In this post, we’ll talk about the difference between outsourcing and offshoring, and where the main friction points are between proponents and opponents of contracting out work to foreign countries.
Is offshoring a blessing or curse for IT processionals in Canada? Does it help our IT sector develop and mature, or is it whittling away at the progress we’ve made in developing our own IT talent?
Let’s start by looking at the big picture.
Two words, two different things
It’s hard to name a business practice that brings out as many emotions as “outsourcing” does.
I put the scare quotes around the word because the term is often misused by people who are actually opposed to something different: offshoring.
It’s common to hear complaints about “our jobs being outsourced to (India/China/Brazil/etc.),” which is an accurate way to describe what’s going on in general terms. But when the single word “outsourcing” is hurled around as some sort of epithet, it makes the fundamental argument about jobs leaving the country a confusing one.
Outsourcing is the practice of contracting out work to other firms that you expect will handle a certain project more cheaply, quickly or at a higher quality level than you can manage in your own shop. This happens within Canada every day.
In fact, to give you an idea of how common outsourcing has become, take a look at this. Just a few months ago, industry analyst firm IDC Canada estimated that over 50 per cent of Canadian companies are now outsourcing 10 per cent of their application and infrastructure support jobs.
As you read this blog, countless Canadian companies are outsourcing some job or other, perhaps a software development project in which the contracted company has particular expertise. Or, maybe a company has hired a ‘third-party’ recruiter for a specified period. In such a cases, both firms stand to benefit from the transaction, and the actual job isn’t accomplished by an army of minimum-wage workers in a warehouse in Vaughan.
Well, at least I hope not.
Meanwhile, according to IDC, the offshoring of IT jobs is taking off in Canada. According to the firm’s figures, it’s an industry worth nearly $3 billion. And it’s in offshoring—not outsourcing—where the controversy comes in.
Why offshoring is controversial
So, let’s get to the real issue at hand. There are essentially two arguments against offshoring. First, there’s the practical one, represented by the people who resent the idea of paying foreigners to do work that could have gone to Canadians. They’re not necessarily concerned about what’s going on overseas. They just want the jobs to stay here.
Then there’s the moral argument. Some people are appalled at the low rates of pay in developing countries. A talented and highly experienced web programmer in India might be paid less than a McDonald’s employee here. And while our companies generally pay competitive rates abroad, they’re mostly competing against other multinationals, virtually none of which are offering Canadian, American or European level salaries and benefits to their foreign workforce.
We saw a good example of the moral argument against offshoring when Apple Inc. was chided for manufacturing their products overseas when they could, in theory, keep those jobs in the United States and still make a buck.
In short, there are both moral and practical arguments against sending jobs abroad, and there are many Canadians and Americans who express them with particular zeal. Usually, what really gets to them is the “greed” of the corporations, and sometimes even these organizations’ supposed lack of patriotism for denying job opportunities to their fellow citizens.
Even good guys respond to incentives
There may be a shortage of IT workers available at the right price, but there’s certainly no shortage of greed in the world.
Not everyone is greedy. However, the fact remains that even the most noble people will respond to incentives to make more money. When there are skilled IT professionals in other countries who are willing to work at a cheaper rate and for longer hours than their homegrown counterparts, a business will see a great opportunity in offshoring IT jobs.
Is this greed? Or is this just smart business?
At the same time, most Canadian corporations have a decent code of business ethics, and it’s unusual to find examples of companies who are knowingly tolerating flat-out abuse of their overseas workers. There are certainly abuses that occur, but they tend to be sensationalized in the media, and thus, some people assume that these cases are the norm rather than exceptions.
Finding the middle ground
In my next blog post, we’ll delve further into the subject of offshoring IT jobs: why they leave Canada, where they end up, and how Canadians benefit from offshoring. In other words, I’m going to argue the case for offshoring.
But since there are two sides to this coin, I’m also going to dedicate a post to the risks and dangers of offshoring, of which there are many. Businesses fall hard when they venture out into this rough-and-tumble world, and we often feel the shock back here in Canada.
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