How Much Does It Cost to Save?
The impact of software development offshore outsourcing has many economic and social impacts. Economically, India is thriving with GDP growth accelerating exponentially including having the potential to achieve double-digit growth.1 Meanwhile, in the United States, the numbers relating to developer jobs are quite the opposite. Most figures suggest that by 2015, roughly 3.3 million business-processing jobs will have moved abroad. As of July 2003, around 400,000 jobs already had.2
Socially, job loss has many strong emotional implications. Job loss due to cost cutting measures coupled with the dot-com layoffs in Silicon Valley conveys an outlook for finding a technical position quite bleak. In addition, changing jobs is stressful, let alone moving into a project management position that now appears to be a position a US engineer must look into. In India, although there is significant momentum to put their trained technical skills to use, the temporal logistics of the situation force many Indian engineers to work during the night time. The economic benefits are seen, but at what cost on a personal basis?
With such facts, one can argue for both sides of the economics and social impacts of outsourcing. The context must apply internationally, particularly in the United States and India. When viewed at this level, the economics suggest that the outsourcing moves are indeed overall beneficial. The social impact, however, is not so supportive and an ethical analysis shows that when these factors are taken into account, the suggestion that the economic benefits outweigh all the costs is not necessarily the case.
The immediate negative economic impacts in the United States about outsourcing receive much notoriety. For management, it is not without logical reason. In an article sourcing information from CIO Magazine in 2002, the average annual salaries of Information Technology programmers in the US was $63,000 while in India it was $5,800.3 In addition, the quality of service provided by offshore developers is comparable and essentially puts a cost-cutting organization that has to make a decision in a situation that favors India. In order to compete, US developers would have to take a reduction in salary. This conflicts with the cost of living in places like Silicon Valley.
Cost cutting though ultimately has many benefits for companies and individuals as it opens up other opportunities and investments. Silicon Valley firms have used resources freed up through offshore production to develop new products, new industries, and new employment opportunities.4 A Silicon Valley engineer may not like the opportunities that come up because of outsourcing, but they are there. Gregory Mankiw, chairman of the White House Council of Economic Advisors, feels that “there will be jobs in the future because this is a vibrant economy, a dynamic economy.”5
Mankiw’s support for outsourcing is without a doubt...