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Global Sourcing: Trends and Implications for the U.S.

GLOBAL IT SOURCING. How big is it?What does it mean for the US?What should we do about it?. HOW BIG IS OUTSOURCING?. World-wide IT spend in 2003 -- $357 bIndia is the world's leading destination for IT outsourcing (80% market share for BPO).India's share of IT -- $20 b$12 b from exports =

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Global Sourcing: Trends and Implications for the U.S.

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    1. Global Sourcing: Trends and Implications for the U.S.

    2. GLOBAL IT SOURCING How big is it? What does it mean for the US? What should we do about it?

    3. HOW BIG IS OUTSOURCING? World-wide IT spend in 2003 -- $357 b India is the world’s leading destination for IT outsourcing (80% market share for BPO). India’s share of IT -- $20 b $12 b from exports = only 3.4% of world expenditure Source: IDC and NASSCOM

    4. India’s IT share of US economy India sold $5.5 b worth of IT work to the US in 2002-2003. This is .05% of the US economy Source: NASSCOM and BEA

    5. WHAT DOES GLOBAL SOURCING MEAN FOR THE US?

    6. Hysteria: 3.3 million US Jobs Moving Offshore 2000-2015 Forrester report of 2002 = 220,000 jobs/yr for 15 years America typically “loses” 7-10 m jobs/yr Outsourcing would = only 2-3% of annual “job loss”

    7. JOB LOSS 200 year history of job shift Farm >>>>> manufacturing Manufacturing >>>>> service sector Job shift = increase in income over time

    8. Effects of job shift on income 1960-2004 --15 m manufacturing jobs (flat) real hourly wage increased by 50% 1999-2002 IT “bubble burst” 11% increase in network and data communications analysis jobs ($61,390/yr) 7% increase in software engineering jobs ($73,800/yr) 10% decrease in data entry jobs ($23,190/yr) Source: Bain and Co.

    9. US job “loss” in Q1 ‘04 4,633 jobs went overseas of the 239,361 lost in this quarter. (about 2%) 65% of “lost” overseas jobs were in manufacturing Less than 1% of job “loss” due to IT outsourcing Better to describe this as job ‘displacement” rather than actual loss Source: Bureau of Labor Statistics

    10. HOW BIG IS I-T LABOR? US IT workforce is 10.5 m people civilian US labor force is 148 m IT employment is 7% of the US workforce Total IT workforce consists of 8.3 m non-IT workers 2.2 m IT workers (1.5% of US labor force) 72% of all IT jobs are in small companies Source: Bureau of Labor Statistics

    11. Economics 101 Lower costs=lower prices=higher exports Outsourcing lowers costs By 2008 outsourcing is expected to increase IT exports by $9b/yr Source: Global Insight and ITAA

    12. ENGINE FOR US GROWTH EFFECTS Lower cost Free domestic resources for other purposes Yield high quality services and software Increased productivity BENEFITS Lower prices Reduce inflationary pressures Lower interest rates Higher spending throughout the economy

    13. WHAT SHOULD THE U.S. DO ABOUT GLOBAL SOURCING?

    14. Educate Educate Educate Educate

    15. Life-long Education & Training The US worker will change jobs 10+ times in a career Work place and skill sets continually evolving Corporations, public sector, and individuals must attend to training opportunities--life-long.

    16. Top Leading Skills Required In rank order (assuming technical skills) : On-the-job training Interpersonal skills Multi-tasking Analytical skills Team building Communication skills Project management Loyalty Source : ITAA Survey of Employers Sept. 2004

    18. English: the language of IT India graduates 2.3 m English speakers each year. The US graduates 1.2 m The UK graduates 200 k Australia graduates 200 k

    19. GLOBAL SUPPLY: Science and Engineering grads in 1999 ('000)

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