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Offshore outsourcing: Love it or live with it

As the popularity of offshore outsourcing grows, many analysts and IT pros agree that U.S. corporations need to do more to protect high-quality workers in danger of losing their jobs.

Jim Goode joined the ranks of the unemployed last year when he lost his job as a contractor for Microsoft, which outsourced his workload to a firm based in Bangalore, India.

Now, Goode, a former Windows NT administrator, serves as CIO of Dallas-based Goode Technical Solutions, a company he helped found. Goode's company helps IT pros who have lost jobs to offshore outsourcing find employment and some camaraderie.

Companies are not outsourcing their whole HR and finance functions, but we're beginning to start down that road.
 Kip Martin
vice presidentMeta Group

"I'm not an anti-globalist, like most people that are against offshoring," he said. "I just think our government and corporations should show more stewardship to the employees that are losing their jobs. Up to now, they've been pretty ruthless and cold about it."

Analysts discussed the issue during a conference call hosted yesterday by Stamford, Conn.-based research firm Meta Group. During the call, which was titled: "Offshore: It just is -- learning to love or at least live with offshore trend," analysts said that U.S.-based companies can take advantage of the benefits of offshore outsourcing, but they must be aware of the social, legal and political consequences associated with the trend.

"We're seeing organizations looking to find the best resources abroad from a skills perspective, a knowledge perspective, as well as a cost perspective, and that's not going to stop anytime soon," said Michael Doane, a vice president of research at Meta Group.

The types of IT jobs being sent overseas include application management, enterprise configuration and process design, according to Meta Group. Database administrators and programming jobs have also been hit hard, as companies look to farm out positions to cheaper labor in India, China and Western Europe.

"Companies are not outsourcing their whole HR and finance functions, but we're beginning to start down that road," said Kip Martin, a vice president with Meta Group. "Firms that are doing offshore work are maturing. Their expertise is maturing, and the things that they are bidding for and winning is also maturing."

Although there are benefits to offshore outsourcing, those benefits come with a number of pitfalls, Doane said.

Companies that choose to send jobs overseas face putting intellectual property at risk, he said. Big risks are incurred in countries like China, where few laws exist to protect intellectual property, like software code.

Additionally, the cost savings associated with offshore outsourcing have been overstated, Doane said. The costs of travel, data management and process change all add to the total price tag of outsourcing, he said.

"Most companies do a poor job identifying, vetting, engaging, and managing any outsourcing provider, much less offshore," Doane said. "It's incumbent on offshore companies to have more onshore staff to help do that, and it should be a ray of hope and actually a good direction for many of the IT people concerned about the offshore jobs today."

Meta Group analysts highlighted several things that companies can do to lessen the impact of offshore outsourcing. For starters, training programs can help workers find other jobs, including positions as portfolio managers, who help manage outsourcing, Martin said. In addition, the government should enhance unemployment benefits for workers who have lost jobs to outsourcing, or offer tax incentives to workers who are footing the bill for job retraining programs.


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To provide feedback on this article, contact Robert Westervelt.

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