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Current State of Offshore Outsourcing

Wednesday, May 23, 2012   (0 Comments)
Posted by: Alan Strong, Association Director
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I just finished reading an article titled "Second Thoughts on Offshoring” in the recent edition of CIO Magazine.

It seems like many firms are re-examining their outsourcing mix and bringing much of what they previously outsourced in house. Several large firms were mentioned in the article, and a majority of them want to have certain disciplines close to home that they can better manage.

Even GE, who is one of the earliest adapters of Offshoring, is making a concerted effort to bring development back in house. They are working to hire 1300 IT and Engineering people by 2013 at one of their locations in Michigan. The plan is for these individuals to be working on regaining the intellectual property that they have outsourced in the past.

What many firms hoped to accomplish in the past was a mix of 80-20 ratio of offshore people to their onshore staffs. Some are reversing these numbers, while most are embarking on taking a closer look at what needs to go offshore, and what needs to stay locally to be managed more closely.

The disciplines that they are looking to fill for these on shore openings are for new development projects with the latest technology development tools. Recruiting this talent is not going to be an easy chore.

Since the downturn in the economy in 2001, and the onset of Offshoring that took place at the same time, our college ranks for IT disciplines have become pretty scarce. During the late 1990's the Universities had large populations of students in the IT and Computer Science areas. Since that time, the parents of many students told their kids that they wanted them to be able to work once they finished school, and steered them away from the areas that were Offshoring. In particular, Information Technology.

Today most of the Colleges offering IT degrees are mostly populated by foreign students. Most class sizes have 50% or as much as 80% of their students who are foreign born. Many of these students will have to return home once their studies are completed. The US will only allow 20,000 of the foreign students to obtain H-1B working visas once school is over.

In the long term, our education system needs to be addressed. Our kids are not taking an interest in Information Technology. In many cities in our country, high school drop outs are 50% or more. Somehow we need to get these kids interested in the hard sciences, and stop the dropout rate.

For many years our elected officials and a hand full of major corporations have been speaking about this problem. Yet we have seen very little progress accomplished toward this goal.

So now we are facing the desire to bring the work back in house, and there are not enough people in the US to take the place of the work that was previously done in other countries.

The manner in which we address this problem will go a long way toward insuring our competiveness as a nation. It is not just going to happen, but will take thought and action to do it right. At this moment, Southern California has a 12% unemployment rate. However, in IT, the unemployment rate is 4% or less.

Bringing the work back in house is going to be a challenge for all the firms embarking on this goal in the immediate future.


Alan Strong
CEO
Commercial Programming Systems, Inc.

May , 2012


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