Term Paper: Outsourcing of it Jobs

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Outsourcing

companies first outsourced manufacturing jobs. This initial outsourcing was touted as a necessary agent because the economy of the United States was transitioning from a manufacturing-based economy to a service-based economy. Many individuals that were unemployed as a result of outsourcing in the manufacturing sectors were retrained in the area of information technology. For many years the information technology sector and jobs within this sector thrived within the United States. However, more recently there has been a significant increase in the number of IT jobs that have been outsourced to countries where skill levels are similar and the cost associated with labor is cheaper.

It is estimated that at least 250,000 highly skilled white collar jobs -- most of which are IT jobs -- will be outsourced every year between 2005 and 2015. In the United States between the years of 2005 and 2015 more than 60,000 jobs will be outsourced for each quarter. One of the primary issues surrounding the outsourcing of IT Jobs is that there are only a handful of laws that prohibit or limit the amount of IT outsourcing that it allowed. One of the legislative measures being suggested would forbid governments for outsourcing high tech jobs. In addition, there are at least 100 bills pending in 38 states to ban the outsourcing to foreign contractors by state and local governments. The amount of outsourcing that is currently taking place has an adverse effect on the types of jobs that students believe that they will be able to have after they complete college. For this reason there has been a marked decrease in the number of students that are pursuing careers in information fields. Although outsourcing is a controversial issue there is evidence that it will be practiced for many years to come as a result companies will benefit form lower cost and consumers will benefits from less expensive products.

Introduction

The outsourcing of American jobs has been the subject of debate since the 1980's. Initially, the outsourcing of jobs was only prevalent in the manufacturing, however in recent years the information technology sector has begun to rely heavily upon outsourcing. The purpose of this discussion is to examine the outsourcing of U.S. IT related jobs to other parts of the world, such as Southeast Asia.

To this end the research will investigate how long we can expect this current practice to continue and whether or not outsourcing of IT jobs will continue to have the same economic impact five to ten years from now. In addition the research will investigate the possibility that laws will be passed in the near future to prevent jobs from moving and the outside the U.S. The research will also focus on what the future holds for graduates in the information technology fields and the manner in which companies and individuals can benefit the most from outsourcing since it now appears to be common practice.

History of Outsourcing in the United States

According to Dulebohn (2005) U.S. companies first outsourced manufacturing jobs. This initial outsourcing was touted as a necessary agent because the economy of the United States was transitioning from a manufacturing-based economy to a service-based economy (Dulebohn). In addition the disappearance of manufacturing jobs was described as economic progress because the country could then focus on high-skill service and manufacturing jobs, and the low-wage, labor-intensive manufacturing jobs could be sent overseas with little if any impact on competitiveness of the U.S. (Dulebohn). It was also asserted that those that had lost manufacturing jobs could train for higher skilled jobs including computer programming (Dulebohn). In fact many individuals that were unemployed as a result of outsourcing in the manufacturing sectors, were retrained in the area of information technology (Dulebohn).

For some time the information technology sector and jobs within this sector thrived within the United States (Marks). However, in recent years there has been a significant increase in the number of IT jobs that have been outsourced to countries where skill levels are similar and the cost associated with labor is cheaper (Dulebohn). The article explains that The Internet facilitates this strategy, and any service activity that can be done via wire and does not require face-to-face interaction with a customer may be outsourced. This trend is not limited to low-skill service jobs, such as data entry and call center jobs, but increasingly includes the use of high-skill, low-cost foreign labor for high-skill service jobs. IT jobs such as computer programming have been among the first to be moved overseas; other high-skill service sector jobs in other industries such as financial services, accounting, and architecture are currently being moved overseas. The authors cite studies estimating that as many as 14 million, or 11%, of all U.S. jobs are currently at risk to outsourcing (Dulebohn, 46)."

The author also points out that many successful businesses have very large workforces outside of the United States in countries such as India (Dulebohn). In addition their strategic plans for further expansion are also looking toward India and other countries in the same region (Dulebohn). These plans for expansion include the use of highly skilled foreign workers as opposed to their U.S. counterparts. In addition many companies are providing oversees workers with training in the use of the latest technologies.

The author asserts that as a result of such training, American workers now have to compete with foreign workers that have not traditionally been competitors (Dulebohn).

Using the aforementioned explanation for the use of outsourcing the author explains that in the same way that manufacturing jobs were replaced with IT jobs, it is believed that IT jobs will be replaced with newly created high-skill jobs. However, many believe that this position is untrue because many companies are beginning to higher foreign workers that have the high skill sets that are being referred to (Dulebohn). For instance, there are many high tech companies that are hiring software engineers from abroad that have the same level of education as their U.S. counterparts (Dulebohn). The author also explains that many of the American workers that are being overlooked have advanced degrees and the jobs that they can be retrained to perform are scarce or nonexistent. In fact the Department of Labor reemployment statistics, asserts that more than one in three downsized workers stays unemployed and more than 50% of those that find jobs experience a decrease in the amount of money they are paid (Dulebohn).

Furthermore an article entitled "Outsourcing information technology" asserts that even though outsourcing has been practiced for centuries the outsourcing of information technology is relatively new. The authors further explain that Companies have been outsourcing payroll and accounting functions for years, but only recently have they discovered the benefits of relinquishing control over their IT departments. To keep pace with the information technology advances of the last decade, many large organizations have chosen to outsource the departments that handle their information systems and network services. Companies embracing IT outsourcing have benefited from the expertise and technological capabilities of their vendors, but they have had to deal with decreased control as well...In spite of concerns about decreased control, more and more companies today are moving toward outsourcing departmental functions to save time and money (Harmozi et al.)."

How long we can expect this current practice to continue and the economic impact of outsourcing of IT jobs five to ten years from now According to an article entitled "IT Jobs Outflow Expected to Rise" it is estimated that at least 250,000 highly skilled white collar jobs -- most of which are IT jobs -- will be outsourced every year between 2005 and 2015 (Zarocostas). The author further explains that in the United States between the years of 2005 and 2015 more than 60,000 jobs will be outsourced for each quarter (Zarocostas). This means that over the next decade there will be continued outsourcing of IT Jobs ("Global Firms Forecast to Continue Outsourcing"; "IT Jobs Outflow Expected to Rise").

Although America will be effected as it relates to IT outsourcing, the agency claims that the European Union will also be greatly affected by outsourcing (Zarocostas). In addition "Britain is expected to be the most affected with more than half of the losses, while Germany and France should sustain fewer job losses, the OECD said (Zarocostas)." In addition, research has asserted that impact on the American labor market is small when the full context of the labor market is taken into consideration because every three months 7 million jobs and lost or created in the United States. In addition, "from an adjustment perspective, the number of jobs likely to migrate is small in relation to the overall movement in the U.S. labor market and to the estimated number of jobs to be created (Zarocostas)"

The article goes on to state that although the impact of outsourcing may be less significant in the United States it is still having a significant impact upon those that are loosing their IT jobs (Zarocostas). Many companies choose to outsource to… [END OF PREVIEW]

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