Download The Transfer of Software Work to Low

Globalization and the Offshore
Outsourcing of Software Work
William Aspray
School of Informatics
Indiana University, Bloomington
ACM Job Migration Task
Force
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Moshe Vardi and Frank Mayadas, co-chairs
John White, ACM, ex officio
William Aspray, executive consultant
30 members from US, UK, India, Germany,
Sweden, Israel, Japan, China
• computer scientists, social scientists
• Delivery January 2006
• International perspective, analysis not
recommendation, no new research, expert
testimony, lit review, expert members
ACM Report
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Executive summary
Big picture
Economics
Countries
Firm case studies
Research
• IP, privacy, security
• Education
• Policy
• Condensed version
• Annotated
bibliography
Some Definitions
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Outsource
Offshore
Multinational or national/local
Captive or independent
Export or domestic market
Globalization
Work We Include
• programming, software testing,
and software maintenance
• IT research and development
• high-end jobs such as software
architect, product designer, project
manager, IT consultant, and
business strategist
Work We Exclude
• physical product manufacturing:
semiconductors, computer components,
computers
• business process outsourcing/IT
enabled services/knowledge process
outsourcing (e.g. processing insurance
claims, reading X-rays)
• call centers and telemarketing
Countries sending work
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US
Western Europe (UK, Germany)
Japan
Australia
India
Countries Doing Work
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Cost and capacity
Language skills
Nearsourcing
High-end niche
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India, China
Phillipines
Canada, Czech R.
Israel
Drivers of Offshoring
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Telecommunications
Standardized IT
Pace of innovation
Downsized corp.
Champions
Venture capital
Forced re-engnring
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Intermediaries
Work process
Higher ed
Free market
Immigration
English language
Aging population
Economics of Offshoring
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Theory of Comparative Advantage
Critics
Long-term harm to innovative structure
Saftey net for workers and communities
Data Issues
• Problems with definitions
• Problems knowing which metrics
• Problems with sources
– Government
– Trade association
– Consulting firms
• Projections v. current/past data
• Vulnerability projections
data
• US
– 12-14M vulnerable
– 2 to 3% loss per year maximum
– BLS ten-year projection
• India
– 10 to 40% increases per year
• UK and Germany
• Global
US IT Jobs 1999/2003 (BLS)
Programmers *********
529
403
SE applications
289
410
SE systems
209
293
Computer support
463
481
Computer systems analysts
428
486
Database administrators ********
101
97
Network and systems admin
205
245
Network & data communications analysts
98
156
Computer systems managers ********
281
257
Hardware engineers
60
70
Total
2688
2922
Country Perspective
• Relationships
– US-India
– Western-Eastern Europe
– Japan-China
• India v. China
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Infrastructure, policy experience, industry maturity
Research
Domestic v. export market
Education
• Private, access, quality control
• Central planning, academic-industry relationship
Firm Perspective
• Developing Entrepreneurial (TCS, Softtek)
• Developed Software Package (Adobe, SAP)
• Developed Software Service (IBM Global
Services, Siemens Business Services)
• Developed High-Tech Startup (Hellosoft,
Netscaler, Ketera)
• Developed Established Non-IT (Agilent,
Citicorp)
Why Companies Offshore
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Reduced Costs
Access to skills
Experience
Time Shifting
Time to Market
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Market access
Ramping Up/Down
Capital burn rate
Process
improvement
Reasons not to Offshore Work
• Job process is not routinized.
• Job cannot be done at a distance.
• The infrastructure is too weak in the vendor
country.
• The offshoring impacts negatively on the client
firm’s workplace.
• There are risks to the client company in
offshoring the work.
• There are not workers in the offshore
company with the requisite knowledge.
• Cost of opening or maintaining the offshore
operation is prohibitive.
Research
• Globalization, not offshoring
• Close relation between PPP GDP and IT
Research - some countries high (Sweden,
Israel), some low (Mexico, Indonesia)
• Rapid growth in globalization
• Home country vs. satellite
• Winners and losers
• Inventor migration healthy - even if net loss
Risks and Exposures
• Heightened risk - longer chains, legal
systems, COTS
• Vulnerability to governments
– IT-enabled systems (power, telephone), citizen
confidence
• Vulnerability to companies
– Data privacy, IP and other trade secrets, business
continuity
• Vulnerability to individuals
– Identity theft
• Business opportunities
Policy: High-Wage Country
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Protectionist rules and tariffs
Safety net for workers and communities
Level playing field (tax, currency)
Visa
Innovation
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Foreign students and workers
Enhance education system
Promote indigenous careers
R&D funding
Policy: Low-Wage Country
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Regulation for FDI, trade
Taxation
Infrastructure
Protect IP, privacy, security
Education and training policy