Developed industrialized countries have engaged in international outsourcing for years, but this year the debates about “offshoring“ penetrated from technology circles into the sphere of politics, macroeconomics and labor unions.

The polemic about offshore outsourcing, however, will run high, for corporate strategies on increasing of offshore outsourcing coincide with constantly increasing number of offshore outsourcing companies entering the global market.

Probably the most threatening to the Western IT employees in a long perspective seems the declining opportunity to move up the labor chain, from basic programming jobs to high-end design, project management and analytical work.

Only in U.S. alone, the scope of IT services rendered by offshore personnel will double to $16 billion next year and triple to $46 billion by 2007, as stated by market research company IDC.

Though India has the leading position in offshore work, demand and competition will heat up as more countries will try to get their share. A speaking proof of that is that at exhibition TechXNY almost half of more than 180 vendors participants of New York conference, a major business-oriented IT event in the U.S., were outsourcers. A good proportion of those were from Bulgaria, the Philippines, China, Mexico and South Africa.

Companies hoping to re-delegate some work that usually goes to India claim that the cost of conducting business there has risen, and that in some regions telecommunications and manufacturing infrastructure leaves much to be desired.

For instance, China has better developed infrastructure compared to India, and Chinese companies create good competition in the terms of prices, especially for small and medium-size companies. Many experts think that China’s IT outsourcing industry will get ready for big gains in the coming years.

“It possesses a great potential, it could skyrocket within just a couple of years,” experts say. “The whole turnover of China market would double in the next year or even three times or four times in the next several years.”

Outsourcing to Chinese companies can reduce customers customer cost on software development to 50 percent or more providing “the same level of services with the same quality or even better”.

In conditions of such fair competition it’s natural that experienced outsourcers long for high-end jobs.

But the opportunities look quite unlimited, for customers explore newer spheres for outsourcing to India. The major part of India’s software development exports so far consisted of custom application development and support. But the situation is changing – more and more Indian companies engage into IT consulting, systems integration, infrastructure management, and even product development for customers ranging from technology vendors to non-IT organizations.

Costly work typically done in-house like design, research and development, systems analysis tends to be outsourced to Indian vendors experienced sufficiently to prove their capabilities in taking up such work and its successful delivering, meeting global quality standards.

Such shifts are observed and seem to be happening faster in the wholly owned development affiliations of multinational technology companies in India.

For example, Intel development center in Bangalore began with pieces of coding work but now is responsible for a new 32-bit chip aimed at the enterprise market. The team engaged in development of the chip has a product architect and analyst whose job is to communicate with customers worldwide and then collaborate with the development team to determine the processor architecture.

This cost efficient effort will add money to the coffers of a U.S. company, but for American specialists this trend can mean only one thing: high-end IT development and conceptual job used to be the perquisite of the West is now shifted elsewhere.

Entrepreneurs from Asia to Eastern Europe are also looking to regain a piece from high-end.

Recognized offshore development leaders feel the pressure from Belarus, Ukraine, and other Eastern Europe countries. They make substantial investments in infrastructure and project management capabilities to increase their competitiveness.

However, technology staff engaged in product design and other high-end IT jobs in the U.S. and Europe have no reasons for panic. Attempts of new outsourcers to get into the global outsourcing market will inevitably run into obstacles. It requires time and much effort to gain communication skills, project management experience and learn new programming methodologies.

For instance, Chinese IT staff have very strong technical skills but they often lack the business instinct and knowledge required to make the most effective use of IT. In China a lot of highly educated IT people still have problems. They are ignorant in questions of management and production. They still need clear instructions.

Indian software development companies typically had minor involvement in mission critical IT systems such as stock trading systems. However, Indian software development companies try to conquer the areas of software architecture and IT consulting, but it is time consuming, and the crucial issue will be whether they will be able scale to hire and manage sufficient amount of employees to do that work.

In product development outsourcing it may be some time before Indian companies get into product definition and architecture. Most part of this activity today is done in the U.S. since in the context of a software product, the vision and the innovation for the product will be next to company founders and their teams. In addition to that large contracts require an outsourcer to take over the IT assets of a customer.

Infrastructure management is in nascent state in India, and clients with large outsourcing projects would automatically opt for a seasoned company than just some start-up. These projects also very asset intensive, and it is troublesome to take on assets on balance sheet. Indian companies still relatively small in an international context. Such contracts are sometimes billion dollars deals.

Against the background of increasing global competition for IT jobs, it turns out that Western professionals will have time to think over how to deal with constantly evolving worldwide labor market best.