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Outsourcing and Unintended Consequences

My post of a week ago brought a number of comments, in the feedback and via e-mail, both on outsourcing and on the relationship between outsourcing and the lack of young people interested in technology careers. I mentioned that the Wall Street Journal reported on the curious anecdote that the children of many successful and prominent technologists are shunning education and career in technology. One of the reasons given was that they were perhaps more cognizant than most young people of the phenomenon of outsourcing. In one case, the parent was a venture capitalist who advocated that start-up companies establish their development teams inIndia to reduce engineering costs.

The responses I received provide some clarity on both the intended and unintended consequences of outsourcing. We have pursued outsourcing to some extent in order to achieve economic benefits; that is, to save money on developer salaries. By and large we have achieved that, although there have been exceptions noted in the press in cases where for various reasons the outsourced developers haven't resulted in the desired savings.

Perhaps another intended, or at least unavoidable, consequence is a more macro one—reduced levels of employment for technical professionals in the United States, as well as some level of salary depression for the group as a whole. From an economic sense, this is a desired outcome for those engaging in outsourcing, though undesirable for the individual developers.

So at first glance the impacts from outsourcing seem to be primarily economic. I've heard arguments that outsourcing of basic functions saves a corporation money that can be used to initiate new and innovating projects employing local developers, but that remains an economic argument (and an unproven one).

But as the Wall Street Journal article implied, there are consequences that are not economic, and that few if any of us thought about prior to initiating outsourcing. One is that young people seem to be less inclined to pursue these careers, making such skills less available domestically. This was a trend that was evident prior to large-scale outsourcing, because technical training tended to follow the growth and dips of the technology industries. After about 2000, technology jobs dried up, and the desire for training for those jobs went down.

We are currently seeing cautious growth in technology industries, but is it having an effect on career choice? I spoke to Richard Heckel, Technical Director of Engineering Trends (www.engtrends.com), a research firm specializing in engineering education trends. "There is," said Dr. Heckel, "a direct correlation between a student's expectations of a monetary reward as an engineer and enrollment in that field. This is a clear trend since 1945. We are currently seeing an increase in the number of engineering graduates in general, and will probably reach the largest number ever next year.

"Except," he continued, "for computer science and computer engineering graduates. Those numbers tanked in 2002, and continue to remain poor. I believe that the reason is outsourcing."

I offer no personal opinion on the subject of outsourcing and its effect on career choices. The issue has not impacted me, and I lack a basis on which to have personal feelings on the subject. But it does seem to me that utilizing talent irrespective of physical location is both inevitable and, individual pain aside, desirable. In time it should even result in greater levels of employment for all.

But it's pretty clear that one unintended consequence of outsourcing is its effect on future career choices in technology. Dr. Heckel concluded our discussion by saying, "You might think of engineering as the new form of liberal arts education." Technology and its applications have become so central in our everyday lives that to understand it thoroughly might be as important as reading and understanding the classics were in an earlier era.

Posted by Peter Varhol on 04/09/2005 at 1:15 PM


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