October 17, 2003    Volume 10, No. 19

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Inside The Debate Over Outsourcing Information Technology Service Jobs Overseas

U.S. industry is being driven to outsource high-tech service and software jobs to cheap locations overseas, but federal and state governments dare not do so. The issue is a growing political hot potato as more highly educated and well paid IT workers lose their jobs.

Every company providing information technology outsourcing services is being asked by clients how they can substantially reduce costs by shifting work offshore, says William Sweeney, vice president of global government affairs with EDS. "In the commercial sector, if youıre a major [IT service provider] and youıre talking to a major customer about a possible client engagement, if you do not have an offshore component, do not even talk to them anymore," he told a recent press gathering in Washington, D.C. "Itıs changed dramatically. Theyıve almost come to expect that to be price competitive -- and with the customer in the driverıs seat setting prices for their services -- you have to have an offshore component."

Shifting high-tech service jobs offshore is a trend that is accelerating, says Arup Gupta, president of TCS America, an IT services firm based in India. "In a very serious, competitive environment, companies have to concentrate on their core competency and they want to outsource everything and reduce cost and therefore we are seeing the trend toward offshore outsourcing increasing," he says.

Guptaıs company has 25 years of experience in developing high-tech skill sets among its employees, many of whom it is recruiting from premier technical institutes in India that rival Harvard in terms of the quality of the individuals being trained, he said.

Information Technology Association of America (ITAA) president Harris Miller thinks its less of a problem than people are making it out to be. His association is working hard to derail legislative fixes that require government agencies to award IT contracts only to American companies.

American IT workers should not be paranoid about losing their jobs to cheap offshore rivals, Harris said in response to a question from Manufacturing & Technology News. The high-tech industry is simply in an economic slump and when demand accelerates for products and services, employment will follow thereafter.

"I describe this as a perfect storm," says Miller. The end of the Y2K spending spree, the dot-com collapse and the softening of the global IT market have all conspired against the U.S. information technology workforce. "This is a short-term blip," he says.

Of greater concern is a long-term problem a potential skilled manpower shortage due to the aging workforce and a younger corps of workers not educated in science, technology and engineering. "We have a graying population that is going to retire and the talent pool is going to dry up over night," he said. "Itıs impossible to reach the conclusion that India is going to take all these jobs when the economy is this soft. When the economy starts to pick up again and companies start hiring again, are they going to hire here or are they going to insist that everything be done in India? We donıt the answer to that yet."

Bruce Mehlman, Assistant Secretary of Technology Policy at the Commerce Department, wasnıt as sanguine. "Yes, IT workers need to be paranoid," he responded.

The Information Technology Association of America is also lobbying at the state level to defeat legislation that prohibits the "offshore" outsourcing of government IT contracts. "The reason we donıt want to see legislation prohibiting states from sending work offshore is it hurts our efforts as an association representing American companies to convince countries around the world to open competition to allow EDS, Oracle, Accenture, IBM or Microsoft to win contracts," Harris explained. "We canıt turn to the rest of the world and say open your markets and then turn around and say if your country wants to send companies here weıre not going to allow that to happen."

Public-sector contracting officials in federal and state governments are already extremely sensitive to the issue of outsourcing government IT service functions to offshore entities. A politician using the word "offshoring" could not "survive the end of that sentence," said George Newstrom, chief information officer for the Commonwealth of Virginia.

The main issue at the state level is jobs, and one of the problems states confront today is the fact that robust growth in productivity "is gained by a tremendous number of layoffs," said Newstrom. "Itıs a terrible misnomer because it looks like a productivity gain, but we donıt see it on tax roles or the unemployment rate. Itıs not going anywhere. Productivity is not an indicator that we use in the states. Profit per employee doesnıt translate to new jobs....I have a grave concern that there is going to be a backlash [against offshoring] very quickly."

Sweeney of EDS agrees, saying there are "some very negative reactions" even to the possibility that any pubic-sector IT work will move offshore. "What we have to do in discussing these complicated issues is to be clear of what specifically weıre talking about," he said. "What I fear may happen is all of these topics may be merged into some very negative protectionist, prohibitive and uninformed legislation and reaction. That is a real danger to all of us who are in this space in the public and private sector."

Numerous grass-roots political action groups have been created recently to fight for the rights of displaced U.S. IT workers. Many of them are focusing on the H-1B and L-1 immigration laws that allow skilled workers into the country. "Are you unemployed and invisible?" a recently created group in Connecticut called The Organization for the Rights of American Workers asks in its recruitment literature. "If you are currently working but become unemployed in the future, will you become a non-entity? Stand up and be counted!"

Job Protection Groups Emerge On Internet

  • Americans for Better Immigration: Fight Abuses of the H-1B Program: http://www.betterimmigration.com
  • American Workers Coalition: http://www.awcorg.us
  • Coalition for the Future American Worker: No More Amnesty: http://www.americanworker.org
  • Federation for American Immigration Reform: http://www.fairus.org
  • Hire American Citizens: http://www.hireamericancitizens.org
  • H-1B Info: http://h1b.info
  • H-1B Visa Sucks: http://www.h1bvisasucks.com
  • No More H-1B: http://www.nomoreh1b.com
  • Numbers USA: http://www.numbersusa.com
  • Programmers Guild: http://www.programmersguild.org
  • Project USA -- For An Immigration Time Out: http://www.projectusa.org
  • Rescue American Jobs: http://www.RescueAmericanJobs.org
  • Stop Immigration Now: http://www.stopimmigrationnow.org
  • The Organization for the Rights of American Workers: http://www.toraw.org
  • ZaZona: The H-1B Hall of Shame: http://www.zazona.com/shameh1b

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