Offshore outsourcing has certainly fueled controversy, but is the subject given more attention because it's an election year? Our editors argue the point.
Despite political hype, the threat is real
Offshore outsourcing is a real issue. It's not just a political debate. Thousands of people are being affected both positively and negatively by this megatrend. On one hand, many IT workers are losing their jobs as a result of offshore outsourcing -- 123,282 jobs since March 2000, according to an offshore job tracker on TechsUnite.com. On the other hand, companies, including IBM, EDS, Accenture and HP are saving millions of dollars by farming out IT work to cheaper labor pools in countries like India, China and the Philippines. When you have an issue like this -- that brings such failure to some and success to others -- it creates a major controversy.
So we need to look beyond the politics and negative press surrounding offshore outsourcing and consider the growth predictions for this market. We can't overlook the fact that Forrester is estimating 830,000 U.S. jobs will move offshore by 2005, and Gartner is predicting 25% of IT jobs will be sent overseas by 2007. Growth like this will change the way we do business. This is the real root of the offshore outsourcing debate.
The best thing the political debate has done for the offshore outsourcing issue is to shed some light on an already highly controversial issue. Politicians have tapped into a serious concern among today's IT workforce. Whether they're bringing attention to it to obtain votes or to protect U.S. jobs, politicians can't ignore that the offshore outsourcing trend isn't going away any time soon.
Whatever their intentions are, politicians have helped and hurt the cause. Some politicians are trying to help the cause by passing laws to protect workers affected by offshore outsourcing. The offshore outsourcing debate is also pushing politicians to take a closer look at our education system and set up programs or invest more money in the math, sciences and engineering fields (all IT related).
On the flip side, the political involvement in offshore outsourcing is hurting the process. Because of all the negative publicity surrounding this trend, CIOs and executives have become very silent about their offshore plans. This is resulting in a huge backlash among IT workers who get blindsided when they are suddenly out of work or lose their job to an offshore move.
So is the political debate over offshore outsourcing justified? No, it's not. The current political debate is only addressing the loss of IT jobs in the U.S. This is only a very small part of the offshore puzzle. Politicians should look more closely at the real cause of job loss in the U.S. and address how we can better prepare our IT workers to succeed in today's economy. Offshore outsourcing is about more than just IT job loss. It's about globalization. We are shifting to a truly global economy and nothing, not even the political attention this issue is receiving, will stop this process.
Is Karen right? Let her know.
Presidential campaign muddies water
By Sarah Lourie, Assistant Editor
The candidates in this year's presidential election have been playing on your fears and they should be ashamed. The statistics we have been fed are often overestimated or just plain wrong. Election year issues are full of buzzwords, and this year is no different. Offshoring is just that -- an election year buzzword that will burn out as soon as we elect or re-elect our next president.
How do I know this? Let's start by looking at some history. We never did have that hot war with the Soviet Union that President Reagan feared. Sen. Joe McCarthy's "communist recruiters" didn't brainwash us with their movies or music. NAFTA didn't "cause a giant sucking sound as jobs go south" quite the way Ross Perot said it would and former President George H.W. Bush did create new taxes even after we read his lips.
Walter Cronkite recently commented on the role of the president when he stated: "The mood he communicates has a direct effect on the mood of the nation." That may be true once he's in office, but during a campaign, it's the other way around -- the mood of the nation has a direct effect on what you will hear from the candidates.
As a nation, we are scared and angry and politicians are doing everything they can to alleviate that feeling for your vote, even hiding the truth. John McCarthy, an analyst at Forrester Research Inc., published a report that said that 3.3 million jobs representing $136 billion in wages would be sent offshore by 2015. "This is 2% of our entire workforce," said Democratic presidential candidate John Kerry, citing the report last November. What wasn't mentioned was that the analyst made an educated guess from his own assumptions and later admitted his numbers were "hyped." In addition, when Sen. Kerry uses the term "Benedict CEOs" to describe the heads of U.S. companies who send work overseas and take advantage of U.S. tax breaks, he fails to mention that his wife's company, the Heinz Corp., does the same thing. I don't hear him calling her a traitor -- although, with her fiery temper, I'd love to be a fly on the wall for that conversation. Finally, Kerry's official Web site includes the statement: "Whether you're a CEO in the corner suite or a worker in an office or on the factory floor, you'll have a president who honors you, respects your contribution, and will fight for you and your future every day." Does this include the Benedict CEOs?
President George W. Bush is not much better. When his chief economic adviser, Gregory Mankiw, was attacked for comments he made to Congress on the advantages of offshore outsourcing, his boss offered only halfhearted support. While the president's staff is pro-outsourcing, the president is taking minor steps to hide his own favor of it, including signing a law that stops federal work from going overseas. If he truly felt that outsourcing wasn't right for this country, why wouldn't he fire his chief economic adviser and give the job to someone whose job had been outsourced? In addition, the president's campaign Web site makes no mention of outsourcing. From what I've researched, it's the pro-outsourcing politicians who are quiet on the subject.
So what else is missing from the candidates' speeches? For one, there are other significant reasons for the unemployment rate in the U.S. that have nothing to do with outsourcing -- the dot-com bubble burst, the consequent recession, the slow recovery and the increase in worker productivity that allows companies to do more with less. In addition, recent studies have shown many interesting facts:
- Of the 2.7 million jobs lost in the last three years, only 300,000 were lost because of offshore outsourcing.
- Business Week magazine reports that 1% of productivity growth can eliminate up to 1.3 million jobs a year.
- According to the Organization for International Investment (OFII), foreign companies with U.S. offices employ a record high 6.4 million Americans and support an annual payroll of $350 billion, which is heavily invested in the U.S. economy.
- The OFII also reports over the last 15 years, total insourced jobs grew by 117% and total outsourced jobs grew by 56%.
- A 2003 report put out by the market research company International Data Corp. and which was cited by the Associated Press, Los Angeles Times and The Wall Street Journal was later called "a little wobbly" by an IDC spokesman.
- U.S. educational institutions collected $1.2 billion from Indian nationals in 2002, a reported six times the amount received from British students.
- According to The Economist, America's population grew by 23.9% between 1980 and 2002. The number of employed Americans grew by 37.4% in the same period, a near record high.
A recent article in The Economist states that outsourcing has been a phenomenon for centuries. So why is offshore outsourcing all of a sudden an issue now? Could it be because it's finally affecting the white collar worker? Is it finally threatening the electoral count? Tune in November 2nd for the answer.
Is Sarah right? Let her know.
Dig Deeper on Information technology outsourcing
So what are the realities of offshore outsourcing? Roger Cox, managing vice president of the Gartner Strategic Sourcing Practice, spoke with SearchCIO about the best countries to outsource to and the obstacles U.S. companies must overcome to successfully implement an offshore outsourcing program.