What Does the Trump Administration Mean for Outsourcing QA?
It would be an understatement to say that the Trump administration’s mission is to “shake things up a bit.”
Unless you’ve been living under a rock, it is almost impossible not to have faced the flurry of articles, videos, and other forms of media that chronicle President Trump’s polarizing actions, statements, and tweets as of late. With his issuance of 18 executive orders in just the first 12 days of his tenure, it’s clear that President Trump has been hurriedly working to make good on his campaign promises, effecting change on several controversial issues ranging from healthcare to homeland security.
One of the issues that President Trump has taken by the horns is immigration as it pertains to national security and the economy, creating massive implications for the American tech industry. Which leaves us wondering, what does the Trump administration mean for the QA industry? Let’s take a moment to analyze how Trump’s intended policies may affect the decision of several companies to outsource QA to an offshore provider.
Trump’s Aim to Boost National Security
Tightening our borders is one of Trump’s most ambitious goals. He strongly defends his measures that many deem drastic by reiterating that his aim is to stop criminals from entering the country; whether they hail from Mexico or the Middle East. To ensure that it does not happen, he has been going full steam ahead, getting everything lined up to build a wall on the U.S. border with Mexico. In addition, he signed an executive order imposing a temporary ban on immigration from seven middle eastern countries that had previously been identified as “countries of concern” regarding terrorist activity by the Obama Administration.
These measures have invoked virtually every response from the global population ranging from condemnation and indignation to outright praise. Silicon Valley, for the majority, has vocally expressed its outrage and opposition as several companies had to go into crisis management mode when some of their employees who left the country were told they would not be able to re-enter the US and go back to work. Interestingly, several of the most important US companies like Google were founded by immigrants, so the issue hits close to home for them. Leaders from Uber, Tesla, and Linkedin just to name a few, joined Google in publicly denouncing the executive order, stating it’s “un-American.”
Even within the testing community, the ripple effects of the ban have been felt and our leaders have taken a stance too. One of the conferences that we had planned to attend and present at, Agile Testing Days Boston, was canceled after many speakers pulled out, leading the organizers (who are from Europe) to cancel it. They also expressed their strong sentiment against the current political environment in the US and the conflict it presents with the conference’s high value placed on diversity.
Here is what Michael Bolton had to say about the matter:
Make America Ignorant Again: the Administration’s incompetent policy shenanigans are preventing knowledge exchange in my craft. https://t.co/BWyL7Ai6cA
— Michael Bolton (@michaelbolton) February 13, 2017
With all of the bans and measures to make immigration more rigid, people are left wondering whether it is practical to do business with the US and what other policies the Trump administration will enact that might hinder their doing business here.
Focus on Bringing Industry Back to the USA
On the one hand, we have immigration being a factor in the Trump administration’s mission to increase homeland security, but it is also a hot button when it comes to the strength of American enterprise and is central to an upcoming wave of protectionist policy making.
Here is where it really gets interesting for QA outsourcing companies and their partners.
President Trump ran for election on the promise that he would fortify US manufacturing and recover jobs that had been shipped overseas by penalizing companies who do it and rewarding those that open more factories domestically and ramp up hiring. On the bright side, Trump has not mentioned how he feels about IT outsourcing specifically, as the core industry he normally mentions regarding this is the auto industry.
As financial services attorney, Ross Delston, puts it in a recent American Banker article, “Pursuing outsourced services such as IT may not have the political ‘sex appeal’ of vowing to keep American factories open, which was a big aspect of Trump’s campaign rhetoric.”
Yet, we still have to wait and see, as curbing IT outsourcing would be consistent with Trump’s goal of bringing jobs stateside and it is hard to predict just what he will do next.
Something more pressing regarding the future of QA outsourcing is the issue of work visas.
According to an article by the CIO Review, “The biggest hit to the IT outsourcing industry would come in the form of increased restrictions on temporary work visas, such as the H-1B, which Indian and U.S.-based IT services firms use to bring offshore workers on-site stateside.”
Unfortunately, Trump declared in his campaign that he would make it much harder to obtain H-1B visas as the number per year would be reduced and the minimum salary requirement would increase to $100,000 per year from just $60,000.
So, the future looks uncertain for Indian IT outsourcing companies like Wipro, Infosys, and Tata Consultancy Services who depend on the H-1B (having obtained almost ⅓ of all H-1B visas in 2014) and the fact that their workers are typically a more cost effective solution, as those two realities may change.
Lack of STEM Talent in the US and the Case for Outsourcing
Although President Trump may encourage more American workers to take jobs in tech, the fact of the matter is that there is still an immense shortage of STEM skills in the US job market. By making it harder for tech giants to hire H-1B workers, many positions may go unfilled.
According to the Wall Street Journal, one report suggests that while the U.S. will have nearly 1 million jobs available for computer professionals in 2022, there will be only 500,000 Americans qualified to fill them.
Furthermore, it has been said that Google’s parent company, Alphabet has just as many outsourced workers as full-time employees.
Tech companies will most certainly do everything they can to oppose any tighter restrictions on immigration so they can continue to source the talent they need. One thing that we are sure about at Abstracta is that outsourcing, whether it be onshore, nearshore, or offshore, cannot be subdued by political leaders as the symbiotic relationship is too appealing for both parties.
Peter Drucker, an early pioneer of outsourcing, touted the benefits it provides, pointing out that when companies arise that help others to take care of non-core competencies, they compete in a free market and will be incentivized to maximize efficiency to win and keep customers, improving the bottom line of the customers they serve. It is not only great for the customer but, for example, due to the possibility of outsourcing, a janitor can go from being an employee at a large company with little prospects of upward mobility to becoming an entrepreneur who starts a janitorial services company, opening up infinite possibilities for growth. Here you have a classic win-win situation and you can see why outsourcing is a key component for our economy’s growth.
So, what will be the solution given President Trump’s previously stated intentions that, if carried out, may derail today’s common QA outsourcing practices?
Prediction: Nearshoring to South American IT Companies is the Answer
American companies who are used to offshoring will turn to nearshoring to set up their quality assurance centers. With Indian service providers, the idea is to bring their migrant workers stateside, in order to avoid the stifling time difference between the US and India. But, there is no need to look so far to bring quality talent to your team, and the ease of telecommuting while in similar time zones can’t be ignored.
Latin America is another hub for IT outsourcing that should be recognized as a serious contender in the QA outsourcing market especially now that President Trump is in office. There are several advantages of nearshoring to Latin America:
- Eliminate the visa application process as workers don’t need to leave Latin America in order to communicate in real time.
- Latin American providers’ rates are lower than both the minimum pay for H-1B workers and the rates of US-based providers
- Flights are shorter and often cheaper between the US and South America than between the US and India, so the initial introductory trip at the outset of the partnership is less of a hassle should you decide to have one.
- Since we share the same western culture, companies in the US and Latin America have an easier time learning how one another other operates and can collaborate faster and more effectively from day one.
There you have my thoughts on what the Trump administration means for the QA outsourcing industry. Do you agree, will more companies move their QA nearshore or will they continue to battle it out in the fight to obtain H-1B workers?