Outsourced Worker: How Do You Stack Up?

Chances are, you work for a company that’s involved in outsourcing in some form. The question you need to answer for yourself is whether that’s such a bad thing.

Alan Phillips was employed by the same Minnesota company for 15 years—12 in a production role and the final three as the newest member of the IT team. In the fall of 2002 he and the rest of the 15-person group learned that GE was acquiring the firm. The grapevine said that GE preferred to outsource its IT support and help desk operations to divisions in India. Since he was two weeks of training and two exams into an MCSE on Windows 2000, Phillips made a case to his employer to pick up the pace by transferring those training dollars into bootcamp tuition. They bought on his proposal and he passed another four exams. After two more weeks of self-study he passed his seventh test and got his certification—just before the buyout was completed.

Shortly thereafter, he and his colleagues were pulled into private meetings with managers and told they had jobs for six more weeks. Now all the calls go to India, and a lone person is on staff physically to perform hands-on support. According to Phillips, the company has churned through three or four people in that role during the last year.

Sound like the typical story of outsourcing? Big company dumps its American workers in favor of Indians willing to work for a quarter of the salary.

The fact is, Phillips says he’s gone onto a new job with more opportunity, albeit in an entry-level administration position. “I can look back and see how [the outsourcing] benefited me,” he concludes. “There’s nothing holding me back.”

What has become a movement to contract out those tasks deemed non-essential to a company’s core business has turned into a corporate mantra that outwardly pits workers against management. While the concept of contracting out particular jobs to experts has been around for centuries, the term “outsourcing” came into use in the late ’80s when companies like Kodak and Enron decided to contract out their IT infrastructures to get the expense off the books. In terms of network administration, the last decade saw the progressive development of computing technology that makes it possible to do much of the work off-site—from running a help desk to deploying OSs to managing servers without ever touching the equipment. What’s different now is that employment opportunities for people in high tech are tougher to come by and salaries have sagged. That sharpens the edge of this particular sword.

In this article, we look at the current face of outsourcing, hear from those who have been directly affected by this seemingly unstoppable movement, and provide some advice on how best to prepare for the prospect of outsourcing in your organization.

Measure of a Mountain
Forrester Research has garnered a lot of attention for a report it issued in November 2002, in which it stated that more than 3.3 million service—white collar—jobs would migrate from the U.S. to other countries by 2015. Of these, about 14 percent, 473,000, represent the “computer” category.

That number may be conservative, say researchers Ashok Deo Bardhan and Cynthia Kroll, with the Fisher Center for Real Estate & Urban Economics at the University of California, Berkeley. According to “The New Wave of Outsourcing,” a paper published in November 2003, the “outer limit” of potential job loss among computer and math professionals in this country could total upwards of 2.8 million, with much of the work going overseas to countries like India, China and Russia.

The report emphasizes that the high number doesn’t take into “account many of the dynamic adjustments that may occur in qualifications, skill requirements and task descriptions.” In other words, they don’t want to sound too alarmist. In an interview with Salon, Bardhan admits, “We have done a kind of forward-looking paper. The chances of being wrong are pretty high in this kind of a situation.”

“We created a global information network that allows work to be done anywhere in the world—and it’s going to be used,” says Michael Corbett, president and CEO of Michael F. Corbett & Associates Ltd., a New York company that does research and training on outsourcing. “It’s going to create changes that we haven’t anticipated.”

Corbett estimates that IT outsourcing is growing by about 20 percent a year—to the tune of $500 billion globally for IT and communications technology work combined. About 70 percent of the outsourcing originates with U.S. companies. About two-thirds of that is done by Fortune 1000 or 2000 companies.

Why do companies look to outsourcing? Reducing costs may be a factor in about a third of IT outsourcing deals, but other business matters come into play as well, according to Corbett. “In other cases, it has to do with going with a more variable cost structure—[allowing companies to] ramp up and down [in staffing]. In other cases, they can’t find the skills they need. In other cases, they’re looking to conserve capital—they don’t want to tie up capital in new IT systems or new software, so they look at acquiring that capability through the outsourcer.”

Reducing costs is at the top of the list for most IT outsourcing deals, agrees Mary Lacity, Associate Professor of Information Systems for the University of Missouri in St. Louis and author of several books, including, Beyond The Information Systems Outsourcing Bandwagon: The Insourcing Response. “Next is the flexibility in [company] decisions and financing, service improvements, and access to talent.”

Time To Join a Union?
Although unions haven’t proven particularly popular among IT professionals, the latest public debates about offshoring of technical work and legislative efforts to steer the future of H-1B and L1 visas have driven people to look into the merits of organizing.

Perhaps the two largest organizations are Communication Workers of America and the International Federation of Professional and Technical Engineers, both affiliated with the AFL-CIO.

The CWA (, 700,000 members strong, grew out of the telephone industry in the early 1900s and expanded from there to be affiliated with broadcast engineers and technicians, law enforcement professionals, university technical and professional workers and The Newspaper Guild. Its motto these days: “The Union for the Information Age.” It works to organize technology workers through

The IFPTE (, begun in 1918, represents 70,000 members working in the U.S. and Canada for companies that include The Boeing Company, General Electric, state of Washington, Turnpike Authority of New Jersey, NASA, Library of Congress and various energy firms in Toronto, Canada.

The Washington Alliance of Technology Workers,, a local affiliate of CWA, was founded in 1998 specifically by a group of Microsoft “permatemp” workers—so-called because they served on long-term contracts with Microsoft for a year or more without receiving job security or benefits. The organization has expanded to encompass all high-tech workers.

Organizer Marcus Courtney says that WashTech has grown from a modest 250 dues-paying members last year to about 425 currently; but he points to explosive growth in the group’s e-mail newsletter over that same period—from 2,000 primarily in Washington state to more than 16,000 nationwide—to show the increasing interest in unionizing among high-tech workers. As a result of that interest, Courtney says, organizing committees are forming in Silicon Valley, Chicago, Boston, New York City and New Jersey.

Courtney believes the growth is coming from what he calls a “growing recognition among white collar computer geeks that they need to have an organization to represent their economic interest in the face of a global economy. The high-tech industry has organizations that represent their interest such as the ITAA, AEA, etc. lobby for increased guest visa programs, allowing more technology jobs to be shipped overseas—issues that high-tech workers don't agree with them on... If CEOs have contracts with their boards, it is time for high-tech employees to have one.”

—Dian Schaffhauser

Outsourcing the Outsourcer
Scott Hampton is a former IT manager who worked for a subsidiary of Garland, Texas-based software reseller Software Spectrum, out of its Liberty Lake campus in eastern Washington. Hampton and his teams provided technical support for Microsoft products—first for Windows 95, then Windows 98, and, in time, the Office suites and games. In the fall of 2001, Microsoft was so impressed by the subsidiary’s services that it gave the firm the job of providing tier-two support, too. In mid-2002 Spectrum Contact Services was sold by Spectrum to H.I.G. Capital, a Miami-based private equity firm, which changed the division’s name to ECE, “exceptional customer experience.”

In the fall of 2003, Hampton says, “They took the domestic support operation offshore... Now it’s in Bangalore.” According to news accounts, 325 people in the Liberty Lake call center were expected to be laid off.

Some of Hampton’s associates have “landed smaller internal help desk positions with healthcare and hospitals in the area. Several of them went back to school,” he says. Others are “still trying to find their way.” For himself, because his wife does “OK,” Hampton has returned to creating art.

He still considers IT a good field in which to work, but “there has to be a recognition to how the field is changing. It’s not the jewel it once was—until we see the next giant innovation.”

Another contractor, MCSD Larry West, was the project leader for a company whose main customer was Delta Airlines. The project in which he was involved was cut after the terrorist attacks of September 11 and the firm laid Larry and a couple of others off. The only full-time position he’s managed to obtain ended two weeks later when the owners heard a pitch “on how they could get it done cheaper over there—so they said they decided to replace me with four Indians.” As he recalls, “[They literally said,] I could probably do the work of three Indians but not four.”

West has had several interviews, but no offers. He spends his time networking with local computer organizations and developing his Web skills, as well as applying for work. “Lately, [companies have] told me they received a hundred résumés...instead of 300 résumés. I take that as a good sign.”

Does that mean offshore outsourcing has become the enemy? Corbett puts that into perspective. “I’ve sized this a couple of times and it always surprises folks because offshore outsourcing to countries like India, Philippines, and China, for IT and [business process outsourcing] is only about [two to three] percent of the global market,” he says. “For example, India’s entire software, IT outsourcing, and business process outsourcing industries are projected to hit $13 billion in revenue this year. EDS, all by itself, had $21.8 billion in revenue in 2003. Even GE, which is probably the most advanced company for offshoring (both through outsourcing and captive centers) has 22,000 of its 315,000 employees in India, or only about seven percent of its worldwide workforce.

“The offshore trend is obviously quite strong, but the magnitude is still fairly small when compared to the entire outsourcing industry,” he says.

Lacity, who has interviewed a multitude of affected parties in her research, considers the focus on offshore fear-based. “Most [companies] aren’t doing it as a total percentage [of their outsourcing efforts]. Most of it, she says, “is replacing contract workers, not in-house people. That means the people most affected are the contract labor force.”

Hanging On
It isn’t simply large organizations that want to exploit the advantages of outsourcing. Small companies want to get into the act too, as Mark, who contracts for a small firm in the travel industry, can attest. (He prefers not to use his last name.) As he explains it, the CEO of the firm “wanted to move the hardware, the e-mail server, the domain controllers, to an outsourcing co-location and then all 45 users would connect there.” The CEO backed away from that when he discovered that the solution providers only wanted to handle the e-mail and Web hosting. “Everything else they thought should stay here—where the data is stored. You’ll still have to have someone on-site to monitor the servers.”

But even in that, the CEO is trying to slice expenses. “That’s what he has to do, because they’ve had to cut their income per reservation to compete with Orbitz and Expedia and the other online reservation companies,” Mark acknowledges. “They want to reduce my hours and offload what I do on a daily basis to another individual on staff.”

The Politics of Outsourcing
It’s a tricky business to run for president of the United States. On one hand, you don’t want to look like you’re ignoring the unemployed white collar voters who blame offshore outsourcing for their inability to find new jobs. On the other hand, you want to support business in its efforts to reduce costs, the presumption being that it’ll eventually help spark economic growth and generate more jobs. And it’s tough to say what’s right and what’s wrong in these matters.

That’s exactly the dilemma President Bush and the Democratic contenders find themselves in during this election year.

In his State of the Union address, Bush stated that job training is the key to helping Americans “gain the skills to find good jobs in our new economy.” Toward that end he’s pushing a $250 million job-training program that would be administered primarily through community colleges.

At nearly the same time, Gregory Mankiw, chairman of the President's Council of Economic Advisers, recently came under intense criticism for stating that “outsourcing” by U.S. companies is “just a new way of doing international trade.”

Shortly after, Senate Democrats introduced a Jobs for America Act, which would require companies to report the jobs that they export to other countries—how many jobs, where the jobs are going, and why.

In spite of the fact that offshore is still just a fraction of the outsourcing business, that’s the part of the movement that has generated a grassroots movement of tech activists with Web sites like, and It’s also spawned a slew of legislative initiatives, like AB 1829, a California assembly bill which would prohibit moving call centers, software development or data processing involving state business from being sent to foreign countries. According to a recent Sacramento Bee article, 14 states are evaluating similar bills, though none has passed.

These efforts are in many ways an amplification of the debates surrounding L-1 and H-1B visas, which were established to allow non-immigrant employees and executives who come to the U.S. to work on a temporary basis. When the economy went south and tech professionals faced the loss of their jobs and decreasing salaries, much of the blame landed at the feet of those who hire people brought in from countries like India.

Congress reduced the H-1B cap to 65,000 for the current federal fiscal year after having set it at 195,000 for each of the previous three years. That new cap was expected to be reached before the end of February. L-1 visas, held by about 325,000 people, have no such limitation.

House Bill 2154, introduced by U.S. Representative John Mica (R-Florida) and currently under review by the House Judiciary Committee, would introduce changes to L-1. Heralded by Mica’s office as “legislation aimed at closing a loophole in current immigration law and protecting American jobs,” the bill still allows American companies to employ L-1 visa holders. However, those employees can only be transferred from company subsidiaries, not from a third party.

But it doesn’t go far enough, according to Mike Emmons, who maintains His site documents his efforts to convince Mica that HR-2154 has too many loopholes.

While Mica calls Emmons “rude” in correspondence, Emmons has responded with the ultimate judgment: He’s gathering signatures to run for Congress himself against Mica on a platform to fight offshore outsourcing.

—Dian Schaffhauser

Hiring Your Replacement
Two years ago Andy Willingham worked for a financial institution doing WAN administration and security—”everything from firewalls to routers, to circuits to the whole ball of wax.” He was one of 12 on the help desk team. One day his manager came to him and said, “See what companies you can find that do this particular type of work, then report back to me.” The specifics involved “outsourcing of managed firewall services as well as managed router services.” After a couple of minutes of thought, Willingham realized the request was tied to the fact that the organization had new management. “I put two and two together and figured out what they were doing”

He approached the CIO and said, “Mike, it looks like you’re outsourcing my job.” The CIO responded, “Well, we’re just looking at different options and we’re going to be moving people around and things like that.”

Willingham did the research, turned in his findings and heard nothing for a couple of months. Then a senior VP invited Willingham out to lunch. The topic of conversation: Willingham’s name had appeared on a list of people to be laid off. “I was the only guy who he could count on to get his work done when I was doing more of the desktop support and administration [work] a couple of years earlier. He felt like he owed me that... I was thankful to him.”

Within two or three months seven or eight people on staff were let go. A few months after that, the manager who had asked for the research in the first place lost his job, too.

When Willingham had been informed that the organization was going to be moving people around, it had been true. The firm offered him a position going back to desktop support. “I felt like that was not where I wanted my career to go... I told them right then I wasn’t interested. I would have been absolutely miserable.”

Since then he’s held two other positions, the latest with another financial institution—which had been owned by the first one—until it was sold a week after Willingham had started. “For one week I was once again affiliated with my old company in a round-about way,” he says. Now his days consist of “doing everything IT-related... except development.”

Willingham admits to a taste of bitterness. “Part of me says, stick it to them before they stick it to you, but I can’t tell anybody to do that. My thinking is, this is what they’ve given me to do at this point in time. But I would tell others, do what they’ve been assigned to do and make sure their résumé is in good shape.”

Reducing Expectations
Dennis Wood worked for Oracle as a database consultant based in the Philippines alongside consultants from that country as well as from India. When the work dried up, Oracle kept many of the others, but laid off the Americans. He was earning $130,000 at the time. He’s convinced that he might still be employed if he were willing to “work for a third of what I was making.” The unspoken irony is that that’s just about what he expects to make after his career switch into entry-level networking is completed. He’s had an interest in networking for a while and recently completed his MCSE. But he still hopes to be called back by Oracle.

Wood believes it’s time for IT people to organize, but he admits that given the chance to do so before in his life, he didn’t take up the call.

“I worked with Lockheed. A union tried to come into our executive offices and to unionize us. We booted them out,” he says. “I lived in Kentucky and worked for a natural gas company. A union came in and we booted them out.” Even now organizing might not have much impact on his efforts to find employment. “It would be nice to be protected—but I don’t know that they can protect us against the Indians and the Chinese.”

His advice to others facing the prospect of having their work outsourced is to keep six to eight months’ worth of money in the bank and “learn something. Go to school when you don’t have a job. Then you’ll have new skills.”

Embrace It or Leave
The power of training was exactly what one MCSE who works for a large bank (and asked not to be identified) used to believe in too. He’s come to realize, however, “Business was business and someone further up the food chain had made the decision to outsource as much IT as possible... In the end the corporate juggernaut leading to outsourcing could not be denied. The bank simply did not want its techs anymore. We were not seen as constituents of the bank’s ‘core’ business—which is, of course, banking, not information technology.”

After surviving a merger lay-off, and an outsourcing of LAN support to Compaq, this MCSE was outsourced to EDS. He remained behind as part of a core team “to handle any complications with the outsourcing—a ‘CYA’ team.”

“I was repeatedly told that I was chosen to remain because of my combination of technical expertise and communication skills with non-techies. The latter always was stressed as a very valuable commodity,” he says in e-mail. “Proficient techies are plentiful; proficient techies that can make the client feel good about IT are not.”

In hindsight, he wishes he’d answered the siren call of the outsourcer, in this case, Compaq. “I wish I had investigated the company and considered the possibility of employment there. I believe that if I had, I might have actually requested to be part of the outsourced group... I missed a chance to join an organization more in keeping with my skill set (desktop and server) than the company to which I was eventually outsourced.”

His advice to others: Embrace it or leave. “If your company has made the move to consider outsourcing—even if they ultimately keep you—read the writing on the wall and then find a way to take the initiative yourself. Investigate the companies being considered and ask yourself, ‘Would I consider applying for a job there?’ If the answer is ‘No,’ start looking somewhere else now! Don’t be a hunk of meat on the auction block. The flies tickle and eventually you start smelling bad.”

Lou Spahn would have to agree; the moral of his story, as he puts it: “Work for the outsourcer.” Spahn was earning in the low 20s as a tech for a mid-sized broadcasting company in the mid-Atlantic area. “I was their sole source of all IT information including 24/7 support for production, Web site design/updates, backups and instruction.”

Spahn found a job with a contract firm that supports a major East coast bank—for six months as a temp and then as a permanent employee. “My base salary increased by over 50 percent, and with my overtime, it is almost a 100 percent increase in pay,” he says. “My new company is currently helping me achieve multiple certifications for several vendors including IBM, Dell, HP/Compaq, Microsoft and Cisco.” Sometimes the work is interesting, he says, and sometimes, “you get the other stuff.” But that’s still better to him than the radio station job, where, he says, it was the same thing day in and day out. His primary role now is to support “over a thousand machines.”

Spahn’s attitude is that eventually, “everything’s going to be outsourced... You need a CCNP or CCIE for a short period of time. The rest of the time, [that person is] twiddling his thumbs.”

Keeping the Lights On
But going to work for the outsourcer isn’t always a palatable option—though it can be a steppingstone to other, more interesting, possibilities. In 2001, Perot Systems garnered attention when it signed one of those outsourcing mega-deals that make the front pages of trade weeklies and local business papers—in this case, a 10-year, $600 million contract to provide IT services for Catholic Healthcare West (CHW), the largest healthcare system in the western U.S. As part of that deal, Perot bought a Phoenix-based data center from CHW and took over the organization’s entire 4,800-person IT staff.

According to Gregg Hartt, an MCSE and CCNA, CHW owned 52 hospitals across several states. The IT infrastructure was decentralized. A 1999 effort to consolidate data operations went bust during the general panic over Y2K updates. Hartt worked for a specific hospital and leapt at the opportunity to work on a new project for a managed billing service within the larger organization to upgrade their software and enhance their reporting structures.

Just on the verge of finalizing the upgrade, the outsourcing contract was signed. As Hartt says, “April 15... I was working for CHW. And April 16 I was working with Perot Systems.” It took a couple of months, Hartt says, for CHW to realize that the new “contract only covered keeping the lights on... We had keeping lights on automated and down and not a problem.” His project was frozen—a result, he says, “of the discretionary service project process that Perot has in place.”

His boss started the effort of getting the paperwork finished to complete the upgrade. “There were a lot of meetings and a lot of Perot people [involved, saying], ‘Once we approve it, then we need to get CHW to approve it, because it’s not in the budget.’” The client at the billing service, Hartt says, “is screaming, ‘Why isn’t this getting done?!’ And my boss had to say, ‘This is why.’”

Of the nearly 5,000 IT employees who had moved over from CHW, Hartt says, Perot dropped a thousand. A few were gone because they couldn’t pass the drug testing imposed by their new employer, and another thousand left of their own accord.

Business unit managers who had been stripped of direct control over their IT services found ways around the system. Says Hartt, “I had two hospital CIOs begging me to come work in finance departments [as a ‘support analyst’] so I could... get their projects done...” A former co-worker, he explains, is currently in finance, “pretending not to be an IT person.”

Hartt stayed with Perot long enough to decide he was being under-compensated, having received minimal raises during his two previous reviews. After a few short stints, he landed in a software development house where, paradoxically, he and others picked up the pieces left by a Pakistani company that had failed to deliver a small medical billing application it had been hired to develop as an outsourced project.

Hartt has two pieces of advice for others facing a similar situation: keep your options open and be prepared to quit. “When they set that paper down in front of you, either sign it or get out. If you have other opportunities, it makes your decision a lot easier.”

Now that he’s on the consultant side, he doesn’t view what he and his co-workers went through as “terrible,” because “we have recurring dollars coming in” as a result of outsourced work his firm performs. Although he’s taken a “huge pay cut” with his current job, he finds the rewards more fulfilling. “Now I know VB very well. Data drives everything. All the money is in the data.” But he acknowledges, “The IT people whose jobs we take—it’s got to be rough on them.”

Moshe Lambert is another IT professional who sees outsourcing not as the enemy but as the forgone conclusion of the business he’s in. He started his tech career in Toronto, then moved to Israel in 2001. He became his “own outsourcing service, due to the nature of the market... in Israel.”

Lambert believes that any professional has to view himself or herself as his or her “own corporation.” That’s the only way to be prepared to shift with the market, he says. That requires keeping skills up to date, as well as developing other aspects that aren’t part of a typical technical person’s education—such as interpersonal networking, basic marketing skills and the ability to do the paperwork required in running a small business.

His attitude: “Today, you are outsourced; tomorrow, you will have a new position with a firm.”

8 Tips for Being Prepared

1. Unless you’re self-employed, assume you work for a company that’s considering outsourcing.

2. Befriend senior people as much as possible so they’ll give you a head’s up when change is in the wind.

3. If you’re asked to research outsourcing options, do it with all the competence with which you approach your current work activities.

4. Confront your manager privately and see what you can learn as early as possible.

5. Presuming you already keep your skills current, also keep your resume up to date and monitor job opportunities in your industry and geographic location, whether you’re actively looking or not.

6. Once you know what outsourcing companies are involved, research them to find out whether they’d be a good fit for your career plans.

7. Learn what you can about project management. It may be a skill you never get to use, but it may come in handy if you’re put in charge of some aspect of managing the outsourcing effort.

8. Don’t become bitter; if you do, it’s bound to come out in your next interview, which won’t help your chances of getting the job.

—Dian Schaffhauser

It’s a Global Economy
Victor Castillo might be considered the enemy by those in this country who don’t want to see IT work cross the border. He works for a contracting firm in Costa Rica that supplies IT services to Chiquita Brands International. He’s bilingual, his salary is $450 a month, and because it’s a selling point for his company, he’s encouraged to keep his skills and certifications up to date. His primary job is to resolve computer problems by phone and e-mail. The customers are primarily in the tropics—Salvador, Guatemala, Honduras, Nicaragua and Panama.

Castillo says outsourcing has benefited him. “Different customers have different platforms (Windows, Unix, MAC, Linux, Citrix...) and applications (Exchange, GroupWise, Eudora, Lotus...) so I’ve had more opportunities that way.”

And he sees more opportunities heading that direction. “Companies here are looking for 1,500 bilingual employees to start operations with USA and Europe companies in areas like customer support, telemarketing and others. That means that about 1,000 employees will be fired somewhere else.” It happens that way, he says, “because our ‘pay per hour’ is a lot less money than North Americans [will work for] and we speak several idioms.”

Yet blaming the Victors of the world for slow job growth in the U.S. ignores a basic fact. Chiquita itself isn’t an entirely U.S.-based company. Although the headquarters are in Cincinnati, the company also employs 2,500 people on its banana farms in Costa Rica, according to its 2002 annual report.

The same point can be made for many sizable firms taking work to another country: Globalization en-compasses markets, too. Ford expected to triple its sales in Russia in 2003; India purchases IBM goods; everybody wants to sell to the China market. Who should do the IT work for those firms and how should the rewards be divided?

Says researcher Corbett, “If I were in IT right now, I would assume my company was looking at outsourcing. Once I’ve made that assumption, I would do an inventory of my skills and capabilities. [Then I would look at] what elements of IT need to be done within this company and steer my career in that direction—or think about the fact that the specialized work is going to move inside the service providers and make myself more attractive [to them].”

Corbett says the people he’s seen who are most successful are the ones who identify what has become a commodity skill and what’s more valuable, then focus on the latter. “If you’re at your desk coding or doing pure telephone work, that can probably can be done anywhere.”

Lacity is more specific: “The more outsourcing you do, the more you have to understand relationship management. Even if 90 percent of the budget ends up being outsourced, there’s got to somebody in there with the stakeholder perspective of the customers.” Among the skills that will be most valued: “The ability to elicit user requirements and translate those into documents that suppliers can develop systems from, the ability to manage projects, change management, the ability to work with suppliers, to facilitate supplier work.”

As she puts it, “It’s either a matter of adapt—or potentially be unemployed.”


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