Separating hype from reality:
Will globalization and offshoring leave any IT jobs in the US?

There has been a great deal of media attention given to the impact of offshoring on the IT workforce, but very little systematic analysis. The Association for Computing Machinery (ACM) convened a blue ribbon task force to conduct a comprehensive study on the globalization of the IT workforce and the migration of jobs resulting from offshoring and outsourcing. The task force was comprised of computer scientists, social scientists, and labor economists from around the world including CRITO Consortium Director, Vijay Gurbaxani, who was invited to serve on the panel because of his expertise in the economics of IT outsourcing.

The recently released study, “Globalization and Offshoring of Software,” has drawn significant media coverage regarding its conclusion that offshoring can be a win-win game, benefiting both developed and developing countries. The study notes that while the volume of offshore outsourcing will continue to grow over the next decade resulting in a loss of some IT jobs, different IT jobs in the US are being created simultaneously. According to the task force, some of these new jobs are at young entrepreneurial companies that are able to produce economically viable products and services by taking advantage of the lower cost structures resulting from offshoring. This finding reinforces the notion that innovation is the engine of economic growth in the global economy and that, to stay competitive, countries must adopt policies to foster innovation.

As the largest user of IT in the workplace, the US is well suited to invent and adopt IT-enabled innovations, in products and business models. Moreover, the US has several distinct capabilities: strong universities and research institutions, highly efficient capital markets, flexible labor markets, the largest consumer market, business-friendly immigration laws, and a large and deep managerial pool. However, the perception that globalization and offshoring has led to a decline in IT jobs has in turn led to a significant decline in the demand for computer science education in the US. This is a major problem as we run the risk of making this belief a self-fulfilling prophecy by not creating a sufficient pool of qualified workers to take advantage of the IT jobs that will become available in this country.

To this end, the study advises that policies that improve a country’s ability to attract, educate and retain the best IT talent are critical. However, the study recognizes that educational policy and investment are not enough. While many economies benefit from globalization, there is no denying that the costs to individual workers can be significant both emotionally and financially. The study recommends that a safety net is needed to provide income and training opportunities for adversely affected workers, including extended unemployment benefits, wage insurance, and retraining.

Globalization of the software industry will continue and is likely to increase. The future is exciting but different from the past. Success will depend on our ability to build the foundations for innovation.

For more detailed information on the study, please visit www.acm.org/globalizationreport.