Limited outsourcing benefits the United States through adept diplomacy and entrepreneurship.
Its easy to blame offshore outsourcing for the lethargic, jobless economic recovery in the United States. However, by skimming the news, you can paint a picture that looks different from the one Stan Gibson presents in his Outsourcing & Services column "Stemming IT Job Loss."
First, a 1 percent rise in productivity eliminates about 1.3 million jobs in a productivity-based economy like ours. If you look at the past three years, we have had 3 to 3.5 percent productivity gains per year, instead of the normal 2 percent. In that same time, we have lost about 2.7 million jobs. Of that number, only 300,000 have been lost to offshore outsourcing, according to figures from the U.S. Department of Labor and from Forrester Research.
Second, limited outsourcing benefits us through adept diplomacy and entrepreneurship. Contrary to Gibsons contention, outsourcing is blazing new paths into the worlds second-largest country, India, opening a lucrative market to U.S. corporations. We have tried to enter this huge market since India gained independence from Britain in 1947, but our attempts were rebuffed by socialist governments that breast-fed homegrown industries by placing astronomical tariffs on imports.
Fast-forward to this year. Since January, reported BusinessWeek, New Delhi has cut tariffs on such IT-related hardware as PCs in half, to 18.5 percent, and it has ended tariffs on microprocessors. The Indian government also raised the ceiling on foreign equity investment in Indias banks, from 49 to 74 percent. U.S. banks can own a majority stake in Indian banks, which was unthinkable even 10 years ago. And when New Delhi computerized its tax and revenue departments, the first contract, for $150 million, was won March 5 jointly by Hewlett-Packard and Microsoft. The state of Haryana just standardized on Suns StarOffice, and Sun has 10,000 StarOffice licenses with United India Insurance. Sun and Red Hat are close to signing multimillion-dollar contracts with the Indian government for software and services.
Its important for outsiders to note that India is in the midst of its first national election campaign in which the majority party is openly campaigning on a platform of economic reform and development. But if U.S. politicians succeed in legislating a ban on outsourcing, they risk driving India back into the protectionist shell from which it has been emerging, and we will lose a lucrative market.
Since the U.S. economy responds quickly to global changes, its not difficult to conceive that software will follow the route of manufacturing: Low-end coding will end up in countries where it can be done more cheaply.
We must acknowledge the paradigm shift and retrain our work force to take the upper-end jobs in IT.
Anjan P. Bagchee is manager of IS at the Offices for Medical Education at the University of Rochester School of Medicine & Dentistry, in Rochester, N.Y. Free Spectrum is a forum for the IT community. Send submissions to firstname.lastname@example.org.
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