Inaction on Offshoring Will Hurt U.S. IT, Author Says

Computerworld - U.S. political and business leaders are in a state of denial over the impact of offshore outsourcing, brothers and co-authors Ron and Anil Hira argue in their new book, Outsourcing America (Amacom, 2005). Ron Hira, an assistant professor of public policy at the Rochester Institute of Technology in New York, said in an interview with Computerworld last week that some actions need to be taken in response to the offshoring trend. Excerpts from the interview follow:

Ron Hira of the Rochester Institute of Technology

By offshoring a lot of our IT work, is the U.S. losing its ability to innovate? I personally think that is true in a number of respects. You're creating the next generation of entrepreneurs overseas. If you look at the IT services firms in particular, who are sort of the first movers in all of this, they don't do a lot of research and development, but that doesn't mean they're not innovative. What they're doing is incremental innovation, and a lot of the capabilities are built into the learning the workers actually gain [on projects]. And a lot of these companies are started by people who have worked at other companies. You are going to be losing that next generation of potential entrepreneurs.

Are you worried that the U.S. is going to lose its ability to stay ahead of the global IT marketplace? I don't think we can sit on our hands. I'm worried by the inaction. We're at a state where essentially nothing has happened. U.S. companies may succeed, but they won't necessarily succeed with U.S. workers, and that concerns me about our future. I do think we need to take some responses here.

What responses can be taken? There are some no-brainer responses. [For example,] extending trade adjustment assistance to services workers. Software workers who are displaced by trade - and they are clearly being displaced by trade - are not eligible for trade adjustment assistance. It's extended unemployment insurance, health care benefits and retraining money.
What else should be done? The first step is that we acknowledge that this causes problems. There are a lot of people out there who say that this really isn't a problem. One of the other things that we could be doing is collecting objective data on this. The McKinsey Global Institute, which benefits from outsourcing and which consults and helps companies figure out how to outsource more, just came out with another study two weeks ago. I don't think that we should be relying on their data inorder to have a public discussion.

Will a combination of business and technical skills be enough to ensure future employment for U.S. IT workers? The labor market here is going to be flat or shrink to some extent in response to [offshoring], unless there is a real increase in demand, and I don't see that. I've heard a lot of people talk about the need for a mix of business and IT capabilities - just being a good programmer is not enough. If that were true, we would expect to see MIS programs in business schools booming because there would be so many companies knocking on their doors trying to hire their graduates. The reality is, enrollments are down significantly in those MIS programs, too. The labor market signals aren't there yet that that's where you need to be.

Read more about outsourcing in Computerworld's Outsourcing Knowledge Center.