By SARITHA RAI

TO his compatriots, Azim Premji is the Bill Gates of India. By transforming his family-owned vegetable oil business into a global technology powerhouse, Mr. Premji has become the country's richest citizen, with a net worth hovering around $8 billion.

Outside India, however, Mr. Premji is not exactly Mr. Popularity these days. A British newspaper recently went so far as to describe him as "the man who wants to take away your jobs." That has to do with the nature of Mr. Premji's business: his company, Wipro, is one of the biggest outsourcing concerns in the world.

At Wipro's sprawling suburban campus near Bangalore, enthusiastic young engineers in blue-and-cream cubicles write code, build software and maintain computer systems for a host of American companies, including Lehman Brothers, General Motors, Home Depot and Boeing. And they do it for a small fraction of what it would cost these companies to do the work.

But in the United States and elsewhere, Wipro and the rest of India's growing technology services industry are increasingly denounced as a major cause of job losses. Senator John Kerry of Massachusetts, the likely Democratic presidential nominee, has called chief executives who shift work overseas "Benedict Arnolds."

Mr. Premji, 58, contends that Americans are blowing the issue out of proportion. Still, as he sits in his elegant office, gazing through its huge glass windows at the eucalyptus trees in the distance, he allowed that he is feeling the pressure. "How can you ignore such rooftop shouting against outsourcing unless you are an ostrich with your head stuck in the sand?" he said.

So the dapper, ordinarily reclusive Mr. Premji has reluctantly turned himself into one of the industry's chief spokesmen and defenders. Early this month, he set out on a 48-hour mission to the nation's capital, New Delhi. In meetings with India's most influential policy makers, including Prime Minister Atal Bihari Vajpayee, he conveyed a succinct message: the political backlash in the United States is potentially explosive, and India needs to deal with it as a national priority.

As his audience in New Delhi understood well, protectionist measures in the United States could choke the industry. Legislation could curb the outsourcing of government work, and caps on the number of visas issued to foreign workers limit Wipro's ability to place Indian programmers and managers at American sites.

Although Secretary of State Colin L. Powell, in New Delhi last week, assured Indians that the Bush administration would not try to halt outsourcing of high tech jobs to their country, Mr. Premji isn't taking anything for granted. He has asked government ministers to publicize India's purchases of American products and to underscore the advantages of doing business with India. For example, he said, the United States financial services sector alone has saved $8 billion in the last four years by outsourcing to India.

MR. PREMJI, Wipro's chairman, has also spent the last few weeks collecting a variety of statistics. In an interview, he rattled off a few of them: India's technology industry employs 800,000 people, he said, while the American technology industry employs 10.2 million. And 300,000 people work in Indian call centers, compared with six million in the United States.

The point, he said, is that Americans are unduly worried. "We are not dealing with cold reasoning here,'' he said, "but with emotions of Americans whose personalities changed after 9/11 and who feel threatened by anything that hurts their security, their wealth and their jobs.''

Like many others, Mr. Premji argues that shifting jobs to lower-cost countries will benefit the United States in the long run. "Offshore outsourcing is another example of U.S. innovativeness to stay competitive by reducing costs and cycle times," he said.

Still, the heightened sensitivity is hard to miss, even with Mr. Premji's best customers. At many American corporations, top executives are concerned that even an inkling that they are meeting with Wipro will put employees on red alert, said Wipro's president, Girish S. Paranjpe.

According to Mr. Paranjpe, a prospective customer who was catching a flight recently to Bangalore received a call from his 86-year-old mother, who asked if he was taking American jobs with him.

"That call must have played on his mind all through the trip," Mr. Paranjpe said. Increasingly, he said, customers seem conflicted. "The head wants to offshore, but the heart holds them back," he said.

So far, at least, there are few signs that the controversy is hurting Wipro's business. On one recent day, the company had 17 clients visiting at once, and a mad scramble ensued for conference rooms. Over all, the company said it expects revenue to reach $1.3 billion in the 12 months through March, up 44 percent from the previous 12-month period.

THE story of Wipro is as unconventional as that of its chairman. Upon the death of his father in 1966, Mr. Premji dropped out of Stanford to return to India and take care of the family's cooking oil company.

Western Indian Vegetable Products, as the company was then called, was founded in 1945. It was small, unfocused and, much like other family-run Indian enterprises of the time, not professionally managed. For several years, Mr. Premji struggled to keep the business afloat.

The break came after India's government kicked I.B.M. out of the country in 1977. Wipro eventually stepped in with a homegrown alternative. The large research and development team assembled by Mr. Premji would later offer technology services, billed by the hour, to big American companies like Intel and Texas Instruments.

As the global market for outsourcing ballooned, Wipro flourished. To be closer to customers, it set up an American headquarters in Mountain View, Calif., in February last year. In 1999, it hired Vivek Paul, a former General Electric manager, as its chief executive and was listed on the New York Stock Exchange. With $125 million worth of acquisitions in the last two years - including a call center business, Spectramind, and two boutique high-technology consulting businesses in the United States - Wipro has moved closer to its goal of becoming a full-service outsourcing company.

Today, software and related services account for 92 percent of Wipro's revenue, though most Indians identify the company's brand by other products that it now makes: soap, diapers, light bulbs and medical equipment.

"Looking back, neither did we dream that outsourcing would be so big, nor did we imagine that we would face such fierce opposition to our business," Mr. Premji said.

In the last 11 months, as the debate about layoffs at American corporations has reached fever pitch, Wipro has roughly doubled its work force, to nearly 30,000. Most of its workers speak the same impeccable English as Mr. Premji and perform a wide variety of tasks for United States companies, from staffing telephone help desks for the baggage-claim services and frequent-flier program of a top airline to designing the car navigation system for a leading carmaker. Some workers even interpret X-rays for a Boston-based hospital. (Increasingly, Wipro's clients are asking it not to reveal their names.)

"They are undoubtedly the top layer,'' Lakshmi Narayanan, chief executive of Cognizant Technology Solutions, an outsourcing rival based in Teaneck, N.J., said of Wipro. "When we compete against them, we have to put the best foot forward."

Given the political environment, Wipro strives to make outsourcing risk-free for its customers - at least as a business proposition. "Failure is no longer an option; on the other hand, every project needs to be a resounding success," said Mr. Paranjpe, who oversees Wipro's banking, insurance and other financial outsourcing businesses.

But the controversy has created additional management challenges. Mr. Paranjpe's prospective customers are peppering him with questions about how other companies are dealing with the transition to outsourcing. "They ask: 'What do we communicate to employees? When and how do we do it?' " he said.

In recent months, another manager said, clients were so nervous about the sentiment against outsourcing that they had Wipro take their company names off the Wipro Web site.

MR. PARANJPE and other top managers advise companies to be forthright in their communications with employees. "We tell them, instead of sending a vague, generic e-mail or leaving a voice mail and sending all the employees into a tizzy, define the exact scope of your offshoring activity," he said.

The technology services industry also remains very competitive, and executives at Wipro see its primary mission as holding its own against competitors like I.B.M., Accenture and Electronic Data Services.

RECENTLY, after staving off bids from three rivals for a $50 million, three-year project with an American company, Vishal Talwar, a business analyst at Wipro who sealed the deal, was jubilant. Mr. Talwar, an intense-looking 25-year old, was hired 11 months ago from the campus of a top Indian business school. During the week, he prospects for new business. On weekends, he and the two software engineers with whom he shares an apartment play soccer, watch Bollywood movies or hang out at a Bangalore pub.

Mr. Talwar says he and his co-workers have never had it so good. "With outsourcing, at least there is a job at the end of a graduate degree in India," he said. Entry-level positions for M.B.A.'s like him pay more than 600,000 rupees a year (about $13,300). Mr. Talwar says he is expecting a 25 percent raise soon.

But he is hardly oblivious to the outsourcing furor. After he closed his recent deal with an American company, he said its executives understandably did not want to crow about the 30 percent cost savings from shipping the work to India. "They said they could handle a leak but did not want to go straight on the Lou Dobbs show," Mr. Talwar said.

The New York Times

By Craig Karmin

Global giants aren't the only companies cutting costs by shifting jobs overseas. Increasingly, small businesses are finding that "offshoring" jobs is a boon to their bottom line -- and sometimes gives them room to create new jobs at home.

For example, when Rajeev Thadani wanted to expand Claimpower Inc., his medical-billing service in Fairlawn, N.J., he chose to outsource some of the work to India. But unlike most companies going this route, his business had just five other employees at the time.

Thadani, who runs the company with his wife, flew to his native Bombay in 2001 and hired four locals to help file insurance claims on behalf of New Jersey doctors. They use a software system that Thadani, a programmer by trade, developed specifically for the task.

Today, he employs 35 people there. Since he pays his Indian employees the equivalent of $133 to $663 a month -- quite good by local standards -- he can charge doctors less than his competitors and has more time to offer specialized attention. That has given his business a big lift: In a little more than two years, he says, his client list has soared to 41 doctors from 10, and his firm's annual revenue jumped to $700,000 from $100,000.

Now he's taking steps to expand his business nationally, while planning to add staff in the United States. In the past, Thadani relied on referrals from existing customers to get new business. He will soon add a sales team for recruiting clients and hire new managers in the United States to work with doctors. Longer term, he hopes to add as many as a dozen U.S. employees, plus 30 or so additional people in India, to help him reach his goal of handling claims for 500 doctors nationwide.

At a time when the United States has lost 2.3 million jobs over the past three years, foreign outsourcing -- to India in particular -- is frequently blamed for the jobless economic recovery. But recent employment trends suggest the moves also can trigger the creation of new U.S. jobs.

"This shows that outsourcing is not the one-way street many think it is in the United States," says Joseph Quinlan, chief market strategist at Banc of America Capital Management. "Outsourcing can also be a catalyst for lowering costs and creating jobs, notably at small and medium-sized companies."

An industry like medical billing is particularly well suited for outsourcing, says Bob Burleigh, a billing consultant and president of the Healthcare Billing & Management Association, a trade group. He notes that many of the larger medical billing companies -- and even a few of the smaller ones -- have hired workers abroad to cut costs at a time when insurance companies are paying less to doctors per claim.

"The business is characterized by a high volume of fairly predictable, fairly repetitive data-entry tasks," Burleigh says. "The employees in India speak English and often have higher levels of education than the people doing data entry in the U.S."

At Claimpower's Bombay operations, workers input figures on a computer, print out forms and proofread them, stuff envelopes and phone insurance companies in the United States with follow-up questions.

Like most Americans, Thadani never much thought about outsourcing until a few years ago. A lanky 48-year-old born to a middle-class Indian family, he graduated with an economics degree from Bombay University and moved to New York in 1981.

Thadani worked as a programmer, eventually becoming an outside contractor taking on long-term projects for major Wall Street firms.

Ten years ago, he was writing software programs for a Wall Street company when he agreed to help a friend launch a medical-billing business. In 1995, when the business partner got married and left the country, Thadani and his wife took over the operation. They hired part-time workers to help enter data.

Not content to run a mom-and-pop shop, Thadani looked to expand his business but believed the costs of taking on more employees in New Jersey were too high. That's when he placed a phone call to a friend in Bombay, leading him to hire a manager and two employees there to enter data.

The initial results weren't encouraging. The manager didn't know the business and couldn't properly train the two employees. Mistakes abounded, and there was confusion over how the software worked. "I thought I was going to have to shut that office down," Thadani recalls.

So, as his wife worked in their U.S. office, he flew to Bombay and found a new manager. Then Thadani helped the manager hire four other data processors and personally trained them on his software. The business began to turn around, and in 2002 he decided to quit his work for J.P. Morgan and devote himself full time to Claimpower. During the following two years, he hired 30 more workers in Bombay.

Several physicians have switched to Claimpower after bad experiences with other billing companies. Antonio Ciccone, a primary-care physician in Belleville, N.J., says he pays Claimpower on average a 5 percent commission of the amount it collects from insurers; that's less than half of what he paid his previous service, which also made too many mistakes.

Because Thadani isn't preoccupied by the day-to-day operations and data entry that are done overseas, he can focus on client relations, Ciccone says. "I can get Rajeev on the phone in five minutes if I have a question," he says.

Thadani currently has five full-time U.S. employees. While his company is a net positive for U.S. jobs --Thadani said he never could have expanded at all were it not for the possibility of hiring workers in India -- he's unapologetic about the phenomenon even when it causes job losses. "There will be pain in the economy, and there will need to be retraining," says Thadani, who adds that his previous job writing software for J.P. Morgan was itself recently eliminated by outsourcing. "But this will put an even greater premium on innovation in the U.S."

His 13-year-old son learned this last year when Thadani informed him that the part-time job he had with Claimpower was now going to be handled in India. While his son eventually got a different task to do, it taught him the importance of keeping his skills ahead of the curve in the job market, Thadani says. "It was a good lesson for him."

ContraCostaTimes

Offshore outsourcing is an extremely hot topic, and more companies than ever are outsourcing vital business functions abroad. But companies need to be extremely careful when deciding on an outsourcing strategy. Business executives need to understand and evaluate the potential risks and rewards of outsourcing to determine if it is right for their business. In order to best make this decision and to set and execute an effective outsourcing strategy you need to evaluate all of your outsourcing options, select what functions to outsource, negotiate your outsourcing contracts, choose between short-term and long-term outsourcing and decide whether to go offshore.

In response to this growing industry need, Strategic Research Institute presents: Global Sourcing: What the Future Holds (http://www.srinstitute.com/ci283), April 14-15 at the Pan Pacific Hotel in San Francisco. This forum is specifically designed to share how outsourcing philosophy and techniques can be applied to obtain competitive advantage.

This event will feature strategies, solutions and best practices, providing specific insight into:

• Discussion of alternatives to start your organization's journey into Sourcing
• The factors companies need to consider when deciding what functions can be outsourced offshore
• Criteria to consider when deciding upon an offshore service provider
• How to determine your readiness for offshore sourcing
• Start-to-finish analysis for effective offshoring of business processes
• Ways to power global cooperation through outsourcing
• Winning strategies to dramatically increase productivity by outsourcing IT applications
• Effective management of your outsourcing service providers
• Best practices for minimizing the risks and hidden costs of software development
• How to build an offshore strategy that fits your business objectives and organizational culture
• How to determine the best financial model for your offshore outsourcing project
• How to manage the offshore outsourcing lifecycle

Attendees will explore this multi-trillion global market with industry leaders from: Microsoft, Keane, The Paaras Group, NeoIT, McCamish Systems, Renodis, Inc, Tower Group, Lord, Bissell & Brook LLP, Fifth Third Bank, Vcustomer, Eforce, Bain & Company, Evaluserve, Shaw Pittman, VA Software Corporation, Vee Technologies, China Techsource, I.T. United, ASCI Inc., Infosys, and Barbados Investment and Development Corp.

PR Newswire

By Paul Murphy

It doesn't matter which side of the political aisle you're on or whether you believe, as I do, that this legislation is fundamentally uninformed. A "fair trade act" requiring the United States to apply Communist China's own rules on imports from the United States to imports from Communist China would be fairer and more effective.

One way or another, anti-outsourcing legislation seems likely to pass both houses of the U.S. Congress relatively soon. Whether this comes about through the House initiative led by Bernard Sanders or through other routes isn't important. What is important is that most of the proposals being discussed have bipartisan support and outlaw the use of government dollars to support foreign jobs at the expense of American workers. From the long-run economic and military perspectives, this kind of reflex protectionism is counterproductive. In the long run, free trade produces balanced budgets and better jobs while ensuring that authoritarian regimes like Communist China's come to an end. The problem right now, however, is that the process is out of balance, with the negative consequences arriving a lot faster than the benefits.

What knocked the process off kilter is well known, too: Clinton made two deals with North Korea, one in 1994 and the other in 1999. In both cases, those arrangements were mediated by Communist China, which got provisional most favored nation (MFN) status for its help in the first round and permanent MFN status -- as well as WTO membership -- in the second.

Foreign-Sourced Services

With the controls attendant on conditional MFN lifted in 1999, Communist China made increased exports to the United States a national economic objective while continuing to block imports from the United States. In an environment where the government owns the country, that support for contract manufacturing quickly led to a disproportionate movement of manufacturing jobs from the United States to China, and consequently set off a frenzy of competitive bidding for American manufacturing jobs by other Asian governments trying to hold market share.

As a result, a lot of good people in both Canada and the United States are now either unemployed or underemployed. And politicians in both houses of Congress are reading polls telling them it's time to do something. No one yet knows in detail what that something will be, but it's a pretty good bet that the eventual compromise will attempt to slow the imbalance while providing political cover for those involved.

Thus, two elements seem almost certain to emerge as parts of the eventual consensus legislation. First, the new law likely will prevent the export of personal information for offshore processing. Second, it almost certainly will prohibit the expenditure of taxpayer dollars on foreign-sourced IT services -- if those services could be provided by Americans.

Both of these restrictions are vitally important to the IT industry. The prohibition against sending personal information out of the country for processing will stop the export of jobs -- and therefore the IT support for those jobs -- in areas such as personal financial planning and healthcare claims processing. That will kill the profitability of the financial management outsourcing services offered by companies like IBM and thus stop the targeting of those jobs and their IT support for offshore consolidation.

The Prepaid Infrastructure

More immediately, the requirement that federal dollars not be spent on foreign services where American equivalents are available will make foreign-sourced software support and development a thing of the past.

Federal dollars don't make up a big percentage of outsourced IT services dollars, but this tail will wag the much bigger dog of state and private-sector outsourced IT support because of the short-term impossibility of untangling the financial impact of different classes of outsourcing contracts. For example, when a company like HP offers Windows support as part of the purchase price of a PC, the service is internally priced on the basis of marginal cost plus a small contribution to overhead -- meaning that pricing assumes shared use of an existing infrastructure.

Thus the cost of adding support for another thousand PC users for a company that already supports a million or more is close to zero, because the only variable cost analysts need be concerned with is the pennies per hour paid to a foreign support worker.

Spreading Infrastructure Costs

Take away that prepaid infrastructure, however, and the picture changes. Now the cost of adding support for the next thousand users is about the same as adding it for the first thousand users, and companies like EDS, HP or IBM will have a much smaller cost advantage over the in-house IT department.

The legislation -- as currently proposed in both houses of Congress -- has provisions that will create this situation because the prohibition against spending federal dollars offshore makes commingling (spreading infrastructure costs across multiple clients) virtually impossible. Sorting out commingled costs on a pro rata or proportionate basis has a long history in military procurement, particularly for national offset programs, but would fly directly in the face of clear legislative intent and is therefore likely to be unacceptable.

As a result, a supplier like HP or IBM will need to prove that none of the cost associated with something like a leased PC reflects commingled services -- and doing so will require an internal "Chinese wall" that will take at least a year to set up. It should be obvious that the biggest potential IT industry losers, at least in the short term, are Accenture -- which could be virtually wiped out in the United States -- EDS, IBM, HP and Oracle. Companies like Sun and PeopleSoft (Nasdaq: PSFT) essentially will be unaffected. Dell, interestingly, has been putting its defenses in place for some time, with the probable ability now or very soon to sell a PC whose warranty support costs flow only from an investment in American workers.

Supporting Action

The other companies, of course, aren't sitting still either, but they appear to be focusing their efforts on lobbying for exceptions and special clauses to let them continue commingled support products -- and that's where you get your chance to play.

It doesn't matter which side of the political aisle you're on or whether you believe, as I do, that this legislation is fundamentally uninformed. A "fair trade act" requiring the United States to apply Communist China's own rules on imports from the United States to imports from Communist China would be fairer and more effective. You should get to work and make sure your representatives in both houses know you support action on both kinds of restrictions.

In doing this, don't be discouraged by the fact that the lobbyists on the other side have more money and access than you do. Remember, elected representatives usually want the lobbyists' money only so they can use it to buy your vote -- which you can give or withhold directly.

TechNewsWorld

By Chris McManes

Offshoring contributes to high unemployment levels among U.S. technologists, and poses a serious, long-term challenge to the nation's technological and innovative leadership, its economic vitality and its military and homeland security, according to a position recently adopted by IEEE-USA.

"We must develop a coordinated national strategy to maintain U.S. technological leadership and promote job growth in the United States," IEEE-USA President John Steadman said. "But it's going to be difficult to remain technologically competitive, if we continue offshoring the jobs of our innovators at rates currently projected."

Offshoring, or the outsourcing of high-wage jobs from the United States to lower-wage countries, is contributing to unprecedented unemployment rates for U.S. electrical and electronics engineers (EEs) and other information technology professionals. The EE joblessness rate rose by 47.6 percent in 2003 to a record 6.2 percent, compared to 4.2 percent in 2002. The 2003 unemployment rate for computer scientists and systems analysts reached an all-time high of 5.2 percent.

IEEE-USA also believes that new U.S. workforce assistance programs are needed to help displaced high-tech workers. One immediate step is to expand the Federal Trade Adjustment Assistance (TAA) program's eligibility guidelines to cover all workers whose jobs move offshore. TAA extends unemployment compensation for up to two years, and offers job training, job search and health insurance assistance to eligible U.S. workers who lose their jobs because of foreign competition.

The entire position statement, developed by the IEEE-USA Career & Workforce Policy Committee, is available at http://www.ieeeusa.org/forum/POSITIONS/offshoring.html.

IEEE-USA is an organizational unit of The Institute of Electrical and Electronics Engineers, Inc., created in 1973 to advance the public good, while promoting the careers and public- policy interests of the more than 225,000 electrical, electronics, computer and software engineers who are U.S. members of the IEEE. The IEEE is the world's largest technical professional society.

U.S. Newswire

With a view to tap the east Europe market better, the NASDAQ-listed software major Infosys is planning to set up a centre in Czechoslovakia for both IT and business process outsourcing (BPO) operations.

"We are planning to set up a centre in Czechoslovakia, close to Prague, for both our software and BPO operations", Kris Gopalakrishnan, COO and Deputy Managing Director, Infosys Technologies, told newspersons here on the sidelines of a CII summit.

He declined to comment on the time-frame within which the centre would be set up and whether it would be through a local partner.

Bangalore-based Infosys has European presence through countries like France, Netherlands, Germany, Sweden, Switzerland and Austria.

Eastern Europe has become an attractive destination for BPO and software destination because of good delivery locations and many software and BPO companies are ramping up their capabilities in Prague and Budapest among others.

"BPO is the fastest growing segment within IT services and is expected to grow at a compounded annual growth rate of 6.8 per cent to reach 33 billion euro by 2007," analyst firm Gartner said.

Infosys operates in the BPO space through its arm Progeon.

THE HINDU

By JOHN COOK and PAUL NYHAN

Outsourcing.

That single word has evoked far-reaching emotions in the past year, prompting presidential candidates and labor groups to decry its practice and economists and chief executives to defend it as a natural progression of the economy.

But what is outsourcing?

As a concept it's not new. Companies have chased cheap labor around the globe for decades, making cars in Mexico, plastic toys in Taiwan and shirts in Malaysia.

But in recent years, the effort has crept into higher gear and income brackets, and it shows no signs of slowing down. The latest outcry is fueled by the fact that some service professionals, once insulated from outsourcing, are watching their jobs head overseas during a largely jobless recovery.

It is unclear how many accounting, engineering, technical support and other professional jobs have moved offshore in recent years. But some industry watchers believe as many as 200,000 service jobs could be lost each year for the next 11 years.

That has some American job seekers concerned. But others view it as an opportunity.

"We are on the leading edge of just a transformation of what work means around the world," said Hank Queen, who has watched plenty of work move overseas as vice president of engineering and manufacturing at The Boeing Co.

BOEING

Perhaps no player in the local economy has sent more jobs overseas than Boeing.

The company makes no excuses for sending work to South Africa, Italy, China, Russia and other far-flung parts on the globe.

But unlike the new breed of outsourcers, Boeing isn't only hunting for cheaper labor. Rather, it places work in countries where it is also trying to sell planes or spreads risks on new projects by farming out work to foreign suppliers. Officials are drawn to cheap labor, but sales are more important, Queen said.

And the company argues it has no choice. It must build planes with fewer and more productive workers to remain competitive.

"If we don't change, we die," Queen said last year.

Boeing's longstanding overseas recruiting effort underscores the fact that outsourcing is nothing new. Where once car building shifted to Japan, now financial analysis, telemarketing and software development head to India and elsewhere.

"We should not view this as something that is revolutionary. It is more evolutionary," said Gus Faucher, a senior economist at Economy.com "To a large extent it is inevitable."

It may be an unavoidable chapter in a long-running story, but it's a pivotal one, and one that could remake the U.S. work force.

We are at the beginning of a trend that could end with employers caring little where many employees work, instead connecting with global work forces through networks, Queen said.

That's one possibility, but the future is far from clear because so little comprehensive data exist and because the story is just beginning. The majority of Fortune 1,000 firms, 60 percent, have yet to embrace outsourcing, while 5 percent to 10 percent rely on it as a critical business tool, according to a report from Forrester Research Inc.

The General Accounting Office, a research arm of Congress, will bring the problem into greater focus when it releases a study this spring on trends in information-technology jobs going overseas.

TECHNOLOGY

It is no secret that American technology companies in recent years have benefited from sending work to lower-cost operations overseas. From printer assembly in Taiwan to microprocessor manufacturing in Malaysia, the cost advantages of outsourcing have been on the top of the list for many corporate executives.

About 30 percent of Intel's microprocessors are now built overseas, primarily in Ireland and Israel. Four of the six manufacturing facilities operated by Dell Computer are outside the United States.

The off-shoring efficiencies achieved by companies such as Dell and Intel help fuel the U.S. economy by sparking more innovation, said Bill Miller, a venture capitalist with OVP Venture Partners in Kirkland

"If they hadn't made that decision to keep their costs as low as they are, the two leading companies (in semiconductors and personal computers) would not be American companies," Miller said.

But in the past couple of years, the debate over outsourcing has intensified as technology companies reduce costs by sending technical support, software development, quality assurance and other functions offshore.

Only a few years ago this idea would have been impossible. The world mostly turned to its technology leaders, companies such as Microsoft Corp. for example, when it needed software. But with the growth of broadband Internet connections and e-mail, technical support staff and software developers can respond to questions with the same speed in Bangalore, India, as they do in Bellevue. And they can do it at a fraction of the cost.

A host of Seattle area software companies are taking advantage of the cost differences, with many of them targeting India because of its English-speaking population and wealth of talented programmers.

Bellevue-based Talisma, a maker of customer-relationship-management software, employs about 200 of its 275 workers in Bangalore. Click2learn, Aventail, Watchmark-Comnitel and others have set up centers in India. Last year, Microsoft opened a technical support operation in Bangalore -- a move that angered Seattle labor organization WashTech, which said it would threaten American jobs. Microsoft already operates a software-development center in Hyderabad, India, with plans to staff it with 500 programmers.

Technology companies say they need a global work force to compete and that the current wave of outsourcing follows a trend that began when international barriers started tumbling in the 1990s.

But don't tell that to Myra Bronstein, a Mercer Island resident who lost her software-testing job last year when her company shifted the work to India. Before she was laid off from Watchmark-Comnitel, Bronstein was making $76,500 a year.

Now with her paycheck gone and unemployment benefits exhausted, Bronstein has resorted to selling furniture and collectibles on eBay.

She blames outsourcing.

"The fact that they not only outsourced my job, but my entire industry, makes me feel powerless and paralyzed," said Bronstein. "Frankly, this situation has created problems that are way too big for one person like me to solve."

BACKLASH

Not surprisingly, politicians are rushing to fill the void left by the lack of enough hard data.

Democratic presidential front-runner Sen. John Kerry has already said he will "tear every page from the tax code" that allows "any Benedict Arnold CEO or company to move jobs overseas."

In Congress, Democratic lawmakers bashed top Bush administration economic adviser Dr. Greg Mankiw when he suggested outsourcing could eventually help the economy.

Lost in the Democratic response was that Mankiw also said the administration is committed to helping workers through the change.

Politicians may huff and puff, but there is only so much they can do.

If they erect barriers against countries that grab U.S. jobs, they risk a backlash in which trading partners create their own barriers. They also risk violating global trade laws in the future by imposing tariffs.

So some lawmakers are trying to help by cushioning the blow.

Washington Democratic Rep. Adam Smith is pushing a bill that would allow service workers whose jobs go overseas to claim retraining and income assistance currently reserved for displaced manufacturing workers.

Miller, the Kirkland venture capitalist whose companies are contemplating sending work offshore, understands why outsourcing has become such as hot-button issue. But he also worries that protectionist policies could damage the economy.

"People have lost their jobs, and they may not be coming back," he said. "But the other side of it -- and one of the reasons why business people are concerned -- is that by being reactionary to this emotional issue, we could easily shoot ourselves in the foot."

It may hurt now, but Seattle eventually could benefit from the trend, economists say. More complex and better paying positions could replace disappearing jobs.

Seattle is in a good spot because it already generates those kinds of jobs at Microsoft, local biotech concerns and other high-tech firms, they say.

"I think Seattle will come out a net winner," Economy.com's Faucher said.

WashTech's Marcus Courtney, one of the most vocal critics of outsourcing, doesn't think Seattle has anything to gain when high-paying jobs move.

"There are benefits to trade," said Courtney. "But how does exporting thousands of local jobs, our best-paying and best-skilled jobs, benefit us?"

Courtney disagrees with the theory that outsourcing brings more money back into the economy in the form of research and development, thus creating more jobs.

He points to the manufacturing sector as an example.

"I don't hear many kids today saying 'I want to grow up to be a steel worker,' " he said.

seattlepi.com

Giving India competition Chinese-born entrepreneurs help homeland
By Vanessa Hua

Shenzhen, China -- To snatch the offshoring crown from India, the king of the global outsourcing market, China is relying on expatriates like Raymond Tong.

Tong, a Hong Kong native, started his tech career in Silicon Valley in the early 1980s. The naturalized U.S. citizen has returned to run the China operations of Achievo, a software outsourcing startup headquartered in the East Bay city of Dublin.

Like their Indian counterparts, Chinese American entrepreneurs from the Bay Area are going back to their homeland with Silicon Valley know-how, connections and capital to help build a burgeoning software industry.

Blessed with cheap technical talent, Chinese firms have begun to undercut the bargain-rate companies in India.

"Our mission is to become like Infosys and those big companies, someday, as soon as possible,'' said Tong, 50. "They are 20 years ahead, but that doesn't stop us."

For Achievo, Shenzhen is the best place to begin its expansion. The central government designated Shenzhen as a special economic zone in 1980. Since then, tax breaks and other incentives have lured companies such as Achievo.

Once a fishing village, Shenzhen quickly grew to become one of China's richest cities, with a population 8 million. Located just over the border from Hong Kong, the boomtown is filled with factories and has an entrepreneurial reputation.

Shenzhen is working to become a center of technology. Towering offices, apartment buildings, shops and restaurants brim with China's new middle class. At night, the city pulses with neon signs and lasers.

Achievo is here to tap into the growth. The firm reported $5 million in revenue in 2003 and hopes to double that amount this year. By comparison, India's outsourcing giant, Infosys, reported $233.3 million for its 2003 fiscal year revenue.

Yet, according to Gartner, a technology research firm based in Stamford, Conn., China will catch up to India by 2006, with each country generating more than $27 billion in software outsourcing revenue.

Among China's advantages:

-- Cheap labor. In China, salaries of information technology professionals are roughly one-sixth (or even less) of those earned by their U. S. counterparts, according to Gartner. That's on a par with India, industry watchers say. But the final cost of any software outsourcing project may vary, experts say, depending on tax breaks and other incentives, the experience level of the staff and other factors.

-- Market opportunity. China's entry into the World Trade Organization in 2002, its selection to host the Olympics in 2008 and double-digit economic growth are luring multinational corporations that need help localizing their products for the Chinese market. Foreign investment in China reached $53.5 billion in 2003, up from $3.41 billion in 1990.

-- Domestic demand. China, too, will have domestic demand for software, as the country's booming home-grown companies require these services.

-- China as gateway. Chinese programmers can also serve customers from Japan and Korea, whose language, culture and geography are closer to the mainland than India. India's outsourcing firms have struggled to access these markets.

-- Government incentives. China's government has fostered its software industry, offering tax breaks and space in high-tech parks to startups, expanding universities and providing funding to software vendors for international-standards certification. Shenzhen is a chief contender for the title held by Bangalore, India, competing with cities such as Hangzhou, Guangzhou and Shanghai.

India is on notice. Tata, Infosys and Wipro, the top three Indian software outsourcing firms, are establishing a foothold here in rival territory, hoping to profit from -- rather than lose out to -- China's rise.

In October 2002, Tata opened a development center in Hangzhou, about two hours from Shanghai. Infosys will open a center in Shanghai this year, and Wipro also is considering expansion in China.

"The opportunities are huge. You have an untapped workforce and very motivated economy,'' said Richard Baldyga, Infosys vice president of outsourcing solutions.

Although labor costs for an entry-level programmer here are lower than in India, experienced management is pricier in China, he said. Infosys plans to use its China centers to support Asian Pacific clients, rather than North American customers.

Achievo remains headquartered in Dublin for several reasons: The company wants to go public on the U.S. stock market and the sales force can sign up U. S. customers. The company's chief executive, Robert Lee, heads another tech firm, Accela, in Dublin. In selling itself, Achievo plays up its Bay Area connections, which the company says help ensure language and cultural compatibility and accountability.

At least every two months, Tong flies back from Shenzhen to visit his wife and two sons, who live in San Ramon.

But by working in China, his career has advanced more quickly, Tong said. He has friends and family in Hong Kong, and he shares a deep cultural affinity with the locals.

"There are still lots of poor, but you can see there is a lot of hope,'' Tong said. "Things are getting better.''

On average, Achievo's software programmers earn about 5,000 yuan ($600) per month, enough for a comfortable middle-class life, Tong said. New college graduates start at 3,000 yuan, with salaries going up to 10,000 to 12,000 yuan for system architects.

Achievo, which moved into spacious quarters in a technology park last fall, plans to expand from 100 to 450 engineers by the end of this year, and to grow from 60 to 100 at its Beijing branch.

Achievo's offices are quiet but for the hum of computers. The occupied cubicles are neat, with minimal decoration or personal belongings and ubiquitous tins of tea.

Twice a week, small groups of workers meet in a conference room to practice English, with the goal of better communication with customers. Though they can read and write in English, speech fluency is elusive. The top floor of Achievo's Shenzhen office is under construction, and half the cubicles on the other two floors are empty. Compared with the shining campuses of Bangalore, which house thousands of software programmers, Achievo's offices are small.

Nevertheless, workers say getting in at the start has its rewards.

At Achievo, Gigi Yu, 37, makes less than a quarter of the pay she received while working at Intel in Dupont, a suburb of Tacoma, Wash. But after her husband, another Intel employee, was offered a long-term assignment in Shenzhen, they both decided to go. She started working at Achievo in October as a manager of software quality.

While Yu misses the natural environment and the easy commute she left behind, she said she feels more valued at the startup. After graduating from college in China, she headed to the United States, which held the most educationand career opportunities in the early 1990s.

"Now China is the best place for the future,'' Yu said.

Achievo is not the only software outsourcing company in China that has strong ties to the Bay Area.

Winston Wong, the chief technology officer at Bamboo Networks, worked at Hewlett-Packard and other valley companies for two decades. Born in Hong Kong, he immigrated to the Bay Area as a teenager in the late 1970s. Now a U.S. citizen, Wong says his roots are in China, but his home is in the Bay Area. He visits his sister, who owns a gift shop in San Francisco's Chinatown, at least twice a year.

Bamboo, founded in 1999, has 150 workers at its development center in Guangzhou, the provincial capital of Canton. After moving into a science park this summer, Bamboo -- named after the flexible and fast-growing plant -- will expand to 500 to 600 workers. Its clients include Bank of America, Hewlett-Packard and IBM.

The company's goal is to shape the software industry of China, so that the country becomes known for outsourcing and Bamboo is known as a long tou, or dragon head. Much as a dragon leads the parade at Chinese New Year, Bamboo wants to be at the forefront of the industry.

"The dot-com era where programmers earn lots of money -- those days are gone,'' said Wong, a naturalized U.S. citizen. To compete with other countries in Europe and Japan who are saving money by outsourcing, companies in the United States must follow, he said.

Others from the Bay Area are just entering the Chinese software outsourcing industry.

At the end of last year, Bob Huang, a Fremont tech entrepreneur, traveled for seven weeks to 12 cities in search of the best place for his startup. He picked Hangzhou. City officials offered him tax breaks and free office space for three years.

He employs 12 engineers in at Gopher King in Silicon Valley, which develops wireless and Web e-mail programs. If all goes well, he'll outsource his engineering operations to his new company in China and leave only the sales and marketing department in Silicon Valley.

Naturalized as a U.S. citizen in 2002, Huang now has to pay for a visa every time he goes back to the land of his birth. As a foreign citizen, he cannot stay in locals-only hotels and can no longer use a Chinese credit card. Despite these hassles, Huang feels he's in the best position.

"I know the Chinese ways and the American ways,'' said Huang, 33. "I can make the connection."

SFGate.com

By Michael Heise

The German experience

FRANKFURT Globalization is biting at the heels of the United States. For years an aggressive advocate of greater openness to trade and investment flows, the United States today is faced with a situation where it must respond to new international challenges.

That scenario is one with which Germans are well familiar. Germany's moment of truth occurred in the mid-to-late 1980s, when its industry found that because of cost pressures from abroad it no longer commanded as powerful a market position as it once did in key export sectors such as cars, chemicals, pharmaceuticals, electronics and especially machine tools. In the wake of this development, some branches, like consumer electronics, virtually disappeared.

At the time, it was U.S. and Japanese competitors who put a mirror to the face of German industry. German manufacturing came under tremendous cost pressure. This came as a shock to many Germans, who had believed that Germany's strong system of vocational training and its focus on value-added and high-quality production made its position in the manufacturing sector almost unassailable.

The current worries in the United States about India fall into a similar category. The reason why the outsourcing of well-paying service jobs is so painful is that it is hitting the United States right where it thought its comparative advantage was most robust.

Twenty years ago, we all lived in a simpler world. One could roughly identify "goods" with "tradables" - and "services" with nontradables. Today, the Internet and satellite communication are rapidly breaking the geographical constraints on almost all services. In addition, the U.S. economy is exceptionally dependent on services, with 64 percent of men and 86 percent of women employed in those sectors. The comparable numbers for the 12 member countries of the euro zone are 54 percent and 80 percent, respectively. In Germany - the least service-oriented of the advanced economies - the numbers are 50 percent and 79 percent.

Some of the highly qualified service activities that the United States has dominated - software production most notably among them - are facing fierce new competition from Russia, China and especially India. But lower-tech services - such as call centers and medical transcription - are similarly feeling the heat.

The new competition in services is here to stay. Just as Germany awoke in the 1980s to find its prized manufacturing and machine tools sector could no longer dominate its rivals across the board, the United States is finding today that service activities it thought were locked into place are footloose and looking for a better deal.

The German story, though, is ultimately a heartening example for the United States. Rather than retreating into protectionism, German industry was pruned by the shears of competition. That process allowed the survival of only those companies and products that were doing well in international competition.

The German share of world exports is still far greater than the Japanese share and about the same as that of the United States. The adjustment strategy entailed efforts to bolster productivity, to focus on profitable areas and to foster distribution and retail activities.

But another strand of the story was a surge in outward investment. Part of that was focused on distribution activity, but a large fraction also meant export of jobs. This triggered decades of discussion about the merits of globalization. But at the end of the day, the German case does provide evidence in support of the thesis that foreign direct investment is a way of keeping companies competitive in ever-fiercer markets.

Germany's adjustment process was painful, but worked even within the confines of inflexible German labor laws, tough environmental standards and sluggish domestic economic growth. America's greater flexibility and more robust growth should make it easier for U.S. companies to adjust to new realities and find ways to employ those workers - many of them highly skilled - who were displaced by outsourcing.

That is how competition is supposed to work. Some companies will go bankrupt and some products that had been produced domestically will be imported, but new companies and products will prosper. That is the lesson America has long advocated when it urged other countries to open up and reform their economies.

The United States is now being tested not only to see whether its actions match its rhetoric, but whether it can take politically difficult steps that will ultimately benefit its economy - and its claim to global economic leadership.

Michael Heise is chief economist at the Allianz Group and Dresdner Bank. The German experience

International Herald Tribune

By Michael Heise

The German experience

FRANKFURT Globalization is biting at the heels of the United States. For years an aggressive advocate of greater openness to trade and investment flows, the United States today is faced with a situation where it must respond to new international challenges.

That scenario is one with which Germans are well familiar. Germany's moment of truth occurred in the mid-to-late 1980s, when its industry found that because of cost pressures from abroad it no longer commanded as powerful a market position as it once did in key export sectors such as cars, chemicals, pharmaceuticals, electronics and especially machine tools. In the wake of this development, some branches, like consumer electronics, virtually disappeared.

At the time, it was U.S. and Japanese competitors who put a mirror to the face of German industry. German manufacturing came under tremendous cost pressure. This came as a shock to many Germans, who had believed that Germany's strong system of vocational training and its focus on value-added and high-quality production made its position in the manufacturing sector almost unassailable.

The current worries in the United States about India fall into a similar category. The reason why the outsourcing of well-paying service jobs is so painful is that it is hitting the United States right where it thought its comparative advantage was most robust.

Twenty years ago, we all lived in a simpler world. One could roughly identify "goods" with "tradables" - and "services" with nontradables. Today, the Internet and satellite communication are rapidly breaking the geographical constraints on almost all services. In addition, the U.S. economy is exceptionally dependent on services, with 64 percent of men and 86 percent of women employed in those sectors. The comparable numbers for the 12 member countries of the euro zone are 54 percent and 80 percent, respectively. In Germany - the least service-oriented of the advanced economies - the numbers are 50 percent and 79 percent.

Some of the highly qualified service activities that the United States has dominated - software production most notably among them - are facing fierce new competition from Russia, China and especially India. But lower-tech services - such as call centers and medical transcription - are similarly feeling the heat.

The new competition in services is here to stay. Just as Germany awoke in the 1980s to find its prized manufacturing and machine tools sector could no longer dominate its rivals across the board, the United States is finding today that service activities it thought were locked into place are footloose and looking for a better deal.

The German story, though, is ultimately a heartening example for the United States. Rather than retreating into protectionism, German industry was pruned by the shears of competition. That process allowed the survival of only those companies and products that were doing well in international competition.

The German share of world exports is still far greater than the Japanese share and about the same as that of the United States. The adjustment strategy entailed efforts to bolster productivity, to focus on profitable areas and to foster distribution and retail activities.

But another strand of the story was a surge in outward investment. Part of that was focused on distribution activity, but a large fraction also meant export of jobs. This triggered decades of discussion about the merits of globalization. But at the end of the day, the German case does provide evidence in support of the thesis that foreign direct investment is a way of keeping companies competitive in ever-fiercer markets.

Germany's adjustment process was painful, but worked even within the confines of inflexible German labor laws, tough environmental standards and sluggish domestic economic growth. America's greater flexibility and more robust growth should make it easier for U.S. companies to adjust to new realities and find ways to employ those workers - many of them highly skilled - who were displaced by outsourcing.

That is how competition is supposed to work. Some companies will go bankrupt and some products that had been produced domestically will be imported, but new companies and products will prosper. That is the lesson America has long advocated when it urged other countries to open up and reform their economies.

The United States is now being tested not only to see whether its actions match its rhetoric, but whether it can take politically difficult steps that will ultimately benefit its economy - and its claim to global economic leadership.

Michael Heise is chief economist at the Allianz Group and Dresdner Bank. The German experience

International Herald Tribune

The US Senate has backed a measure to restrict the exporting of jobs to developing countries such as India.

The move, which is not yet law, was passed with a vote of 70 to 26, and would forbid the outsourcing of work on contracts paid for with federal funds.

Democrats say taxpayers' money should not be used to send jobs overseas.

Last month, presidential adviser Gregory Mankiw was heavily criticised for suggesting that outsourcing could help the US economy.

Defence exception

The policy proposed by the Senate would not take effect until the US Commerce Department showed a ban would not harm the economy or lead to more job losses.

It also makes an exception for defence, homeland security and intelligence contracts deemed necessary for national security.

It would take effect when the government privatises work once done by federal employees, when the federal government contracts for goods and services, and when state governments contract work using federal funds.

Democratic Senator Chris Dodd of Connecticut, who sponsored the bill, said outsourcing should not be subsidised.

"You may be able to do that with your own money. The question is, should you be able to do that with the taxpayers' money?"

Other Democrats want to strip tax benefits from American companies with offshore operations, or provide federal aid to workers whose jobs go overseas.

Political problems

The issue, and jobs in general, is seen by the Democrats as their main chance to win support away from Mr Bush.

Millions of jobs have been lost during Mr Bush's term in office, and there are accusations he has not done enough to ward off the threat of low-cost economies such as China and India.

Mr Mankiw said last month that outsourcing was "something that we should realise is probably a plus for the economy in the long run".

He later said he regretted the way his comments had been interpreted.

Meanwhile, Indian software industry association Nasscom has said it is hopeful recovery in the US economy will help to cool the backlash against outsourcing work to India.

BBC news

But the effort has drawn fire from the Information Technology Association of America
By Grant Gross

The U.S. Senate voted to approve an amendment restricting federal tax dollars from being used on jobs going overseas, a day after a U.S. representative introduced a bill prohibiting federal grants and loans from going to some companies that send jobs out of the country.

The Senate, by a vote of 70-26, voted to approve an amendment from Sen. Chris Dodd (D-Conn.) that would prohibit taxpayer dollars from being used to outsource or take offshore work formerly done in the U.S. The amendment, added to a bill to restructure corporate taxes, would prohibit outsourcing in three areas of government contracting: privatizing of federal work, federal procurement of goods and services, and state government procurement using federal funds.

"American workers are hurting," Dodd said in a statement. "Our nation's chief export shouldn't be jobs for foreign workers. Thankfully this measure says enough is enough. Taxpayers' hard-earned money shouldn't be used to bankroll the loss of taxpayers' jobs to overseas workers."

The Information Technology Association of America (ITAA), which has opposed limits on offshore outsourcing, criticized Dodd's amendment and a bill introduced by Rep. Bernie Sanders (Ind.-Vt.). Sanders' bill, introduced Wednesday (see story), would bar companies from receiving federal grants, loans and loan guarantees if they lay off a greater percentage of workers in the U.S. than they lay off in other countries.

It's unclear how many U.S. companies could potentially be affected by Sanders' bill, which had the support of 50 co-sponsors when it was introduced. Sanders' office didn't return repeated phone calls for comment.

The Sanders bill takes a "very mistaken" approach, said Bob Cohen, senior vice president of the ITAA. "We entirely disagree with its general direction and its specific language. There's nothing about it we would agree with." The ITAA and other opponents of restrictions on outsourcing argue that the U.S. economy benefits more from free trade than from attempts to save U.S. worker jobs through limits on outsourcing. The U.S. exports more IT-related products and services than it imports, the ITAA argues, and restrictions on offshore outsourcing could prompt a trade war in which nations cut back on U.S. tech imports.

The Dodd amendment could lead to other countries refusing to allow U.S. IT companies to do government work, the ITAA said. The amendment could also result in higher prices being paid on some U.S. government contracts, with the option of sending work overseas eliminated, said ITAA President Harris Miller.

"The U.S. IT software and services industry has a multibillion-dollar surplus with the rest of the world, in large part because governments around the world buy products from U.S. IT companies," Miller said in a statement. "That means we create more jobs selling to them than they create by selling to us. Trying to protect unclassified government business from overseas competition is a step that is sure to backfire, shrinking markets and harming workers."

Dodd said the U.S. needs to stop job loss. The U.S. has lost 2.7 million manufacturing jobs since 2001, he said.

Sanders, in a statement, also defended his legislation. "In my view, it is an insult to the middle class of this country, that American taxpayer dollars are being used to provide loans, loan guarantees, grants, tax breaks and subsidies to huge and profitable corporations who then say to the American people: 'Thanks for the welfare, chumps. But we're closing your plant and taking your job to China,'" he said.

COMPUTERWORLD

By Patrick Thibodeau

Although the backlash from offshore outsourcing is doing little to slow the accelerating trend, it's increasingly noticeable at conferences attended by managers who make and execute offshoring decisions. The focus on political and emotional issues associated with offshoring is turning portions of these conferences, such as the Outsourcing Strategies 2004 confab here this week, into a mix of pep talks and gripe sessions. Also, fewer users are willing to appear on conference panels to talk about offshore work, and some are canceling appearances. Deals, once touted by vendors, are often no longer publicly announced.

One IT manager who said he was wrestling with an outsourcing decision raised his hand at a conference session and asked, "How do I justify it to myself?"

The justification is complex. The manager, who asked not to be named, was advised by panelists to ensure that the economics are compelling. And he heard the frequently expressed view that job loss is a fact of life that requires an adaptable workforce. According to that line of thinking, the U.S. sheds thousands of jobs annually for a variety of reasons unrelated to offshore work, such as productivity improvements gained from technology. It's an article of faith at offshore outsourcing conferences that the U.S. economy is dynamic and innovation will generate jobs.

What's not in dispute is corporate interest in offshoring. The political controversy "is not changing or slowing the impact to our business," said Michel Janssen, a consultant at The Everest Group, a Chicago-based firm that advises buyers of outsourcing services. "The trend is just happening faster and faster."

But that doesn't make it easier. "It is emotional for lots of people," said David Elmo, president and chief operating officer of Corbus LLC.

Dayton, Ohio-based Corbus is an outsourcer that does development work in India. But the company says it has an approach to mitigate some of the backlash while delivering savings through a process it calls "microsourcing." The process focuses on select IT functions, particularly where there are backlogs, and not entire departments.

Elmo argues that companies can outsource too much and leave themselves vulnerable to changes in business processes. "I think we have to take responsibility for what's happening, and I think we have to think it through," he said.

Stamford, Conn.-based Gartner Inc. earlier this month said the trend is in fact toward selective sourcing of IT and business processes, characterized by smaller agreements and fewer unwieldy megadeals.

COMPUTERWORLD

By William Mougayar

The U.S. needs a plan that clearly describes the risks, rewards, opportunities and challenges of offshoring. The national debate over this highly visible phenomenon is escalating, but it seems deadlocked. To get past this impasse, the White House should commission an unequivocal report that defines the benefits and drawbacks of offshore outsourcing, describes its full impact on the U.S. and world economies, and provides very specific details on how to cope with it with minimal stress and disruption. Without a national plan, the issue will remain undefined and be allowed to meander. Statements made by the Federal Reserve or President Bush's chief economic adviser don't add up to a policy. If the U.S. government wants to adopt a laissez-faire attitude, that's OK, but we need a clear statement that says so. The current uncertainty surrounding the official government position makes it look as if the victims and beneficiaries of offshoring are having a debate of their own, without real arbitration to judge what's right or wrong.

Precedent exists for issuing such White House reports. In 1997, President Clinton released a significant policy report titled "A Framework for Global Electronic Commerce," which was compiled under the direction of Ira Magaziner. In 2002, President Bush published "The National Security Strategy of the United States of America." Globally, the issue of international competition has given rise to comparable reports. In the U.K., the Department of Trade and Industry has commissioned a study to look at the competitiveness of British call centers, with an emphasis on the impact on the overall U.K. economy. And Amicus, the largest manufacturing union in the U.K., has launched a campaign to influence the European Parliament to consider enlarging the offshoring debate to all member states, with the aim of producing a pan-European industrial policy and a comprehensive report that looks at the pros and cons of offshoring.

A White House report on offshoring could tackle a long list of outstanding questions on the issue, including the following:

Is there an endpoint to the offshore-outsourcing phenomenon? What happens once the rate of outsourcing stabilizes? Is this part of a fundamental change to the U.S. economy, or is it a cyclical trend? Is this trend really unavoidable and unstoppable?
What sorts of companies are taking advantage of outsourcing? Which ones are initiating layoffs? How much has this benefited them? Has it produced higher earnings or significant savings? What have they learned from this process? Who are the real victims? Which states are the most affected?
What is the long-term prospect for American economic power? Which countries are the real beneficiaries of offshoring? How is the practice affecting their relationships with the U.S.? Are there geopolitical and socioeconomic benefits to recipient countries? Does the U.S. gain more political influence on these countries, and does that help to prevent further terrorism?
Is the scope of the offshore craze limited to the IT industry? Which industry sectors are the most affected?
How many jobs have been lost? Will a growing economy create more jobs than have gone overseas? What needs to be done in the areas of education and training to ease the transition into new jobs? Might newer technology make these offshore services obsolete? Will these services then be repatriated?
So many questions. To answer them, the administration must step up. Like other high-level policy reports, this one would be initiated by the White House and include the participation of cross-governmental departments and agencies. The most obvious contributors would be the departments of Labor, Commerce and Education, plus the Office of Science and Technology Policy.

COMPUTERWORLD

By CHRISTOPHER KOCH

U.S. CIOs want to do business with offshore companies with high CMM ratings. But some outsourcers exaggerate and even lie about their Capability Maturity Model scores.

AS SOON AS SHE WALKED into the meeting, Jane Smith knew that the executive on the other side of the desk wanted to buy something that Smith wasn't supposed to sell: a trumped up rating for the executive's software development division so that his company could qualify to bid on contracts from the United States Department of Defense.

Smith (not her real name) is one of a select group of experienced IT pros, called lead appraisers, who go into companies and assess the effectiveness of their software development processes on a scale from 1 (utter chaos) to 5 (continuously improving) under a system known as the Capability Maturity Model, or CMM. The company she was visiting wanted to move up to Level 2, but based on some initial discussions, Smith knew that the company was a 1. Level 1 describes most of the software development organizations in the world: no standard methods for writing software, and little ability to predict costs or delivery times. Project management consists mostly of ordering more pizza after midnight.

After a few initial niceties, the executive leaned across the table to Smith and another lead appraiser who had accompanied her to the meeting and asked, "How much for a Level 2?"

"That's when I got up and left the room," Smith recalls. "The other appraiser stayed. And the company got its rating."

The stakes for a good CMM assessment have gotten only higher since Smith's close encounter with corruption some 10 years ago. Today, many U.S. government agencies in addition to the DoD insist that companies that bid for their business obtain at least a CMM Level 3 assessment—meaning the development organization has a codified, repeatable process for an entire division or company. CIOs increasingly use CMM assessments to whittle down the lists of dozens of unfamiliar offshore service providers—especially in India—wanting their business. For CIOs, the magic number is 5, and software development and services companies that don't have it risk losing billions of dollars worth of business from American and European corporations.

"Level 5 was once a differentiator, but now it is a condition of getting into the game," says Dennis Callahan, senior vice president and CIO of Guardian Life Insurance. "Having said that, there are some Level 3 or 4 startups that we might consider, but they have a lot more convincing to do before I would do business with them. They would be at a disadvantage."

With CIOs increasingly dependent on outside service providers to help with software projects, some have come to view CMM (and its new, more comprehensive successor, CMM Integration, or CMMI) as the USDA seal of approval for software providers. Yet CIOs who buy the services of a provider claiming that seal without doing their own due diligence could be making a multimillion-dollar, career-threatening mistake.

That's because software providers routinely exaggerate their assessments, leading CIOs to believe that the entire company has been assessed at a certain level when only a small slice of the company was examined. And once providers have been assessed at a certain level, there is no requirement that they test themselves ever again—even if they change dramatically or grow much bigger than they were when they were first assessed. They can continue to claim their CMM level forever.

Worse, some simply lie and say they have a CMM assessment when they don't. And appraisers say they occasionally hear about colleagues who have had their licenses revoked because of poor performance or outright cheating in making assessments.

Yet CIOs who want to check up on CMM rating claims are out of luck. There is no organization that verifies such claims. Furthermore, the Software Engineering Institute (SEI), which developed CMM and is principally funded by the DoD, will not release any information about companies that have been assessed, even though appraisers are required to file records of their final assessments with the institute.

As American and European companies stampede offshore to find companies to do their development work, they first need to understand what CMM ratings really mean. Yet few CIOs bother to ask crucial questions, say IT industry analysts and the service providers themselves. "Not even 10 percent of customers ask for the proof of our CMM," says V. Srinivisan, managing director and CEO of ICICI Infotech, an Indian software services provider that claims a Level 5 certification. "They inevitably take it for granted, and they don't ask for the details."

CIOs who don't ask for the details will not be able to distinguish between companies that are using CMM in the spirit it was intended—as a powerful, complex model for continuous internal improvement—and those that are simply going through the motions to qualify for business. Buying by the CMM number alone could mire CIOs in the same problems that caused them to look offshore in the first place: high costs, poor quality and shattered project timetables—not to mention the loss of thousands of U.S. IT jobs.

"When you talk about something simple like a number and lots of money is involved, someone's going to cheat," says Watts Humphrey, the man who led the development of CMM and is currently a fellow at the SEI. "If CIOs don't know enough to ask the right questions, they will get hornswoggled." (For a list of the best questions to ask, see "Twelve Critical Questions," right.)

Where CMM Comes From

The CMM was a direct response to the Air Force's frustration with its software buying process in the 1980s. The Air Force and other DoD divisions had begun farming out increasing amounts of development work and had trouble figuring out which companies to pick. Carnegie Mellon University in Pittsburgh won a bid to create an organization, the SEI, to improve the vendor vetting process. It hired Humphrey, IBM's former software development chief, to participate in this effort in 1986.

Humphrey decided immediately that the Air Force was chasing the wrong problem. "We were focused on identifying competent people, but we saw that all the projects [the Air Force] had were in trouble—it didn't matter who they had doing the work," he recalls. "So we said let's focus on improving the work rather than just the proposals."

The first version of CMM in 1987 was a questionnaire designed to identify good software practices within the companies doing the bidding. But the questionnaire format meant that companies didn't have to be good at anything besides filling out forms. "It was easy to cram for the test," says Jesse Martak, former head of a development group for the defense contracting arm of Westinghouse, which is now owned by Northrop Grumman. "We knew how to work the system."

So the SEI refined it in 1991 to become a detailed model of software development best practices and added a group of lead appraisers, trained and authorized by the SEI, to go in and verify that companies were actually doing what they said they were doing. The lead appraisers head up a team of people from inside the company being assessed (usually three to seven, depending on the size of the company). Together, they look for proof that the company is implementing the policies and procedures of CMM across a "representative" subset (usually 10 percent to 30 percent) of the company's software projects. The team also conducts a series of confidential interviews with project managers and developers—usually during the course of one to three weeks and, again, depending on the size of the organization—to verify what's really happening. It's a tough assignment for the internal people on the team because they are being asked to tattletale on their colleagues.

"It can be very stressful for the [internal] assessment team," says a lead appraiser who asked to remain anonymous. "They have conflicting objectives. They need to be objective, but the organization wants to be assessed at a certain level."

David Constant, a lead appraiser and partner with Process Inc., a software projects consultancy, recalls assessing a company where all the developers had been coached by management on what to say. "I had to stop the interviews and demand to see people on an ad hoc basis, telling the company who I wanted to speak to just before each interview began," Constant recalls. "And the sad part was that they didn't need to coach anybody. They would have easily gotten the level they were looking for anyway—they were very good."

The new model is much tougher to exploit than the original questionnaire. In 1991, Westinghouse's Martak recalls telling his management: "This is a different ball game now. If you have a good lead appraiser, you can't fake it out." Martak led his group to a Level 4 assessment and eventually became a lead appraiser himself.

The depth and wisdom of the CMM itself is unquestioned by experts on software development. If companies truly adopt it and move up the ladder of levels, they will get better at serving their customers over time, according to anecdotal evidence. But a high CMM level is not a guarantee of quality or performance—only process. It means that the company has created processes for monitoring and managing software development that companies lower on the CMM scale do not have. But it does not necessarily mean those companies are using the processes well.

"Having a higher maturity level significantly reduces the risk over hiring a [company with a lower level], but it does not guarantee anything," says Jay Douglass, director of business development at the SEI. "You can be a Level 5 organization that produces software that might be garbage."

That assessment is borne out by a recent survey of 89 different software applications by Reasoning, an automated software inspection company, which on average found no difference in the number of code defects in software from companies that identified themselves on one of the CMM levels and those that did not. In fact, the study found that Level 5 companies on average had higher defect rates than anyone else. But Reasoning did see a difference when it sent the code back to the developers for repairs and then tested it again. The second time around, the code from CMM companies improved, while the code from the non-CMM companies showed no improvement.

Truth in Advertising

Stories about false claims abound. Ron Radice, a longtime lead appraiser and former official with the SEI, worked with a Chicago company that was duped in 2003 by an offshore service provider that falsely claimed to have a CMM rating. "They said they were Level 4, but in fact they had never been assessed," says Radice, who declined to name the guilty provider.

When done correctly, CMM is a costly, time-consuming effort. The average time for a company to move from Level 1 to Level 5 is seven years, and the expense of building a really robust, repeatable software development process with project and metric tracking is many times the cost of a CMM assessment (which alone costs about $100,000). For small companies short on funds and staff, or startups, forgoing business while building a software process capable of receiving a Level 5 assessment may seem more risky than fudging a number—especially when your customers don't know enough to ask about it. And mature companies that already have a high CMM level may not want to risk the disruption, cost and potential disappointment of getting assessed again regularly.

Officials at the SEI deny that companies are exaggerating or lying about their CMM claims.

"There is no one who will declare 'We are CMM Level 3 as an organization,'" says the SEI's Douglass. "They'll say they are Level 3 in this development center or that product group."

Not true. A quick Nexis search revealed four companies—Cognizant, Patni, Satyam and Zensar—claiming "enterprise CMM 5," with no explanation of where the assessments were conducted or how many projects were assessed, or by whom. Dozens more companies trumpet their CMM levels with little or no explanation.

Indeed, all of the services companies we interviewed for this story claimed that their CMM assessments applied across the company when in fact only 10 percent to 30 percent of their projects were assessed. That's partly because experts say that assessing every project at a big company would be too unwieldy and expensive.

Yet few of those same experts support the idea that assessing a 10 percent slice of projects—even those considered to be representative of all the different types of work a company does—should lead to claims of "enterprisewide CMM." Vendors argue that there is logic behind these claims. The higher CMM levels (3 and above) require that a company have a centralized process for software development and project tracking, among other things. Since everyone across the company is supposed to use that same process that was used in the projects that were assessed at Level 5, for example, all projects across the company can be assumed to be at Level 5.

But as soon as you dig beneath the surface, the logic falls apart. The process may have changed completely since the assessment was performed. Indeed, Indian services companies in particular, where the most CMM Level 5 assessments have been reported, are growing so quickly—some adding as many as 50 to 60 new developers a week—that avoiding change is nearly impossible. The company also may have changed the types of work it does and perhaps acquired other companies along the way that were not assessed at any level. And if the company does not have an excellent training program for all its project managers and developers—so they can work at the same level as those in the projects that were assessed—the assessment means little.

CMM is a "snapshot in time," says the SEI, and it encompasses only the projects that were assessed. Furthermore, if the snapshot was taken more than two years ago, most experts say, it will have yellowed so badly that the company is probably no longer at the same maturity level.

Now that CMM has become table stakes for billions worth of business, some believe that providers should bite the bullet and get all their projects assessed if they are going to claim "enterprise Level 5 CMM."

"If I were a CIO and a company was telling me their entire company was CMM 5, I'd want all the people on my project to have gone through the assessment," says Margo Visitacion, a Forrester Research analyst and former quality assurance manager at a software development company. "[The service providers] are getting millions in business from their CMM levels. Why shouldn't they have all of their developers go through an assessment?"

How Much for That Certification?

Appraisers continue to cheat too, according to their colleagues. The pressure on appraisers, in fact, is higher than ever today, especially with offshore providers competing in the outsourcing market. Frank Koch, a lead appraiser with Process Strategies Inc., another software services consultancy, says some Chinese consulting companies he dealt with promised a certain CMM level to clients and then expected him to give it to them. "We don't do work for certain [consultancies in China] because their motives are a whole lot less than wholesome," he says. "They'd say we're sure [certain clients] are a Level 2 or 3 and that's unreasonable, to say nothing of unethical. The term is called selling a rating."

Will Hayes, quality manager for the SEI Appraisal Program, would only acknowledge one recent case of an appraiser who had his license revoked by the SEI for improperly awarding a company a Level 4 assessment. However, it's difficult for the SEI to know exactly how much cheating is going on because it does not monitor the claims that companies make about CMM.

"Are there organizations out there claiming Level 5 who have never submitted the information to the SEI? I'm sure that there are," says SEI's Douglass. That's little comfort to CIOs who would rather not discover a false CMM claim the hard way—by seeing their projects fail.

There is a way to prove whether the assessment was done, but it may be hard for CIOs to get the evidence. Appraisers are required to submit formal documentation of all their assessments to the SEI and to customers. Lead appraisers must write up something called a Final Findings Report that includes "areas for improvement" if the appraiser finds any (they usually do, even with Level 5 companies). But there is no requirement for the content or format in the reports to be consistent across appraisers or companies. Only the methods for arriving at the final number are consistent. According to one appraiser who asked not to be named, companies will often ask appraisers to "roll up" the detailed findings into shallow PowerPoint presentations that don't give a very good picture of the company and its software development processes. "The purpose of the report is to tell companies where they need to improve—that's the whole point of CMM," she says. "But they make us write these fluffernutters that can gloss over important details."

The Final Findings Report is what company officials present internally to the big brass and to customers knowledgeable enough to ask for it. But there's no obligation to do it. They can declare their CMM level without producing any evidence. They can even hire their own lead appraisers inside the company and assess their CMM capabilities themselves. They don't have to hire a lead appraiser from the outside who might be under less pressure to give a good assessment. And they can characterize their CMM level any way they want in their marketing materials and press releases.

SEI officials say they are not in the business of controlling what companies say about their assessments. Nor will they reveal to the public which companies have been assessed or what the assessments consisted of. "We weren't chartered to be policemen—we're a research and development group," Hayes says.

Instead, the SEI exerts control through the relatively small lead appraiser community (approximately 220 are authorized to do CMM assessments). From the beginning, the SEI has reserved the right to discipline or even remove appraisers who cheat or do their jobs badly. But in the early days, the SEI rarely followed through on those threats, say longtime appraisers.

More recently, the SEI toughened up the CMM itself and plans to completely replace it (as of December 2005) with a broader, more in-depth model called CMMI. In the process, it has increased the training requirements and controls on appraisers. According to Hayes, under CMMI, the SEI reviews each appraisal that comes in for irregularities. And under CMMI, appraisers have to file a report called an Appraisal Disclosure Statement that clearly states which parts of the organization and projects were assessed, as well as all the people who took part in the assessment (though assessed companies are not required to reveal that report publicly, either). The SEI, along with the lead appraiser community, is also developing a "code of ethics" for appraisers.

Yet if CIOs want to get the true picture about appraisers, to check if they've ever been reprimanded for performing faulty assessments or thrown out altogether for cheating, they are out of luck. The SEI will not reveal any information about errant appraisers.

And the SEI has no intention of becoming a governing body like the American National Standards Institute (ANSI), which controls ISO 9000 certification in the United States. ANSI requires companies to be reassessed every six months if they want to maintain their ISO 9000 certification and reassesses all its appraisers each year. "No one has asked us to become a governing body, and that's not our mandate. And if we did, what would that solve?" the SEI's Humphrey asks. "It wouldn't excuse anyone from doing their homework."

Indeed, CIOs who look to CMM for guarantees won't find them, says Rick Harris, director of application development for OnStar, a division of GM that provides communications inside the company's vehicles. He recalls confronting a manager from one of his CMM Level 5 offshore outsourcing companies who did not know how to do a testing plan for software. "My people had to train him to do it," he says. On another occasion, Harris's staff discovered that the offshore provider had fallen far behind schedule in one of its projects but had not told him. "You'd think a Level 5 company would have told me months before that the schedule was slipping and we needed to do something," he says.

AS SOON AS SHE WALKED into the meeting, Jane Smith knew that the executive on the other side of the desk wanted to buy something that Smith wasn't supposed to sell: a trumped up rating for the executive's software development division so that his company could qualify to bid on contracts from the United States Department of Defense.

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Smith (not her real name) is one of a select group of experienced IT pros, called lead appraisers, who go into companies and assess the effectiveness of their software development processes on a scale from 1 (utter chaos) to 5 (continuously improving) under a system known as the Capability Maturity Model, or CMM. The company she was visiting wanted to move up to Level 2, but based on some initial discussions, Smith knew that the company was a 1. Level 1 describes most of the software development organizations in the world: no standard methods for writing software, and little ability to predict costs or delivery times. Project management consists mostly of ordering more pizza after midnight.

After a few initial niceties, the executive leaned across the table to Smith and another lead appraiser who had accompanied her to the meeting and asked, "How much for a Level 2?"

"That's when I got up and left the room," Smith recalls. "The other appraiser stayed. And the company got its rating."

The stakes for a good CMM assessment have gotten only higher since Smith's close encounter with corruption some 10 years ago. Today, many U.S. government agencies in addition to the DoD insist that companies that bid for their business obtain at least a CMM Level 3 assessment—meaning the development organization has a codified, repeatable process for an entire division or company. CIOs increasingly use CMM assessments to whittle down the lists of dozens of unfamiliar offshore service providers—especially in India—wanting their business. For CIOs, the magic number is 5, and software development and services companies that don't have it risk losing billions of dollars worth of business from American and European corporations.

"Level 5 was once a differentiator, but now it is a condition of getting into the game," says Dennis Callahan, senior vice president and CIO of Guardian Life Insurance. "Having said that, there are some Level 3 or 4 startups that we might consider, but they have a lot more convincing to do before I would do business with them. They would be at a disadvantage."

Dennis Callahan, CIO of Guardian Life Insurance, says offshore outsourcers must now have a Level 5 CMM rating to get into the game. With CIOs increasingly dependent on outside service providers to help with software projects, some have come to view CMM (and its new, more comprehensive successor, CMM Integration, or CMMI) as the USDA seal of approval for software providers. Yet CIOs who buy the services of a provider claiming that seal without doing their own due diligence could be making a multimillion-dollar, career-threatening mistake.

That's because software providers routinely exaggerate their assessments, leading CIOs to believe that the entire company has been assessed at a certain level when only a small slice of the company was examined. And once providers have been assessed at a certain level, there is no requirement that they test themselves ever again—even if they change dramatically or grow much bigger than they were when they were first assessed. They can continue to claim their CMM level forever.

Worse, some simply lie and say they have a CMM assessment when they don't. And appraisers say they occasionally hear about colleagues who have had their licenses revoked because of poor performance or outright cheating in making assessments.

Yet CIOs who want to check up on CMM rating claims are out of luck. There is no organization that verifies such claims. Furthermore, the Software Engineering Institute (SEI), which developed CMM and is principally funded by the DoD, will not release any information about companies that have been assessed, even though appraisers are required to file records of their final assessments with the institute.

As American and European companies stampede offshore to find companies to do their development work, they first need to understand what CMM ratings really mean. Yet few CIOs bother to ask crucial questions, say IT industry analysts and the service providers themselves. "Not even 10 percent of customers ask for the proof of our CMM," says V. Srinivisan, managing director and CEO of ICICI Infotech, an Indian software services provider that claims a Level 5 certification. "They inevitably take it for granted, and they don't ask for the details."

CIOs who don't ask for the details will not be able to distinguish between companies that are using CMM in the spirit it was intended—as a powerful, complex model for continuous internal improvement—and those that are simply going through the motions to qualify for business. Buying by the CMM number alone could mire CIOs in the same problems that caused them to look offshore in the first place: high costs, poor quality and shattered project timetables—not to mention the loss of thousands of U.S. IT jobs.

"When you talk about something simple like a number and lots of money is involved, someone's going to cheat," says Watts Humphrey, the man who led the development of CMM and is currently a fellow at the SEI. "If CIOs don't know enough to ask the right questions, they will get hornswoggled." (For a list of the best questions to ask, see "Twelve Critical Questions," right.)

Where CMM Comes From

The CMM was a direct response to the Air Force's frustration with its software buying process in the 1980s. The Air Force and other DoD divisions had begun farming out increasing amounts of development work and had trouble figuring out which companies to pick. Carnegie Mellon University in Pittsburgh won a bid to create an organization, the SEI, to improve the vendor vetting process. It hired Humphrey, IBM's former software development chief, to participate in this effort in 1986.

Humphrey decided immediately that the Air Force was chasing the wrong problem. "We were focused on identifying competent people, but we saw that all the projects [the Air Force] had were in trouble—it didn't matter who they had doing the work," he recalls. "So we said let's focus on improving the work rather than just the proposals."

The first version of CMM in 1987 was a questionnaire designed to identify good software practices within the companies doing the bidding. But the questionnaire format meant that companies didn't have to be good at anything besides filling out forms. "It was easy to cram for the test," says Jesse Martak, former head of a development group for the defense contracting arm of Westinghouse, which is now owned by Northrop Grumman. "We knew how to work the system."

So the SEI refined it in 1991 to become a detailed model of software development best practices and added a group of lead appraisers, trained and authorized by the SEI, to go in and verify that companies were actually doing what they said they were doing. The lead appraisers head up a team of people from inside the company being assessed (usually three to seven, depending on the size of the company). Together, they look for proof that the company is implementing the policies and procedures of CMM across a "representative" subset (usually 10 percent to 30 percent) of the company's software projects. The team also conducts a series of confidential interviews with project managers and developers—usually during the course of one to three weeks and, again, depending on the size of the organization—to verify what's really happening. It's a tough assignment for the internal people on the team because they are being asked to tattletale on their colleagues.

"It can be very stressful for the [internal] assessment team," says a lead appraiser who asked to remain anonymous. "They have conflicting objectives. They need to be objective, but the organization wants to be assessed at a certain level."

David Constant, a lead appraiser and partner with Process Inc., a software projects consultancy, recalls assessing a company where all the developers had been coached by management on what to say. "I had to stop the interviews and demand to see people on an ad hoc basis, telling the company who I wanted to speak to just before each interview began," Constant recalls. "And the sad part was that they didn't need to coach anybody. They would have easily gotten the level they were looking for anyway—they were very good."

The new model is much tougher to exploit than the original questionnaire. In 1991, Westinghouse's Martak recalls telling his management: "This is a different ball game now. If you have a good lead appraiser, you can't fake it out." Martak led his group to a Level 4 assessment and eventually became a lead appraiser himself.

The depth and wisdom of the CMM itself is unquestioned by experts on software development. If companies truly adopt it and move up the ladder of levels, they will get better at serving their customers over time, according to anecdotal evidence. But a high CMM level is not a guarantee of quality or performance—only process. It means that the company has created processes for monitoring and managing software development that companies lower on the CMM scale do not have. But it does not necessarily