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Will Bush re-election open the offshore floodgates?

Ed Parry, News Editor

Now that American voters elected to keep President Bush another four years, there may be an uptick in offshore outsourcing announcements from U.S. companies according to one expert. But some analysts and vendors don't see a link between the election's outcome and a new wave of offshore activities.

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Is offshore backlash much ado about little?

Dr. Martin Kenney, Senior Project Director at the University of California at Berkeley's Roundtable on the International Economy and an expert on offshoring, believes based on feedback from his speaking engagements around the world, that U.S. firms had been holding back on their offshoring plans until after the electoral winner was decided. With President Bush's victory -- and the perception that he is friendlier to free trade than his former opponent John Kerry, who talked of "Benedict Arnold CEOs" and suggested ending tax deferrals for firms that shipped jobs overseas -- Kenney believes companies will lose their "wait and see" attitude and roll ahead with their plans.

"A lot of firms were wondering if the election would give them a government more skeptical of offshoring,' Kenney said. "But now that Bush has been re-elected, those firms are thinking about what the next stage is and how much they should move overseas.

"In the next five months, I predict we'll see a new burst of announcements."

Cyril Eltschinger, CEO of IT United Corp., a software outsourcing firm based in Beijing agreed, saying in an e-mail to SearchCIO.com that the uncertainty of the election had impacted his business, but now he expects his U.S. customers to stop holding back and start placing orders.

Executives with Indian outsourcing giants Infosys Technologies Ltd. and Wipro Ltd. have both stated publicly that Mr. Bush's win means that offshoring can continue unabated. Kiran Karnik, President of Indian IT trade group NASSCOM, issued a statement welcoming Mr. Bush's re-election saying "We are confident that with George Bush getting re-elected, the growth momentum will continue."

But not everyone is convinced that a second term for Mr. Bush would have been any different from a first term for Mr. Kerry from an offshoring standpoint.

"It may have been true in government procurement, but not so much in the commercial sector," said Marc Hebert, executive vice president of Fremont, Calif.-based software offshoring firm Sierra Atlantic Inc. Hebert said Kerry's platform around offshoring was relatively mild and that he toned down his rhetoric as the campaign went on.

"It's not clear to me with Kerry winning that a flurry of offshoring announcement wasn't going to happen anyway," he said. "More companies are struggling with managing offshore contracts than with politics."

I don't see anything now that will increase demand -- it was already great to begin with.
Tom Sundsboe
VPLuxoft USA Inc.

Tom Sundsboe, vice president of sales at Luxoft USA Inc., a Moscow-based offshoring firm with an office in Bellevue, Wash., said he never bought the idea that a Kerry presidency would result in a sea change of offshore outsourcing laws.

"No company working with us was waiting for that. I don't see anything now that will increase demand -- it was already great to begin with," he said.

"The most revealing thing to me was when Kerry was asked how to prevent offshoring, he said 'I didn't say I could stop all offshoring.' I don't think the outcome would have made any difference at all," he said.

"I think there was some concern that Kerry might tinker more with offshore deals," said Rick White, president of TechNet, a Washington-based bipartisan network of CEOs that promotes IT to lawmakers. "But I don't think too many people made business decisions based on that concern. I don't think the results will have an impact one way or another."

White added that the election did result in a good debate over offshoring and could make companies more sensitive to public concern over the loss of jobs. In one of the three presidential debates, Kerry chided the president for "outsourcing" the hunt for Osama Bin Laden to Afghan troops, one of many references to outsourcing that cropped up on the campaign trail.

Dane Anderson, an outsourcing expert with META Group, thinks everyone is breathing a sigh of relief that the election is over and that any delays with offshore plans may be due to companies doing more due diligence rather than waiting to see who'll be in the Oval Office come January.

"Companies may be less reluctant to announce offshore plans, but they'll still be cautious with their approach," he said. "Organizations will ask why it makes business sense to embark on offshore deals.

"Still, it's an emotional issue," he added.

And those emotions won't be going away anytime soon. Ike Gittlen, coordinator of the Jobs and Trade Network, a grass-roots fair trade organization, will continue to push for a kinder, gentler global economy that doesn't cost people their jobs. He was hoping the election would cost the president his job.

Everything's going to be harder now. They [the Bush administration] simply don't see the harm in it.
Ike Gittlen
CoordinatorJobs and Trade Network

"Everything's going to be harder now," he said. "We thought we'd at least have an opportunity with Kerry for a redesign of trade agreements. The Bush administration will resist any attempt to curb free trade policy -- they simply don't see the harm in it," he said.

Gittlen believes the president's mandate was based on issues of security, not trade, and that the public will hold the president accountable if jobs continue slide offshore.

And he's not surprised the Indian tech industry welcomed the re-election news with such Élan.

"Bush is their guy. They realize had Kerry won, the voices against free trade policies would be heard," he said.


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