn.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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In the last few weeks I attended high school and college graduations for two of my children and then my own 30-year college reunion. For the graduates, it is a scary and invigorating time for looking ahead and setting new goals (right kids!?). At my reunion it was a time of looking back over the past. For me looking back included some regrets, some things I would rather not remember and poor recollections of people and events, alas, that I have forgotten (you’re getting old Dad!).

Most goal setting exercises also recommend you look back, but from the perspective of several years in the future. For example, imagine you are three years in the future and looking back at your life with a great deal of satisfaction and a feeling of accomplishment. Then ask yourself, “What are the things that happened to make you feel that way?” These are then the goals you should aim to accomplish – new home, new relationship, new business, whatever.

How about you? Have you set good goals for yourself and your software business? In 2011, will you look back and say you accomplished all you set out to do?

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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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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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An article in Global Services website says the Offshoring Trend May Reverse mainly because of the decline of the dollar’s value. Clyde Prestowitz, President of the Economic Strategy Institute, keynoted at the Global Services Conference 2008

Prestowitz says that Tom Friedman’s concept of world “flatteners” is too simplistic.  Improved global communications and a dynamic foreign exchange market that has seen recent dramatic declines in the value of the dollar have an impact on globalization and the decisions companies are making.

“Tom uses the concept of flatteners to give a scalar view of the globalized world whereas Clyde uses the concept of asymmetries to give a vector view borne out of the direction of international trade movements.”

If the dollar value declines by 50% then Prestowitz says, ” Most of the business arrangements around the world will change; the dollar would be replaced by some other as the world currency…”

What will happen to the value of the dollar over time? It depends on which crystal ball you look in. Perhaps the best thing to do is use existing financial tools to guard against wild swings in the dollar’s value.

Silicon Valley Bank is presenting a series of webinars on foreign exchange and strategies for foreign exchange best practices. The tools of foreign exchange options and contracts may be necessary to protect your interests when using a significant number of global software development resources with a partner or at your own offshore operation.

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Bill Gates was interviewed on NPR today about the limits on the number of H1-B visas issued by the U.S. Gates says the U.S. cannot attract the best talent to come work in the U.S. Microsoft and other U.S. companies are forced to hire these smart workers offshore.

I agree. But so what?

Gates says that ultimately, hiring workers offshore makes the U.S. less competitive.

I disagree.

America will continue to compete through innovation.  The challenge we face is learning how to use this global offshore talent as a resource to implement these innovations.

In other words, you can dream up an application for software without being a programmer. The trick is to communicate with your programmers what the software should ultimately do. This was a challenge even when the programmers were in the same room.  And it still is at many companies.

Companies that are importing programmers using the H1-B visa suspect that they are being trained here and then sent back to the old country where they will continue working but at a lower wage. In other words, they are taking the job back with them.

That seems like a far-fetched scheme when you can hire programmers offshore to begin with already.

To avoid the H1B visa limits, Microsoft has opened an R&D facility in Canada which has no such limits on importing foreign born talent.

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It’s easy to run into many hardworking people of Mexican origin in California. Mexico is a large and diverse country with a several great universities. Mexicans are also coming to the U.S. for high-paying white collar jobs in addition to the manual labor they are famous for.

I heard this story on the radio yesterday that tells how some of them are also becoming high-tech entrepreneurs.

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The dramatic rise in the value of the Indian rupee compared to the U.S. dollar is remarkable. The Economist magazine describes it as the uncomfortable rise of the rupee, but the reality is the value of the dollar is dropping relative to several currencies.

The impact on software development in India has yet to be completely felt. Blended rates for programmers working on a team seem to be holding steady at around $20 per hour (or $3,200 per month). Consequently Indian outsourcing companies are becoming less profitable.

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