Two Takes on IT Outsourcing

Just how big of a deal is the offshore outsourcing of IT? Read this.

The outsourcing of business operations via the internet could earn some of the world's poorest countries billions of dollars over the next few years, according to a United Nations study. In its latest annual report on electronic commerce published yesterday, the UN Conference on Trade and Development (Unctad) says offshore outsourcing could generate some 3.3 million jobs worldwide by 2015, 2.3 million of them in India and most of the rest in developing nations, the report adds.

Though India's skilled English-speaking workforce and low salaries have enabled it to capture a dominant share of the international outsourcing market, the report notes that business process service providers are emerging in countries as varied as Bangladesh, Brazil, China, the Philippines, Romania, Russia, Singapore, Thailand, Venezuela and Vietnam. Unctad nevertheless points out that internet use depends not simply on income levels but also on government policy. "Internet penetration rates in developing countries with comparable income levels vary by as much as 25 times," it says. In particular, the report recommends the use of free and open-source software.

Another point of view on I.T. outsourcing from CIO Today: Information-technology outsourcing to low-wage foreign countries will more than quadruple by 2007, according to research firm IDC. The study offers a mixed picture of the future of the I.T. job market: all the focus on the job loss has been disproportionately attributed to the offshore trend, and it's really more to do with the realignment following an economic bubble. That's the good news. The bad news is that offshore is certainly a structural change that is coming to the industry.

Yet such a dramatic shift may not necessarily translate into a doomed outlook for U.S. I.T. services jobs or U.S.-based services firms. While U.S. services firms will continue to use offshore resources to reduce costs, upper-echelon I.T. jobs will remain U.S.-based. There will always be a place for those highly skilled I.T. workers, but there's going to be a lot of 're-skilling' needed to push up the skill level of workers in the U.S. so they can do the high-end consulting and business strategy work. It's going to be all the stuff that goes on underneath these activities that can be done offshore.

Get the UN Conference on Trade and Development report here.