Financial Times

“The future is already here. It’s just unevenly distributed.” Those of us on the front lines of the offshoring movement can already see the horizon clearly. While I’m an optimist by nature, the picture that emerges for me is amazing even by my hopeful outlook. Simply put, we ain’t seen nothing yet.

IT offshoring is at the confluence of a perfect storm of macro economic and demographic trends. Those include:

* Dramatic ongoing technological improvements in information technology fueled by Moore’s Law and associated laws dictating the improving price/performance of networking, storage and other enabling technology

* Steady, though less celebrated, advancements in the productivity of application software development, fueled by the Open Source movement, SOA, model-driven development, extreme programming techniques, team collaboration tools and the like

* The successful import of the Silicon Valley business model into India and China fueled, ironically, by the very brain drain that helped create the model in the U.S. to begin with

* India’s and China’s embrace of capitalism after a long, disastrous experiment with socialist economic policies, and their inevitable impending influence on the rest of the developing world

* The relentless drumbeat of economic progress in the U.S. economy, reflecting the power of long-term exponential curves (brilliantly captured in graph after graph by Ray Kurzweil in his latest book “The Singularity is Near”)

* The double whammy of demographics in the industrialized countries: an ageing population and workforce, coupled with below-replacement level birthrates that ensure a critical long term labor shortage in North America, Europe and Japan

As a result, several economic truths about offshoring become clear:

* Offshoring jobs does not reduce the total number of jobs in the U.S. economy; rather, it increases it, and we are already close to full employment today, with bright prospects on the horizon

* The best prediction we have for the U.S. economy (from the Bureau of Labor Statistics) over the next ten years is that we will produce 18 million new jobs with only 15 million new workers at current rates. Outside forces, including offshoring and immigration, will have to fill the gap or we slow down

* Technology jobs will grow much faster than the rest of the economy, which means we are entering a new period of labor shortage for engineers and software developers, even with offshoring

* The shortage of engineers will translate into more U.S. students entering those majors in college (and in fact the numbers already bear that out for the past several years)

* The demographic trends in Japan and Europe are much more dramatic than in the U.S., which has both an increasing birth rate and a liberal immigration policy to ensure a steady flow of young workers. In the longer run, Japan and Europe will face dire labor shortages, and their current chronic unemployment problems will dry up from core demand. Offshoring, while less developed there today, will inevitably become a critical part of the solution, current labor laws notwithstanding

All this is to say that in today’s increasingly globalised economy, offshoring plays a central, critical and inevitable role. Just as the offshoring of manufacturing has played out with a relentless inevitability over the past generation, so too services offshoring will march on. Already, we see the productivity of offshore services grow faster than the salary inflation that accompanies it (we hear much more about the latter). Today, it is possible to build world class, complex software in India that wasn’t possible five years ago, simply because the technical and business skills building up in India are nothing short of amazing.

And so it goes. We face an exhilarating future.

The writer is Chief Marketing Officer at Virtusa Corporation and a recognized expert on Offshore Outsourcing and author of the recently published CNet article “The End of India’s Offshore Dominance.” He has given dozens of invited presentations on the subject to a variety of audiences.