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1 in 4 IT Jobs Going Offshore, Says Gartner; One Major "Offshoring Failure" in 2004 Predicted

1 in 4 IT Jobs Going Offshore, Says Gartner; One Major "Offshoring Failure" in 2004 Predicted

  • Read "Offshoring Offers Opportunities for U.S. IT Troubleshooters"
  • Read "Offshore Outsourcing: Magic Bullet or Dirty Word?"

    Roger Cox, managing VP at Gartner, has been telling silicon.com that a quarter of traditional IT jobs in Western countries will move to offshore locations such as India by 2010.

    The global trend toward "offshoring," in other words, continues to boom in Europe - as elsewhere.

    According to the latest figures from Gartner, outsourcing as a whole is outstripping the IT services market in Europe, growing by 3.1% in 2004 and predicted to rise to 8% by 2007 - "with the offshore element tipped to grow hugely," adds Cox.

    Gartner predicts almost a third of leading European businesses will include an offshore element in their IT plans by 2005.

    According to silicon.com, Cox said "The alarming nature of that headline '1 in 4' figure masks the true story."

    "That 25% is over a long period of time," Cox points out. "And if we turn back to a period of growth then you'll find those jobs could go entirely into growth."

    Gartner also claims, according to the report, that 2004 will see the first major offshoring failure that will lead to a company taking its operations back onshore. Here's how silicon.com's Andy McCue reports what Cox had to say about this:

    Cox said this won't necessarily reflect the bigger picture and has more to do with the politics of offshoring, which will see the backlash against white collar job loss continue during the year.

    "Because it is being hyped up, it has become very political, so any failure will be more visible," he said.

    Cox said offshoring has already proved itself as a mainstream IT business decision but warned against companies looking to use the model to make quick cost savings.

    "The first thing is to get that business alignment right," he said. "If companies are only looking at price and levels of service, they are going to drive it off the rails."

    McCue adds a note about the geography of offshoring: "In terms of favoured offshore locations, India still dominates, with China and Russia trying to break through as genuine alternatives for European companies. Gartner also predicts that the new countries joining the European Union in May will become popular for 'nearshore' outsourcing of some operations, although not on the sort of scale that will pose a threat to India."

  • More Stories By Jeremy Geelan

    Jeremy Geelan is Chairman & CEO of the 21st Century Internet Group, Inc. and an Executive Academy Member of the International Academy of Digital Arts & Sciences. Formerly he was President & COO at Cloud Expo, Inc. and Conference Chair of the worldwide Cloud Expo series. He appears regularly at conferences and trade shows, speaking to technology audiences across six continents. You can follow him on twitter: @jg21.

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    Most Recent Comments
    AnIndianProgrammer 03/19/04 10:06:00 AM EST

    Its understandable that an american IT professional would feel very insecure by this offshoring trend. As an indian computer programmer who has been doing offshore projects for the last 6 years, I can say that I do understand the bitterness that is there towards offshoring. For me and the millions of other indian programmers like us, offshoring has been a boon. lot of money, great career opportunities, awesome projects. There are some negative sides too. working 80 hour weeks is very stressful. our personal life and health really suffers. our employers treat us like trash and our life revolves around the whims and fancies of the american clients. we are willing to work like this, because there are very few other alternatives. desperation drives us to work the way we do. to put this in a philosophical angle, i think this drainage of jobs is inevitable. the world cannot be peaceful as long as there are economic disparities. the quality of life in america and the rest of the world will one day come at par and this is but a step towards that. its unfortunate that this natural process causes discomfort to some and joy to others. life is never really fair!!

    Fran DeVenuto 03/19/04 09:52:50 AM EST

    Let me ask this: If the bleeding of our jobs continue, who do these companies think will be able to afford their products? The third world countries they''re outsourcing our work to? Sure, but they''ll have to lower the price of their goods quite a bit! It will really take a village...

    Doesn''t anyone see this could be the death of the working/middle class in this country? Let''s replace the catchphrase "New World Order" with what it really is, "New World Serfdom."

    Someone 03/19/04 09:52:19 AM EST

    Sam K. Obviously, you are not an American "fellow countrymen". I detect from your poor written skills you
    are not from the United States. Therefore, I''ll take
    your comments as being a bit biased. I''ll also assume
    that you''re making a lot of money by off-shoring because
    you already have contacts in "the eastern company". Have
    you really tried implementing CMM with qualified software
    engineers in the United States? Where do you think the
    idea of CMM came from? If you couldn''t, it''s probably
    because you couldn''t communicate the concepts in an effective way to your software engineers. Please keep your
    biased rhetoric to yourself.

    nick 03/19/04 09:35:47 AM EST

    if a US job goes overseas permanently, how can that help US (the US)?

    Sam K 03/19/04 09:18:25 AM EST

    I am owner of a medium size software development and services company. I wanted to keep my employees here but somehow I am pressurized to outsource and here are my views.

    It has become very expensive to do business in US and to compete with the products/services provided externally in low cost countries.

    profit = costs + margin

    Since we are expensive does not mean that we can pass it to end customer.

    With the medical insurance of a one employee here I am able to get one good engineer in eastern countries.

    Till now we could not implement any CMM like process in offices here but with the help of the eastern company I am able to introduce and perfect the CMM levels within the product development.

    If the productivity of employees here is much more than the others then it justifies the cost. But somehow b''se of several reasons it is not working that way and I am getting convinced day by day that it is not going to improve.

    I am sorry for my fellow countrymen but we have to be realistic and accept the facts.

    Real Issue 03/19/04 09:08:22 AM EST

    One the the big reasons this is happening is due to the fact that the executives of the companies that are outsourcing the work are extremely greedy. The want to save money so that they can get there multi-million dollar bonus. I get many annual reports and all during the downturn their salaries and bonuses were not in line with the "real world". The executives in corporate america need to reform their ways. We should never of had the Enron, Worldcom etc. scandals. It still blows my mind that Eisner will get $100,000,000 when he resigns from Disney. What do the non executives get when they resign? Nothing, then the executives should get the same.

    I am all for capitalism but the rich just keep taking more and the middle class is disappearing. Want proof, just go to any ski area or coastal area and look at the vacation homes.

    IN-HOUSE DEVELOPER 03/19/04 08:49:00 AM EST

    What''s gonna happen is that product blanks will be manufactured outside the US, then they''ll be brought over and used by self-employed programmers to create the final value. Truth is nobody needs corporations to do application programming. Corporations outsource themselves.

    KLK 03/19/04 08:42:36 AM EST

    I wonder if there would be better cost savings if we exported upper management?

    GBG 03/19/04 08:19:03 AM EST

    I believe tariffs should be put in place or the removal of tax incentives to companies moving job offshore should be implemented. This will ?slow? the move and allow the US economy to adjust to this change. The funds raised can help re-train displaced workers. Their markets are not 100% open to the US so while should ours be to them.

    Hadi T 03/19/04 08:01:25 AM EST

    This is not only a US related issue, developers from other countries also experiencing the same issues.

    I am from "GCC States-Persian Gulf" and we are experiencing the same problem and bidding against the same type of competition and we are losing to offshore companies that offer cheaper prices.

    We have tried some different scenarios. We have outsourced some projects and established partnerships with Indian companies in order to be able to offer competitive pricing but guess what happened? In most cases I have spent days and nights trying to fix bugs and struggling to land in a safe ground that satisfy the clients and best meet their needs.

    I have also witnessed discussions about the service quality of outsourced call center and the effects of cultural differences that lead in future to in-depth review of these business scenarios.

    The offshore model will continue to grow but it will be more viable for business to do it through their local IT companies.

    Radu Serbanescu 03/19/04 07:59:03 AM EST

    I'm working in Romania for an american company. As long as I'm paid (let's say 1000$) for the work that an american is payed 5000$, that guy doesn't stand a chance, because I provide the same quality in code and management of development (CMM level 2, for instance).

    I'm thinking that the current trend of US dollar is reflecting the fact that indeed the american economy is producing at a very high price (therefore inefficient), and the global reaction is to balance that by lowering the dollar against the yen and euro.

    So I am positively affected by off shore outsourcing (funny thing we've won a bid for a project for a client against their own IT department).

    Next few years: if the american currency keeps going down, outsourcing will start to reduce as asian and east-european labor will become more expensive (but of course, so will the BMWs :), so americans will have to lower their standards along with their currency)

    Another I/T Guy 03/19/04 07:48:59 AM EST

    Waddaya do if you outsource everything to India, and their political climate gets rocky? Not a stretch, eh? Like, them and Pakistan go at it? Then what happens to all your stuff? You have to start all over an give it to another country? Russia? China? Now THERE''s a couple stable places! Oh, no -- gotta hire back my OWN I/T staff. Guess what? Nobody here does that anymore, cause there''s no jobs or money in it. NOW waddaya do? Bend over.

    Jeff M 03/19/04 07:43:38 AM EST

    I have read that its not just the software industry, offshoring is now having an impact on management, accounting, and of course call center jobs. I think the worst case scenario we are going to push all our high paying jobs to other countries, continue to focus "bettering" other countries as they say, and eventually the US is going to suffer as a result. The only jobs left will be nursing assistant, truck loader, Dr., and other stuff where you have to be onsite. Or its just a fad and nothing will come out of it.

    James White 03/19/04 07:41:49 AM EST

    I am Canadian. Like the Americans and the Europeans, we have been on top of the pile for a long time. But we cannot stay here the way we got here; there are no more "uneducated" countries. Our advantages in technology are gone because we have shared them. We cannot compete because we need to make $100k/yr while working 7.5 hours/day while our competitors would KILL for one quarter of that amount while working 80 hour weeks. We are not inherently SMARTER or more WORTHY, contrary to many opinions.

    There is nothing in "America" (read "Western World") that is better any more. It is just more expensive.

    Why would anyone choose to pay huge sums for a similar product just because "we made it"?

    Microsoft is an American product.. see how we support Bill Gates?

    Hey, I would LOVE to hear Bill''s opinion on this topic! C''mon Bill... Reply

    18-yr I/T Guy 03/19/04 07:41:21 AM EST

    Michael McDonald,
    Yes, you chose the wrong career. Sorry.

    MOkon 03/19/04 07:39:36 AM EST

    Who hasn''t been affected by off-shore outsourcing?

    Obviously, what will happen in the next few years is hard to tell. The future of this type of outsourcing depends on the direction of our economy.

    Off-shore outsourcing has mostly flourished due to the desperation of corporations to cut costs and continue to operate. It''s not coincidental that the country has seen mass layoffs and record unemployment rates during this increase in offshoring.

    When the economy starts flourishing again, survival tactics like these will be less attractive to companies looking to quickly grow.

    I think these days are coming soon

    Michael McDonald 03/19/04 07:33:18 AM EST

    Here is why offshoring is bad. One we are losing jobs that our citizens are capable of doing. Two ummm money, that''s a no brainer. What does this mass exodus of jobs and projects say about the companies who use this practice? What does this mass movement off shore say about our state and federal legislators? Why do they allow this?

    What about IBM being the leader of the IT industry''s biggest sell out to India. I recently heard on NPR that 10 states are creating legislation that would penalize companies that outsource jobs overseas that our citizens were qualified to do.

    People in the US in the IT field tend to be upper middle class and like to vote. So if you hear any legislator promoting this type of bill, support him and get the word out that this guy is out there!!!

    Here is a scary statistic, 14% of the unemployed in the US are IT workers!!! Offshoring is wrong and should not be tolerated. How can we improve the situation in our country if we are selling out to the lowest bidder while our own people suffer? Sometimes you gotta take a stand even if it costs more, show where your loyalty lies and help your fellow American brother. I am about to graduate and enter the IT field and to be honest I''m wondering if I chose the right career. There tends to be a lot of sellouts and instabilty in this field. OK sermon''s over!!!!!!!!

    CoolArticle 03/19/04 07:29:59 AM EST

    There''s a cool article here, "Outsourcing and Offshore Coders: Good or Evil?"

    The author, Adam Nelson, didn;''t just whip up an opinion piece and throw it on the web. He also spent a lot of time responding to people who took the time to post comments on the article he wrote.

    Ian Chode 03/19/04 06:43:37 AM EST

    In the long term, will the cost of offshore outsourcing rise as foreign companies and workers feel that they want to be paid a similar sum to those in the west? So perhaps low-cost offshore outsourcing is a relatively short term phenomenon?

    Reefee 03/19/04 05:03:33 AM EST

    Well, Not quite sure about "what you get for what you pay for applies here", the quality of services in software provided by Indian professionals is of extremely high quality and the fact that the cost is low is not because the quality is low, its because of economics..

    Samuel Santiago 03/19/04 01:51:54 AM EST

    Failures will become evident and management folks will soon realize that the old adage "You get what you pay for" is true in software development as well. An article on InfoWorld summarized this point very well: http://www.infoworld.com/article/04/03/05/10OPconnection_1.html. Its basic premise that I agree with is that software development is inherently difficult. Adding the additional factors of distance, time zone, cultural, and language differences is not going to make development easier, in fact it simply adds complexity.