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By David E. Gumpert U.S. Programmers: Bargains Go Begging [Page 2 of 2] Costs: Even though he has sliced a significant amount off the going rate for his U.S. programmers, bringing them close to overseas rates, that is still not enough for some companies. One of Jennings' trial customers, an official of a multibillion-dollar distributor, says that the $38 she pays for Jennings' American programmer is $12 an hour more than an equivalent programmer in India. "The people who run this company have real tight purse strings," she says. As a result, her company likely won't expand its engagement with Jennings. (Tellingly, the woman demanded that neither she nor her employee be identified. "This is on the news every night," she said, "and I don't want my job outsourced.") Expertise: In the view of some corporate types, the financial savings from going to India are enhanced because they include a total package. Thus, John Magrann, vice-president of product development for Ceridian (CEN ), a $1 billion human-resources service outfit, sees the Jennings model as "more of a supplemental resource." Indian firms will likely continue as the core outsourcing resource for his company because they "can offer total outsourcing" of all major functions -- management, programming, communication. Moreover, the firms Ceridian uses have high "Capability Maturity Model" ratings, an internationally recognized system for evaluating programming expertise. By contrast, Jennings' venture doesn't handle complete projects and doesn't offer such ratings. Expectations: The reality in Corporate America today is that any service provider is going to use offshore outsourcing to one extent or other, says Michael Gibson, vice-president of services for Digital Evolution, a small provider of Web-services management and security to large companies, and one of Jennings' trial customers. "If you don't use it [offshore outsourcing], they feel you are not up to the game." When Gibson negotiates with corporate prospects and there are disagreements about price, "They inquire about whether you are thinking about going offshore." So while Gibson likes the services he has received from one of Jennings' technologists, he sees them as a better fit for small-company clients than with Corporate America. "If you're a big company," Gibson notes, "you can negotiate very attractive rates offshore." One of the messages that comes through loud and clear in speaking with Jennings' prospects and customers is that a huge amount of momentum has built up in favor of foreign outsourcing. Think of it this way: Jennings is offering a business model that seems to answer corporations' complaints that the cost of American labor is too high, while also responding to the stump speeches of politicians, who say that the loss of American jobs is undermining long-term economic growth. Yet despite checking both those boxes, his undertaking remains a very tough sell. EXPORTING KNOWLEDGE. I would have expected something different, especially based on a previous column I wrote describing an entrepreneur who has gone out of his way to steer clear of outsourcing and hire Americans (see BW Online, 12/2/03, "U.S. Programmers at Overseas Salaries") That column triggered a deluge of e-mails and many media stories -- nearly all applauding the entrepreneur's approach. But the applause must be coming from American workers and entrepreneurs rather than from corporate executives. Within large corporations, the pressure to trim every last dollar from short-term production costs is so intense, corporations assess their employees and suppliers in terms of how deftly they outsource. No matter that companies may be sending valuable knowledge overseas. No matter that some individual executives feel uneasy about letting their country down. Right now, it looks as if the best Jennings can hope for is that large corporations will come to view him as something of a backup in the event that outsourcing restrictions begin cropping up. For example, he stands to benefit if Congress passes legislation that would tax or otherwise penalize outsourcing, and if states enact privacy-related regulations requiring that sensitive information, like medical records, not be sent offshore. In the meantime, Jennings urges corporate executives to show a semblance of patriotism. "Don't turn your back on these people" who have lost jobs to outsourcing, he pleads. "Give them a shot."
 David E. Gumpert is the author of BurnYour Business Plan: What Investors Really Want from Entrepreneurs and How to Really Start Your Own Business. Readers can e-mail him at david@davidgumpert.com
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