Firms Look to Offshore Companies to Fill IT Needs

The shortage of qualified, talented information technology workers is evident throughout the country as high-powered firms are luring employees with enticing deals and bonuses and technology start-ups are countering them with sweet stock option packages. As financial services firms jockey for the leading IT talent, a new trend seems to be emerging on the horizon. Financial services firms are heading offshore by investing in foreign IT services companies, seeking a wider pool of talent and greater outsourcing opportunities. Why now and how much is actually flowing out of the U.S. to foreign companies?

"Programming resources are hard to find anywhere in today's environment, there's such a shortage," says David Whitmore, vice president technology communications group at GE Equity, a subsidiary of GE Capital, the private equity arm of General Electric. The firm made an equity investment in Software Ventures International (SVI)-a Philippines-based IT services provider with U.S. subsidiary-earlier this year and has partnerships with other IT service providers in Mexico, India and the Philippines.

"They have the resources offshore and for certain types of projects it's less expensive to do it offshore versus onsite because of the difference in the wages and cost of living," notes Whitmore, adding that cost is not the only advantage to offshore outsourcing. He adds that by having teams in both the U.S. and offshore, "you can actually speed up the development cycle by taking advantage of where the sun is rising in the world."

Whitmore describes two trends emerging in the offshore outsourcing department, one being partnerships that are formed to work on projects and develop applications. The other trend is the route that GE Equity has been taking for some time now, the equity investment in offshore IT companies to strengthen the partnerships. Another example is Wilco International, which recently outright purchased-an offshore firm. In mid July Wilco acquired the software development unit of D.E. Shaw located in India.

Recent research supports what firms have been experiencing as IT departments struggle to attract and maintain staff. A study conducted by the Stanford Computer Industry Project found one of the major factors to be that colleges are not producing enough computer science graduates to meet the ever-increasing demand for technology talent. Companies have also gone abroad to bring IT workers to them in the past through professional staffing services, but the demand has outpaced the supply here as limits to the number of visas issued are reached sooner and sooner each year. Citicorp Securities, a member of Citigroup, joins GE Equity as an investor in SVI, as the future looks bright and the market expanding for offshore IT providers.