DQ1 ? Why do companies outsource? What do they hope to achieve? What pitfalls must they avoid?

DQ2 ? What does the literature indicate about the relative complexities and advantages of outsourcing manufacturing functions vs. service functions (such as IT or HR)?

112 International Journal of E-Business Research, 3(4), 112-132, October-December 2007 Macro-Economic and Social Impacts of Offshore Outsourcing of Information Technology: Practitioner and Academic Perspectives Karl Knapp, University of Indianapolis, USA Sushil Sharma, Ball State University, USA Kevin King, Clarian Health, USA Abstract Offshore IT outsourcing has been gaining acceptance among corporations as a mainstream alternative to in-house operations. Various studies conducted over the last 10 years have shown that outsourcing allows firms to reduce high overhead costs and improve productivity, contribute flexibility, and thus improve overall performance of the firm. However, offshore IT outsourcing brings new challenges and risks. The skeptics believe that outsourcing may weaken the local business competitiveness of the region, investors' confidence in investing in local businesses, and may create a spiral effect on economic indicators such as unemployment, enrollment in schools, living styles, housing, and construction, etc. Little deliberate research has been conducted to date. This study investigates the macro- and socio-economic consequences of offshore IT outsourcing in the United States using a system dynamics model. The research finds significant effects perceived and experienced by IS professionals. The research also finds significant differences in the perceptions of practitioners and the academy, especially students whose inflated expectations may cause disappointment with the reality of the current IS professions. Keywords: IT outsourcing, offshore, macro-economic INTRODUCTION Offshore information technology (IT) outsourcing has grown rapidly in recent years. Outsourcing now spans across IT, operations and call center functions. Offshore IT outsourcing has become a major trend as it harnesses the power of information technology from distant locations to bring economies of scale and cost competitive operations. The term offshore IT outsourcing has variously been defined in the information systems (IS) literature. We define offshore IT outsourcing as: \"...the contracting of various information systems' sub-functions by user firms to outside information systems vendors\" (Chaudhury, Nam, & Rao, 1995, p. 132) or \"...the organizational decision to turn over part or all of an organization's IS functions to external service provider(s) in order for an organization to be able to achieve its goals\" (Cheon, Grover, & Teng, 1993, p. 209). Copyright 2007, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. International Journal of E-Business Research, 3(4), 112-132, October-December 2007 113 In today's high-tech world, the terms \"onsite,\" \"offsite,\" and \"offshore\" only refer to the physical locations. Outsourcing has enabled firms to reduce cost, improve cycle time, and speed time-to-market (Carmel & Agarwal, 2003; D'Costa, 2002; De Looff, 1995; Gurbaxani, 1996; Quinn, 1999, 2000; Quinn & Hilmer, 1994; Sheperd, 1999). Offshore IT outsourcing is becoming mainstream for a variety of business processes in retail, banking, financial services, insurance, and telecom industries. The larger Fortune 1000 firms are aggressively moving forward by offshoring to service providers in India, Singapore, Hong Kong, China, the Philippines, Vietnam, Thailand, Hungary, South Africa, Malaysia, and Russia. A study by Logica CMG predicts that \"the outsourcing of IT and other business processes is likely to move from a 2005 average of 12% of organizational costs to 20 % by 2008\" (Logica CMG, 2005). According to Forrester Research Inc., 3.3 million white-collar jobs will go overseas by 2015 (Computerweekely. com, 2003; McKinsey Global Institute Report, 2003; Susan, 2003; Tekrati, 2004). International Data Corporation (IDC) also reports that offshore outsourcing is the dominant trend in the IT services industry, with 42% of the application management contracts now having some offshore component (Benko, 1992, 1993; Computerweekely.com, 2003; Muthuswamy & Crow, 2003; Tekrati, 2004). Making outsourcing decisions also means confronting the social stigma that comes with sending jobs out of the US Employment in the technical sector has fluctuated and Congress is facing a voting populace more worried about themselves than other countries (The Wall Street Journal, 2004). The current debate regarding immigration has fueled the debate regarding foreign workers and foreign sourcing. Along with the potential social stigma, offshore IT outsourcing brings new challenges, risks, and uncertainties (Barthelemy, 2001; Barthelemy & Geyer, 2001; Dibbern, Heinzl, Hirschheim, Heinzl, & Dibbern, 2002). The risk areas include the legal and regulatory environment of the outsourcing country, the geopolitical, economic, and physical stability of the offshore country, regional turmoil, poor infrastructure, intellectual property, and data security issues, loss of control over physical protection of data and quality monitoring, and cultural and human resources issues and lack of exposure to Western business culture (Quinn, 1999, 2000, Quinn et al., 1994). The purpose of this study is to investigate the macro-economic and social impacts of IT outsourcing using a system dynamics model. The study identifies and examines significant relationships among the macro- and socioeconomic variables relating to offshore IT outsourcing. The research also documents varying perceptions of practitioners from the perceptions of those in academia. The socio-economic effects and potential disconnect with the reality of the IS professional market may have long-term impact on the IS educational field. A great deal of this debate is covered recently in practitioners' professional and trade journals, yet little deliberate research has been conducted to date. Most of the research in offshore IT outsourcing has been largely focused on justifying how offshore IT outsourcing will help both outsourcer and its partners in a win-win situation. There has been no serious attempt to study potential socio-economic loss from outsourcing. Our intention in this article is to concentrate solely on research that directly addresses offshore IT outsourcing. The article is structured as follows: Section 2 describes the literature review. Section 3 discusses the research methodology research framework adopted for creation of hypothesis. Section 4 analyzes the results of the data and summarizes the findings. Lastly, the discussion section offers reflective thoughts regarding the possible implications of our findings on research and practice. LITERATURE REVIEW Information systems play a key roll in the US economy. During the 1990s, firms increased their investment in information systems seeking strategic advantage. Some of this increase is attributable the firms' strategic reactions to Copyright 2007, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. 114 International Journal of E-Business Research, 3(4), 112-132, October-December 2007 the rise of the Internet. In the late 1990s, firms felt increasing pressure to hold down costs in order to increase profits. As information systems budgets grew, they became targets for cost reduction. These pressures for cost reduction have not abated and continue today. Outsourcing Business Functions Outsourcing information systems function is a continuing trend. International Data Corporation (IDC) estimated that the worldwide IT outsourcing services market will grow 7.7% a year, to reach nearly $1 trillion in sales in 2007 (Gilbert, 2003). Encouraged by the projections of phenomenal cost savings, many Fortune 500 firms are jumping on to the \"outsourcing bandwagon\" (Lacity & Hirschheim 1993a, 1993b; Jones, 1997). A survey of US CEOs shows that 42% of communication firms, 40% of computer manufacturers, and 37% of semiconductor companies rely on outsourcing from foreign firms. These same CEOs expect the figures on outsourcing to exceed 50% before the mid-1990s (Malhotra, 1995). Yet, despite its growth, outsourcing is frequently perceived to be poorly controlled, high in cost, and a drain on quality and service performance (Barthelemy, 2001; Barthelemy et al., 2001; Jacobson & LaLonde, 1993,). Cost savings has often been cited as the main driver for the IS outsourcing decision (Ang & Slaughter, 1998a; Ang & Straub, 1998b; Due, 1992; Loh & Venkatraman, 1992a, 1992b). The transaction cost of these arrangements has also fallen (Ang et al., 1998a; Ang et al., 1998b). Firms may also outsource to an external supplier so that they can better focus on their core business or gain access to scarce skills (Aubert, Rivard, & Patry, 1996; Grover et al., 1993; Huber, 1993; Lacity et al., 1993a, 1993b; Lacity & Willcocks, 1998; Palvia, 1995; Quinn 1990). Companies also consider outsourcing when the internal IS function is perceived to be inefficient, ineffective or technically incompetent (Lacity et al., 1993a, 1993b). Some critics (Due 1992; Lacity et al., 1993a) argue that IS outsourcing can result in loss of control over information systems and technology assets, the loss of IS expertise, and a decline in the morale and performance of the remaining employees (Richey, 1992). They also suggest that the anticipated cost savings might also be achieved internally (Benko, 1992; Carlyle, 1990; Davis, 1992; Due, 1992; Lacity et al., 1993a; Sharp, 1993). Most controversy regarding IS outsourcing remains around the issue of balance between strategic implications and financial returns (DiRomualdo & Gurbaxani, 1998). IS Outsourcing Decision Processes A review of the literature on information systems outsourcing yields some disconcerting observations on the IS outsourcing decision process. De Looff (1995) found that formal methods were often not used in the outsourcing decision; a one-sided emphasis on cost was the driver; the decisions were made at high levels, with very little knowledge of the IS function. Fowler and Jeffs (1998) found similar results in a case study of a UK firm. They found that the decisions were driven from a desire for economic benefit, but insufficient attention was being paid to the full array of the more subtle costs and risks with outsourcing arrangements. They further suggested that outsourcing decisions were sometimes driven by business managers' frustration with information systems professionals. Other studies conducted demonstrate that offshore outsourcing was in the interests of business (Dibbern, Goles, Hirschheim, & Jayatilaka, 2004). Their argument is that when jobs move offshore from the US, they not only allow US firms to procure cheaper labor abroad, but they also free up talent within the US that can be re-skilled and used elsewhere. Freenstra and Hanson (1996) found that outsourcing production jobs has contributed substantially to the increase in the relative demand for nonproduction labor for the period of 1970 to 1990. Outsourcing also accounts for more than 30% of the increase in the non-production wage share that occurred in the 1980s (Freenstra & Hanson, 1995). However, a recent report generated much Copyright 2007, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. International Journal of E-Business Research, 3(4), 112-132, October-December 2007 115 media attention when Gartner Inc. predicted that 1 out of 20 US corporate IT jobs and 1 out of 10 jobs in IT vendors and technology service firms will be moved offshore (Hoffman, 2003). Displaced IT workers and organized labor are lobbying to prevent government agencies from outsourcing their IT services offshore, either directly or indirectly (Glasner, 2003; Thibodeau, 2003). But has protectionism helped the US economy in the past? After a thorough review on protectionism and the US textile industry, Finger, Harrison, and Krueger (1996) concluded that the protection granted to the textile industry, while substantial, was not enough to prevent significant increases in import competition. With the increased import penetration, the textile industry was more successful in downsizing its labor force than achieving substantial increases in productivity. RESEARCH METHODOLOGY Both practitioner and academic populations were surveyed to measure perceptions of socio-economic consequences of offshore IT outsourcing. The sample includes members with responsibilities throughout the entire spectrum of information systems tasks and is representative of trends in the mid-western information systems labor market. Seventy-six former members of an information systems department dislocated due to a merger 2 years prior to the study comprised the largest information systems sample. This group contains 56 information systems professionals and 13 managers. This group provides insight into both the perceptions of information systems professionals on offshore outsourcing, as well as information on the IS job market. Their dislocation was in no way related to outsourcing, although most are aware of this trend. In order to provide a balanced and statistically valid sample of information systems managers, the 30 member central Indiana chapter of the Society for Information Management (SIM) is also included in the analysis (SIM, 2004). Two groups from the Miller School of Business at Ball State University represent the academic perspective in the study. These groups include the 110 members of the business school faculty, who are informed about the topic of offshore outsourcing, but from different academic disciplines. The second group from the Miller School of Business includes three sections of a required junior-senior level course in operations management taught by one of the authors. These sections include 130 students from a similar representative range of business disciplines; 103 students participated in the survey. The students had engaged in a variety of discussions over the course of the semester regarding the evaluation of make-buy (outsourcing) decisions, cross-cultural challenges and opportunities of international business, and the micro- and macro-economic theories and consequences of outsourcing. Apparatus The survey instrument was designed to specifically test the hypotheses under study. The instrument was pilot-tested and refined with the same four groups (IS professionals, IS managers, educators and students) drawn from similar but different firms and institutions. The pilot-test groups are representative of the sample population. For information systems professionals and managers, the instrument is also designed to gather information regarding recent personal employment and personal financial experience. Procedure The survey instrument was developed in both paper and electronic forms. The electronic form is the preferred method so as to reduce cost and potential transcription error of the survey. The electronic form of the survey was utilized to reach the information systems and educator populations. Their participation was solicited through electronic mail announcements of the study that included a link to the survey web site. Two subsequent reminder notices were sent during the course of a three-week period in order to increase the response rate. The electronic form of the survey was anonymous and set up without specific login parameters. Participants were offered the opportunity to receive copies Copyright 2007, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. 116 International Journal of E-Business Research, 3(4), 112-132, October-December 2007 of the final study by entering their email address along with their survey answers. For those that chose to enter this information, their perception of the anonymity of the study may have been somewhat compromised, depending on the ease of identification of the email address. Links to the web-address of the survey were limited to those contained in the solicitation email messages and no search engines or other web sites provided access to the survey. This process was utilized to limit the participants of the survey to those specifically solicited. The student sample was measured using a paper-based version of the same online survey instrument. In order to ensure that the paper and online instruments were identical, the web-site software utilized in the online survey was used to print the paper version of the instrument. impetus to try to infer dynamic behavior from representations of structure. That impetus has apparently led to a set of definitions of the polarities of causal-loops, which are phrased in terms of behavior over time (Coyle, 1998; Goodman, 1974). Theoretical Framework Unemployment Effects We model the offshoring phenomenon using the system dynamics methodology. The system dynamics approach maps the dynamic relationships between variables to understand the possible consequences of those relationships. This allows exploration of the effects of different levels of intervention, or enables theories to be developed about them. Causal loop diagrams are used for this study consisting of arrows connecting variables in a way that shows how one variable affects another - a theorized causeand-effect relationship. The offshoring phenomenon is behavior generated by a socio-economic system consisting of different components. Therefore system dynamics approach is especially well suited to capture this behavior containing positive and negative feedback loops (Richardson, 1996). Based on the literature review, the following figure (Figure 1) shows a possible set of causal relationships. A plus (+) sign implies that a change in the variable will cause a change in the variable in the same direction. Similarly, a minus (-) sign implies that a change in the variable will cause a change in the variable in the opposite direction. Because system dynamics involves the study of the relationships between feedback structure and dynamic behavior, there is a great Hypotheses The information systems literature does not include studies of the effect of outsourcing on the employees and the community where they work. While this gap is fairly clear, the development of hypotheses can be guided by the literature on the predicted and actual effects of free trade, the movement of labor between markets, and on the effects on the workers and economy when events occur that cause a displacement of workers. In the case of two trading nations with factor differences in labor-abundance (e.g., India) and capital-abundance (e.g., the United States), economic theory predicts that this imbalance leads to a decline in the natural rate of unemployment in the labor-abundant nation (India), but a rise in the natural rate of unemployment in the capital-abundant nation (the United States) (Hoon, 1991). Further economic modeling somewhat softens this prediction if increased productmarket competition offsets the adverse effects of unemployment (Hoon, 2001). Studies of a similar market condition prior to the enactment of NAFTA were conducted where the majority of economic models indicated that free trade and the movement of labor and goods would result in modest positive effects for the US and significant positive effects for Mexico (Almon, 1992; Bachrach & Mizrahi, 1991; Hufbauer & Schott, 1992; Roland-Holst & Reinert, 1992). The popular press is frequently critical of the effect of NAFTA on US unemployment. Academic studies are not conclusive in establishing a correlation between NAFTA and the higher levels of US unemployment. The rise of the Indian IT outsourcing destination has been almost simultaneous with the rise in unemployment of US information Copyright 2007, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. International Journal of E-Business Research, 3(4), 112-132, October-December 2007 117 Figure 1. Systems dynamics model of information systems offshore outsourcing Competitve -ness Security & Privacy Concerns - Community Investment Time with Family + - - Business Investment - - - Business Climate - - - Consumer Spending - - - + Brain Drain - Income Distribution + White\tCollar Unemployment - - Social Impacts - - - - - IS Outsourcing Macro Economic Impact - Retirement Age + + + + + Unionization + + - Consumer Confidence + Lower Wage Jobs Tax Revenue + + - - + + Tax Changes for Wealth Distribution Savings & Retirement - + Protectionism - Standard of Living Value of Currency Welfare Benefits + + - IS Program Enrollment systems workers. The economic theory of labor / capital inequality between India and the US predicts a rise in the unemployment rate for US information technology workers as the movement of labor is facilitated by enabling communication technologies. + Availability of Labor Hypothesis 1: US information systems outsourcing is a positively correlated with unemployment of US information systems workers. + NonTraditional Enrollment An increase in unemployment has the effect of increasing the availability of skilled labor. With an oversupply of skilled labor, laborers must seek employment in other areas, frequently in lower classes of employment. Workers that are displaced often experience a decline in occupational status, or \"occupational skidding,\" which includes decline in job status, pay, or lower work satisfaction upon reemployment (Bluestone & Harrison, 1982). Displaced workers experience earnings declines from 9 to 15% as compared with continuously employed Copyright 2007, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. 118 International Journal of E-Business Research, 3(4), 112-132, October-December 2007 workers (Farber, 1993; Moore, 1990; Stevens, 1997). Declines are most significant for high tenure workers (with six or more years tenure) (Jacobson et al., 1993). Displaced workers frequently endure significant drops in earnings and benefits, experienced decreased work satisfaction, and unstable employment patterns (Aronson & KcKersie, 1980; Dorsey & Eckstein, 1967; Knapp & Harms, 2002). Older displaced workers suffer greater amounts of earnings loss than do younger displaced workers (Koeber and Wright 2001); they experience longer spells of unemployment (Knapp et al., 2002; Love & Torrence, 1989); they may experience not only a loss in earnings but in assets (Chan & Stevens 1999); and are less likely to be hired in jobs that provide fringe benefits (Scott et al., 1995). The theory and effects of increased unemployment lead to several hypotheses and predicted effects for information systems workers displaced by outsourcing: Hypothesis 2: The availability of skilled information systems labor is positively correlated with information systems workers taking jobs in other employment areas at lesser wage rates, with a greater predicted effect for long tenured employees. Thus, tenure of displaced workers is positively related to new employment wage rates. Hypothesis 3: Change in wages (decrease) is positively correlated with worker standard of living. Hypothesis 4: Change in wages (decrease) is positively correlated with worker savings (as savings are drawn down to support a prior standard of living). Hypothesis 5: Decrease in wages are positively correlated with decrease in the level of retirements funds. Hypothesis 6: The availability of skilled information systems labor has a positive correlation with demand for non-information systems training programs. The employment and wage attractiveness of a particular industry has an effect on the number of students interested in that area of study. If students see potential employment and wage growth opportunity, they will be drawn to that field. On the other hand, if students see an increase in unemployment and reduction in wages in a particular field, they may be less likely to study and subsequently seek employment in that field. This effect may lag because students who are already enrolled in programs either may not wish to change, or may not be aware of the changes in the labor market. Hypothesis 7: The availability of skilled information systems labor is negatively correlated with demand for information systems training programs. Income Distribution Effects Globalization and the increase in free trade reduce poverty. But as competitive systems produce winners and losers, they do not necessarily reduce the inequality that is increasingly visible in a globalized world (Pitts, 2002). The inequality of wealth and income is increasing in the US despite the fact that nationwide the level of education, which has traditionally been associated with higher income, has risen. In an economy which is energized by high levels of technology, a reduction in disparities of income is not easy to obtain (Stewart, 2002). Outsourcing of information systems is a part in this drive toward globalization. Hypothesis 8: US information systems outsourcing is positively correlated with a wider distribution of wealth in the US and in India. The widening distribution of income may, in turn, have significant effects in the attitudes of workers in the markets with this widening distribution. A world in which the assets of the 200 richest people are greater than the combined income of the more than 2 billion people at the other end of the economic ladder should give everyone pause. In global terms, this mix of rising inequality, slow growth, and falling or stagnant wages increases excess capacity across Copyright 2007, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. International Journal of E-Business Research, 3(4), 112-132, October-December 2007 119 the globe. As big business has gone global, the labor movement has become more internationalist. Globalization is most destructive in countries where independent unions do not exist and organizing is suppressed (Mazur, 2000). Some displaced workers adopt more critical attitudes toward big business and government and strengthen support for organized labor (Knapp et al., 2002). The workers' attitudes toward their employers and toward government as a result of globalization and job displacement may provide motivation for employees to seek structural changes in the economy including an increase in protectionist sentiment (Atkinson, 1997). Hypothesis 9: A wider distribution of wealth is positively correlated with attitudes toward unionization. Hypothesis 10: A wider distribution of wealth is positively correlated with attitudes toward protectionism. Hypothesis 11: A wider distribution of wealth is positively correlated with attitudes toward tax law changes that result in a narrower distribution of wealth. Social Effects As workers' income levels, status, education, and attitudes about business and the role of government change, clearly several significant social effects may arise from these changes (Earl, 1996). As workers attempt to maintain their standard of living on lower wage rates in lesser status jobs, they may be forced to work longer hours to earn the same total wages. This may have the unfortunate direct effect of workers spending less time with their families. Offshore outsourcing also raises concerns about extended retirement age, deleterious effects on US intellectual capital, and the security of information stored at offshore firms. Hypothesis 12: US information systems outsourcing is negatively correlated with time spent with family. Hypothesis 13: US information systems outsourcing is positively correlated with retirement age. Hypothesis 14: US information systems outsourcing is positively correlated with the brain drain on US intellectual capital. Hypothesis 15: US information systems outsourcing is negatively correlated with the security and privacy of domestic firms' information systems. Business Climate Effects The local/regional economy may face several deterioration effects as a result of outsourcing of information systems. Information systems jobs have historically been attractive because of higher average wage rates and the positive economic effect of these higher paying jobs. Offshore outsourcing of these kinds of jobs creates negative economic effects for the local and regional economies affected. The preceding discussion leads to the following hypotheses that US information systems outsourcing has a negative correlation with (1) the competitiveness of the local economy and region (H16); (2) the investment in infrastructure and development of the local community (H17); (3) the business investment in the community (H18); (4) consumer spending (H19); (5) tax revenue of the local, state, and US government (H20); (6) consumer confidence (H21); (7) increasing welfare benefits paid (H22); (8) and value of the US currency (H23). Spiral Effects Some firms will be unable to take advantage of the lower price of local labor in the information systems area due to internal equity issues with current employees. If a firm has several incumbents in a particular area in information systems, the firm is limited in the amount it can offer to new employees. Internal equity issues must be addressed in employee compensation. The lure of the available skilled labor at lower wage rates can cause firms to make drastic changes in order to reap the benefits. Because of internal equity issues, some firms may seek Copyright 2007, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. 120 International Journal of E-Business Research, 3(4), 112-132, October-December 2007 to outsource an entire functional area in IS in order to reap these benefits. The lowered wages rates caused by structural changes in the information systems area can cause a spiral effect on outsourcing. Outsourcing increases supply of available skilled labor and lowers labor cost. Internal equity issues cause firms to outsource in order to take advantage of the lower wage rates (Garaventa & Tellefsen, 2001). This in turn can lead to additional outsourcing until equilibrium is reached with the offshore market in terms of total cost of the internal versus external costs. Researchers conclude that, contrary to domestic apprehensions, outsourcing is not a zero-sum game and it has benefited the US overall. Game theory says that a zero sum game is a condition where one's gain is another's loss (Elitzur & Wensley, 1997). A 2003 study conducted by the McKinsey Global Institute (MGI) revealed that offshoring creates wealth for the United States as well as for outsourcing partners. (\"Offshoring: Is It a Win-Win Game?\" McKinsey Global Institute, August 2003.) The MGI study asserts that every $1.00 offshored yields $1.14 in benefits for the US economy, a net gain of $0.14. However, the same calculation that yields $0.14 in benefits for the US economy shows a $0.26 loss for US workers resulting from every $1.00 offshored. RESULTS The hypothesized increase in IS unemployment (H1) yields homogeneous perception between the four groups, widely varying perceptions among the four groups, and is not supported by actual IS unemployment statistics. An analysis of variance on H1 indicates the perception of the four population groups (IS professionals, IS managers, college educators and students) is statistically homogeneous (F=1.40, df=3, p=0.25). Hypothesized IS unemployment has the widest variation in perception within respondents with 49% overall believing that IS unemployment would rise. H1 is not supported by actual unemployment statistics from the US Department of Labor showing the opposite of the hypothesized trend: a decrease in the unemployment rate of computer and mathematical occupations from 6.0% to 5.1% for the period April 2003 to April 2004 (Labor, 2004). IS unemployment is related to the availability of IS labor. The hypothesized increase in availability of IS labor yields homogeneous perception between the four groups and is supported by actual IS employment statistics within the largest IS job category (programmers). An analysis of variance indicates the perception of the four groups is statistically homogeneous (F=0.86, df=3, p=0.46). The perception of the survey respondents shows that 55% believe that the supply of IS labor would increase. The hypothesis and perception of an increase in available IS labor is not supported by the actual overall IS employment statistics from the US Department of Labor. The three-year employment level for computer occupations has increased by a modest 1.2% for the period from April 2001 to April 2003 (Labor, 1999, 2000, 2001, 2002, 2003). However, when looking at programmers (the largest IS job category), the hypothesis is supported by a decline in employment (and subsequent increase in available programmers) of 13.9% for the three-year period from April 2001 to April 2003 Labor, 1999, 2000, 2001, 2002, 2003). The hypothesized decrease in IS wage rates (H2) yields statistically significant differences in perception between the four groups and is supported by actual IS wage statistics. An analysis of variance on H2 indicates the perception of the four population groups is statistically different (F=26.23, df=3, p=4.13E-14). A posthoc Scheffe test reveals that the perception of students on the effect IS wages is different than the perceptions of the other three groups. Students generally believed that IS wages had risen (45%) while the other groups perceived that IS wages had fallen (educators 54%, IS professionals 68%, and IS managers 84%). H2 is supported by actual wage statistics from the US Department of Labor. Overall wage statistics show that the mean hourly wage rate for computer and mathematical occupations has decreased 1.3% for the period April 2001 Copyright 2007, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. International Journal of E-Business Research, 3(4), 112-132, October-December 2007 121 to April 2003 (Labor, 1999, 2000, 2001, 2002, 2003). This decline in actual wages is also reported by the IS professionals and managers in the study. Nearly half (49%) of the participants report a decline in wages where only 29% report an increase (see Table 3 for more detail). The same pattern of students having different and more positive perceptions than the other groups (educators, IS professionals and IS managers) continues for the individual and local economic hypotheses and also for interest in non-IS and IS training (see Tables 1 and 2). Students' perceptions are mixed regarding IS workers standard of living (H3). The other groups' perceptions are in alignment with H3 that IS workers standard of living has fallen (educators 68%, IS professionals 73%, and IS managers 78%). H3 is supported by actual standard of living changes reported by the IS study participants. 41% of IS professionals and managers report that their standard of living has decreased over the past three years where only 14% report that it has increased (45% unchanged; see Table 3 for more detail). Students perceptions are mixed regarding IS workers savings accounts (H4). The perceptions of the other groups were more negative Table 1. Analysis of variance for perceptions between groups Source df F 2 p IS Unemployment (H1) 3 1.40 2.27 0.25 IS Wages (H2) 3 26.23* 30.54 4.13E-14 IS Standard of Living (H3) 3 23.17* 27.97 1.02E-12 IS Savings Account Balances (H4) 3 18.06* 23.36 2.73E-10 IS Retirement Account Balances (H5) 3 18.55* 24.03 1.67E-10 Demand of Non-IS Training (H6) 3 5.33* 8.11 1.54E-3 Demand for IS Training (H7) 3 16.15* 21.30 2.47E-9 Distribution of Wealth (H8) 3 0.94 1.55 0.43 Attitudes Toward Unionization (H9) 3 9.60* 13.79 6.52E-6 Attitudes Toward Protectionism (H10) 3 10.90* 15.44 1.31E-6 Attitudes Toward Tax Law Change (H11) 3 3.74* 5.89 0.01 Time Spent with Family (H12) 3 6.05* 9.30 6.06E-4 IS Retirement Age (H13) 3 1.89 3.14 0.13 Brain Drain (H14) 3 30.51* 33.71 5.38E-16 Security & Privacy Concerns (H15) 3 14.82* 19.80 1.16E-8 Competitiveness of Local Economy (H16) 3 10.16* 14.55 3.28E-6 Development of Local Economy (H17) 3 12.44* 17.25 1.99E-7 Business Investment in Local Economy (H18) 3 10.83* 15.37 1.42E-6 Consumer Spending (H19) 3 10.86* 15.18 1.35E-6 Tax Revenue (H20) 3 10.21* 14.82 3.13E-6 Consumer Confidence (H21) 3 3.97* 6.10 0.01 Welfare Benefits (H22) 3 1.57 2.62 0.20 Value of US Currency (H23) 3 3.34* 5.22 0.02 Note. *p<.05 copyright igi global. copying or distributing in print electronic forms without written permission of global is prohibited. international journal e-business research october-december table post-hoc scheffe test for perceptions between groups source df sxe wages standard living savings account balances retirement demand non-is training attitudes toward unionization protectionism tax law change time spent with family unemployment sxp sxm exp exm pxm anova not significant conducted distribution wealth age brain drain security privacy concerns competitiveness local economy development business investment consumer spending revenue confidence welfare benefits value us currency note: s="Students," e="Educators," p="IS" professionals m="IS" managers and alignment h4 believing that accounts have fallen supported by actual changes reported the study participants. forty-six percent report their decreased over past three years more detail experiences regarding were nearly identical to those student perception positive interest both programs reporting increased respectively. educators perceive than this same holds but pronounced. eight-seven only experience sd d i si my has planned note. declined about programs. h6 personal participants seventy-three nonis increased. h7 also lack last set hypotheses where students held significantly different impact offshore outsourcing other macroeconomic effects. again are groups. percentage infrastructure contrasted who pessimistic economic as a result outsourcing. moderately negative managers. most group perceived declines these areas. relating individual social impacts income statistically differed from academia tables specific on issues all four widened supporting view. support hypothesis professionals. seventy-four believe there should be union protections against opposed surprisingly greater work. within similarly protectionist measures strongly professional compared supportive. trade protections. disagree neutral agree widening unions protect workers regulations enacted laws distribute widely wider two generally issue changes. wealth. spend family. seventy-one they will less result. overall report. did ago. statistics supportive similar results plans fifty-four had intellectual resources views practice. sixty capital firms stark contrast decreased. practitioners do it. data once much negative. seventy concerns. seventytwo overwhelming concern area. macro-economic regards revenues mixed h20 differ currency. sixty-one dollar perceiving shared percentages h21 h23. moderate mixed. amounts paid out h22 supported. discussion since according bureau labor people it professions united states lost jobs. some caught dot-com bust others laid off cost cuts shrinking budgets poor desire satisfy shareholders quarter quarter. now growing number having jobs displaced work moves providers. advantages convincing challenges equally intimidating. reveals differences study: consistently factors such wage rates factors. exist face declining variables. suggest disconnect expectations reality anticipated future profession states. practitioners. while agreement regard micro-economic prescriptive measures. not. difference exists capital. although decrease own may yet been experienced. department at least short-term field. noted april note accounts. an increase age. agreed several is. would rise theorized ages rise. difficult generalize relatively small sample population indeed given complexity systems effects partly attributable information systems. nevertheless hold very view share practice raises issues. important apparent issuesespecially students. disappointed graduate unrealistic availability expect command. can cause large amount dissatisfaction recent graduates. long-term if ultimately yield field we educational careers employment decline. gives additional areas inquiry. further larger provide replication increases ability findings. governmental policy-making positions valuable insight. raised area study. limitations correlations revealed generalizability constrained organizations restricted size. exploratory analysis serve heuristic guideline research. conclusion system dynamics modeling help explain socio-economic components obtain holistic questions evaluation needs particularly light findings relationship socioeconomic results. directed broadly identify appropriate levels management structures. investigating make informed decisions enrich organizational theory. show individuals economies real being experienced financial situations. technical professions. understood academy largely unknown salary job prospects fields create pressures continue enrollment likely enrollment. certainly warranted broaden replicate hoped framework initial carry 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