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Outsource This!
By John F. McMullen
We are besieged constantly with talk of job loss through outsourcing to foreign lands.
The press, TV, and radio constantly bombard us with stories of IBM, AOL, American Express,
50 State governments, and many others moving help desk and programming tasks to India, China,
Ireland, and other foreign countries. Senator Kerry referred to CEOs moving work offshore as
"Benedict Arnolds" while an advisor to President Bush took great heat for calling
outsourcing a normal development of free trade " and the political conventions haven’t
even been held yet.
Many questions arise from these stories -- What are we to make out of all this?
Job loss is real - the economy is on its way back yet job growth is negative and we
have never in the US had a robust economy without job expansion. What are the chances
of our jobs being outsourced? What can we do to protect our livelihoods?
Before considering these important questions, it is well to understand some background:
- Outsourcing is not new in the information technology area (in fact the term "outsourcing"
predates the terminology "information technology"). IBM’s Service Bureau Corporation (later sold
to Control Data as a result of the anti-trust settlement) was an early player, ADP and EDS followed
soon after and there are service bureaus and service organizations that handle data center activities,
telecommunications, web hosting & services, and program development for hundreds of thousands of
US corporations and organization.
- The rapid development of telecommunications technology and such innovations as
virtual servers has accelerated the use of such "third parties". Additionally,
the geometric increase in computer power (see Moore’s Law) and development tools has allowed
new service bureaus to do things at much lower rates that be gotten with "in-house" slightly
older systems (whose conversion to newer less expensive, more maintainable technology would be
very expensive).
- The outsourcing referred to above has usually been offset by the continuing expansion of
technology related jobs. While those who lost jobs were not always the ones who filled the new jobs,
there was continual expansion of opportunities within the high-tech area. This expansion ended with
the confluence of the "dot-com crash", 9/11, and the Microsoft suit.
- The outsourcing to which Senator Kerry refers is the "offshoring" of work "
outsourcing to foreign countries; a fairly recent phenomena in comparison to overall outsourcing.
The rapid movement in this area has been brought on by another confluence " much cheaper wages
in foreign countries; great improvement in communications infrastructure in foreign countries; great
expansion of technologically competent workforce in foreign countries; lowering of world wide trade
barriers; opening, in various degrees, of formerly closed societies such as China (with the biggest
workforce in the world); and the increased globalization of companies formerly thought of as
American "these companies not only wish to lower expenses by off-shoring;
they wish to expand global customer bases while competing with foreign companies who already have
low expenses.
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