A recent article in Internet Week touted a new white paper that proclaims that the fears about IT offshoring are overblown. The white paper is entitled "Offshoring of Information-Technology Jobs: Myths and Realities" and was prepared for the American Sentinel University by Jeremy Leonard, who is listed as the chief economist at this private education corporation.

Unfortunately, upon investigation, it appears this white paper is a manipulation of studies done by others (Gartner, Forrester, Global Insight) combined with some Government Accounting Office statistics to prove a preferred perspective. Yet the influence of its message is an example of the worst kind of chicanery.

Undue Influence

The author's perspective is, simply, that offshoring is not bad for the economy, not bad for American workers, and not a bad financial proposition for IT. In other words, it summarizes previous white papers and then twists the results to prove the author's point of view.

And what's truly insidious about this kind of white paper is that it promotes this particular agenda with the express purpose of influencing IT decision-makers without providing any substantiated or quantifiable information. The misinformation is then transmitted across the Internet with headlines that proclaim "Offshoring IT Concerns Overblown!" The message then becomes part of IT management culture, and few have the time to analyze the true impact.

Now, consider this: If I insisted that the earth was flat, you'd immediately wink and say, "There goes Tom again!"

However, if I were to tell you that a new white paper, written by an economist at a university, has reexamined the evidence and found that the world—if not flat—is certainly more cubical in shape than previously believed, what would be your reaction?

Would the Flat Earth Society suddenly gain a bit more respect?

Bad Analysis

So what's the problem with Leonard's analysis? How does it help/hurt IT and the organization?

First of all, in those places where the data doesn't match his perspective, the author reclassifies the data into something that better fits his ideas.

For instance, Leonard's analysis leads him to believe that really only "low-level" IT jobs are being sent offshore. According to Leonard:

"There is a clear bifurcation of trends in low-end and high-end IT occupations in the current recovery. Overall, low-end IT employment continued to decline from 2002 to 2004, driven by the specific occupations of programmers and database administrators. This is certainly consistent with anecdotal evidence of the rise of India as a programming powerhouse."

He classifies programmers and database administrators as "low-level" because they perform functions that require little face-to-face contact with other people within an organization.

This is what I call the "retail-clerk model" of the corporate organization chart: "If you don't see them behind the counter, they obviously are not very important!"

Clearly, Leonard knows very little about how IT actually works and even less about the importance of certain jobs within a modern IT organization.

How Management Sees IT

Management has many choices in how it perceives the role of IT and the staff that supports the organization. True, it often views positions such as programmers and database administrators as static, dead-end jobs. Unfortunately, this perspective was fostered in the late 1990s as the technical requirements of networked databases and object-oriented programming became so overwhelmingly erudite and complex.

At other times, however, these same positions are viewed differently. The most progressive organizations see these same positions as stepping stones for initiation of the brightest employees into the decision-making cultures of the corporation. This progressive perspective sees IT at the center of a corporation's information matrix.

In these organizations, programmers and database administrators are viewed as tantamount to being stewards of the corporation's decision-makers: They are knowledge workers who—through their skilled manipulation of data—distill the decision-making criteria down to something that a line-of-business manager can handle.

Indeed, many individuals who start at one end of the IT spectrum in these organizations move along an unspoken career path through a hierarchy of positions that lead to middle management: system operator, junior programmer, programmer, programmer analyst, database administrator, systems analyst, program manager, line-of-business analyst, line-of-business manager. Because these individuals know the organization's information systems, they are able to navigate with much better acumen as agents of progressive change and automation within the corporation. Many of the most progressive corporations foster this process, promoting from within and transforming the organization, using IT as a strategic tool for competitive advantage.

The Role of Outsourcing

Of course, today this perspective about these positions has fallen out of favor, driven mainly by the idea that "you can get it done on the cheap in India." IT is now perceived as somehow divorced from the organization it serves. Instead, a lot of IT shops have been transformed to make use of the "on demand" model of computing.

In this model, the corporation purchases IT services from the outside world—with an increasing number of sources in countries like India and China. It's a model that works well if the services are fairly generic, but it adds no long-term value to the organization and can get very expensive when customization of those services is required.

How? Let's look at an example.

Outsourcing and the Opportunity Cost

Let's say a company needs to customize a service to implement a new set of business rules. Obviously, knowledge of the business rules that run the organization is crucial. However, in order to implement change, IT must train the outsourcing service about how those business rules function, and that knowledge transfer is expensive.

In fact, training the outsource service actually diminishes the value of business rules. Why? Because eventually nobody within the organization will be able to modify the rules that have been codified in code! Too soon, nobody remembers why the rules were put into place! Finally, and ultimately, to change the rules again, IT will have to train the outsourcing service a second time, and the cycle repeats itself. Each time, IT must reinvent the knowledge needed to keep the organization running.

Consequently, in an outsourced service model, the "opportunity cost" for implementing change is significantly higher than maintaining the knowledge and the tools for change within the organization.

Jobs as Product

On one note, in Leonard's analysis, many of his conclusions are just plain specious. For instance:

"Perhaps the most important is that the U.S. runs a surplus, and in fact exports almost 50 percent more IT services (in terms of dollar value) than it [imports]. The trade surplus narrowed considerably in 1999, but this is primarily attributable to contingency plans for the Y2K bug. Since then, the surplus has been roughly unchanged in dollar terms."

This, according to Leonard, means that because the IT service sector is increasingly servicing other countries, we have an imbalance in trade, translating to a surplus of IT jobs. So it's OK if we send these jobs offshore.

Indeed, IBM announced last week that in the next three years it will triple its offshoring investments in India, a country that in five years time has become IBM's second-largest source of knowledge workers (after the U.S.) with 43,000 employees. According to Leonard's white paper, these must be "low-level" jobs that IBM has moved to India. But it's a bit beyond the pale to insist that such offshoring will have no impact on the job market when IBM continues to lay off workers in both the U.S. and Europe.

To IBM's credit, it is not outsourcing these positions to other companies, but is hiring employees. However, the level of investment in the overall U.S. economy will certainly be smaller as a result.

There seems to be confusion in the minds of many policy personnel in both business and government: They think that IT jobs are actually a product that the U.S. can sell. Consider that recently President Bush is rumored to be offering Iran part of the U.S. IT job market as part of an economic deal in exchange for shutting down its nuclear reprocessing sites.

What's wrong with this picture?

What's Good for the Goose...

Of course, the ultimate irony of Leonard's white paper is that he is, himself, an "offshore" worker writing for an organization (American Sentinel University) that is a distance-learning institution used by the U.S. military for remotely stationed GIs and by developing countries that need access to IT educational opportunities. Leonard is a native of Canada, was educated in the U.S., and today lives in Quebec while working for a distance-learning institution in Colorado. Perhaps his perspective about the benefits of offshoring are colored by his own professional experience.

Of course, MC Press Online also uses the talents of some great writers who live in Canada, so we are not demeaning any country or its people. But it does seem humorous to me that a person who is analyzing data compiled (and previously analyzed) by truly prestigious organizations like Gartner and Forrester might be brazen enough to interpret that data to justify his own circumstances and the agenda of his employer.

The point is, IT management is constantly under siege to reduce costs and increase efficiency, and too often this is translated into reducing head-count by outsourcing and offshoring important IT positions. Educating the company's management about how this kind of outsourcing can detrimentally impact the organization overall is too often an uphill battle. White papers like Leonard's perform a disservice to IT and to the organization as a whole by reclassifying IT job functions without understanding their significance.

Thomas M. Stockwell is Editor in Chief of MC Press Online, LP.

Thomas M. Stockwell is an independent IT analyst and writer. He is the former Editor in Chief of MC Press Online and Midrange Computing magazine and has over 20 years of experience as a programmer, systems engineer, IT director, industry analyst, author, speaker, consultant, and editor.  

 

Tom works from his home in the Napa Valley in California. He can be reached at ITincendiary.com.

 

 

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