Offshore No More

The most controversial information technology (IT) issue of recent years is offshore outsourcing. While most debates in IT never go beyond industry publications, offshore outsourcing has become a topic in the popular press and even has even appeared in the political arena. In November Indiana Governor Joseph Kernan canceled a $15.4 million project with Tata Consultancy Services (a division of Tata Sons, the holding company of one of India's best-known business conglomerate) to handle the state's unemployment benefits system. And the issue is not restricted to the United States. Australian Treasurer Peter Costello recently warned the state-owned telecommunications company, Telstra, that it should try to ensure that the 450 software jobs it was planning on outsourcing to India will remain in Australia.

Despite the scale of the debate, the number of jobs actually being outsourced remains small. According to a December 2003 Forrester report, "Users' Offshore Evolution and Its Governance Impact," most firms are either doing nothing or just starting to outsource. Forrester estimates that 60% of the Fortune 1,000 has no offshore experience, another 25 -30% use offshore vendors, but they are not a key part of their overall IT strategy or spending plans. Only a small group, 5%-10%, have scaled up offshore outsourcing and less than 5% take complete advantage of it.

Yet the temptation to send jobs offshore remains huge. In China the average information technology professional earns $8,900. In Russia the going wage is $6,000 and in India only $5,800. And there is no shortage of qualified workers. India will be graduating 300,000 new engineers this year. Many analysts argue that to remain competitive, western companies must continue to drive innovation and cut costs.

Some of the biggest critics of offshore outsourcing are those who have actually experienced it first hand. They point to time differences, rising salaries and overall difficulties in managing projects remotely as reasons why offshore outsourcing is not a panacea. Taking another perspective, many academics reassure us that new jobs will take the place of programming jobs shipped to Asia. One who is particularly well placed to make these observations is Professor Philip Windley of Brigham Young's Computer Science Department. As the former CIO of the State of Utah, Windley points out that most CEOs are screaming for the automation of processes and support for business activities while most IT organizations are struggling with hooking networks together, managing desktops, and administering databases.

As he points out in his Enterprise Computing Web Log (http://www.windley.com/2003/12/23.html#a961), "What's getting outsourced? The IT equivalent of coal mining jobs. My undergraduate degree is in metallurgical engineering and I've spent some time in mines. It is dirty, but high paying work that doesn't require much formal education. People love it."

In order to understand the issue better, we are devoting an entire session at The Enterprise Software Summit to the issue of offshore outsourcing. For those unable to attend the event, an audio recording of the session will be available after February 5th on the events web site http://www.enterprisesoftwaresummit.com.

Siebel Scholars Chosen

To date, the Siebel Scholars Program has awarded scholarships of $25,000 each to 220 students at 11 schools of business and computer science.

Names of this year's scholarship recipients and additional information can be found at www.siebelscholars.com.

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