Software Development Outsourcing

Oleg Gokhman

Definition

• Outsource Date: 1979: to procure (as some goods or services needed by a business or organization) under contract with an outside supplier [Merriam-Webster Dictionary]

Outsourcing Map

Some Facts

• 61% of surveyed U.S. organizations outsourced more than 40% of their programming.

• 27,000 computer jobs offshored in 2000• 52,309 IT jobs offshored in Jan-Sep 2004• Over 3 million IT jobs might be gone by 2015

Median annual earnings for U.S. computer applications software engineers is $79,780 vs. $20,000 in India

Computer Impact

• Enable fast communication and data transfer over the Internet: Email, FTP, HTTP.

• Interactive development: IRC, voice chat, video conferencing.

• Fast distribution of latest development languages, tools, and techniques

Disadvantages

• High-quality jobs lost

Disadvantages

• Discourages CS students

Damages the U.S. lead in IT

Endangers National Security• Software developed abroad can contain any number of

security threats from backdoors to keyloggers to logical bombs to rootkits.

• “No one knows what's in software that's developed overseas. It might have trapdoors, time bombs or other malicious code put there by saboteurs. And that has a Department of Defense task force worried. "There are very clever things that can be done," says task force chairman Robert Lucky. "And we're talking about complexity that boggles the mind. It's so enormous that no one can truly understand a program with millions of lines of source code."

Creates foreign competition: Infosys

Creates foreign competition: Infosys

Disadvantages

• Used to threaten current developers• Loss of control by organizations• Software quality likely to suffer• Loss of intellectual property and sensitive data

Advantages

• Corporate cost savings– Cheaper software– Increased profits for investors

• Jobs in developing countries• Overall economic growth

Ethical Issues

• Developers lose jobs– Kantian: Developers used as means to profits– Act Utilitarianism: Job loss >> Profit increase– Rule Utilitarianism: Hard to evaluate– Social Contract: • Legal protection of U.S. workers• Public outcry • ---> Social contract to keep jobs in the U.S.

• Conclusion: Outsourcing is unethical

Future Impact

• Uncertain• Recession might accelerate offshoring• Projected to increase• Could slow down:– Falling U.S. Dollar– Rising wages offshore, high turnover

• Could decimate software industry in the U.S.

Necessary Changes

• Removal of tax breaks for outsources• Economic incentives to keep jobs in the U.S.• Licensing of software developers• Labor union• Legal sanctions against outsourcing

companies

Summary

• Software Development Outsourcing– Done to cut costs– Sped up by computers & the Internet– A real threat to • Software professionals• The U.S. Economy• The U.S. Security

– Unethical– Something needs to be done

Questions?