More Firms Seek Overseas Labor

Skills shortage, need to expedite Web projects drive increase in 'offshoring'

When Internet services firm SeraNova Inc. two months ago suggested that auction site Inc. move some of its Web development to SeraNova's offshore operations, Piyush Gupta,'s founder, president and CEO, was skeptical.

Formerly head of software development at database company Informix Corp. in Menlo Park, Calif., and a self-described "control freak," Gupta's motto was, "You don't let development out of the house." But he was eventually swayed by the cost savings: The same project in the U.S. would cost almost three times as much as overseas. And soon he was armed with a strategy to make offshore outsourcing work without giving up control.

Cupertino, Calif.-based isn't the only company farming some of its technology work overseas. Although companies have capitalized on "offshoring's" time and cost savings for years, analysts and labor experts said the practice has accelerated in the past six months. Efforts to expedite Web projects and the depletion of H-1B visas are forcing firms to seek alternative labor sources.

In the past six months, MaryLu Cianciolo, an immigration attorney in Chicago, heard more than 50 employers express interest in offshoring as the quota for H-1B visas approached its cap. (The U.S. Immigration and Naturalization Service stopped taking new petitions March 21.)

But a provision to a proposed H-1B visa bill could significantly alter some employers' approaches to offshoring, Cianciolo warned.

Many companies have bypassed the H-1B cap by establishing foreign offices. U.S. employers can bring foreign workers, who are the company's employees in those offices, to the U.S. on a transfer visa rather than the H-1B. But employers will no longer be able to go that route if a bill introduced two weeks ago by U.S. Rep. Lamar Smith (R-Texas) is passed. While the bill proposes to remove the H-1B visa cap, it also includes a provision that would force employers to "keep those individuals overseas unless they qualify for an H-1B," said Cianciolo.

Although companies have traditionally relied on offshore talent to perform application development and maintenance work, they are now farming out more sophisticated Internet services, said Cynthia Doyle, a senior analyst at International Data Corp. in Framingham, Mass.

This is the case in India, where "services offered are becoming more complex and cutting-edge and revolving around the Internet," said Doyle. The time zone difference between the U.S. and India lets workers engage in Internet projects around the clock.

Julie Giera, an analyst at Giga Information Group Inc. in Cambridge, Mass., said offshore development has risen more than 25% in the past seven to eight months.

One factor is the skills shortage, Giera said. A study from the Information Technology Association of America in Arlington, Va., estimated that U.S. employers will need 1.6 million IT workers during the next 12 months but that about half of those positions will go unfilled.

Copyright © 2000 IDG Communications, Inc.

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