Globalization and offshoring of software (original) (raw)

2006, Report of the ACM Job Migration …

Over the past decade, low-wage countries such as India have developed vibrant, export-oriented software and IT service industries. Attracted by available talent, quality work, and most of all low cost, companies in high-wage countries, such as the United States and the United Kingdom, are increasingly offshoring software and service work to these low-wage countries. Trade (together with automation) cost many jobs in the manufacturing sector to be lost from the West and many developing nations in East Asia to increase their wealth and industrial prowess since 1970. Changes in technology, work organization, educational systems, and many other factors have caused service work-previously regarded as immune to these forces-also to become tradable. This trade in services, led by the trade in software and IT-enabled services, presents many opportunities and challenges for individuals, firms, and policymakers in both developed and developing nations. Many people in the United States and Western Europe fear that sending software work offshore will cause wage and job suppression in the high-wage countries. Others believe that the process of getting good labor at lower prices will make the economy more productive, enabling the creation of new wealth and new jobs. Many people in the low-wage countries are excited by the economic development that their software and service industries are bringing them; while some are concerned about the side effects such as congestion, pollution, and loss of traditional cultural values. One thing that is clear is that the globalization of software is here to stay, so that policymakers, educators, and employers all need to address the realities of offshoring. This includes, for example, how to help people whose jobs are shipped to another country to get assistance with their careers, how to create innovative environments that help to create new jobs, and how to revamp educational systems for the realities of a globalized world. "Offshoring" is the term used here. It is a term that applies best to the United States because, even though the United States does outsource work to Canada and Mexico, most of its work is sent over the seas-mostly to India, but also to China, Malaysia, the Philippines, and many other places. Germany, for example, also sends work across its borders, including to Eastern Europe, but there is no water-no shore-to cross. Some of the work that is offshored is sent to entrepreneurial firms established in these low-wage countries. Other times, multinationals