www.acm.org/globalizationreport/summary.htm
This study reports on the findings of a Task Force established by The Association for Computing Machinery (ACM) to look at the issues surrounding the migration of jobs worldwide within the computing and information technology field and industry. ACM initiated this study to provide a deeper understanding of the trends in, and the forces behind, the globalization and offshoring of software. Because ACM is an international educational and scientific computing society, the study approached the issue of offshoring of software from an international as opposed to a United States-centric perspective. Moreover, the task force that conducted the study comprised not only computer scientists (ACM's traditional constituency) but also labor economists and social scientists from around the world. We believe that this approach, and this perspective, are unique. Most reports on globalization and offshoring are produced either by governments or national organizations, and thus provide an inherently national perspective, or by consulting firms in pursuit of their own or their clients' business interests. The primary purpose of the study is to provide ACM's 83,000 members, the computing field, the IT profession, and the public an objective perspective on current and future trends in the globalization of the software industry so that ACM members can better prepare themselves for a successful future in the system, software, and services portion of the global information technology field. We also believe this extensive study will be of value to those shaping the policies, priorities, and investments any country must make if it desires to remain or become a part of the global software-systems-services industry. Scope of the Study This study reports on the current state of globalization and offshoring of software and related information technology (IT) services. The ACM Task Force reviewed existing reports and data from around the world, and heard in-person from many experts, on issues relevant to globalization and offshoring. In the process, the Task Force took an in-depth look at the following: 1 The economic theories and data that underpin our current understanding of the forces shaping globalization today and in the future. Each of these areas is explored in detail in a chapter of the report. Findings and Recommendations In reviewing many existing reports, data, theories, and perspectives, a number of key findings and recommendations emerged. Key enablers of this growth are information technology itself, the evolution of work and business processes, education, and national policies. Information technology is largely now a global field, business, and industry. There are many factors contributing to this change, and much of this change has occurred within the past five years. Offshoring is a symptom of the globalization of the software-systems-services industry. This rapid shift to a global software-systems-services industry in which offshoring is a reality has been driven by advances and changes in four major areas: 1Technology-including the wide availability of low-cost, high-bandwidth telecommunications and the standardization of software platforms and business software applications. The economic theory of comparative advantage argues that if countries specialize in areas where they have a comparative advantage and they freely trade goods and services over the long run, all nations involved will gain greater wealth. As an example, the US and India have deeply interconnected software industries. India benefits from generating new revenue and creating high-value jobs; the US benefits from having US-based corporations achieve better financial performance as a result of the cost savings associated with offshoring some jobs and investing increased profits in growing business opportunities that create new jobs. This theory is supported to some extent by data from the US Bureau of Labor Statistics (BLS). Moreover, IT jobs are predicted to be among the fastest-growing occupations over the next decade. Some economists have recently argued that in certain situations offshoring can benefit one country at the expense of another. While debate continues about this aspect of theory/policy, the majority of the economic community continues to believe that free trade is beneficial to all countries involved, though some argue that globalization may lead to technology leaders' losing their current dominant position. In any event, economists agree that even if a nation as a whole gains from offshoring, individuals and local communities can be harmed. One solution to this potential negative impact is for corporations or their governments to provide programs that aid these individuals and their related communities in once again becoming competitive. The cost of such "safety-net" programs can be high and, thus, difficult to implement politically. Skepticism is warranted regarding claims about the number of jobs to be offshored and the projected growth of software industries in developing nations. Data for making good decisions about offshoring are difficult to obtain. Government data as collected are not very helpful and do not adequately address the specific issue of offshoring. The objectivity and quality of other data sources, especially the data in reports from consulting firms and trade associations, is open to question, as these organizations may be serving their own agendas. Projections are always more suspect than data on current employment levels. It is very difficult to determine how many jobs are being, or will be, lost due to offshoring. Some reports suggest that 12 to 14 million jobs are vulnerable to offshoring over the next 15 years. This number is, at best, an upper limit on the number of jobs at risk. To date, the annual job loss attributable to offshoring is approximately 2 to 3 percent of the IT workforce. But this number is small compared with the much higher level of job loss and creation that occurs every year in the United States. Thirty percent of the world's largest 1000 firms are offshoring work, but there is a significant variance between countries. This percentage is expected to increase, and an increase in the amount of work offshored is consistent with the expected growth rate of 20 to 30 percent for the offshoring industries in India and China. Almost all estimates are based on reports from national and international consulting firms and, thus, subject to scrutiny. These standardized jobs were the initial focus of offshoring. Today, global competition in higher-end skills, such as research, is increasing. These trends have implications for individuals, companies, and countries. The report considers several case studies of firms and how they are addressing offshoring, including software service firms in low-wage nations and four types of firms in high-wage nations: packaged software firms, software service firms, entrepreneurial start-up firms, and established firms outside the IT sector. These cases show that the amount and diversity of work being offshored is increasing; and companies, including start-ups, are learning how to access and use higher skill levels in developing countries. One example of a higher-skill area now subject to global competition is computing research. Historically, the bulk of this research was carried out in only a few countries - countries with high purchasing-power-parity adjusted gross domestic product (PPP GDP) and with a relatively large percentage of PPP GDP devoted to research and development. This situation is changing rapidly and the trend looks inexorable. Many companies have established research centers in multiple countries. Most of these companies retain strong research operations in their home country. This fact, combined with increasing national research investment in India and China, is leading to both an increase in the total worldwide investment in research and a wider distribution of research activities around the world. The historic advantage held by Western Europe and the United States is not as strong today as in the past, given the developments in the graduate education systems in China and India, ...
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