By Lewis Loflin
In October 2002, Jennifer Bjorhus of the Mercury News reported on a growing trend: the offshore outsourcing of technology jobs amid a U.S. economic slowdown. This practice, initially pioneered by Silicon Valley firms over a decade prior, was accelerating as companies sought cost reductions by shifting work to countries like India, China, and Ireland. The article highlighted concerns from engineering groups about the loss of white-collar tech jobs, a phenomenon that has since evolved and significantly impacted regions like Southwest Virginia (SWVA). This updated analysis revisits Bjorhus’s findings, integrating data and insights from 2025 to assess the long-term economic consequences.
Bjorhus noted that approximately 200 Fortune 500 companies were outsourcing software work overseas by 2002, with the trend expanding to Fortune 1000 firms. Global revenue from offshore software services was projected to reach $7.68 billion that year, a 20% increase from 2001, with forecasts suggesting a doubling by 2004 according to Forrester Research. Companies such as Oracle, Cisco, Microsoft, and even non-tech giants like Target and Citigroup embraced this strategy, driven by significant cost savings—tech executives reported a 25% reduction on projects. In India, a software engineer earned approximately $5,000 annually compared to $50,000 in the U.S., underscoring the economic incentive.
The article detailed specific cases, including Charles Schwab’s relocation of 150 tech jobs to Bangalore, India, following a 25% companywide layoff, and Franklin Templeton Investments’ shift of 20% of its tech work offshore. Even the state of California had $76.6 million in contracts with firms outsourcing tech services, though the extent of overseas work remained unclear due to a lack of regulatory oversight. This trend extended beyond software to back-office functions, with India’s software association predicting a 60% surge in such services.
The outsourcing surge raised alarms among U.S. engineers. The IEEE-USA reported that the jobless rate for engineers doubled from 2% to 4% in the second quarter of 2002, with even higher increases for computer scientists and electronics engineers. Critics, including Norman Matloff of UC-Davis, argued the job loss was a small fraction of the total, emphasizing the value of in-person collaboration. However, others, like Terry Oldberg of the Programmers Guild, expressed concern over unmaterialized tech jobs and a lack of organized resistance. A major engineering group petitioned Congress to investigate whether H-1B visa imports and offshore outsourcing contributed to high unemployment, signaling a broader threat to the U.S. tech workforce.
Two decades later, the offshore outsourcing trend has had a profound impact on regions like Southwest Virginia, where efforts to attract high-tech jobs through fiber-optic investments have faltered. Since 2002, Bristol Virginia Utilities (BVU) invested over $120 million in its OptiNet project to boost economic growth, supplemented by $45 million in 2010 federal stimulus funds for LENOWISCO areas and $1.5 billion in Virginia’s broadband funding since 2021. Despite an estimated total investment exceeding $300–$400 million, the region has seen a 45% decline in the information sector from 2010-2020, contrasting with a 2% national increase. This misalignment reflects the persistent offshoring of tech jobs, as warned in 2002.
Case studies from SWVA, such as Sykes in Buchanan County and Travelocity in Dickenson County, illustrate how promised tech jobs often shifted overseas or materialized as low-wage call center roles ($12–$15/hour in 2025). Population declines of 3–5% in counties like Buchanan and Russell since 2010, coupled with outmigration of 8,000–10,000 college graduates annually, underscore the region’s economic challenges. The lack of transparency in investment data, a common practice to shield competitive strategies, further complicates accountability.
A LENOWISCO study foresaw the collapse of non-unionized call centers, warning of offshoring risks (e.g., Asia’s $1–$5/hour wages), low-skill reliance (~30% with no high school diploma in 2003), and firms exploiting subsidies, such as the Virginia Coalfield Economic Development Authority’s $5.6 million for Sykes. Non-unionized sites lost approximately 2 million U.S. jobs by 2015, unlike AT&T’s protected workforce. Education gaps—around 50% with no diploma in Dickenson County (2008)—exacerbated vulnerabilities, a prediction borne out by SWVA’s economic stagnation despite significant broadband investment. LENOWISCO Study, sullivan-county.com
| Sector | SWVA (% Decline) | USA (% Change) |
|---|---|---|
| Arts, Ent., & Rec. | -20% | 6% |
| Wholesale | -25% | 3% |
| Construction | -35% | 24% |
| Information | -45% | 2% |
| Mining | -50% | -11% |
Notes: With the exception of mining, SWVA experienced the greatest declines in sectors that grew nationally. The region’s mining sector decline also exceeded the national average. A total of 10,451 jobs were eliminated across these five sectors, with 16,774 jobs lost when including national mining sector declines between 2010-2020. The 45% decline in the information sector occurred despite an estimated $200 million in public investment, likely exceeding $300–$400 million, with significant data withheld from public view.
Ref: Zach Jackson, Virginia Tech
The 2002 offshore outsourcing trend, as documented by Bjorhus, has evolved into a structural challenge for the U.S. tech sector, particularly in regions like SWVA. While initial cost-saving measures benefited corporations, the long-term impact includes a 45% information sector decline in SWVA, despite substantial broadband investments. The LENOWISCO study’s warnings about offshoring and low-skill job reliance have proven prescient, with call centers dominating over high-tech roles. Moving forward, policymakers must address transparency, workforce development, and incentives to retain tech jobs domestically. Originally reported October 21, 2002, and updated April 16, 2025.
Acknowledgment: I’d like to thank Grok, an AI by xAI, for assisting in drafting and refining this article. The final perspective and edits are my own.
