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Exporting
— and Importing — IT Jobs
By Michael Alan Hamlin
March 05, 2001
Recruiting and keeping bright people
— not multinational muscle — is the biggest challenge
Philippine and other Asian companies face as a result of liberalization
and globalization. U.S. legislators remain under pressure to increase
the number of visas issued to IT workers every year after almost
doubling the visas available last year to 200,000. But around 800,000
IT jobs go unfilled every year.
Yes, that’s true despite the downturn in the U.S.
economy, and warnings by most technology companies of slackening
demand. That’s because despite reduced capex expenditures in
general, virtually no company — traditional or non-traditional
— plans to pull back on investment in its Internet and customer
relationship management strategies, according to a recent AMR Research
study. That study estimated that 94 percent of the companies surveyed
indicated that they will sustain or increase spending on B2B marketplace
activities. Especially in hard times, companies need the benefits
of increased efficiency and productivity as alternative revenue
streams the Internet provides.
The U.S., of course, is not the only market competing
for international intellectual talent. Companies in many Asian markets
— Australia, Taiwan, Singapore, Malaysia, and Hong Kong, for
instance — recruit heavily in the Philippines, as well as in
India and Eastern Europe, for bright people. And like U.S. companies
with no choice, many of these companies have decided that it makes
more sense to export jobs than to import brains. It’s cheaper,
easier, and inherently do-able. That’s a trend that’s
going to accelerate dramatically.
A just released IDC report says that U.S. companies
are going to dramatically increase their spending on offshore outsourcing.
In fact, "the amount will more than triple from under US$5.5
billion in 2000 to over US$17.6 billion in 2005." And cost
is no longer the principal motivation. "While cost savings
has historically been the main driver for using offshore outsourcers,
today accessing IT talent is quickly becoming the primary motivation,"
according to the study.
IDC research manager Cynthia notes that, "American
companies unable to find, hire, and retain skilled IT workers at
home are finding a vast pool of highly educated technology-savvy,
English-speaking workers available overseas. These companies are
sending IT projects offshore to compensate for the limited pool
of talent available in the United States." They are doing fundamentally
important work, too.
Doyle explains, "In the past, offshore IT service
firms were primarily utilized for their programming, coding, and
software development work, but they have expanded their skill sets
and expertise and can now deliver enhanced e-business solutions."
e-business and Internet application development, IDC says, will
grow to US$5.6 billion by 2005, just four years from now. That’s
more than the entire IT outsourcing expenditure for U.S. companies
last year.
But IDC doesn’t see the Philippines as one of
the principal beneficiaries of the outsourcing trend. Instead India
— despite a looming people shortage of its own expected to
hit 200,000 this year — is projected to take in the lion’s
share of the U.S. outsourcing investment. Following are Canada,
Ireland, Mexico, Israel, South Africa, and even the Caribbean. That’s
despite another research organization’s finding last year that
the Philippines is the best source of IT workers in the world. Whether
that’s true or not, the IDC conclusions suggest that the Philippines
— if it wants to recruit outsourcing investment — still
has a perception, and therefore a competitiveness, issue to deal
with when it comes to attracting outsourcing investment.
Doyle hints why: "To be a successful provider
of outsourcing services, a region must demonstrate fluency in English,
a vast pool of IT talent, a solid infrastructure, and experience
doing business with Western companies. So far, only India meets
all these requirements. Other regions have some of these characteristics,
but not all."
Where does the Philippines fall behind? Infrastructure
seems the obvious gap. But the obvious can be misleading. More probably,
and you may be surprised, it is experience doing business with Western
companies, certainly in the IT sector (Although most people also
fret about declining English proficiency.). That’s because
India officially exported around US$6 billion in software in 1999,
compared to about US$200 million for the Philippines — a paltry
sum by comparison.
While in all likelihood actual software exports from
the Philippines were much greater, they are harder to account for,
as I’ve noted here and elsewhere before. That’s in significant
part because India’s exports are by Indian firms that have
grown into giant software export factories over the past couple
of decades. By contrast, Philippine software exports are principally
from development centers set up here by multinationals and other
outsourcers. And those exports are harder to track in part because
they are shipped out electronically, over the Internet.
You might wonder why the India firms bother to report
all that income, since they undoubtedly also export via the hard-to-track
Internet channel. The reason is that they are domestic firms that
hope to, aside from attracting customers with their impressive revenue
stream, eventually IPO. By contrast, the Philippine development
facilities are subsidiaries of companies based outside the country.
Revenue streams here don’t matter. As a result, the Philippines
is a cost center, not a profit center.
What does all this have to do with the big challenge
Philippine companies face attracting bright people? It has to do
with tough choices. On the one hand, the Philippines needs to be
an outsourcing center because it needs to create the jobs. The more
jobs created, the better the economy does. On the other hand, it’s
going to be tough for Philippine companies to compete for people
because offshore firms pay more. Not having bright people is the
same thing as not having an Internet strategy. No people, no strategy.
So what’s the answer? Clearly, it’s going
to be jobs. No government can survive long without creating lots
of them, and IT jobs are relatively easy to create (But that’s
another story.). But precisely because they are easy to create,
there is hope for Philippine companies that need bright people to
implement strategic IT initiatives, despite the competition for
brains. However, government and the private sector must, together,
pile as much investment into training and developing IT people as
they can.
That way, it may be possible to have your cake, and
eat it too.
(Mr. Hamlin is managing director of the consultancy
TeamAsia and the author of two books on Asian economies and managing
in Asia. His latest book is The New Asian Corporation: Managing
for the Future in Post-Crisis Asia. His e-mail address is mahamlin@teamasia.com.ph.)
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