If you’re looking for dry reading, you couldn’t do much better than a state information technology proposal. Voluminous and full of trade jargon, such works rarely attract attention from people who are not paid to read them.

But the IT proposals that came out last month were different.

One of those, prepared by a company called Deloitte, contained a provision that even people who know nothing about computers readily understand: Off-shoring.

Some of the work Deloitte proposed to do for the state would be done by foreign workers overseas.

So far, no award has been granted, but the situation has raised a lot of questions: Is this the first time Montana, or other states, have entertained off-shoring elements of tax-funded IT work? How common is this? And is off-shoring a bad thing if it saves taxpayers money?

A legislative panel is taking up the issue at its meeting today. But at least one expert, an economist at Pittsburgh’s Carnegie Mellon University, says Montanans needn’t have been so surprised; off-shoring IT work is an everyday occurrence. And, he said, it’s good for the economy.

“We were able to draw upon this external resource,” said Lee Branstetter, an associate professor of economics and public policy at Carnegie Mellon University and a research fellow at the National Bureau of Economic Research. Branstetter is conducting a research project looking at the role of IT off-shoring in America’s technology-fueled boom of the 1990s and early 2000s.

“And we did it much cheaper and much faster than the rest of the world.”

Here’s the background

Almost every program the state of Montana operates, from the state lottery to sending out food stamps, runs on a big computer program. These programs are complex and expensive; a cheap one might cost a few million dollars, but it’s not unusual for the state to spend more than $100 million for a particularly complicated system that will run major state programs.

There’s a limited number of companies that do this kind of specialized work. Many, like Deloitte, have large operations in India, said Branstetter, and most are global companies with offices throughout the world.

So it was this May when Montana sent out a call that the state was looking for new software to run its food stamp and cash assistance welfare programs, known by their acronyms as SNAP and TANF respectively.

The state got five proposals in response, but only four were complete enough to be considered for the final scoring. A committee rated all the proposals in late September. Deloitte’s won top billing, although it was more expensive.

That might have been the end of the attention to the proposals.

But this time it came out that Deloitte intended to off-shore some of the work. Northrop Grumman, which came in $6 million lower than Deloitte, intended to do all the work in Montana.

Northrop Grumman put nine people on unpaid leave after Deloitte emerged as the top-scoring company. For some, the story boiled down to this: Nine Montanans lost their jobs as Montana prepared to off-shore some work of a tax-funded project.

Branstetter said the story is not that simple.

For one thing, he said, off-shoring is common place and has probably occurred in other Montana IT contracts. Montana does not require companies to say if work will be done out of the country.

But, Branstetter said, “Most IT consulting firms have off-shore operations.”

And off-shoring work has been very good for the United States.

Off-shoring began in the mid-1990s, he said. Back then, companies were working to get “on line” and the nation’s need for software engineers outstripped America’s ability to graduate them.

At first, some engineers immigrated to America to fill the void. Later, companies learned they could do some IT work in India cheaper.

Instead of putting Americans out of work, Branstetter said, off-shoring some computer programming resulted in a major step forward for American companies and allowed our economy to grow faster than our competitors, “creating millions of jobs,” he said.

Other nations did not off-shore as much and their IT dollar did not stretch as far, he said, which slowed the growth of their economies.

“There’s a sense of envy,” he said, in Japan and European nations at the quick growth of the American economy in the late 1990s through the mid-2000s. That growth was due, in part, to how quickly our companies moved into the IT economy. And we did it cheaper and faster because we could off-shore some of the work.

“We just got more for our investment,” he said.

Off-shoring is limited. When a company — or a state — seeks a computer system to run some, or all, of a complex system, there’s an element to that which must be done on-site. Off-shoring only works for pieces of software engineering that are basically universal and can be done anywhere, he said. The SNAP/TANF contract bears that out: Montana has required that the managers of the project, estimated somewhere between 12 and 15 people, work in Helena.

Branstetter said it’s hard to say that off-shoring has hurt software engineering as a field. In terms of U.S. jobs created and the money earned by software engineers, that broad sector of the economy has outperformed the rest of the U.S. economy based on numbers gathered before the recession fully hit.

But, Branstetter said, he’s not immune to the emotions surrounding off-shoring, especially in what he calls the current “U.S. economic shock.”

It’s hard to say if off-shoring has really cost American jobs, but it’s a popular target when people are feeling the pinch.

If Montanans want to boost job creation, Branstetter said he didn’t think buying a lower-scoring software only because it’s “Made In Montana” is the best solution. Instead, he said, Montana ought to invest in training workers to be ready for the changing job market.

“Investment dollars are always limited,” he said, and that includes tax dollars. So if you’re going to invest in Montana jobs, Branstetter said he thought it made more sense to spend money in ways that would create jobs, not to buy a Montana-made product purchased to keep jobs here.

“We’re talking about a much longer investment,” he said.

Jennifer McKee 447-4069 or jennifer.mckee@lee.net

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