Over the past couple years, just about every publication from The Economist to Fortune to Forbes, Businessweek, CIO and CFO has written extensively about IT outsourcing & offshore software development, obviously citing India and other low-cost countries as prime examples and providers of this service. In a report published two months ago, Forrester Research professed some incredible forecasts: At least 3.3 million white-collar jobs and $136 billion in wages will shift from the US to low-cost countries by 2015.

First, it happened to the steel industry, then the manufacturing industry and for the past decade or so, the services industry (not just IT, but hospitality, etc.). Jobs were indeed lost, arguably leading to a temporary backlash. But, businesses *will* continue to do WHATEVER it takes to survive and definitely so, in these uncertain economic times. Recent legislation to prevent flight of state-mandated IT outsourcing contracts that was almost passed by the New Jersey State Senate or even the one being considered by Mississippi will not prevent corporations from implementing any form of cost cutting, and IT outsourcing happens to be the flavor of this decade. Note that as an industry, outsourcing has been around for many decades - companies like EDS, CSC and IBM have provided outsourcing services since the '70s. But, according to Tony Baer, principal with NY-based consulting firm Demand Strategies, "Outsourcing gained a bad rap during the last recession, as Fortune 500 companies boasted to shareholders of shedding their IT organizations to the IBMs of the world. Those deals were plagued by rigid, long-term contracts that left little or no incentive to modernize technology or improve service levels, as well as poor productivity due to diminished staff loyalty. The lessons this time around include better contracts and staff retention, plus all the usual things that accompany a large project: top management support backed by a vision, strategy and specific goals. Start with a pilot, and once it is scaled up, require the offshore firm to permanently station project coordinators on site."

During a recent social gathering, I was privy to an interesting discussion on IT outsourcing. Not surprisingly, this morphed into a lively debate; fortunately, we had just finished gorging on pizza and pop, so everyone was in a chatty mood, which then continued online. Said MS, "I guess a question that was perhaps lost on all of us is what alternative do corporations have if they don't send these jobs offshore to reduce costs? In the current economy, if they don't stay profitable, then they may simply have to shut down their business and/or do massive layoffs." In response, SS countered, "In the past (I believe) the other industries already existed while the work started migrating offshore. So, when the existing jobs started migrating offshore, more folks shifted to the "next wave" industry. I don't see another industry with the potential of steel/manufacturing/service industry in this market place, though I'm sure there is one out there somewhere." Despite the recession, Infosys, Wipro and Cognizant have grown by more than 25% in the past year. And the new software development centers aren't just cheaper. In many cases, their quality and disciplines are also superior.

It is interesting to note that companies like Wipro are now moving into the next level of offshore market, buying US-based companies for cash, such as its December 2002 acquisition of an energy IT consulting firm, that added 90 industry experts to its energy practice. IT outsourcing will remain extremely attractive to corporations, as long as they're aware and acknowledge that not all tasks can be effectively outsourced.