Does India Threaten your Community?
The business media ran a series of provocative stories during the last quarter of 2003 about India’s ascendancy in computer programming and technical support. Many of our colleagues are facing job losses from outsourcing to India and the Philippines.

How serious is the Indian threat to your technology efforts?
Taimerica’s associates have substantial experience working with Mexican outsourcing that offers some parallels. Let’s begin our discussion with a few facts about the relative size of the IT sectors in India and the US:

• India is just a fraction of the size of the US in terms of IT production. India had an IT workforce of 522,000 in 2002 versus over 3 million in the USA. India’s numbers include support workers while U.S. figures are for IT occupations alone, meaning that the US numbers understate the size of the U.S. IT workforce.
• India graduates 170,000 engineers and computer scientists yearly versus 215,000 in the USA. Watch Out here! India offers a vast new talent pool for US multinationals that approaches the US in sheer numbers. Our communities will have to ramp up training in IT or we will see more of our IT jobs emigrate to India.
• The IT workforce in India grew by 80,000 jobs between 2001-2002 (20 percent growth rate). Employment in IT companies in the US, according to BLS figures, declined by 20 percent between January 2001 and March 2003, a loss of 400,000 high paying jobs (see table below). Notice that 100,000 lost jobs in internet companies are part of the U.S. trend. IT growth in India is a fraction of the job losses in the USA.

		January 2001				March 2003
Name		Establish- ments	Employ- ment	Weekly Wage		Establish- ments	Employ- ment	Weekly Wage		Growth
Software Publishers		11,191	278,394	$1,990		10,799	239,779	$1,834		-14%
Internet Publishers		3,860	51,811	$1,454		3,309	29,884	$1,361		-42%
Internet Service Providers		14,320	196,951	$1,695		11,513	123,069	$1,363		-38%
Data Processing & Related		13,107	320,081	$1,155		13,110	286,105	$1,146		-11%
Computer Systems Design		141,598	1,354,257	$1,464		147,993	1,109,251	$1,423		-18%
TOTAL IT FUNCTIONS		184,076	2,201,494			186,724	1,788,088			-19%

How serious an impact has India had on US Info Tech Operations?
Before panicking about India, developers should look at these facts which we compiled from government sources:

• Two-thirds of the 155 metro areas for which data is available lost employment between January 2001 and March 2003 in NAICS 5415 (Computer systems design and related services). In Boston, Boulder, New York and Oakland, with large concentrations of large IT companies, job rolls shrank by 30-45 percent.
• Places like Ft. Lauderdale and Lawrence, Kansas added significant new jobs in this sector (over 1000). Indian outsourcing affects different communities in different ways.

Where’s the bottom?
Taimerica, for the following reasons, sides with Forrester Research in suggesting that much of the current reporting is alarmist hype:

• Our experience with the maquiladora program in Mexico suggests that offshoring of services, as with manufacturing, only works for large operations producing a routine product, such as technical assistance for retail software or computers. Operations with millions of customers, such as non-business software, are the most likely to offshore.
• Operations that require lots of client collaboration, such as customized business software development, are not amenable to global outsourcing. Dell Computer and Lehman Brothers recently conceded as much when they announced they were bringing their business support functions back from India.
• Periods of rapid economic growth, when markets change rapidly, dampen the returns from global outsourcing. Having a dynamic US economy is one of the best ways to thwart the drive to India. Having an abundant pool of technically trained labor in the US is another.
• Our maquila experience suggests that the returns from offshoring are not built strictly on low cost labor. Foreign locations provide a business platform with much lower corporate overheads. A study done by Kurt Salmon Associates, for instance, suggests that manufacturers save as much on corporate overhead as on labor by production in Latin America. We believe that the same relationship holds in software and office support functions.

India clearly understands the overhead equation in IT functions. The Indian government offers IT concerns 10 year tax holidays, they exempt software exports from Indian corporate taxes plus tax overseas license royalties at a 15 percent rate (versus the US income tax rate of 36 percent plus additional state income taxes that run as much as 11 percent). India’s competitive advantage for software development and IT consulting is built on more than $20,000 salaries for college educated programmers.

Gaining a Competitive Edge
Taimerica, in conjunction with Wadley Donovan Group, has pioneered a product to assist you compete with global outsourcing. For a modest cost, we evaluate your competitive office situation in terms of labor and overhead factors and advise you of how best to position yourselves in the global competition for office functions. Call or email Ed Bee for further details.

Three R’s in Rural Development
Taimerica recently completed several strategic plans for smaller communities, what most call rural America. Many of the old strategies, like branch plant manufacturing, aren’t working in rural America. We found that Retirement, Retail and Recreation (as in tourism) are effective tools in the right circumstances. We’ll devote our next newsletter to an in-depth discussion of active retirement community programs.

More on Technology
Most developers would envy a community with a Battelle lab employing 3500 in basic research and would think they had everything they need to become a technology powerhouse. We recently completed a strategic plan is such an community and found that such communities have their own sets of challenges. Technology development is not an automatic outcome from having a lot of scientists in your workforce. We’d love to discuss what we’ve learned with your state association or developers group. If you are looking for a dynamic speaker on the subject of technology, give us a call.

Taimerica Expands its Offerings in Training
Because we’ve had so many requests, Taimerica developed a series of training programs for economic developers and volunteers in the areas of New Economy Trends, Effective Management in Economic Development, and Basic Training in Economic Development. If you are looking for speakers that can connect with volunteer boards or that can enrich your state association meeting, give us a call. A complete directory of our offerings and downloadable brochures are listed on our web site at www.taimerica.com/Training.html

Contact Information
Taimerica has active associates in North Carolina, Mississippi, Louisiana and Idaho. Visit our redesigned web site to view resumes and to look at examples of recent projects. Feel free to contact any one of our four associates to discuss your needs: