Dr. Dobb's Journal February 2003
The ongoing shenanigans in the boardrooms of large corporations have made oxymorons out of terms like "business logic" and "business ethics." Let's see. There's Enron, Westar, Aquila, Global Crossing, and WorldCom. Then there is Stanley Works, Ingersoll Rand, Xoma, and Tyco, all of which—like thieves in the night—moved their corporate headquarters offshore to avoid paying U.S. taxes. (Of course, leaders in Congress could have put the skids to this practice by denying government contracts to such companies, but ultimately—to no one's surprise—backed off. Hey, big dogs and politicians have to eat, too.)
The latest catch phrase making the rounds in fancy-dan boardrooms is "business process outsourcing," which occurs when organizations turn over business functions to third parties. In truth, there's nothing new about the concept other than, of course, the name. Let's face it, "business process outsourcing" has a better PR spin on it than, say, "Sorry, we've just eliminated your job."
In the past, outsourcing generally has been relegated to functions ranging from accounting and human resources to call centers. More recently, however, the advent of technology in general and the Internet in particular has enabled offshore outsourcing to engulf a multitude of business processes, including software development. Estimates peg the worldwide market for business process outsourcing at about $127 billion in 2002. Market-research firm Gartner further projects it will grow to $200 billion by 2005. Of this, about 60 percent of U.S. outsourcing remains in country, with the other 40 percent distributed worldwide to countries such as India, Russia, Ireland, and the Philippines—all of which have plenty of skilled, English-speaking, high-tech workers, relatively inexpensive labor costs, and generally sound communication infrastructures. In an interesting turn of events, some U.S. newspapers have even been carrying employment ads touting jobs for engineers who might want to return home to manage jobs outsourced from the U.S.
India, in particular, has fueled this growth, accommodating companies such as Dell Computer, Sun Microsystems, General Electric Capital, Hewlett-Packard, i2 Technologies, and Oracle—all of which have moved business segments to that country. Oracle, for instance, plans on employing more than 4000 workers in India by the end of this year. And, according to services chief Ann Livermore, HP is "trying to move everything we can offshore."
As you might expect, all of this business process outsourcing stuff has ignited a gold-rush of sorts. While any comparison to dot-com madness might be an overstatement, lots of companies see a big pie and want a piece of it. Local companies in India fighting for a share of that pie include Wipro, ICICI Citigroup, InfoSys, OneSource, Evalueserve.com Private, and TransWorks, among others. Muddying the waters are U.S. software service companies like Cognizant Technology Solutions, which plans on opening India-based business process outsourcing operations this year. All in all, there are from 75 to 100 companies offering business processing services in India, with the top 10 having perhaps as much as 90 percent market share.
This competition, along with a soft global economy, has crimped business process style in India, leading a recent Gartner report ("IT Trends in India, 2002"; http://www4.gartner.com/1_researchanalysis/focus/itsvcs_fa.html) to speculate on an upcoming dot-com-like bust. As in the dot-com boom-and-bust, the lack of capital and inflated mergers and acquisitions are stretching return on investments at the same time that billings are being squeezed. Compounding the problem is pressure on customers—particularly those in the U.S.—not to take business offshore, thereby saving jobs at home. In particular, proposed laws like Senate Bill 1349 (http://www.njleg.state.nj.us/2002/Bills/S1500/1349_I1.HTM), introduced in New Jersey by state Senator Shirley K. Turner, would prevent outsourcing of government contracts to non-U.S. citizens or legal resident aliens. Specifically, the bill "provides that only citizens or persons authorized to work in the U.S. pursuant to federal law may be employed in performing certain State contracts...[and] is intended to ensure that State funds are used to employ people residing in the United States and to prevent the loss of jobs to foreign countries." Turner's proposal was prompted by published reports about telephone inquiries to welfare and food stamp clients under New Jersey's Families First Program being handled by operators in India. "I'm opposed to using taxpayers' dollars to send our jobs overseas," says Turner. From her perspective, companies that outsource offshore are "in the long run undermining the fabric of our country." Turner's bill unanimously passed the New Jersey Senate and is currently awaiting passage in the state Assembly.
In fact, it is unlikely that even well-meaning laws will have an impact on business practices such as outsourcing. Laws are made by politicians and, as we've seen over and over, most politicians are the toadies of corporate boardrooms. What's needed is a commitment to human decency. Alas, that's probably asking too much of corporations in America.
Jonathan Erickson
editor-in-chief
jerickson@ddj.com