By Ed Frauenheim, 17 December 2004 09:05
NEWS
Over the next six years, 15 per cent of information technology jobs required by US companies will be done in India, a new report predicts.
But while some US-based jobs might move overseas, offshore outsourcing can help the economy as a whole, according to the report, from AMR Research. The analysis firm on Wednesday said its research shows that companies reinvest 60 per cent of cost savings attributed to outsourcing in IT or business unit projects. AMR projects that by 2010, savings from offshore outsourcing will spark an added $30bn per year in new investments from US companies.
The firm said in its report: "Outsourcing to India will aid the US economy if the savings from outsourcing continue to be reinvested in new strategic projects."
Sending high-skilled work such as technology tasks to lower-wage locations, such as India, has emerged as a hot-button issue. Defenders of offshore outsourcing say it ultimately benefits the US economy and its workers. Critics claim that the practice eliminates high-paying jobs and threatens the nation's long-term technological leadership.
Comprehensive information about the scale and impact of what's sometimes called offshoring has been lacking, but the US Congress recently passed a bill that would set aside $2m to study the issue.
The new AMR report estimates that the Indian IT labour force will be larger than three million by 2010, and half of the workers will be performing jobs for US companies.
Companies that effectively outsource to India can reduce the cost of data centre operations, help desk support and other non-strategic activities by 40 per cent to 50 per cent, AMR said.
With average IT labour costs in the United States approaching $80,000 per worker per year, "a worker in India represents a $36,000 saving per year, and 1.5 million workers represent $54bn in savings each year," AMR said.
Ed Frauenheim writes for CNET News.com.
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1. Mark
bull!! CEOs are already pocketing the money. i guess owning 10 corvettes isn't enough, so let's lay everyone off so we can own 15.
http://news.com.com/For+CEOs%2C+offshoring+pays/2100-1022_3-5331845.html?tag=nefd.top
Chief executive officers at the companies shipping the most U.S. jobs overseas seem to be pocketing some of the savings, according to a new report.
The study, published by two groups concerned with economic inequality, found that average CEO compensation at the 50 firms outsourcing the most service jobs abroad increased by 46 percent in 2003. CEOs at the 365 large companies surveyed by Business Week only saw an average raise of 9 percent, according to the report from the Institute for Policy Studies and United for a Fair Economy.
CEOs at top offshore outsourcers earned an average of $10.4 million in 2003, while average CEO compensation hit $8.1 million, according to the report. From 2001 to 2003, the top 50 outsourcing CEOs earned $2.2 billion while sending an estimated 200,000 jobs overseas, the report said.
"These 50 CEOs seem to be personally benefiting from a trend that has already cost hundreds of thousands of U.S. jobs and is projected to cost millions more over the next decade," the report said.
2. anonymous
"With average IT labour costs in the United States approaching $80,000 per worker per year, "a worker in India represents a $36,000 saving per year, and 1.5 million workers represent $54bn in savings each year," AMR said."
Using the AMR stats and salary information from hotjobs.com, a company could save even more by locating in the American Heartland like Omaha, NE where the average IT person gets paid 40,000 per year. Indeed a 50% savings compared to only 36% savings for India. Plus you can actually understand your IT support personnel because they speak the same English language and not some garbled heavily accented "English".