March 1, 2006
Outsourcing key functions, particularly when they're taken offshore, has always been a tricky business. Whether it's King George III's outsourced army, the Hessians, taking a pounding during their offshore adventures in the 1700s or Dubai's controversial attempts to become an offshore manager of several U.S. port operations, there's usually more than meets the eye, more than simple economics or business practices.
In the case of offshoring IT, myth has largely trumped reality—such as the myth that IT employment in the United States is down significantly, due to offshoring, or that our country's overall position as an IT powerhouse has been permanently threatened by the shift to countries such as India. And then there's the biggest myth of all, one that a CIO passed on to me at a recent lunch meeting: The office of the CIO is "next." My CIO friend, stone-cold sober at the time (it was a three-ice-tea lunch, no martinis), opined that his job was soon slated to become offshored, along with his budget and staff. Luckily for those in search of a sane view of IT outsourcing, the Association for Computing Machinery recently released an exhaustive study of the IT outsourcing/offshoring phenomenon. Hidden in the ACM's voluminous study are some reassuring words for those who think that CIO really means "career idling offshore." The ACM's first reassuring data point comes from an analysis of IT employment in the U.S. between 1999 and 2004. Guess what, doomsayers: Overall IT employment is up by 3.8%. Only two categories, computer programmers and database administrators, were down—which could be a reflection of improvements in software development and database technology as much as anything else. A second data point comes from an analysis of research spending in IT. Research spending is not only an indicator of overall innovation; it's also a leading indicator of where that innovation will be applied first. And the data shows the limited influence of the offshore countries that dominate IT outsourcing: One third of all IT research takes place in the U.S., and another third in Western Europe and Israel—which as regions continue to represent the lion's share of global IT spending. The final data point comes from my own informal survey of CIOs whose companies outsource some of their software development to offshore partners: The result looks better on paper than in reality. All too often, one CIO told me, quality and other issues render offshore adventures much more interesting as a tax write-off than as a valued means of achieving corporate IT goals. In the end, complacency is probably the biggest threat to any CIO's job and budget. If what you're doing as a CIO provides no competitive value to your company, watch out—you're a candidate for outsourcing. But if you're staying ahead of the curve—by being innovative, keeping quality up, and making a difference in the competitive profile of your company—you can relax a little. Just don't relax too much—you can be sure your offshore competition isn't drinking martinis for lunch either. Feedback question: Tell us whether your offshore software development made you feel like celebrating or like you had a throbbing hangover.
Josh Greenbaum, principal of Enterprise Applications Consulting, has 20 years of experience in the industry as a computer programmer, systems analyst, author, and consultant. His column appears monthly.
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