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Who to Blame for Skills Shortages

          Are CIOs the Makers of the Tech Skills Shortages They Bemoan?

Check out Allan Alter's piece in CIOInsight (http://www.cioinsight.com/c/a/Opinion/Blame-CIOs-for-the-IT-Skills-Shortage/). Alter lays a goodly portion of the blame squarely at the feet of CIOS. This is an interesting read and one educators, recruiters and others should read.

Destination Wedding? No - Destination Surgery!

                      Surgery - the Emerging Outsourcing Frontier

Next time you need that gall bladder surgery, coronary bypass or other health procedure, your insurer may ply you with financial incentives to get you to have the operation outside of the United States. For example, a heart bypass costs between $10,000 - 18,500 if you have it in India, Thailand or Singapore. Stateside, it will set you back $130,000.

As employers re-negotiate health care benefits packages, some may insist on medical travel unless you want to pay some steeper deductibles or plan costs. In this situation, outsourcing is triggering the work (i.e., the patients) to come to the offshore firm.

This trend may take some time to gain material uptake in the marketplace. Employers with unionized work forces are already spooked about offshore job losses and they will fight these moves. The fact that U.S. patients might lose the right to sue for medical malpractice when using certain overseas physicians or facilities could be another deal breaker.

That said, quality of care in the few facilities offering this is rated well for now and this will need to be closely monitored and adhered to if these sorts of programs are to take off.

Will we see either Hillary Clinton, Barack Obama or John McCain recommend this during their election campaigning? Doubtful.

For more info, see: The Economist, March 24, 2008, "Outsourcing the Patients".

Name Your H-1B Legislation

       When Congress Gets Creative - The Selling of H-1B Legislation

Two new bills are being introduced in Congress to raise the cap on the number of H-1B visas. One would double the number initially and eventually triple the number of visas granted annually. The other takes the limit up to 195,000 in 2009.

Take the H-1B Legislation Naming Game!!!

Can you guess which legislation names are legit and which aren't?

1. The Innovation Employment Act
2. SUSTAIN - Strengthening U.S. Technology and Innovation Now
3. Replacement Work Force
4. Full Employment Act for Outsourcing and Global Competitiveness
5. The North American Job Security and Economic Stimulus Act
6. American Workers are Lazy, Uneducated and Ignorant of Technical Disciplines

The correct answers are the first two although numbers 4 & 5 could also work. The congress persons leading these efforts should be applauded for the creative names they've chosen. You'll notice that the bills are named around innovation as any name that would imply loss of jobs to offshore workers would be death to their political careers.

If you'd like to learn more about these bills (e.g., exactly who is sponsoring them and where they are from), please read: http://www.eweek.com/c/a/Careers/Bills-Would-Double-and-Triple-H1B-Cap/ .

   

Let The Fighting Begin - H1B Issue Goes to Washington

                The Best Reading on H-1B: Issues, Testimony, Fraud....

                        Can't We Make a Hit TV Show From This?

Ever get the feeling that someone's making money on those H-1B visas you read about? Check out U.S. Senator Chuck Grassley's letter to the Bush administration re: H-1B visa abuses: http://grassley.senate.gov/public/index.cfm?FuseAction=PressReleases.Detail&PressRelease_id=9af53fa4-b99b-5638-8db2-5021e681c258&Month=3&Year=2008 There's some really juicy stuff in this. It discusses the blatantly illegal job advertisements here in the U.S. where advertisers are only looking for holders of H-1B visas. It details how visa factories are being established to create false employer fronts within the U.S. There's the story of an Iowa businessman getting harangued by an offshore firm with all of these potential visa holders on the bench. The fact that Homeland Security is being alerted to these abuses suggests something is really rotten here. Great reading - really.

Computerworld expands on the Senator's letter in this story: http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9067738&intsrc=hm_list . Like the above, it's a great read, too.

We also have Network World chiming in with their piece: http://www.networkworld.com/news/2008/031208-h1b.html.

Bill Gates, of Microsoft fame, testified before Congress and a synopsis of his remarks can be found here: http://www.networkworld.com/news/2008/031208-gates-immigration-reform.html

All this comes at a time when the U.S. government is being asked to raise the limits on H-1B visas from 65,000 to 110,000/year.

Here are the questions U.S. policy makers must address pronto:

• Does bringing in more non-US workers actually motivate US students to pursue technical degrees or does it achieve the opposite effect?
• The H-1B program was intended to bring in people with unique skills and talent. How do green, low-level tech coders meet that standard? What aren't more PhDs being granted this visa?
• Why are large tech outsourcers allowed to hog the number of available visas? Should U.S. based tech companies get an equal or better opportunity to import scarce, unique talent?
• Why are students at U.S. colleges electing not to pursue careers in technical areas? Is it because of bad employer behavior? Is it because these positions are vulnerable to outsourcing? Is it because potential employers send mixed signals to colleges, employees and job seekers? Or, is it that U.S. college students can't be bothered with these degrees? What is the real root cause?
• Is the L-1 visa program as messed up as the H-1B? Should both be addressed?

Approving or disallowing the increase in visa permits is not the issue. Congress must address bigger concerns (e.g., national security) and discover the answers (and appropriate remedies) to the matters above and more.

Can an Industry Police Itself?

Will H-1B Abusers Corral Their Collective Greed or Ruin Things for Everyone?

Data from the U.S. Citizenship and Immigration Services (as reported in BusinessWeek March 17, 2008), indicates that large offshore outsourcers have materially dipped into the well for H-1B visas for their workers. Infosys led the way in 2007 with 4,559 followed by Wipro (2,567), Satyam (1,396), Tata (797), Patni (477) and i-flex (374).  Cognizant, a US-based firm with the bulk of its workers in

India

received 962 visas.

As the BusinessWeek article (www.businessweek.com “Guess Who’s Getting the Most Work Visas”) indicated, these visas were intended to be granted to the world’s best and brightest. As originally envisioned by Congress, these visas were to be offered to extraordinary individuals with unique skills and abilities. C++ programming language skills are neither.

What’s at risk for Indian offshore service firms is the loss of onshore personnel if Congress reacts badly and publicly to their collective abuse of the H-1B visa program. As the late Ben Franklin was fond of saying “Moderation in all things” and by all, that includes visa applications. There’s no doubt offshore firms would be stung by a retraction of these visas, tightened qualifications or new penalties levied against firms who are abusing the program or taking away US jobs from equally qualified US workers.

Will any Indian firm voluntarily scale back their desired allotment of visas? That’s highly unlikely as many of these firms would gladly accept far more visas than they’re granted now. Moreover, competitive pressures would dictate they grab all they can lest a competitor have an unfair advantage.

Should Indian firms self-regulate? That would appear to be a logical alternative and one that might meet with acceptance in

Washington

. However, these firms would have to agree to some sort of allotment arrangement that would satisfy existing and upcoming offshore providers. Given the number of firms involved, this seems unlikely. Worse, a fixed allotment would favor larger firms and prevent smaller firms better access to US markets. But the real reason self-regulation won’t work is that Indian offshore firms may be all over the map as to how serious the H-1B matter is. For those who don’t see it as a problem yet, no effort will be made to self-regulate.

In markets where there appear to be scarce permits (like taxicab permits/medallions in major US Cities), the government auctions them off to the highest bidder. That may be the best approach for the

US

. Auction off H-1B visas and let market forces bring the best and brightest to its shores. Better still, use those auction proceeds to fund unemployment compensation and training programs.

Hewitt Financial Results - HR BPO Observations

                          An Analyst's Assessment of Hewitt

Check out: http://www.theindustryradar.com/Home/?currentHome=/Accounts/article/layouts/Hewitt_Hood.xml for an interesting read on how Hewitt is doing. This piece is not that positive but it does give some insights into the competition and financial performance of the HR Business Process Outsourcing space. Check it out.

Stats on Outsourcing

                    Great Outsourcing Data From CIO Insight

CIOInsight, like its sister publication Baseline, does some really nice research. I dare say that some of it beats the stuff coming from some of the analyst firms.

In the 03.2007 issue, they ran a piece titled "Expect the Unexpected" (see: www.cioinsight.com). I will not add any editorial comment to their stats. I will just identify some of the interesting factoids they presented in their research on IT outsourcing.

• 67% of executives say domestic outsourcing costs as much as in-house work. 43% of executives believe offshore outsourcing costs as much as in-house work.
• Half or more of executives say outsourcing projects have been successful regardless of whether they were completed via on-shore or offshore resources
• the percentage of IT budget spent on outsourcing varied from  18-30% depending on company size
• the number of companies planning to outsource continues to rise with 40% expected to do so this year
• simultaneously, in-sourcing is also on the rise
• 68% of survey respondents believe that outsourcing is over-rated as an IT cost-cutting strategy
• 53% of respondents use outsourcing to free up staff time to work on other initiatives

This document is several pages long and warrants a review by anyone selling or exploring the use of outsourcers.

Job well done CIO Insight.

Data Point: Maturation of Outsourcing Firms

Finally, It’s Becoming a Global World

Fortune magazine in the August 6, 2007 issue has a small article titled “Indian Call Center Lands in Ohio” (www.fortune.com). The article describes Tata’s outsourcing center in Reno, Nevada.  Tata’s decision had similarities to business decisions other outsourcers have made.  The article indicates how the travel service Expedia needed workers with intimate knowledge of United States destinations. They used a U.S. call center. Some insourcers need workers with a more entrepreneurial attitude in their work.  Some firms need workers with a familiar accent that no amount of training from half-way around the world can replicate.

In the sidebar to this article, other new developments within the United States are being planned by Chinese, Indian and Mexican firms.  Whether these include the opening of domestic manufacturing plants or the creation of talent development arrangements with US-based universities, it’s becoming very clear that outsourcing is no longer just a low-cost country source decision/solution.   

 

The decision as to whether any business function, plant or asset should be located domestically or abroad is a more complex business question than one of simple economics.  In the highly interrelated business world that exists today, businesses have done remarkably well at shrinking boundaries.  Telecommunications capabilities today dwarf those of just 10 years ago.  And telecommunications capabilities 10 years ago dwarfed those of the preceding fifty years.  But the physical shipping of items like automobiles, produce, electronics, etc. requires movement, fuel, logistics, planning, government approvals, etc. These things take time and energy. While collaboration technologies, communications and access to improved decision-making information are abundant today, they still cannot shorten physical limitations like port delays, transportation times, distance and fuel costs. 

 

What we are seeing now, is a smarter kind of outsourcing.  This is an outsourcing where many factors are considered other than just landed cost.  What we’re seeing now is how business leaders are looking at individual customer and market niches to devise solutions that make sense for every segment and constituency.  These are solutions that look at numerous factors such as customer satisfaction, delivery dates, intellectual property protection, and more. 

 

Outsourcing is growing up.  It’s also getting more refined.  Companies like Tata are starting to look less like an Indian-based outsourcer and more like every other well managed multinational or global manufacturer.  This is a good change for the world economy.

Outsourcing Help - Who You Gonna Call?

                           Help Is On the Way

Global Services magazine (www.globalservicesmedia.com ) ran a piece on boutique advisory firms for those of you structuring new outsourcing deals or re-negotiating an existing arrangement (see "Boutique Outsourcing Advisory Firms Come of Age").

There's an interesting table of boutique firms you can call on for help. The firms listed include: Backes Crocker, EquaTerra, Everest Group, Global Equations, Morgan Chambers, NelsonHall, neoIT, PA Consulting Group, Pace Harmon, Tholons, TPI and Alsbridge.

For my money, I'd actually recommend a couple of these firms and I'd even recommend my former arch-nemesis (when he was at PWC), former Gartner analyst and former business partner of mine Vinnie Mirchandani (www.dealarchitect.com). His knowledge of service providers is intense and he uses that to deliver crushing results in negotiations for clients.

No matter who you call for help, do the following:

• Don't use an integrator or other firm with outsourcing services in its product mix to advise you on who to choose or how to structure the deal. Independence and objectivity are critical here.
• Make sure your adviser has had extensive, local experience in markets like India, China and Eastern Europe.
• While a lawyer is a critical member of the team, get a team with serious process, negotiation, service firm knowledge and other competencies.

If you're serious about doing an outsourcing deal, drop me an email and I'll forward you a buyer's guide I developed a couple of years ago for BPO deals. It's still relevant and it might save you some heartburn in the future. There's no charge - just shoot me an email with your particulars to: contact@techventive.net .

Who Gets In/Who Stays Out?

                        Behind Visas, H-1B and Outsourcing

Over the last few weeks, there's been a flurry of reporting re: the use of non-U.S. workers in the IT sector. Let's recap some of the more important data points:

A Washington Post piece by Pamela Constable ("Skilled worker visas also stir controversy") showed a breakdown of work visas issued to foreign-born professionals. She showed the visas by country of birth and by occupation (using 2004 data). Those numbers showed:

                 India   123, 567

                China     26,258

              Canada     13,412

            Philippines  11,300

                Korea      8,159

   And, occupation breakouts reported were:

          Computers                                        127,279

          Architecture, Engineering, Surveying   34,595

          Education                                           27,583

          Administrative                                    27,537

          Medicine & health                               17,676

The article also quoted a couple of  worker groups and research firms. One indicated that "very few H-1B workers could be called highly skilled" and that "wages for such workers were on average $12,000 below their U.S.-born counterparts".

The article also discussed the battle looming between advocates for opening up the limits on H-1B visas and opponents for same.

In the April 9, 2007 InformationWeek cover story ("The H-1B Limit"), Marianne Kolbasuk McGee reported that the U.S. government received over 133,000 envelopes with H-1B applications (some envelopes requested multiple visas) for only 65,000 openings in just the first 48 hours that applications were received.

To critics of the H-1B program, the massive over-subscription to this program is evidence that many are using it not for attracting the super-talented, geniuses it was intended to bring into the U.S. Instead, companies are exploiting this visa to bring in lower cost workers into technical roles.

This article also stated that "seven out of the ten biggest applicants for H-1B visas were India-based companies, led by Infosys and Wipro".

The data behind that is found in the 5/21/2007 issue of InformationWeek ("Feds Cast Wary Eye On Indian Outsourcers" Use of H-1B" www.informationweek.com/1133/h1b.htm ). They show the top ten companies granted H-1B visas last year. Infosys led the pack at 4,908. Wipro followed with 4,002. Others included: Microsoft (3,117), Tata Consulting Services (3,046), Satyam (2,880), Cognizant (2,226), Patni (1,391), IBM (1,130) and Oracle (1,022).

And finally, see what Eric Lundquist of eWeek (www.eweek.com "H-1B answer: Innovation") adds to the discussion. His take is decidedly more creative than most.   

When you speak with America's educators you get another insight into this issue. Whether fact-based or anecdotal, professors, teachers and deans will tell you that it has gotten much harder to attract today's students into technical careers. Many students believe that it is pointless to pursue a career in one of these disciplines (e.g., IT or engineering) as they've seen too many U.S. outsource their parent's jobs to offshore firms. Why get a career in a field that will get outsourced? Second, they see competition for these positions being lopsided with non-U.S. workers being allowed to work in-country at a wage rate that makes U.S. workers wages fall or stay depressed. Third, U.S. firms that have used offshore or outsourced personnel have shown themselves to be poor employers. These firms don't provide careers to their employees. In fact, they're seen as users of workers not developers of talent. I can't say I fault today's youth for wanting to stay away from such fickle and feckless firms.

As originally designed, H-1B visas were meant to bring the world's best and brightest stateside. The numbers and over-concentration of these visas within software & services firms clearly indicates that the system has been gamed (or abused) by a few firms. Given the focus this issue is getting in Capitol Hill, one can expect more attention, more press and more legislation soon.

Let see how well offshore IT firms can work the Washington influence and lobbying world. Remember, Presidential election campaigning is already underway. Politicians love to point out villains, especially non-voting foreign entities. If these candidates want to make offshore firms their symbol of what's ailing the U.S. workforce or economy, they will. Votes matter these days and it will be interesting to see whether the votes in Congress or in local elections will matter more when it comes to the H-1B issue.