One in 10 U.S. Tech Jobs May Move Overseas, Report Says

Reuters ^ | July 29, 2003 | Eric Auchard

[demlosers]

NEW YORK (Reuters) - One out of 10 jobs in the U.S. computer services and software industry could shift to lower-cost emerging markets such as India or Russia by the end of 2004, a top computer consultancy said on Tuesday.

Gartner Inc., the world's biggest high-tech forecasting firm, said in a report entitled "U.S. Offshore Outsourcing: Structural Changes, Big Impact" that 500,000 of the 10.3 million U.S. technology jobs could move just in 2003 and 2004.

While professionals in the computer industry itself are likely to bear the brunt, the report predicts that one in 20 tech jobs in industry-at-large also could be moved overseas.

This is especially true in industries with high concentrations of knowledge workers such as banking, health care and insurance, the author of the survey said.

"Suddenly we have a profession -- computer programming -- that has to wake up and consider what value it really has to offer," Diane Morello, a Gartner vice president and research director who studies work force issues said in an interview.

"Offshore outsourcing" is the euphemism the computer industry uses to describe the transformation of software development, computer services and customer call-center work.

As a global economic recession has hit hard over the past two years, U.S. companies have embraced as never before a decades-old trend to hire educated workers overseas who can be employed for a fraction of the cost of U.S.-based programmers.

Just last week, software maker Siebel Systems Inc. SEBL.O of San Mateo, California said it would cut 9 percent of its work force, or 490 jobs, and planned to move some operations overseas.

Executives of the world's largest computer and services company, International Business Machines Corp. were quoted recently as saying they had no competitive choice other than to expand software and semiconductor development overseas. The comments came to light in a recording supplied by a union seeking to organize IBM workers and supplied to Reuters. IBM now employs 5,400 workers in India out of a total work force of 316,000.

A JOBLESS TECH RECOVERY?

The debate by economists over whether the United States may now be experiencing a jobless economic recovery echoes disputes over high-tech job losses that heated up during the last technology recession a decade ago. These petered out quickly in the Internet boom of the late 1990s.

The recent acceleration of job losses actually began during the late 1990s when shortages of qualified U.S.-based workers led companies to turn overseas to countries such as India, Ireland and elsewhere for computer and Internet project work.

The mounting job losses are heating up as a political issue, with bills put forward by legislators in five U.S. states that would require workers hired under state contracts be American citizens or fill a special niche citizens cannot fill.

Morello said her study did not speculate on where such jobs were moving. But she indicated that India, Russia and other countries in Southeast Asia were the most likely locations.

She also pointed to how Canada has moved recently to position itself as a "nearshore" alternative to companies who have trouble shifting jobs to more distant "offshore" locales.

Electronic Data Systems Corp. EDS.N of Plano, Texas, the world's second largest computer services provider, has already reached into Canada and many points beyond. EDS has begun promoting its "Best Shore" strategy of positioning software and customer service work in what it says are the most cost-effective locations around the globe.

EDS has 16 centers that range from New Zealand to India to Egypt, Poland, Brazil, and Canada.

The Gartner analyst said that based on her preliminary calculations that one in 10 software services jobs are at stake at computer vendors and 5 percent of technology jobs in the wider corporate world, at least 500,000 jobs will be moved. (Additional reporting by Caroline Humer)

[sten]

In that short term that may be very true, but those companies are not going to last by employing such stupid strategies (and people). The market will reward those companies that make the right choices, business cannot afford to hire unskilled workers.

Actually, the businesses can survive fine with that strategy and they know it. Large corporations can sustain the incompetence due to their market share. Small to medium sized companies cannot. Therefore, the smaller companies, unable to utilize the cheap labor, are competing with the more expensive labor and won't survive. This exact same model was used to defeat most small/medium sized companies in the retail sector. Larger companies with cheaper/inferior products are able to easily defeat the local retailers.

As you see, competence or quality do not factor into the fight. Pre-existing market share and budget capacity determines who will survive. Why was there a backlash against the "Buy American" movement that started after 9/11? Because that is the only thing that can defeat the large corporations.

[just_living]

Good point. Very good point.

Actually, the businesses can survive fine with that strategy and they know it. Large corporations can sustain the incompetence due to their market share. Small to medium sized companies cannot. Therefore, the smaller companies, unable to utilize the cheap labor, are competing with the more expensive labor and won't survive. This exact same model was used to defeat most small/medium sized companies in the retail sector. Larger companies with cheaper/inferior products are able to easily defeat the local retailers. As you see, competence or quality do not factor into the fight. Pre-existing market share and budget capacity determines who will survive. Why was there a backlash against the "Buy American" movement that started after 9/11? Because that is the only thing that can defeat the large corporations.

[Beck_isright]

E

xcuseeeeee me. I made a typo. At least I understand the 80/20 rule. Owning your own business opens your eyes. Watching the 80% just validates my opinion. I notice you dared not challenge the concept of changing the tax structure so companies are rewarded and not punished for being profitable. RINOits is running rampant at FR.

[just_living]

I notice you dared not challenge the concept of changing the tax structure

Dared not? That’s a bit of hyperbole. I did not address that because you said you want high tariffs, which to me is government regulation and protectionism, which, as strong and smart citizens of the world I don’t think we need. I don’t want any government telling me I’m too weak to compete without their unfair help. I like to win because of survival of the fittest, not because of friends in high places. The tax code needs to be revamped, reworked, thrown out and more, and on that I will never waiver.

[jpl]

If Americans have priced themselves out of the market, they deserve to be punished by the market.

This is exactly the kind of know-nothing Republicanism that lost us the White House in '92 and is going to cost us dearly in '04 if we're stupid enough to go down this road again.

[sten]

I am all for an even playing field. But in order to do that, the government will have to adjust tariffs on imported goods and SERVICES produced by offshore projects and imported foreign labor. So long as the goods brought in are tarrifed to account for the taxes, educational costs, and the standard of living within the US, I would have no problem.

Of course, that will never happen, the corporate lobbists will see to it.

• Congressmen Inslee (D-WA) reassures foreigners they will have jobs within the US

[sten]

There are plenty of unemployed IT workers in the US. Don't try to say they are offshoring to find the talent. It's about saving money.

• IBM accelerates offshore outsourcing

[Beck_isright]

For over 150 years, we relied on tariffs to finance this monster known as the Federal Government. The minute the socialist FDR and his cronies turned inwards and started punishing producers within this nation we started to slide. What you are advocating is the same kind of gloablist nonsense that Truman, FDR, and LBJ along with Bush Sr. and Klintoon believed in. You are in great company. And your kind of thinking is one of the reasons the GOP may not get a 2nd term in the White House in 04, or worse, a real socialist, Hitlery, will get elected in 2008. You can not have unfair trade. We have that now and have financed our own destruction. You are too narrow minded in your thinking. This problem will end up destroying what is left of our nation.

[hedgetrimmer]

Doesn't "jobless recovery" seem like an oxymoron?

[The Green Goblin]

Stop waiting for other's to fix it. Let's get together and start a new industry.

Ok, let's do that. You go first since you seem to be more informed about this than I am. What kind of new industry do you propose we start?

[hedgetrimmer]

"What most of us care about is the ability to think, create, and enjoy. The new economy makes that better, easier, and smoother for more people than ever. Say goodbye to the tarriffs from the tolltakers of corporate America. We won't miss them."

John Robb
Wed, May 29, 2002
John Robb is the president UserLand Software

Well, looks like he got what _he_ wanted.

[just_living]

Stop waiting for other's to fix it. Let's get together and start a new industry.
Ok, let's do that. You go first since you seem to be more informed about this than I am. What kind of new industry do you propose we start?

I was thinking of a collaboration, people working together. Us working together, not one person thinking up an industry. That was the part about "let's get together"

[harpseal]

Good for business owners. If Americans have priced themselves out of the market, they deserve to be punished by the market.

So you favor government interfer3nce with the free market to harm computer programmers.

We need to get better or different skills that blow away our competition, or lower our prices.

Those skills are already in the USA and if we had no currency controls in India and a lack of governbment support for the offshoring we would not have this probvlem which started with a government policy to interfere in teh free market.

I am all for the market deciding what is right. And in this case our overfeed programmers are going to have to figure out how to make themselves attractive to our top corporations once again.

This last sentence alone shows you to be be either ignorant of this issue or merely another hard core anti-American who merely wants to see some Americans suffer.

[harpseal]

What company pays with bowls of rice?

Quite a few in China especially those that utilize political prisoners.

[dljordan]

Overfed programmers is it? Lets see, where I work the average salary is $60,000 - $70,000. The average work week is 50-60 hours not counting 24 hour on-call duty and frequent 24 hour work sessions. 50 weeks X 40 = 2000 hrs. $65000 / 2000 =$32.50. Thats a normal week. Now we figure it with 55 hrs. 50 wks. x 55 hrs. = 2750 hrs. $65000 / 2750 = $23 per hr. Now divide that in half for Fed, state and local taxes and you have the princely sum of $11.50 per hr.Yeah, those nasty, worthless, lazy programmers deserve everything they get.

[just_living]

So you favor government interfer3nce with the free market to harm computer programmers.

Not really sure how you made that leap. I favor no government interfer3nce, no help, no harm. The harm, the punishment as I said, comes from a market that either doesn't value your skills, or has come to value them at less then you think they are worth.

When did a free market become taboo?

[sten]

Just ignore this guy. He doesn't address any of the points and just baits people. He is a corporate shrill and a classic troll.

** TROLL ALERT : just_living **

[sten]

sheesh.. usually this is posted sooner...

just_living : Since Jul 30, 2003

[just_living]

I am trying to address every point. And not doing a half bad job. I am not "baiting" so much as encouraging debate and trying to help us all think through our beliefs, and iron out contradictions.

[harpseal]

A free market has nothing to do with trade policies and you were supporting the results of an interference in the normal free market process specifically the introduction of guest workers directly hampering what is actually a vital industry for our national defense, IT. Now since you cheered the use of a short circuit arround the Free Market and are viewing the harm that is occuring to American IT workers as a positive development onne must clearly infer your objection is to a free market within the USA and since you view the current trade envirornment as inherently beneficial even though it clearly and obvviously is harming the USA it follows from your positions.

I have a particular aversion to letting people who are opposed to a Capitalist economy in teh USA get away with praising harming the USA call me old fashioned but I am an American.