Bush Administration Won't Impede Offshore Outsourcing

Positive effects such as increase in productivity cited

NEW YORK -- Although the Bush administration sees pros and cons in the trend toward offshore outsourcing, it has no plans to impede companies' efforts to move IT jobs to India or elsewhere. Instead, it plans to focus on developing an economic climate that helps create jobs in the U.S., an administration official said last week.

"The answer to economic challenges is growth and innovation," said Chris Israel, a deputy assistant secretary at the U.S. Department of Commerce, speaking at an IT services outsourcing symposium here. He cited the administration's support for increased investment in research and development, education and expanded trade authority for the president as examples of its efforts to improve growth.

If it chose to do so, the White House could create obstacles for U.S. companies that want to move work overseas. It could use its power over regulated industries, such as financial services, to discourage sending work offshore by raising national security concerns. It could also set "buy American" standards for government purchases of IT products or back legislation in Congress to restrict visas such as the L-1, which multinational companies use to facilitate offshore development.

Israel said he understands the ramifications of offshore outsourcing, such as downward pressure on salaries in the IT industry and the potential for a "reverse brain drain," where highly skilled IT workers choose to work in countries other than the U.S. But he also noted that offshore development could have positive effects, such as driving prices down and productivity up.

Although the Bush administration may be on the fence about the effects of offshore outsourcing, Phil Friedman, CEO of Computer Generated Solutions Inc., is not. He opposes moving jobs offshore. Friedman said his company, a New York-based systems integrator and managed services provider, recently opened a technical services center in Atlanta. The company had to fill 300 positions at the new facility, and it received 3,000 applications for those jobs in three days.

"That tells me the story," said Friedman. "We have plenty of talent, so we are not moving jobs [offshore] because we cannot find talent or we don't have the quality of talent in this country. But I'm wondering [if] in the rush to send jobs offshore, we, in some respects, are neglecting the moral responsibility we have with our employees.

Phil Friedman, CEO of Computer Generated Solutions Inc.
Phil Friedman, CEO of Computer Generated Solutions Inc.
"We need those technology skills. This country is making productivity gains only because of the technology we've been able to implement, and all of a sudden we are abandoning those employees, and it's bothersome," said Friedman.

Countering that view was Gordon Coburn, senior vice president and chief financial officer at Cognizant Technology Solutions Corp., a Teaneck, N.J.-based offshore services provider, who said offshore work allows businesses to remain competitive.

"For a U.S. company to take the approach that 'No, I have to do it all here because I have to protect the jobs,' in the end, it's going to cost more jobs here because they're not going to survive, because they won't be price-competitive," said Coburn. "On a long-term basis, I think that by our clients leveraging the offshore model, they are actually protecting American jobs."

Israel said it's difficult to distinguish the number of IT jobs lost as a result of offshore outsourcing from those lost because of the industry downturn. He said there isn't "statistical data that shows one-to-one correlations."

Priscilla Tate, director of the Technology Managers Forum, a New York-based group representing IT executives at large companies, said offshore development is taking a toll on U.S. workers. "Higher-skilled jobs are going away," she said. "There are people who will not get jobs in the IT industry again -- they just have been replaced."

Copyright © 2003 IDG Communications, Inc.

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