State CIOs Don't Offshore Much--But Many Would Like To

Panel members at the National Association of State CIOs midyear conference say they actually outsource very little work to vendors who use offshore employees--but mostly because of politics, not economics.
The trend toward outsourcing IT work to countries such as China and India conjures up images of the desolation and joblessness that took hold of America's manufacturing industry a few decades ago. While IT workers seem powerless to keep their private-sector employers from looking overseas to cut costs and pad profit margins, as citizens, these IT workers appear to have greater influence over public-sector use of the offshore model.

At a global IT sourcing roundtable at the National Association of CIOs' midyear conference in Chicago, much of the discussion between IT vendors and public-sector CIOs centered on the need for the vendors to meet customer demand for cheaper services through the offshore model, while elected officials struggled to find work for their displaced IT-worker constituents. Yet, when the panel's state CIOs--from Maine, Massachusetts, Michigan, and New York--were asked how much IT work they're actually outsourcing to vendors who use offshore employees, the answer was very little.

With the exception of Massachusetts' 2002 decision to outsource the development and implementation of its Web-based retirement system for the state's teachers to Tata Infotech, states on the panel made little use of offshore outsourcing.

The lack of state-level offshore outsourcing is more a function of politics than economics. Massachusetts CIO Peter Quinn said Tuesday that he could do more with fewer resources if he had the green light to outsource more government work to service providers who hire talent in lower-cost regions of the world. "The cost of government is not sustainable," he said.

Michigan CIO Teresa Takai agreed that the use of offshore outsourcing for low-level IT work would help her gain efficiencies, but cautioned that outsourcing is not a good political move in states such as hers. Having lost so many manufacturing jobs over the past few decades, Michigan residents are leery of any company that outsources work to foreign countries. It doesn't matter to some residents whether the state is outsourcing low-level call-center jobs or high-end programming jobs, she said, adding, "To them, jobs are jobs."

Takai suggested that offshore outsourcing be examined from a number of angles, including what offshore outsourcing means to local jobs and whether or not her actions would encourage vendors to make greater use of the offshore model. Still, she said, Michigan doesn't have any policy that discriminates against companies that use offshore talent.

Vendors and service providers present on Tuesday's panel, including BearingPoint, Ciber, Covansys, Internet Security Systems, and Unisys, defended the practice of offshore outsourcing by saying that customer demands for lower prices and shareholder demands for higher profit margins drive their business practices.

Another motivation for vendors is the search for talented young IT professionals, who are pouring out into the job markets in places such as China and India, while the United States produces fewer and fewer workers interested in computer science, said Larry Herman, managing director of state and local government and education for service provider BearingPoint.

Conference attendees generally weren't in favor of laws and executive orders as ways to stifle the use of offshore IT talent. Instead, 66% of those polled during the roundtable responded that the issue should be worked out either by providing companies with tax incentives to keep work in the United States or by letting market forces determine the flow of IT work and jobs.