Recommended Reading



Source: Ericson, Jim. “Forrester updates offshore job numbers.” Line56. 17 May 2004.

Comments: This article from the e-business daily Line56 outlines some very recent statistics released by Forrester regarding rates of offshore outsourcing. The article talks about how many white-collar IT jobs have moved out of the U.S., and discusses some projections for off-shoring rates in the near future.


Political History of Offshoring

 Source: Yergin, Daniel. Cran, William. “Commanding Heights: The Battle for the World Economy.” Corporation for Public Broadcasting, InVision Productions, Heights Productions Inc. 2003

Comments: This three-part documentary has been instrumental in my understanding of global economic policy in regards to protectionism versus free market theories. It clearly outlines the development of free market thought from its inception in the early twentieth century by Friedrich Von Hayek. There is little discussion of the offshoring of computing jobs. However, the documentary provides a great conceptual basis for why offshoring occurs.


Economics Behind Offshoring

Source: Digital Economy 2003.” US Department of Commerce. Economics and Statistics Administration. 2003.

Comments: This report describes the economic state of the US IT industry. The news is positive for revenues generated by IT firms. However, it shows that there has been little job growth in the sector. I believe that this minimal job growth is in part due to offshoring, but also due to the natural cycle associated with recently busted economies. When a recently busted economy starts to rebound, job growth is one of the last things to take off.

Source: Gross, Grant. “US Government Report: IT Industry Growing Again.” ComputerWorld. December 17, 2003.

Comments: This article does a great job of breaking down the important points of the US Government report on the Digital Economy. Perhaps the most interesting point is that Kathleen Cooper, the Commerce Department’s undersecretary for economic affairs, believes the job freeze in the IT industry to be over.

Source: Outsourcing Creates Jobs, Study Says.CNN Money. March 30, 2004.

Comments: This article does a great job of explaining the impact outsourcing has on macro economic indicators like inflation, productivity, and interest rates and what those indicators mean in terms of overall job creating within the US.

Source: “The New Geography of the IT Industry.” The Economist. Business Section. July 17, 2003.

Comments: The Economist has run several articles related to offshoring IT jobs (slightly bias towards free market capitalism, but otherwise an excellent source). Their theory is that innovation has slowed tremendously due dry venture funds and a skeptical public post the dot com bust. As a result, software companies are looking abroad to reduce labor costs. The Economist argues that the savings from offshoring are in excess of 30% even after infrastructure is built and the workforce is trained.

Source: Pink, Daniel. “The New Face of the Silicon Age: How India Became the Capital of the Computing Revolution.” Wired Magazine. February 2004

Comments: This article provides interesting statistics (for example, the average programmer in India makes $8,000 per year while in US they make $70,000).

Jobs Typically Shipped Offshore

Source: Calbreath, Dean. “Exporting work.” The San Diego Union-Tribune. April 4, 2004.

Comments: This article explains some of the basics on offshoring and how it applies to the San Diego area, and also discusses the effects that offshoring has on specific jobs. One interesting point is that the least vulnerable jobs are those require face-to-face contact with customers.

Source:Migration of IT Jobs into Emerging Companies.” TECHNOCompétences. January 22, 2004.

Comments: This article discusses trends in offshoring in the software industry, which began with call centers and has extended into programming, systems maintenance, and other jobs. It also mentions key issues that must be addressed to stem the tide and keep up software innovation in the US.

Source: Tansey, Bernadette. “Testing the offshore waters Biotech firms experiment with moving work overseas.” April 18, 2004.

Comments: This article discusses how the BioTech sector, which many analysts predicted would grow significantly and help offset the job losses in IT, is itself beginning to offshoring and increasing amount of its contracts.

Source: Thottam, Jyoti. “Is your job going abroad? February 23, 2004.

Comments: An interesting snippet: once a person's labor can be reduced to a contract, it matters little whether the contract is filled in India or Indiana; the only relevant issue is cost. This article discusses they types of jobs that offshoring affects the most and the reasons for that.

Source: Vaas, Lisa. “Offshoring Eats Away at IT Pay, Study Shows.” eWeek. January 13, 2004.

Comments: An interesting point about this article was that it discussed the way that offshoring in one sector of the software industry affects other sectors. It also lists several jobs that aren’t being offshored, but instead have continued to see growth through 2003.


Offshoring Failures

Source: Cohen, Beth. “Network services: to outsource or not to outsource?CrossNodes.
26 Feb 2003.

Comments: This article weighs the advantages and disadvantages of outsourcing, providing a concise comparison of the most commonly cited advantages and disadvantages of moving operations abroad. Although the two-part article concentrates specifically on network services, its arguments apply equally to other areas of IT as well such as software development. The author concludes that for companies that already have high-quality technical and support services in place, the benefits of offshoring are far less clear than they are for companies that require a jumpstart in these areas.

Source: Gouge, Ian. Shaping the IT Organization: The Impact of Outsourcing and the New Business Model. Leeds: Springer-Verlag, 2003.

Comments: In Shaping the IT Organization, Gouge argues that “IT functions are poorly aligned to both manage [external] relationships and rise to the challenges that outsourcing offers.” In Chapter 5, Gouge highlights challenges to IT managers who undertake outsourcing arrangements, such as a loss of control and third parties who “promise anything and make unrealistic claims about their capabilities.” While his arguments are directed at outsourcing in general, many can be applied to offshore outsourcing in particular. Additionally, Gouge argues that often-overlooked aspects of management and risk erode some of the benefits that managers expect to accrue by outsourcing.

Source: Hagg, Leslie. “Offshoring backlash rising.” CNN Money Online. 12 Jan 2004.

Comments: This article describes a rising backlash against offshoring, both in public opinion and in legislative action. Specifically, it describes a sudden public outcry that has prompted a fierce legislative debate, even though the practice has been continuing steadily for years. Although this is not specifically addressed in the article, the widespread protests could also spell bad press for companies known to offshore en masse. The fact that offshoring could be highly restricted in the future—particularly if the November elections usher in a new administration—signifies one possible explanation for why some CIOs are hesitant to invest heavily in a practice with an uncertain future.

Source: Hof , Robert D. and Marc Andreessen . “Outsourcing isn’t ‘a zero-sum game.’BusinessWeek Online. 1 Mar 2004.

Comments: This BusinessWeek cover story features an interview with Marc Andreessen, a cofounder of Netscape Communications. This champion of offshore outsourcing argues that in the long run, the practice will lead to job creation and faster economic growth in the U.S. Rather than simply displacing workers, he argues that offshoring will serve to replace lower-value IT jobs in the United States with higher-value jobs in areas such as systems and applications development. Andreessen cites a common argument that new industries and job descriptions will emerge in the States, as jobs moved offshore “free up American programmers to build new systems, new applications, new Web sites.”

Source: Khosrowpour, Mehdi. Managing Information Technology Investments with Outsourcing. USA: Idea Group Publishing, 1995.

Comments: Nine years is a long time in the IT industry. However, it’s noteworthy that many of the same questions that outsourcing raises today also applied in 1995, when “IT outsourcing” simply meant transferring operations to a third party (without the connotation of moving jobs offshore that it carries today.) Managing Information Technology is a compilation of seventeen essays that include “The Real Costs of Outsourcing,” an argument to carefully consider “the emotional costs that employees pay and the productivity cost a company risks,” as well as four essays evaluating the success of outsourcing and practical case studies.

Source: Robinson, Marcia and Ravi Kalakota. Offshore Outsourcing: Business Models, ROI and Best Practices. USA: Mivar Press, Inc., 2004.

Comments: Essentially a guidebook for managers and corporations interested in integrating offshore outsourcing into their IT cost structures, Offshore Outsourcing provides a comprehensive breakdown of what setting up operations overseas really entails. Particularly useful is one section that makes explicit contrasts between the realities of offshore outsourcing and widespread assumptions that imagine offshoring to be more useful than it actually is. Although the book is fundamentally in favor of offshoring when it fits into the context of one’s business, it provides a realistic explanation of the financial, communications, and complexity hurdles that companies must be prepared to deal with. Noting that “costs add up even when offshoring is done right,” Offshore Outsourcing makes a compelling case that that offshoring isn’t for everyone.

Source: Teslir, Basil. “Outsourcing IT development: advantages and disadvantages.” Intetics Co. Web Space Station.

Comments: This article explains some of the advantages and disadvantages of outsourcing alluded to in other articles in more detail. Specifically, this article was selected because it provides a concise but thorough summary of the primary disadvantages of outsourcing all in one place. Loss of control, poor quality products & services, and offshore service providers who follow their own agendas can be obstacles to progress, and the article also provides useful insight on the large percentage of companies unwilling to revive offshoring programs. Several sub-issues relating to the pervasive problem of communication are also discussed. For companies looking to jumpstart the efficiency of their IT programs, to cut costs effectively without running into the same problems that plagued the company back home.


Impact of Offshoring Abroad

Source: Chandrasekhar, C. P. and Jayati Ghosh. “Outsourcing for Development.” Dec 3rd 2003.

Comments: Offering a frank analysis of the outsourcing trends and their impacts upon economies of the technology leaders and developing countries, this article seems to suggest that outsourcing and digital relocation is not a sustainable or optimal strategy in the long run. The authors question whether developing countries can really develop outsourcing industries large enough to have a significant and long-lasting positive economic impact, basing their analysis on significant statistical data and well-reputed sources.

 Source: Hafkin, Nancy and Nancy Taggart. “Gender, Information Technology and Developing Countries: An Analytical Study.

Comments: This is a very interesting look at the burgeoning Indian outsourcing industry has affected women’s roles in the labor force. In general, the article finds that women have been excluded from jobs in the IT industry as they have increased in complexity and requisite skill level. As such, the new industry is not substantially changing the division of labor, but developing its own divisions analogous to those in traditional labor.

Source: Primo Braga, Carlos A. “The Impact of the Internationalization of Services on Developing Countries.”

Comments: Mr. Primo Braga discusses how the global market has changed due to the greater share of intangible resources (services), and how this has provided greater opportunities for underdeveloped countries to enter expanding markets. Because these markets require relatively less capital, they offer a footstep into greater economic development for poor countries.

Source: Mitter, Swasti. “Offshore Outsourcing of IT Enabled Services: Implications for Women.”

Comments: Mitter discusses her generally optimistic view of the, albeit limited in scale, impact of the IT employment growth in developing countries. She points out that although women are not on an equal footing with men, they are gaining unprecedented opportunities to earn relatively high salaries with moderate skill levels.

Source: McKinsey & Company. “New Horizons: Multinational Company Investment in Developing Economies.” October 2003.

Comments: Mr. Primo Braga discusses how the global market has changed due to the greater share of intangible resources (services), and how this has provided greater opportunities for underdeveloped countries to enter expanding markets. Because these markets require relatively less capital, they offer a footstep into greater economic development for poor countries.

Source: Homepage of one of the largest Indian software outsourcing firms.

Comments: This expansive website provides insight into how the outsourcing companies view themselves and the entire process: “ Offshore outsourcing is simply moving work from high-cost, developed countries to low-cost, developing ones.” Companies like Mastek show that the Indian software industry really is thriving, and has produced multi-million dollar companies very similar to those in Silicon Valley . Particularly interesting is the section describing Mastek’s efforts at improving local Indian communities.


Is there a Job Shortage?

Source: The Economist defends offshoring.” 23 February 2004.

Comments: This article explains how offshoring will not decrease the overall level of employment in the software industry, but instead will just change the pattern. It also discusses how the perception of the disruption that offshoring has caused is exaggerated, estimating that more jobs are lost every quarter by job-churning than will be lost due to offshoring in the next ten years.

Source:The Great Hollowing-out Myth.” The Economist. February 19, 2004.

Comments: This article discusses how, although America has lost a great deal of jobs in the last few years, the majority of the losses are cyclical in nature and that the creation of new jobs will overwhelm the destruction of old jobs by a large margin.

Source: Matloff, Dr. Norman. “Debunking the Myth of a Desperate Software Labor Shortage.” December 9, 2002.

Comments: This testimony for the US House Judiciary committee argues that the only shortage is for cheap labor. Its main points are that wage increases are low, and that employers only hire approximately two percent of their software applicants. As discussed in class, the shortage is not for any programmer, but only for good programmers.


Is Outsourcing Inevitable?

Source: The Associated Press. “Study: Outsourcing tech jobs a plus.” March 29, 2004.

Comments: This column suggests that although some U.S. companies will suffer in the short-term, the longer-term effect on the U.S. economy will be positive. Thus, American companies will actually benefit from outsourcing, as long as they survive the earlier price-slashing phases.

Source: Kenton, Christopher. “The Changing Face of Offshore Programming.” BusinessWeek Online. 5 Jan 2004.

Comments: Kenton suggests that although U.S. IT industries cannot at present compete with offshore companies on price, U.S. companies maintain the quality advantage. More importantly, though, he notes the decreasing costs of U.S. software development and increasing prices of outsourcing as foreign industries become better established. Finally, he discusses the hidden costs to U.S. companies of splitting up projects for outsourcing.

Source: Wiggins, Dion and Diane Morello. “Outsourcing backlash: Globalization in the knowledge economy.”

Comments: This article elaborates on the rapidly changing outsourcing industry. The author’s chief argument is that the global market will normalize and outsourcing will fail to be a long-term practice: a shortsighted but interesting argument.