Outsourcing woes touch independents, too

Not having a boss doesn't mean the outsourcing trend won't hurt you. Find out what you can do to protect yourself.

As an independent software engineer, Tim Roberts was insulated from the outsourcing of information technology services.

Or so he thought.

During 14 years of contract work, Roberts managed to secure long-term agreements with major corporations to provide IT services ranging from project management to development. One contract spread over seven years. Another project lasted six years. But those kinds of gigs are scarce nowadays.

"It's getting harder and harder to find good contracts because a lot of work is going overseas," said Roberts. "Plus, my rates are half what they were a few years ago," during the high-tech boom.

Roberts' situation underscores the deep and pervasive effects corporate outsourcing has had on IT professionals. Not only are those in IT shops at risk, but so are thousands of freelancers like Roberts, who serve as valuable adjuncts to paid technology staff. Proponents of outsourcing say it streamlines costs for businesses by farming out non-essential IT services. But critics contend it takes jobs away from Americans and ultimately hurts the U.S. economy.

Roberts seems ambivalent about outsourcing, though. "I honestly think it's good for the industry, because a lot of people who entered the field during the boom probably didn't belong. On the negative side, though, I think outsourcing is overused in too many places."

Regardless of the debate, few dispute the increased role outsourcing plays in the global economy. Determining the number of IT jobs outsourced is an inexact science. U.S. companies are not required to report such figures, but analysts don't expect the practice to slacken anytime soon.

McKinsey Global Institute, an economic think tank attached to McKinsey & Co., predicts white-collar jobs will be outsourced at a rate between 30% and 40% during the next five years. Forrester Research of Boston says about 3.5 million U.S. jobs will get shifted to lower-wage, developing countries by 2015. What's more, experts say corporations earmarked fewer dollars for IT training in 2004.

"Most training companies I've talked with say their revenue is down about 70% from historical expenditures, which is based on peak values," said Ed Tittel, an IT training expert and author of the "Exam Cram" series of books.

The upshot: IT professionals who are worried that their jobs will disappear overseas are learning to shoestring their own career development. More workers have begun paying for their own training classes instead of depending on their corporations to foot the bill. Corporate spending on training made up only 35% of the total expenditures, down from a norm of about 50%, Tittel said.

To hone his skills, Roberts participates in online code writing competitions run by Glastonbury, Conn.-based TopCoder. Sponsored by heavyweights like Yahoo, Microsoft Corp., Sun Microsystems, Intel Corp. and others, the competitions pit developers against one another. Aside from cash prizes, contest winners usually wind up landing big contract assignments from companies seeking topnotch programmers.

"There is no better way to hone one's self but to compete against someone else. You improve through necessity and through viewing what others do," said Roberts, whose latest client was secured through contact with fellow TopCoder members.

Still, the outlook isn't entirely gloomy. As sectors like software development take hits, other emerging IT disciplines present opportunities for motivated tech workers, according to experts.

Information security, for instance, assumes greater importance because companies place more value on data as a corporate asset. Those with an applied knowledge of LAN/WAN security, virtual private networks, PCIP, Voice over Internet Protocol, and other security-related technologies are expected to be in demand.

"Companies can't outsource everything, and information security is one of those things they need to keep in-house," said Katherine Spencer Lee, executive director of Robert Half International in Menlo Park, Calif. "The reason is because they have a lot of information going back and forth between different places."

Project management skills also are in high demand, said Spencer Lee. Companies prize IT pros with the ability to define goals, track their progress, negotiate contracts, and communicate effectively with customers.

Although outsourcing may threaten IT jobs now, Roberts said that the pendulum ultimately will swing the other direction. He reasons that overseas projects lack the direct oversight of on-site programmers, fostering an error-prone environment that increases development costs and creates unnecessary delays.

The difference in time zones and workdays limits interaction between overseas developers and domestic programmers. Moreover, development standards can't be checked as assiduously on outsourced projects.

"You can't really outsource whole projects or whole IT departments," said Roberts, "because projects eventually will run into trouble. Once companies figure out how to use outsourcing – how it's effective for doing their projects – our market in IT will rebound."

Wary programmers can only hope Roberts is right.

Garry Kranz is a business and tech journalist based in Richmond, Va.

This was first published in September 2004

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