Bob Miano's Blog

An Executive journal

2006 Archive

Debunking the “IT Offshoring Costs U.S. Jobs” Myth

There is a growing wave of concern that America is turning inwards, becoming isolationist and protectionist. It’s something we Americans cannot let happen.

What drives this irrational, isolationist push? It’s a number of news and media sources misrepresenting offshoring and its effects. The message often conveyed by the media is that American jobs are being taken overseas, which is causing significant job and economic loss here in the States.

However, the marketplace facts do not support these claims. For example, there is Lou Dobbs, CNN anchor, who writes, “…so-called free trade has come at an inordinate cost to working men and women in this country. We've lost three million manufacturing jobs as a result of these so-called free trade agreements that enable corporate America to export plants, production and jobs to cheap foreign labor markets. Millions more American jobs remain at risk of being outsourced.”

To that, I would ask Mr. Dobbs to go back to school and review the basic macroeconomics of “comparative advantage” to understand how he is misleading the public. It’s a widely accepted understanding that the world benefits when there are no barriers to free trade. Every nation should seek the lowest prices for comparative goods and services as it benefits the world economy. Adam Smith espoused this concept in The Wealth of Nations, and our forefathers saw the wisdom in the model, making it a core principle in building our market-driven economy.

But what if you are someone who doesn’t care about the rest of the world? What if you only want to focus on what is good for America (as some in the media seem to suggest is the best approach)? Then, I invite you too to get in the offshoring game as well because its impacts have proven to be good, good, good for the USA.

The U.S. Bureau of Labor Statistics (BLS) reports that during the push to offshore IT jobs, IT unemployment rates have fallen. In 2004, the unemployment rate for computer and mathematical occupations was at 4.2%. It fell to 2.9% in 2005. In the second quarter of this year, the unemployment rate for computer programmers was at an incredible 2.1%. Contrary to the “job loss myth” so many would have us believe, corporate America and IT jobs opportunities are expanding at a steady rate.

My hope is that cooler, forward-thinking heads prevail when it comes to offshoring and the World Trade Organization’s Doha Development Round negotiations. Lowering trade barriers around the world will result in better business and work opportunities across the globe. Whether you’re an isolationist or a fan of the growing global marketplace, offshoring is here to stay. With strategic offshore solutions in place, the U.S. will succeed, the world will succeed and all our boats will rise together.

Tony Blair for President?

This week I attended (on 11/28/06 and 11/29/06) what was truly one of the most impressive business symposiums of my career: the CBI Interactive Conference held in London.

Being an American, I was truly awed by both the prestige of the speakers and the high-level business executives in attendance. It was a most remarkable compilation: some of today’s most renowned CEOs intermingled with UK’s highest levels of politicians and government representatives…all in one forum. Tony Blair, Gordon Brown and our own U.S. Treasury Secretary, Henry 'Hank' Paulson, were just a few of the headliner politicians.

I was most impressed by the caliber of the business panelists who spoke about issues of monumental importance to us all, such as globalization and the rise of new economic giants like China, India, Brazil and Russia. Presentations were designed to be intelligent exchanges of ideas and stimulating debates on whether these countries present threats or opportunities. Other topics of the conference included free trade, protectionism (during which a few shots were levied at us Americans), energy security, global warming and more.

While the topics were weighty and broad, the atmosphere was intimate and approachable. The audience and speakers interacted on a level playing field, discussing and debating with spirit, graciousness and reciprocity. I for one don’t know of an equivalent forum here in the U.S. that provides such an open platform for business and government interaction.

And on a personal note, I was thrilled to have Albert Ellis, the CEO of Harvey Nash, introduce me to Tony Blair. He presented me as the President of the U.S. (as I am president of Harvey Nash, USA), which I think momentarily took Mr. Blair back. Maybe he thought President Bush had shrunk and taken on a serious tanning regime. But he recovered quickly and asked me what state I was from, to which I replied New Jersey. I could see him mulling over in his head whether he was going to zing me with a cheap quip about NJ, but fortunately he spared me. I then asked him if he would come to the U.S. and run for President. (I believe he’d win in a landslide.) He just smiled. We were both probably thinking the same thing, but he’s too much a polished politician to jump on the softball I tossed him!

In Admiration of London Cabbies: The Self-reliant Talent Factor

Ever taken a cab in London? There is no better place to hitch a ride. First of all the famous black cabs are cool, old-fashioned vehicles that look like they rode right out of a 1930’s detective novel. Second, the drivers are genius at what they do: getting you where you need to go. Every driver has passed “The Knowledge,” a test that requires the memorization of more the 25,000 streets and the location of every hospital, government building, theatre, hotel, metro and train station in the city.

Navigation systems are taking off worldwide but not in cabs in London. As the recent CNN.com technology article “London cabbies: Brain cell mightier than microchip” points out, London drivers take pride in their expert city knowledge. And hey, a London cab driver has “a larger hippocampus” (section of the brain responsible for navigational capabilities) than the average person, the CNN article points out. So why turnover that big brain to a computer?

As someone who has worked in the technology sector for decades now, I still find myself thinking a little more “old school” than “cutting edge” at times. I admire the London cabbies who say no to navigation systems and yes to brainpower. However, I much prefer that New York cabbies—who have an easy entry test to take, know limited locales and often depend on their passengers to know exactly where to go—hook up their cabs to today’s state-of-the-art navigation systems ASAP!

As a business professional working in the human capital industry, I take an important lesson from the London cabbies and their commitment to knowing their jobs and their city. Too often in the workplace today, we rely on systems and high-tech tools to feed us information and forget about the TALENT it takes to make that information valuable and accurate. The applications and gadgets we use so liberally in business today are only as effective as the talent of the people who built them and the skills of the people operating them.

As business leaders and managers, hiring a self-reliant go-getter is one of the smartest moves and best investments we can make. When it comes to measuring the collective drive of an organization, I believe you can look at the ratio of “self-navigators” to “auto pilots.” The more “self navigators” you have on staff, the farther your business will go.

CEO Blogs: Bring Them On

Yesterday’s Sunday, July 30th, 2006 NY Times article “All the Internet’s a Stage. Why Don’t CEOs Use It?” posits a timely question. As we see many corporate managers enter the blogsphere, there clearly is a lack of entries from the very top: CEOs of the Fortune 1K. Jonathan Schwartz of Sun Microsystems is a notable exception as witnessed by his ongoing industry dialogue at Jonathon’s Blog.

Why the lack of participation?

Maybe it is because CEOs are overly cautious of what might get put into print these days, or perhaps they are not at ease writing their own entries. But whatever the case, it is refreshing to see the leader of an organization comfortable and confident enough in his own skin to have an ongoing dialogue with all stakeholders. At Harvey Nash, our C.E.O., Albert Ellis, has not only started his own journal, but has also encouraged many of us to do the same.

Journals by CEOs can provide an un-sanitized view of the CEOs observations and thinking. Clearly this could present some pitfalls; however, I think overall the good will out balance the bad. We at Harvey Nash think blogging is the way of the future and a good way to communicate both internally and externally. Perhaps in time, this medium will become the norm, instead of the exception.

Economics and Hiring: These ARE the Best of Times

The simple fact is we are living in the best of times—especially those in the employment industry. Sunday’s New York Times article by Edmund L. Andrews features the revealing, not widely published, fact that a surprising jump in tax revenues is actually curbing the U.S. deficit. As the article points out, an “unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year, even though spending has climbed sharply because of the war in Iraq and the cost of hurricane relief.”

The national debt is actually predicted to decline this year as corporate tax receipts have nearly tripled since 2003. Additionally, Andrews points out that continued interest rate hikes really haven’t had a negative effect, as companies are carrying historic levels of low debt and are flush with cash.

And what’s more, computers are drastically improving worker productivity.

So what does low debt and greater productivity equate to? U.S. companies are prospering and as they prosper, they HIRE more. The more companies hire, the tighter the labor market becomes. And that is in fact what we are seeing at this very moment in time as most staffing firms report the following talent shortage indicator: a flattening of temporary worker engagements as organization are now seeking to hire full-time staff.

The question for employment market watchers is this: Will this permanent hiring trend going to continue? Almost certainly not. Economic history tells us these hiring patterns are always cyclical. What normally follows the hiring phase is a move to employing contingency workers.

Barry Asin (Chief Analyst with Staffing Industry Analysts) revealed at the latest SIA seminar data that showed businesses will clearly be using more contingent IT workers in the future. In the next two years, the percent of contingent workers is forecast to grow to 12 percent from 10 percent today. The main reason for businesses to increase their contingent workforce, according to a Staffing Industry Analysts customer survey, is “coping with a fast-changing workload” (the reason cited by 84% of buyers).

This means that we can predictably see a future of 1) more job hopping, 2) increased frustrations for companies trying to hire and 3) pressures of corresponding raises in pay rates.

So what can companies do to compete ? Well some companies are wisely investigating and moving to incorporate off-shoring to lower waged countries. But experience teaches us that there is never a single panacea for solving economic and labor issues. That is why it is essential for companies to develop comprehensive talent strategies and pick the right mix of on-shore, near-shore and off-shore approaches in order to address talent shortages and demands.

And at the same time, what can we in the staffing and human capital industry be doing to help our clients? I believe three things are essential:

1) We must educate our clients on the changing dynamics of the supply/demand labor equation.

2) We must urge companies to move quickly when they identify a suitable candidate. If you don’t move fast today, the candidate is gone.

3) We must understand that there is going to be a natural evolution towards increased salaries and bill rates, especially in the professional services arena of IT and finance and accounting.

I also think that this situation will shift companies away from Vendor Management Systems and rate cards so that they are able to meet the demands of hiring managers. But that’s a completely different and highly provocative topic for another day.

Sure Things: Death, Taxes and the IT Labor Shortage

They say the only sure things in life are death and taxes. In the world of economics, we know that things like inflation rates and interest rates will definitively rise and fall, but we never know with certainty when and by how much. However, the upcoming labor shortage is one of those vary rare economic events that is a clear surety. So with such a certain event unfolding, what are those concerned with IT hiring, staffing and employment industry doing?

Robert Morison’s interview of Kathleen Melymuka, author of Workforce Crisis: How to Beat the Coming Shortage of Skills and Talent Harvard Business School Press, 2006, outlines a spot-on perspective and is a must read for those concerned about what’s around the corner for the fate of the IT workforce. The article “Workforce Crisis: Preparing for the Coming IT Crunch,” very neatly lays out the factors that all organizations need to be concerned with, especially those of us in the human capital industry that supply a great deal of the IT talent. The onslaught of the baby boomers is upon us, led by such luminaries as President Bush (about to turn 60) to those trying to defy and delay this reality (i.e. Rolling Stones).

Morison’s interview adroitly outlines the shift in supply and demand dynamics and offers some specific suggestions of what the industry can do to address the upcoming friction points. Organizations need to think about this in much the same way as preparing for Y2K. Although the eventualities of both events are similarly predictable, the impacts are not as clearly discernable at this time. Nevertheless, organizations that depend on a healthy IT labor supply, and organizations that supply this much needed talent, need to realize the inevitability and begin to formulate plans and/or alternatives to cope with the pending IT labor shortage.