A friend predicted that 100,000 Indians will be forced to leave the United States due to jobs lost in information technology in the next 18 months. Foreign nationals with a H1B work permit must have continuous employment to remain in the United States. After six years, the foreign national can obtain a "green card" that permits staying in the US whether employed or not. With the economic downturn, employers are not renewing contracts with high tech body shops and even terminating employees. Without a job, many foreign nationals will have to return to their home country under terms of their work visa, even if they have money in the bank or relatives willing to help.
the increase in wealth and an expanding economy may allow many of these returning skilled workers to readily get jobs back in India.
When the US and world economy improve, these Indians will have the contacts and business knowledge to take advantage of the newly emerging and backlog of information technology work required by American companies. But the jobs may remain in India.
Yourdan wrote in 1990 about the Decline of the American Programmer. He predicted the gradual movement of technology jobs to India with its labor force of trained computer scientists and fluency in English. The trend has accelerated as American companies were forced to reduce labor costs. But many computing jobs stayed in America because of the importance of having staff who understood the unique processes and behaviors of the individual company.
When the economy rebounds, these same American companies will still have requirements for computer specialists who know the idiosyncrasies of the local processes and products. However, the specialist in local needs may have returned to India two years earlier. So rather than recruit for a technical specialist for $100,000 a year salary locally, companies will reach across the Pacific to former employees who can readily assemble a team of developers who will work for $30,000 a year. Shortcomings in the past of overseas developers lacking local insight will be undone by the return of 100,000 technical specialists to India.
Not all the repatriated professionals will have keen insights into the American company internal processes. But it only takes a few thousand with insight to serve as a local presence to provide the essential explanations and guidance to compatriots working at one-third the pay.
Subscribe to:
Post Comments (Atom)
From a Macro Economic perspective, industries and companies will continue to experience competitive pressures regardless if foreign or domestic. Outsourcing has been a 20 year concern and will continue to apply external pressure to our domestic economy. With the largest external emerging market pressures continuing to be India and China, American industries will struggle with these international influences. Repatriating these individuals will certainly increase the potential for a short term "impact" and long term influence over domestic markets. Understanding domestic conditions including business processes, industry expectations and quality standards have been the differentiator to date regarding retention of market share. Longterm impact will effect companies who do not maintain a macro approach with micro level initiatives tied to proven sound business practices. It is clear, outsourcing will continue to influence domestic consultant markets only to the counter proportionate level of the organization, the strategic initiatives of the organization and limited quality proposition perceived in specific market segments.
ReplyDeleteOutsourcing is clearly a byproduct of technologies' influence in creating the international highway for commerce and service industries. The individuals who will potentially be repatriated to their countries of origin will be traveling with large shipments of industry knowledge, local level expertise and clear understanding of on the ground intelligence. It is further evident this will be valuable to development teams and their corresponding organizations in India or China. The impact on local markets will be recognizable and even monitored in quantifiable levels of market share shifts. Will this be significant? Within in short term perspective the impact will be monumental for some, important to others and minimal to approximately 10 to 15% of impacted industries. This last category will be the companies who will be the stable companies with long-term growth strategies. Outsourcing is a market influence which is here and will continue to effect the most vulnerable segments of each market.
Even with expatriates being repatriated to there homeland, the primary countries are becoming emerged markets and as a result, they are maturing into the creation of a middle class society which impact cost point delivery of products and services. These countries are in the infancy stages of this process, as was Japan 30 years ago, South Korea 20 years ago and these latest countries are the next wave focused on outsourcing. In the end, these new countries will find a place at the table, but the bigger question is which companies will survive and which companies will become the casualties of the international competitors. The significance of this issue will continue to be less significant for companies who maintain client relationships, cost effective procedures and quality delivery of final products representing quality value concerns. Service industries have the least exposure to outsource annihilation. Development, Design or Manufacturing have the highest potential for outsource influences. The forward thinking companies will respond based on clear recognition of potentially impacted areas. The brightest companies will avoid low margin repetitive work which has the highest potential for outsourcing, recognize potential market driven use possibilities, or assimilate into the process where appropriate based on the market place.
Outsourcing will not eliminate the local level service process. Outsourcing will be most utilized to create the widget of the process. They will for example, manufacture portions of the process or product. Domestic based companies will continue to design the solutions, manufacture or create the high margin products and outsource the rudimentary aspects of the final product. The impact on industries struggling with available resources issues will be most influenced by what is given away to outsourcing options and what is maintained domestically. Industry leaders who utilize protectionist business practices through strategic initiative related to market share will be good stewards of their corresponding industry. This will represent a short term band aid to industries requiring proactive market awareness. Manufacturing is the longest industrial industry to draw from for guidance related to process driven product delivery and impacts on survivability. Over 100 years, history has watched as the industry has dissolved into a highly competitive low margin product with survivability prognosis for domestic companies at an all time low.
Internationalization will be the biggest transformation to the American economy. Over the next 20 years, there will be a consolidation to a variety of industries which will result in monumental impact to the small businesses of America. The largest consolidation will be in service industries where replication can be used to maximize profitability. Technologies designed for easy scalability or design processes which incorporate automated systems will be capitalized for the perceived benefit to the client and thus will increase the corresponding market share. These impacted industries will see a reduction in head count and increased profitability in the short term with mid sized companies lagging in the transformation. Once the transition occurs and market needs are satisfied, the competitive competition will drive profit margins down.
While macro concerns will continue to mount, the short term perception continues to perceived as bright and promising. This statistics are much more optimistic than this writer is will to embrace. With that being said, there are tremendous opportunities for the technology industry in the short term and mid term time lines (3 to 6 years). Companies who are lucky enough to develop the most demanding product and the most attuned companies will emerge on strong growth paths over the next seven to ten years. Below is an excerpt from US Department of Labor concerning High Growth Industry Sectors, Information Technologies:
"The computer systems design and related services industry is among the economy's largest and fastest sources of employment growth. Employment increased by 616,000 over the 1994-2004 period, posting a staggering 8.0-percent annual growth rate. The projected 2004-14 employment increase of 453,000 translates into 1.6 million jobs, and represents a relatively slower annual growth rate of 3.4 percent as productivity increases and offshore outsourcing take their toll. ("Industry output and employment projections to 2014" by Jay M. Berman, Bureau of Labor Statistics)
However, the main growth catalyst for this industry is expected to be the persistent evolution of technology and business' constant effort to absorb and integrate these resources to enhance their productivity and expand their market opportunities.
Employment of computer and information systems managers is expected to grow between 18 to 26 percent for all occupations through the year 2014. (Career Guide to Industries 2006-07)"
Outsourcing continues to be a potential high impact issue and is one of the greatest concerns in the Technologies Industry probably more so then most other sectors. There are valid reasons for concern and can be the catalyst to insure protection of the industry, growth and profitability. Industry business savvy, strength in industry associations and focused lobby will represent the greatest impact on National Policy. This is where the short term fix will be for companies to then position themselves in the best of markets. If the industry chases the high margin SUV's and Trucks of the market, they will find themselves focused only on high margin profitability and while compromising survivability. The middle way should incorporate economic cycle diversification, segmentation variability and regional stability mindset.
In closing, there are definite current impacts and future impacts coming due to outsourcing, repatriating skilled labor and outsourcing companies assimilation of this talent. With DOL estimating 1.4 Million in Computer Systems Design and Related Services and potentially less than 1% expatriates who would repatriate, the significance will be in focused areas of the market. The companies who are casualties of this phenomenon will be the most vulnerable, slow responding, least interactive with their clients and most repetitive process driven entities. There are numerous examples with the most obvious being website design which lacks unique talent, thoughtful solutions and industry controlled delivery. Companies can now launch comprehensive, high impact and low cost website for less than the cost of an iPhone. Companies, vulnerable to outsource competition, need to build internal market share based on value to the client, strong relationships uniqueness to the delivery process. The companies who maintain niche markets or are capable of scalability will prosper into the next 20 years and potentially emerge as industry leaders, thus seeing minimal impact for outsourcing influences.