Some Reconsider Offshore Outsourcing After The Attacks

Providio Technology Group had planned to hire subcontractors in Pakistan to help develop educational software for its client, Clear Course Technologies. Programmers there work for $5 less per hour than those in neighboring India, reducing the development budget by about 15%.

But that was before Sept. 11. "I wouldn't feel comfortable working with Pakistani programmers," says Clear Course executive VP Winston Lee. "There are too many questions right now." So Providio shifted the work to India.

Financial savings have lured many U.S. companies to offshore outsourcing during the past several years. In 1999, Pakistan instituted the country's first program to entice foreign employers with subsidies. Though Pakistan's population is less educated than that of China, India, the Philippines, and Russia, wages were lower and the country quickly became a serious competitor.

Now, IT executives question whether it's safe to use overseas programmers when war is on the horizon. It's business as usual for Mahboob Akhter, a Pakistani native and president of Irvine, Calif., Web-design firm Focus Software International Inc., but he says he and his clients, including GTE Corp. and Broadcom Corp., are concerned. "If war goes on, everyone will be scared," says Akhter, who uses 26 programmers in India and 45 in Pakistan. "We'll see shortened or irregular work hours as most will want to be with their families."

A slowdown in offshore outsourcing should be short-lived. "It's going to be a bumpy ride for the next couple of months," says Frank Casale, CEO of analyst firm the Outsourcing Institute. "But the drive to cut costs, combined with the intelligence of the average customer, will continue the outsourcing trend."

Ask Bill Donovan. The CIO of CXL Lines, a Charlotte, N.C., shipping company with $750 million in revenue, outsourced mainframe and application maintenance six years ago to two companies, in the Philippines and India, to prevent having all of the work done from one place. "When I decided to outsource, I picked two countries because neither had a stable political situation," he says. "I'd definitely do it again. You just have to spread the risk."