Outsourcing in Colorado: high-tech job robber, or post-bubble savior?

• Author: Peterson, Eric
• Position: Howland Machine Corp. - Cover Story

Stephen Gartside, president and CEO of Evolving Systems Inc., says the 2001 burst of the technology bubble nearly killed his Colorado software company. Offshoring saved it.

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"We, like everybody else in our sector, saw the bubble come, and saw the bubble burst," said Gartside. "We were facing de-listing. We had a stock that was at its all-time low.... An updated development process that included heavy use of offshore talent is what allowed us to restore profitability."

The company went from 400 employees in the early years of the decade to about 140 now. After it restructured, it was back in the black by the third quarter of 2002, and now, Gartside said, it's "focused on growth."

But new growth will occur according to that "updated" development process, he said. That means 60 percent of development labor will be in India from now on; 40 percent will be in Colorado.

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That's the new reality for a host of local technology companies that have used offshoring--foreign outsourcing--to cut costs and balance their budgets over the past three years. Colorado executives, even as the U.S. presidential candidates now argue over the impact of offshore outsourcing on job creation nationwide, mostly argue that the efficiencies offered by the business practice make it irresistible.

Some observers forecast that more than 3 million white-collar jobs will be sent overseas by 2015. While political candidates rail against that, and pundits huff and puff over it, Colorado's tech heavyweights won't even talk about it: Qwest, StorageTek, and Level 3 are just a few of the local companies that declined to comment on the subject for this report. Politics, both national and local, may have something to do with that. The political climate has made the practice a mark of shame, corporate America's scarlet letter--and it has made not offshoring almost a badge of corporate honor.

"There's big savings between programming costs in India vs. programming costs in the United States," said Charlie Fote, chairman and CEO of First Data Corp., owner of Western Union, which uses computer technology to transfer money throughout the globe. Fote said First Data used some Indian outsourcing during the run up to Y2K, but otherwise, he said, outsourcing IT work over long distances creates too much separation between computer designers and programmers.

"We say controlling our destiny is important to us, and it's not worth the trade-off," Fote said.

U.S. Rep. Mark Udall (D-Boulder) is running for re-election in a congressional district that is heavily influenced by high-tech industry. He describes offshoring as a double-edged sword. "The 'outsourcing' of jobs overseas may be an inevitable consequence of globalization and the impact of technology on labor costs," he said via e-mail. "And there are arguments on all sides on whether the long-term results will be good or bad for our economy.

"But this is cold comfort to families who lose work," Udall added. "In the short run, shifting jobs overseas means job losses for U.S. workers and fewer new U.S. jobs created." But "demagoguing the issue won't solve the problem. Neither will resorting to overly protectionist policies," he said.

"I believe the responsible approach is to focus on exporting American products, not jobs ... we need to make it more attractive for American companies to keep and create jobs here at home."

But for now, the opposite is happening. Offshoring IT work is accelerating.

EVOLVING COMPANY

Evolving Systems provides software to major telecommunications firms, which themselves suffered huge business declines over the past four years. Restructuring Evolving Systems was no picnic, said CEO Gartside. "These were not happy times at Evolving Systems," he said. A key component of the restructuring was offshoring a number of jobs to Bangalore, India.

Giri Tirumale, a longtime employee of Evolving Systems and a native of India, started guiding the company's Bangalore operations from the states in 1999, when Evolving Systems, like...