Study: Offshore Outsourcing May Not Cause Flood Of Lost Jobs

An IDC report says offshore delivery of IT services will continue to rise, but openings in some areas will at least partially balance lost jobs in others.
Lost jobs and the decline of American IT may not necessarily follow from the rise in offshore outsourcing. That's the finding of a new IDC study, "Offshore Services: The Impact Of Global Sourcing On The U.S. IT Services Market." According to the report, offshore delivery of IT services will rise as much as 23% by 2007. While this will result in the loss of some jobs--specifically those requiring low levels of skill--the outcome won't be nearly as dire as some fear, says Ned May, program manager of IDC's Worldwide Services research.

"There were a couple of things that were going on the past couple of years that resulted in the shed of a lot of jobs here--mostly the collapse of the technology bubble," May says. "That forced the system to realign itself to the appropriate level, which means jobs were lost. The slowdown in the economy overall furthered that. The jobs that were lost in the past years have been disproportionately attributed to this movement of work overseas."

That said, May expects the offshore trend to continue. "It is substantial, and certainly some jobs will be moving offshore," he says.

But how many is some? In all, 3.3 million over the next 15 years, according to a November 2002 Forrester Research report on the subject. So if IDC is right, expect job losses in that time frame to be somewhat balanced by openings for several million project managers and the like as U.S. IT positions clamber up the value chain to avoid extinction. The Forrester report suggests as much, noting "there's already a shortage of staff that can manage projects internally, let alone halfway across the globe."

An October report issued by research firm Evalueserve and Indian trade group Nasscom (the National Association of Software and Services Companies) frames outsourcing as a demographic necessity. In other words, the United States will be losing people rather than jobs as the population ages. The result, assuming growing GDP, will be a demand-supply gap of 5.6 million jobs by 2010. Industries facing a shortfall will include IT and health care.

It's a trend May readily acknowledges, noting the decline in qualified IT professionals. "Here in the United States," he observes, "we're not producing that many graduates."

The jobs issue as he sees it really depends on whether one considers 2000 or today as the appropriate industry baseline for IT employment. Says May, "Depending on which of those starting points you choose, as you look out to 2007, you come to a much different conclusion."

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