Outsourcing growth predicted, but impact on workers may be uneven

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April 01, 2003 (Computerworld) -- BOSTON -- Companies increasingly will turn to offshore outsourcing to cut costs and will utilize their in-house technology talent for strategic development and competitive advantage. The IT professionals most threatened by the move are those with so-called commodity skills, particularly programmers.
That was one of the key points raised by a panel of IT executives and end-user CIOs yesterday at a forum held by Mass eComm, a Boston-based technology industry association. The panelists generally agreed that outsourcing will grow, driven by companies' need to reduce cost and remain competitive.
But the impact on workers will vary.
For Gregory Tranter, CIO at Allmerica Financial Corp., a decision to outsource some IT workers saved jobs when the economy soured. The Worcester, Mass.-based company outsourced 220 application development jobs, some to India and to Halifax, Nova Scotia.
That step, which began two years ago, allowed the IT staff to focus on more important business issues, said Tranter, and as the slipping economy forced job cutbacks, "we laid off less because we outsourced."
There's no question, however, that offshore outsourcing will create "a huge amount of short-term disruption" for employees and some companies, said panelist Erik Brynjolfsson, a professor at MIT and co-director of its Center for eBusiness. Education and other support efforts will have to be made to minimize outsourcing's impact, he said.
Offshore outsourcing will also put wage pressure on workers whose jobs aren't outsourced.
"If there is somebody offshore who has the same skills, is capable of doing the same job, then over time the economic forces are inevitable," said Brynjolfsson. "The cost of doing it that way vs. doing it onshore are going to equalize. And therefore, you either have to be able to have a better set [of] skills, or else you have to be wiling to compete at the same wage scale as an India programmer. There is no alternative."
But Brynjolfsson said that outsourcing will help make the economy more productive and that its economic benefits will outweigh the social costs. "There is no question in my mind that an outward-looking strategy is ultimately a winning strategy," he said.
David Ellard, CIO at Hopkinton, Mass.-based storage vendor EMC Corp., said he doesn't foresee outsourcing causing a loss of jobs so much as a shift to different types of IT skills.
"I think what's going to stay in America is innovation," said Ellard. "We have been the innovation driver of all this technology, and I think that will continue to be driven by U.S. workers."
The AEA last month reported that IT jobs have declined by 560,000 over the past two years, from 5.7 million jobs in January 2001 to 5.1 million jobs in December 2002. The high-tech trade association called on Congress to approve an economic stimulus package.
John Glaser, CIO at Partners HealthCare System Inc. in Boston, said that in some ways outsourcing isn't new. "We don't develop our own operating systems; we buy third-party applications," said Glaser. "So all the time we turn to others to do something on our behalf.
"This is another form of that. It's got it's own twist, but it's not that radically different," he said.

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