Difference between revisions of "IT Outsourcing: Economic and Policy Analysis"

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== ANNOUNCEMENT ==
 
Monday November 8:  Each team must provide a one-page project description, which will be worth 10% of the project grade:  team members, topic, sub-topics, sources, team organization, etc.  (We will provide brief comments on these submissions.)
 
 
 
 
 
== TOPIC ==
 
== TOPIC ==
  
Line 10: Line 5:
  
 
== ABSTRACT ==
 
== ABSTRACT ==
 
+
We investigate the causes and effects of recent increased IT outsourcing to lower-waged countries. In the first section, we will examine the economic considerations to outsourcing IT work abroad.  The economic considerations include a cost/benefit analysis of the impact that outsourcing has on an individual firm and on the US market as a whole.  This section will provide insight into the economic incentives to outsource or not.  Delving into the economics of outsourcing has important implications for policy because policy can alter decision making of whether to outsource or not by changing incentives.  We will also analyze the non-economic issues involved in outsourcing.  These include looking at the risks and benefits associated with project quality, public relations, employee morale, and time to market. 
 
+
We will also address the educational cirriculum in the United States, along with recent trends of views on the IT industry in the US. Through recent trend analysis we will provide an explanation for why outsourcing is a growing phenomena. Accordingly, the research methodology will be mainly based on the comparative case study.(U.S. vs. France vs. India) We will also analyze how Bush Administration incoporated the point of view of economists as well as the politics in the U.S. labor market. In the end, we will examine the possible public policies and discuss its feasibility, followed by cost-benefit analysis of each policy.
 
 
  
 
== SUB-TOPICS ==
 
== SUB-TOPICS ==
Here's how our project could be divided - PLEASE EDIT/ADD TO THIS LIST
 
  
  
'''1) Economic Considerations To Outsourcing - Pros/Cons'''
+
'''1) Economic Considerations To Outsourcing'''
  
 
- costs/benefits of outsourcing (looking at theory of comparative advantage, supply/demand, costs of transfer, etc)
 
- costs/benefits of outsourcing (looking at theory of comparative advantage, supply/demand, costs of transfer, etc)
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'''2) Technological Incentives To Outsource - Pros/Cons'''
+
'''2) Additional Drivers of Outsourcing'''
  
- discussion of India and why the US chooses to outsource there
+
- Analysis of what is typically outsourced and what is not
  
- What risks do we run by outsourcing our IT to countries such as India?
+
- Quality of outsourced work
  
- Is it safe technologically to do so?
+
- Outsourcing and the impact on internal employees (morale, job opps, etc.)
  
- Are key areas outsourced?
+
- Risks in outsourcing (IT core competancies, PR, etc.)
  
- Helps avoid layoffs when projects are cyclical
+
- Use of outsourcing to avoid overhiring during cyclic business upswings
  
 
- Allows for rapid ramp up of work force to handle strategic projects.  Either (1) using outsourced workers for the strategic projects or (2) using outsourced workes for core projects and freeing US-based workers for strategic projects  
 
- Allows for rapid ramp up of work force to handle strategic projects.  Either (1) using outsourced workers for the strategic projects or (2) using outsourced workes for core projects and freeing US-based workers for strategic projects  
Line 54: Line 47:
  
  
'''3) Analysis Of Existing Public Policies''' (France.. any other countries that have openly initiated policies to stop outsourcing? Discuss the differences between France and US outsourcing--industry.. are they similiar? Are they detrimental to the comparison?) <br /><br />
+
'''3) Analysis Of Existing Public Policies'''
- Analysis of public policies in general that lead to outsourcing.<br />
 
- Protectionism<br />
 
  
  
 +
- Dot-com burst
  
'''4) US Public Policies To Manage Outsourcing'''                                                                                   In this chapter, we will analyze how Bush Administration incoporated the point of view of economists as well as the politics in the U.S. labor market. Also we will examine the possible public policies and discuss its feasibility, followed by cost-benefit analysis of each policy. The methodology of this chapter will be mainly based on the comparative case study. The contents are listed below.
+
- Recent decline in interest in the field
 
+
 
 +
- Compare cost of living in India
 +
 
 +
- competitive advantage of US IT industry is innovation.. cost is definitely not it
 +
 
 +
- foreign currency benefits (pay local workers in money from local product sales)
 +
 
 +
- the argument for modifying IT cirriculum in the US so that workers will maintain competitive edge
 +
 
 +
 
 +
 
 +
'''4) US Public Policies To Manage Outsourcing'''
 +
         
 
- The viewpoint of Bush Administration about IT outsourcing/insourcing  
 
- The viewpoint of Bush Administration about IT outsourcing/insourcing  
  
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- The political economy of outsoucring policy, trade policy: costs and benefits
 
- The political economy of outsoucring policy, trade policy: costs and benefits
 
- Small case study of Silicon Valley vs. France's 20 "competitiveness zones" vs. Washington State (see article below)
 
  
 
- Discussion about possible public policies:
 
- Discussion about possible public policies:
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   f. Trade agreements
 
   f. Trade agreements
 
   g. Visas (this could be a whole topic to itself).
 
   g. Visas (this could be a whole topic to itself).
 
 
5) Conclusion
 
  
 
== GROUP MEMBERS ==
 
== GROUP MEMBERS ==
  
 +
Mandy Chang, UC Berkeley, mandy_c@berkeley.edu [[User: mandy_c]](subtopic 3: Analysis Of Existing Public Policies)
  
Mandy Chang, UC Berkeley, mandy_c@berkeley.edu [[User: mandy_c]]
+
Aamir Alavi, UC Berkeley, aalamir@berkeley.edu [[User: aamiralavi]](subtopic 1: Economic Considerations To Outsourcing)
 
 
Aamir Alavi, UC Berkeley, aalamir@berkeley.edu [[User: aamiralavi]]
 
 
 
Brad Struss, UW, bradstr@cs.washington.edu [[User: bradstr]]
 
 
 
Jeongsoo Kim, UC Berkeley, jk37@berkeley.edu [[user: jk37]]
 
  
 +
Brad Struss, UW, bradstr@cs.washington.edu [[User: bradstr]](subtopic 2: Additional Drivers of Outsourcing)
  
== TEAM ORGANIZATION ==
+
Jeongsoo Kim, UC Berkeley, jk37@berkeley.edu [[user: jk37]](subtopic 4: US Public Policies To Manage Outsourcing)
Members are independently responsible for their own chosen subtopics, but all will collaborate through the Wiki discussion page.<br /><br />
 
  
Aamir - interested in subtopic 1<br />
 
Mandy - subtopic 3<br />
 
Brad - subtopic 2<br />
 
Jeongsoo - subtopic 4
 
  
  
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for Sending American Jobs Overseas]
 
for Sending American Jobs Overseas]
  
[http://www.citizenstrade.org/offshoring.php#Fact%20Sheets%20&%20Popular%20Materials Reports, articles,& statesments in offshoring/outsourcing]
+
[http://www.citizenstrade.org/offshoring.php#Fact%20Sheets%20&%20Popular%20Materials Reports, articles,& statesments on offshoring/outsourcing]
 +
 
 +
[http://www.mckinseyquarterly.com/article_page.aspx?ar=1453&L2=7&L3=10 Exploding the myths of offshoring] (requires free registration)
 +
 
 +
[http://www.iie.com/publications/pb/pb03-11.pdf Globalization of IT Services and White Collar Jobs: The Next Wave of Productivity Growth]
 +
 
 +
[http://www.mckinsey.com/knowledge/mgi/reports/pdfs/offshore/Offshoring_MGI_Perspective.pdf Offshoring: Is it a Win-Win Game?] (may require free registration)

Latest revision as of 23:43, 2 December 2004

TOPIC

Economic and technological incentives to outsource, and government policies that can affect IT outsourcing rates.


ABSTRACT

We investigate the causes and effects of recent increased IT outsourcing to lower-waged countries. In the first section, we will examine the economic considerations to outsourcing IT work abroad. The economic considerations include a cost/benefit analysis of the impact that outsourcing has on an individual firm and on the US market as a whole. This section will provide insight into the economic incentives to outsource or not. Delving into the economics of outsourcing has important implications for policy because policy can alter decision making of whether to outsource or not by changing incentives. We will also analyze the non-economic issues involved in outsourcing. These include looking at the risks and benefits associated with project quality, public relations, employee morale, and time to market. We will also address the educational cirriculum in the United States, along with recent trends of views on the IT industry in the US. Through recent trend analysis we will provide an explanation for why outsourcing is a growing phenomena. Accordingly, the research methodology will be mainly based on the comparative case study.(U.S. vs. France vs. India) We will also analyze how Bush Administration incoporated the point of view of economists as well as the politics in the U.S. labor market. In the end, we will examine the possible public policies and discuss its feasibility, followed by cost-benefit analysis of each policy.

SUB-TOPICS

1) Economic Considerations To Outsourcing

- costs/benefits of outsourcing (looking at theory of comparative advantage, supply/demand, costs of transfer, etc)

- discussion of India and why the US chooses to outsource there

- Compare cost of living in India

- operational costs in the US v. costs in India

- foreign currency benefits (pay local workers in money from local product sales)

- can allow US companies to avoid layoffs

- if costs savings allow company to grow, then company can hire US workers in other areas (marketing, biz dev, etc.)

- outsourcing may lower employee morale which in turn reduces productivity


2) Additional Drivers of Outsourcing

- Analysis of what is typically outsourced and what is not

- Quality of outsourced work

- Outsourcing and the impact on internal employees (morale, job opps, etc.)

- Risks in outsourcing (IT core competancies, PR, etc.)

- Use of outsourcing to avoid overhiring during cyclic business upswings

- Allows for rapid ramp up of work force to handle strategic projects. Either (1) using outsourced workers for the strategic projects or (2) using outsourced workes for core projects and freeing US-based workers for strategic projects

- Effects of outsourcing on US innovation (investing in R&D)


3) Analysis Of Existing Public Policies


- Dot-com burst

- Recent decline in interest in the field

- Compare cost of living in India

- competitive advantage of US IT industry is innovation.. cost is definitely not it

- foreign currency benefits (pay local workers in money from local product sales)

- the argument for modifying IT cirriculum in the US so that workers will maintain competitive edge


4) US Public Policies To Manage Outsourcing

- The viewpoint of Bush Administration about IT outsourcing/insourcing

- The viewpoint of U.S. economists/corporations about IT outsoucring

- The viewpoint of other stakeholders

- The political economy of outsoucring policy, trade policy: costs and benefits

- Discussion about possible public policies:

 a. Improve high school math and science to keep US competitive internationally
 b. Modify college curriculums to provider training for jobs that will continue to be    
    needed in an outsourced economy (project mgmt, architects, etc.)
 c. Additional government spending to university R&D projects to produce higher/highly skilled 
    workers
 d. Tax breaks to US corporations for keeping employees in US
 e. Procurement
 f. Trade agreements
 g. Visas (this could be a whole topic to itself).

GROUP MEMBERS

Mandy Chang, UC Berkeley, mandy_c@berkeley.edu User: mandy_c(subtopic 3: Analysis Of Existing Public Policies)

Aamir Alavi, UC Berkeley, aalamir@berkeley.edu User: aamiralavi(subtopic 1: Economic Considerations To Outsourcing)

Brad Struss, UW, bradstr@cs.washington.edu User: bradstr(subtopic 2: Additional Drivers of Outsourcing)

Jeongsoo Kim, UC Berkeley, jk37@berkeley.edu user: jk37(subtopic 4: US Public Policies To Manage Outsourcing)


SOURCES


Businessweek article

"Offshoring" Service Jobs: Bane or Boon and What to Do?

How Outsourcing Creates Jobs for Americans

Outsourcing, Offshoring, and Globalization

The Outsourcing Bogeyman

Offshore Outsourcing Resource Center

[http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2004/03/07/MNGRT5G2C11.DTL Offshoring's giant target: the Bay Area Silicon Valley could face export of 1 in 6 jobs -- worst in nation]

Global IT Sourcing: Impacts and Implications for Washington State

Dell's dirty words: Outsourcing, proprietary

Relocating the Back Office, Economist

The States and Outsourcing

White House Under Fire for Outsourcing Proposal

[http://www.opednews.com/kelly0204_clinton_policies.htm The Sooner Democrats Disassociate Themselves From Clinton’s Trade Policies, the Better; Otherwise, Republicans Will Turn Their Best Economic Argument Against Them]

Global software outsourcing: The solution to the IT skills gap

[http://www.senate.gov/~clinton/news/2004/2004211549.html Clinton Calls on Senate to Support Amendment Repudiating Bush Administration Support for Sending American Jobs Overseas]

Reports, articles,& statesments on offshoring/outsourcing

Exploding the myths of offshoring (requires free registration)

Globalization of IT Services and White Collar Jobs: The Next Wave of Productivity Growth

Offshoring: Is it a Win-Win Game? (may require free registration)