I've yet to hear anyone state precisely how the President is culpable for the decision making of corporations. Should I continue to wait?
I got a lotta livin' to do before I die, and I ain't got time to waste.
Posted on 08/13/2003 8:20:37 PM PDT by thimios
U.S. Offshore Outsourcing Leads to Structural Changes and Big Impact Gartner
By Diane Morello Vice President & Research Director
As offshore outsourcing ramps up, the dislocation of IT jobs in the United States is becoming real. CIOs must anticipate the potential loss of talent, knowledge and performance.
Many Ramifications With an Outsourcing Decision
In the first half of 2003, the application development manager of a well-known company was frantic. Her staff was near mutiny. A day earlier, the CIO had called an "all hands" meeting and announced that he could save the company $30 million during the next few years. How did he propose to do that? By moving application development offshore to outsourcing vendors. The application developers in the room were stunned. Immediately, they crowded into the office of their manager, all asking similar questions: What does this mean for me? Is my job safe? Will I become unemployed?
That scene is occurring in company after company around the United States, from midsize to large companies, with each decision affecting between 150 and 1,000 people. The movement of IT-related work from the United States and other developed countries to vendors and offshore sites in emerging markets is an irreversible mega trend. Although the United States may feel the biggest effect from this movement, other developed economies, including Australia and the United Kingdom, feel disoriented, too.
The workforce changes that accompany the trend toward offshore delivery - whether offshore outsourcing or offshore insourcing - are structural in nature, not fleeting or temporal. The effect of IT offshore outsourcing on the United States is a harbinger of changes in other countries that pursue global sourcing models. The workforce and labor-market consequences will be substantial.
Three CIO Issues
Three overarching issues shape CIOs' obligations around offshore outsourcing:
As long as new investment in IT remains low in North America and Western Europe, IT offshore outsourcing will yield a displacement of IT professionals and IT-related jobs. CIOs who make ill-informed decisions today will be unable to find or acquire the requisite local knowledge and competencies when IT investment resumes.
Few enterprises would deliberately choose to cede intellectual assets to offshore outsourcing vendors, but some executives fail to envision today which skills, knowledge or processes will generate business innovation tomorrow. Vision, leadership and an understanding of how technology fuels competitive advantage will help CIOs and business counterparts retain core knowledge.
CIOs and other business leaders must be clear about their plans, timing and transition phases for the offshore outsourcing transition. They must develop milestones, timelines and accountability. Moreover, they must communicate honestly and respectfully to keep performance high and defuse employee anger.
Not a Pretty Picture for the IT Workforce
Since 2001, according to the U.S. Bureau of Labor Statistics, more than 500,000 people in IT professions in the United States have lost their jobs. Some were caught in the dot-com bust. Others were laid off by cost cuts, shrinking budgets, a poor economy and a desire to satisfy shareholders quarter by quarter. Now, a growing number of IT professionals and practitioners are having their jobs displaced as IT work moves to offshore venues.
Without a "shot of adrenaline" to the U.S. IT profession - such as an investment boom, a "white knight" industry, new IT-led innovation or new ways of competing globally - the scenario for the IT workforce in the United States and other developed nations looks bleak.
Large U.S. enterprises, vendors and service providers aggressively are investigating or pursuing offshore markets for IT delivery. Combining that interest with minimal new investment, preliminary Gartner analysis - based on the IT Association of America's count of 10.3 million IT practitioners in the United States in 2003 - indicates that another 500,000 IT jobs plausibly may disappear by year-end 2004.
By year-end 2004, one out of every 10 jobs within U.S.-based IT vendors and IT service providers will move to emerging markets, as will one out of every 20 IT jobs within user enterprises (0.8 probability).
Through 2005, fewer than 40 percent of people whose jobs are moved to emerging markets will be re-deployed by their current employers (0.8 probability).
Likely Implications of IT Offshoring
To many CIOs and business executives, the decision to outsource activities offshore is fiscally sound:
The cost, quality, value and process advantages are well proven.
Moreover, at a time when IS organizations are struggling with poor credibility and IT is being scrutinized, offshore outsourcing is becoming a tool for improving service delivery and a source of highly qualified talent in greater numbers.
Finally, the extensive use of quality methodologies among offshore vendors - such as Software Capability Maturity Model (CMM), People CMM and ISO 9000 - enables a degree of assurance that many in-house organizations lack.
Gartner urges CIOs and other business executives not to trivialize the impact of offshore outsourcing on their business strategies, their organizations or their employees. Three areas of concern arise:
Loss of future talent;
Loss of intellectual assets;
Loss of organizational performance.
Loss of Future Talent
Many IT applications and services that are being considered for movement offshore are now run and maintained by seasoned IT professionals in user companies, technology vendors and IT service providers. Offshore movement of that technical work implies a significant displacement of IT professionals who possess organizational memory around IT investments. At the same time, college students in the United States, the United Kingdom and other developed countries see technical work moving to emerging markets, and see family and friends losing technical jobs. Interest in pursuing technical careers will wane.
Why should CIOs care? Because they cannot afford to have domestic IT talent "dry up." When investment resumes and the economy rebounds, CIOs will need a cadre of seasoned IT professionals and eager recruits to "turbocharge" new ideas, new investments and new programs.
Loss of Intellectual Assets
CIOs and enterprise executives must ask: If everything can theoretically be outsourced, what kind of knowledge must we retain or develop? At Gartner's Outsourcing Summit in Los Angeles in June 2003, 39 percent of attendees at the session "Managing Workforce-Related Risk in Outsourcing" cited the loss of critical knowledge as the greatest source of workforce-related risk around outsourcing. Identifying, capturing and measuring core enterprise knowledge is daunting, especially when critical knowledge is often subordinate to technical skill sets.
For now, most enterprises send straightforward technical activities and routine business processes offshore, but the ease with which they can move those activities may numb decision-makers to the need to maintain and protect essential knowledge/
Six areas of core knowledge that are worth protecting include:
Enterprise Knowledge: How do our products, services and systems blend together?
Cultural Knowledge: How do we do things here? What are our beliefs? Who really makes decisions?
Social Network Knowledge: Which roles and which people form critical connective tissue?
Strategic Knowledge: What are our objectives and competitive advantages?
Industry and Process Knowledge: How do our industry, competitors, and customers operate?
Activity Knowledge: Do we know which people are doing what today?
Loss of Organizational Performance
Offshore outsourcing weakens the already-fragile relationships between employees and employers. Whether CIOs are considering, investigating or actively pursuing offshore outsourcing, they should prepare for a bumpy ride. Beneath the sound business reasons for outsourcing lie thornier issues associated with people.
Decisions to outsource - whether offshore or domestic - bring upheaval to IS organizational competencies, roles and makeup. More than 40 percent of attendees at the workforce-related risk presentation at Gartner's Outsourcing Summit considered their organizations to be ill-prepared for the new roles, competencies and skills that accompany an outsourcing delivery model.
Are Enterprises Prepared for Outsourcing? Not Really
The situation worsens with offshore outsourcing, because fewer than 40 percent of the people affected will be re-deployed. During the offshore transition, the degree of uncertainty is so high that it can severely disrupt organizational performance. CIOs and other business executives should hold themselves accountable for sustaining and improving organizational performance levels during the transition. To do so, they should coordinate along several lines:
Identify competencies, roles, people and knowledge that will be retained. To prevent organizational paralysis, CIOs must define the future role and shape of their IS organizations as certain day-to-day activities move overseas. Gartner research reveals that many enterprises retain such critical functions as application design, application integration, client-facing process management, enterprise architecture, information management and high-investment competency centers. In addition, they develop new competencies in service management, vendor relationship management, process management and business integration.
Create a meaningful transition plan. Provide clear timelines and milestones to help people prepare for the changes that offshore outsourcing brings (for example, Milestone A will be reached in six months, Milestone B six months later and Milestone C 12 months after that). At each milestone, certain segments of work or applications will complete their offshore transfer, and the affected people will be terminated or re-deployed. Companies that have a lasting commitment to their people will generally spend time arranging redeployment of their affected employees.
Outline employees' options. Define the options available for affected employees: re-skilling, re-deployment, termination or outplacement. The way in which enterprises deal with employees during the offshore transition will be a lasting testament to the perception of leadership and the reputation of the company as an employer. Executives must hold themselves accountable for communicating clearly, quickly and meaningfully. "I don't know" is an unacceptable answer when the organization's performance and people's livelihood are at stake.
Bottom Line
CIOs and business leaders in the United States and other developed countries should move carefully as they pursue offshore outsourcing.
Until IT investment resumes, IT offshore outsourcing will yield a displacement of IT professionals and IT-related jobs.
CIOs who make ill-informed decisions will be unable to find or develop qualified talent when they need it.
Additionally, CIOs and other business leaders must be clear about envisioning what knowledge, roles, people and skills will fuel competitive advantage in the future - otherwise, they risk losing core knowledge.
Finally, CIOs must communicate clearly, honestly and respectfully about the transition plan, and about the options available to affected employees.
For one thing, we're talking on the development end v. the prduction end. So, two different things. If computers which power our military technology, which provide businesses with fast access to information are being designed and troubleshot overseas, eventually we're going to fall hopelessly behind in technology and be displaced as a world power.
I've yet to hear anyone state precisely how the President is culpable for the decision making of corporations. Should I continue to wait?
I got a lotta livin' to do before I die, and I ain't got time to waste.
While good in principle, it does little to put food on the table or keep a roof over your head during the "bad times."
Replace one word and it's back to the late 70's and the world didn't end in 1979, did it.
Since 1979 the bottom half of the American labor force, non college educated regular guys, has been steadily losing economic ground. Since 1979 the cities of the Northeast were dealt a blow from which they have never recovered because financial services never replaced the good factory jobs of 30 years ago. The world didn't end. It got worse.
You think you can destroy the ability of a non college educated American to have a steady job without the most dire socioeconomic consequences ?
You may be right, but I can't get there yet.
This is far better than the Marxdist internationalism that has infected our current trade policy.
The last time it happened it helped ruin the Republican Party for 50 years.
Another lie. Since its founding in Ripon Wisconsin the GOP has never been out of power for 50 years.
Sure hope history doesn't repeat itself.
Since it never happened how can it repeat. care to state what fifty year period you are reffering to?
Much of this hand wringing is being spawned by unions,
Care to back up that statement I doubt you can find many union memebres or supporters on this oor any other thread on this subject on Free Republic and even if you did so what that has absolutely nothing to do with the correctness or incorrectness of the position,
which you'd think would give conservatives their first clue.
Consevative one who values traditional values. No getting rid of tariffs is the stated position of the NEA, hillary clinton, Jay Inslee and many others. what do you have against the Free Market system in the USA? Why do you want damage done to the USA what differntiates you from such as Howard Zinn, or Noam Chomsky?
Sir you have been shown to be a liar by at least one of your statements.
Nice to see a Free Trader admit it for a change.
People said the same thing about Japan in the 80's. Remember when the Japanese were going to be the new kings of the world, Japan Inc. etc.etc.
Well look what happened.
JMO, the dot com bubble burst and now IT profesionals aren't in as much demand and now they also have competition. Just like the auto and steel workers found out in the late 70's. Of course the unions blamed Reagan for their plight, kinda of like the new IT worker who is facing foreign competition knee jerkingly blames Bush.
Welcome to the real world, IT workers.
Nope.
Those who would blame the President will continue to blame him, even though the truth beats them upside the head.
As I said yesterday, the Administration can do some things to help soften the blow, but they need to pull off the rose-colored glasses to do so.
When you are ready to bring some facts into the discussion please let me know if you merely wish to contue one line irrelevancies expect to dismissed as the having nothing worth consideration.
I'll remember that next time I pass a Subaru Outback (made in Indiana) or Mercedes M-Class (made in Alabama) on the road.
No. Allow me:
Bush is not culpable for the decisions of the officers in corporations, except to that extent that he creates federal policies that influence said decisions. The Unfair Trade Practices, put forth by Clinton and continued by Bush, are exerting such an influence. As China illegally manipulates its currency and imposes huge tariffs against our goods and services, and as India imposes tariffs on our goods and services and targets our strategic intellectual markets, we respond by eliminating tariffs and assuring India that the American gov't will do nothing to prevent the Indian takeover of the software industry.
Is Bush directly responsible for the decisions of the CIO's and CEO's? No.
Is Bush indirectly responsible for the decisions of the CIO's and CEO's? Yes.
But listen, I'm not in the business of advising the Prez. He's got a paid team. If they cannot figure out that a vast percentage of people who voted for him last time, might not -- or might sit home -- this time, then it's his problem. I'm just trying to hip him to the possible problem.
After all, he got elected by 500+ votes last time. He might not want to gamble with the votes of millions.
We're going to have a whole country with no engineers at this rate. I can't imagine this, and yet I see it happening.
I want to tell kids to go into engineering. Nothing spells "the future" like engineering. But right now, any kid who takes my advice will probably go into debt earning a degree in a field in which there will be no jobs. Furthermore, he'll face hardships paying off that debt while waiting tables at Pizza Hut.
Getting a degree in Engineering is heading toward being like getting a degree in History. All you can do with it is teach it somewhere.
You're right. This is going to be a big issue by November 2004. Right now, Bush looks blindsided. He doesn't appear to see it at all.
Yeah, and anyone who disagrees with you is a traitor worthy of imprisonment and torture.
Fascist.
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