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Report: Offshore outsourcing helps U.S. job market

Offshore outsourcing isn't killing the U.S. economy, it's helping. That's the conclusion -- in a nutshell -- of a new study. But given the fact that this is one of the most contentious issues of our time, the report has its critics.

A new report finds that offshore outsourcing allows companies to create new jobs within U.S. borders. But many IT professionals and workers rights activists stand firm in their belief that sending work to foreign countries is ultimately bad for business.

The report, "The Impact of Offshore IT Software and Services Outsourcing on the U.S. Economy and the IT Industry," was released by the Information Technology Association of America (ITAA). The group, which consists of 375 corporate members including Microsoft and IBM, commissioned research and forecasting firm Global Insight to conduct the study. Global Insight's chief economist, Dr. Nariman Behravesh, led the research team.

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Dr. Behravesh and his associates found that outsourcing increases the number of U.S. jobs, improves real wages for American workers, and pushes the U.S. economy to perform better.

Specifically, the team reported that global sourcing saves money, some of which is used to create jobs within U.S. borders. Global Insight claimed outsourcing generated 90,000 new U.S. jobs in 2003.

The team concluded that global sourcing increases the net pay of U.S. workers by helping to keep inflation and interest rates low and productivity high. The report said sourcing caused real wages for U.S. workers to increase 0.13% in 2003, and predicted that this number would climb to 0.44% in 2008.

Despite the ITAA/Global Insight report, many people still feel that the practice of shipping any jobs overseas is bad for U.S. workers, many of whom have found themselves jobless because of the trend.

The subject is so controversial that it has risen to presidential ranks. President George W. Bush and his presumptive November foe Sen. John Kerry have been battling over outsourcing in print and on the airwaves. Members of the  Bush administration have said that offshore outsourcing is good for the economy and that they will not erect barriers, while the Kerry camp is running television ads blasting the president for allowing the practice to continue.

Conventional wisdom holds that only low-level IT jobs are going overseas. But Fred Tedesco, co-founder of Waterbury, Conn.-based MAD in the USA, an anti-outsourcing organization, said the country is already starting to lose higher level jobs to places like India. He said those jobs fall in the area of research and development.

Earlier this year, Tedesco, along with members of his group and representatives from at least seven other workers organizations, protested offshore outsourcing at the Strategic Research Institute's New York conference on global sourcing. Those groups helped to sponsor the introduction of several pieces of legislation aimed at curbing the offshoring trend at the federal and state levels.

"If we send out all that technology and all that research then what is going to be left here?" said Tedesco. "A whole range of white collar, high-education jobs are now becoming expendable and are being sent overseas."

Mrinal "Satta" Sattawala is vice president of sales and marketing for Patni Ltd., a Mumbai, India-based firm that helps enterprises outsource work domestically and overseas. Patni plans to become a member of the ITAA.

Sattawala agreed with Tedesco that new kinds of jobs are now being outsourced, but he said they are still low-level jobs. For instance, he said, research jobs might go overseas, but the high level job of analyzing that research remains in the U.S.

Despite the short term job loss associated with offshore outsourcing, Sattawala's company believes the practice will ultimately push U.S. workers into a higher level "skill paradigm." It's important for governments and companies to implement training programs for those displaced by outsourcing, he added.

Robert Gannon, senior systems engineer with Raleigh, N.C.-based Progress Energy, said outsourcing hasn't affected him yet. But it has affected many of those like him who work with mainframes.

Gannon said companies that outsource things like technical support call centers are neglecting customer service. He said customer service suffers because of language barriers and a lack of expertise on the part of those working in the overseas call centers, many of whom read from scripts.

"This is a very shortsighted economic plus for companies," Gannon said. "They may save money because they're cutting the head count but customer service will suffer in the long run."

Earl Perkins, an industry analyst with Meta Group in Stamford, Conn., explained that his company generally agrees that outsourcing is good for the U.S. economy.

Perkins said the good news is that software workers who have lost their jobs to outsourcing tend to be highly educated and can easily be retrained for new technical jobs. The bad news? They'll oftentimes have to start over at lower-level jobs than they previously held.

"With those kinds of skills sets, you have more alternatives," he said.

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