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Seize the Inevitable (Again)

Looking offshore but not over your shoulder

by / May 21, 2003
Deep in the Government Technology archives is an early thought leadership piece called Seize the Inevitable, which memorializes a way of looking at the world. The heart of the piece, which predated the commodity Internet, was when to take a stand on principle -- the "what" and "why" questions of governing -- and when to embrace change -- the question of how to govern.

In the closing decades of the last century, discussions about changing "how" were dominated by outsourcing and technological solutions with hyphenated or three-letter names. The result was a polarized debate with the pendulum swinging unevenly and sometimes wildly -- depending on the politics and fiscal considerations of the day.

This history may leave government flat-footed for the sleeper issue of the coming months and years -- offshore software development and engineering. It is inevitable, given that there are really smart, educated people all over a networked world competing on price for software projects -- all without leaving home.

Cutting code is becoming a commodity, including big-project programming and generic software maintenance. "Offshore" is becoming a verb -- a way of doing rather than a place where it's done. In fact, the once dominant offshore software development outfits in India are looking over their shoulders at emerging competitors in the Philippines, Vietnam, Thailand, Russia and China, which are doing to India what India did to the United States.

George Newstrom, Virginia's secretary of technology, sees competitive pressures among incumbent and upstart offshorers working to the advantage of this country. "Private companies should help find labor skills wherever they are to change the cost curve for doing business, while we should be focused on innovation and investing in reskilling for the high-value work that innovation produces," said Newstrom, a 28-year veteran of the global technology industry.

Such a shift is counterintuitive to government. Federal funding for programs delivered by state and local governments explicitly bans the so-called export of jobs. Likewise, state legislatures -- including two this year -- often are tempted by protectionist instincts to keep jobs close to home.

These instincts are seen in some quarters as a pre-emptive strike against offshoring, all of which is shortsighted because cutting the salary of a public-sector programmer by a third to match offshore prices is the real nonstarter. Nor can government afford to become an employer of last resort, artificially inflating labor costs for routine code cutting as it contends with structural budget problems.

There is actually good news in this for the public-sector IT community. Few government IT organizations have the bench strength to do everything demanded of them. Moving generic workloads offshore would provide relief, and more importantly, focus internal IT expertise where offshore houses cannot compete.

At the top of the list are those activities that require intimate knowledge of an agency, or classified access to the most sensitive of records. Add to the list those specialized skills needed for iterative design-and-build processes, or the care and feeding of complex or largely undocumented systems. Round it out with the prospect of using the offshore savings to pursue the next new thing and the interesting technologies that come with it.

The relationship between domestic companies and their government clients also change in the face of offshoring. Phil Keisling, former Oregon secretary of state turned software executive, has worked to position his regional firm as a "pivotal provider." While pure offshore entities take all of the work overseas, Keisling's company takes a hybrid approach -- the routine code cutting is done by its partner in Vietnam, while the domestic organization focuses on the higher value work of design, consultation, testing for malicious code (just in case), and maintaining a local point of accountability for the quality and timeliness of the product.

The offshore juggernaut already is having a moderating influence on the rates of domestic companies -- not an unwelcome development for government customers. Another hybrid model pursued by a Canadian company is marketed as "near shore" development -- differentiated from offshore by time zone and linguistic similarities with the United States while providing discounts that reflect a favorable exchange rate with our northern neighbor.

Although IT has long been the platform on which government operations are performed, software development is not, strictly speaking, a core function of government. Whether viewed as an opportunity or a threat, offshore is coming ashore. Public entities can anticipate its coming by surgically reshaping their IT functions for this new global environment, or wait and weather the impact of a blunt instrument. Proper public stewardship demands that we seize the inevitable, again.

Paul W. Taylor, Ph.D., is the chief strategy officer of the Center for Digital Government, former deputy state CIO of Washington and a veteran of startups.

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Paul W. Taylor Chief Content Officer, e.Republic Inc.

Paul W. Taylor, Ph.D., is the chief content officer of Government Technology and its parent organization, e.Republic. Prior to joining e.Republic, Taylor served as deputy Washington state CIO. Dr. Taylor came to public service following decades of work in media, Internet startups and academia. He is also among a number of affiliated experts with the nonprofit, non-partisan Information Technology and Innovation Foundation (ITIF) in Washington, D.C. He is creator, producer and co-host of the GovTech360 podcast.

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