END OF JOB used to signify the end of processing for some batch job, but perhaps not any more. Now it would be better used to signify what has happened to many IT and telecommunications jobs in the current boom of outsourcing.
Because far from being a short-term product of the heady days of Y2K fixes and the internet boom, outsourcing is well and truly here to stay.
What started as outsourcing within the boundaries of a country has now increasingly moved offshore as the business benefits have become more apparent. As communications have improved, more and more governments are supportive of efforts to provide outsourcing because of the income it generates for their countries.
And it truly looks like outsourcing might become a great leveller of nations, raising the standards in most and perhaps lowering it a little in others.
I am sure that not many people would have any philosophical disagreements with the notion of others raising their standard of living, but I wonder how many IT workers in the USA, Western Europe and Australia have been truly happy when they were forced to give up their jobs because their work was being moved to a country with lower costs.
This situation applies to a range of IT workers from those who assemble hardware, to those who cut code, test software and even those who manage systems on a day-to-day basis. In short, if you are not involved with face-to-face situations with users or customers, then chances are that your job is a candidate for outsourcing.
The benefits of outsourcing are difficult to deny. Lower costs are a prime factor and just how low can be gauged from an Aberdeen report from July 2002. They said "An IT worker who earns $63,000 per year in the U.S. earns approximately $4,750 in China, $5,850 in India, and $6,550 in Russia." Of course one should be a little cautious about such comparisons because salaries have fallen in the USA in the last year or two, nonetheless the comparisons are interesting.
Other factors are the technical expertise, lower time-to-market -- usually because additional software engineers can be thrown at the problem -- savings on the replacement of staff who typically stay less than 1 year in US companies, and the ease of not renewing a contract compared to trying to get rid of permanent staff.
Some outsourcers claim that they can offer special technical expertise, not only in modern skills but in the hard-to-find skills of supporting older computer systems. There is also the benefit of flexibility because outsourcing allows a customer company to reassign its resources - money and staff - to other projects. Of course the prevalent argument a year or two ago was that outsourcing could overcome the shortage of skilled staff, but that shortage, if indeed there was one, certainly no longer exists.
Most people will be well aware of India's dominance in IT outsourcing. It has provided such services for over 10 years and is now happily moving into other areas such as back-office functions, such asauditing, accounting, payroll, human resources, and even into medical and legal services. India is however just the major player among nations vying for business.
Across the rest of Asia, you can find outsourcing providers in China, Malaysia, Pakistan, Nepal, Bangladesh, Sri Lanka, Philippines, Indonesia, Singapore, South Korea, Thailand and Vietnam. All are saying that their IT professionals are paid less than equivalent people in the USA; India says 50% to 70% less, and Vietnam even less again.
If you prefer to look to Eastern Europe you will find a similar story there. Outsourcing to Russia is rapidly increasing but likewise other countries in that region -- Ukraine, Belarus, Armenia, Lithuania, Romania, Bulgaria, Czech Republic, Hungary and Poland -- all have outsourcing services to offer. In recent times Estonia, Latvia, the Slovak Republic and Slovenia are also starting to get involved.
Or maybe the outsourcing providers in Central American, Caribbean or South American can do the job. Argentina, Uruguay, Brazil, Chile, Panama, Costa Rica and Mexico all have services to offer, as do Caribbean countries such as Barbados, Jamaica, Dominican Republic, Trinidad & Tobago, Grenada, and St Kitts & Nevis.
Canada provides outsourcing services to the USA, claiming its costs are about 50% less than US, that property is readily available and that it has a greater cultural compatibility with the US than do many other outsourcers.
In the African continent and just north of it into western Asia, you can find outsourcing providers in South Africa, Madagascar, Mauritius, Israel, Egypt, Palestine and Dubai. And in the Pacific region you can find outsourcing services in Fiji and Australia, although the latter is mainly within that country and basically unable to compete on cost with the nearby Asian countries.
The range of outsourcing services in these various places runs through data-entry, call-centre operations, software design, software coding, testing, integration, day-to-day system management and so on. Some countries are still at the data-entry stage but various providers in other countries are quite advanced.
India stole a march on the rest of the world, and now those other countries are trying to catch up, each trying to find a niche to exploit. Most countries highlight their low costs but for China it is also the sheer number of IT workers and university IT graduates; for Russia it is technical programming and the availability of a wide variety of engineers and scientists; for some countries it is proximity to US markets, for others it is multi-language skills and even favourable alignment of time zones between themselves and their major customers.
Skills in spoken language seem to be a minor handicap rather than a barrier to outsourcing. In the IT world most technical information is in English and it is just sometimes that deficiencies in the conversational use of that language catches people out.
And it is not necessarily only English that outsourcing providers cater for, Central American and South American countries are fluent in Portuguese and Spanish and they claim that their call-centres can operate at lower costs than Europe. Indian outsourcers have established major contacts in the Benelux countries and with Germany too. Many Russian professionals speak two other European languages and this makes it easy to deal with other countries.
The old barriers have broken down. Distance, political systems and language have largely ceased to matter. In many countries we also find professional associations working with the governments to smooth the path of this global industry and improving their telecommunications systems or granting tax breaks or providing other inducements.
These service providers are drawing customers from all round the world. This brief summary - culled from service providers - will give some flavour of the global nature of the business.
Nortel, IBM, Sony and networking company Cisco have worked with Vietnamese outsourcers but fellow communications companies Lucent have used Russian outsourcers. Microsoft, Boeing, Dell, Motorola and Intel set up joint ventures in Russia, and Colgate-Palmolive and SAP were just clients of Russian outsourcing. Swisscom mobile phone division also dealt with Russians but Switzerland's national airline went in the other direction and had work done in South Africa.
In contrast, Delta Air Lines and British Airways have outsourced to India, as has the UK's Prudential Insurance. US companies HP, Intel, Amazon, Microsoft, Novell, Oracle, GM, Ford, Sears and GE, and many others have outsourced to India. The Bank of America have work done there, as do Australia's ANZ Bank, Deutsche Bank, Citibank and several UK banks, but other European banks have worked with Eastern European outsourcers, particularly in Romania.
Japanese giants such as Fujitsu and NEC, along with many international banks, have worked with Chinese service providers while Intel, Motorola, Nokia, IBM and Nortel have been joint-venture partners. Joint ventures are common while the Chinese develop expertise in management areas.
Joint ventures are also common in the Caribbean. Various US and UK companies have call-centres in Barbados, and that is also the location of data entry for a number of US and Canadian companies.
It's all become so international that many outsourcing companies, including some from India, have sites in several different countries and they benefit from low costs there or access to nearby markets.
The outsourcing business is growing rapidly and is expected to continue to do so. It is true that there have been some cases of dissatisfaction often due to problems with communicating the precise requirements to those developing code or modifying those requirements over time as IT projects are wont to do. But by and large, the customers seem more than happy with the outsourcing services.
Market research organisations and industry observers all predict a booming future for offshore outsourcing.
In November last year, Forrester Research claimed that nearly half of all CIOs use offshore providers today, and two-thirds plan to send work overseas in 2003.
It was claimed here, that in the year ended 31 March 31 2002, software and back-office services outsourcing accounted for nearly three per cent of India's gross domestic product, up from 0.3 per cent three years earlier, and that it was expected to increase to seven percent in 2008, worth some $18.3 billion.
In Eastern Europe the situation is no different. Outsourcing to Russia is expected to grow exponentially and this growth is not just n the bigger countries. In 2000, the Romanian software market was worth about $175-$200 million, of which $40 million was exported. It has been estimated that by 2005, the software market in Romania will grow to $1.5 billion. (See here )
Late in 2002, CIO Magazine undertook a survey of IT executives in the USA and in six European countries (here). The results showed that across a range of six IT functions, more than 57% will outsource about the same amount of work in 2003 as they did in 2002, and about 14% will outsource more. Eleven per cent will outsource less and the remaining 18% were undecided. Most US respondents gave the reduction in costs as a primary reason but Europeans were looking more for additional expertise.
This is what many IT professionals are faced with today, regardless of whether they work in countries that are outsourcing customers or for the outsourcing providers. The tasks are steadily migrating to the lowest cost countries that are capable of doing the work. If you have a role that involves face-to-face contact with users, then your job may be safe for a while yet.
Likewise, if you have specialised skills or work in areas such as national defence -- that cannot be outsourced -- then your job is relatively secure. For the rest of the IT industry, the lower levels are looking particularly vunerable and the nature of management roles is under threat.
In Part Two, we will look at the reactions of governments, why they should be concerned about the growth of outsourcing and the consequences for society and the individual. µ
