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1/30/2004
12:55 PM
Bob Evans
Bob Evans
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Business Technology: Diverse Views On Outsourcing

While some lament lost jobs in the technology industry, others say the need to compete is driving companies offshore.

Time to share some thoughts from readers on offshore outsourcing, with a bit of outside commentary tossed in as well:

"How come when corporate execs are confronted with paying a fair wage they immediately look overseas for another country to exploit, but when the American consumer does the very same thing to purchase prescriptions from Canadian drugstores, these very same 'free-market' advocates scream bloody murder?"
--Gary Tsuchiyama

"The true answer to the problem is intractable. ... The education system must be fixed, but no one has the political will to fix it."
--Alma Wetzker

"As a capitalist I think it's a company's imperative to be as competitive as possible, and if that means shipping labor offshore, well maybe. However, I also think Congress should do something to limit exactly what is happening now."
--Manager at "one of the top three financial firms in the country"

"Outsourcing has transformed manufacturing from vertically integrated production structures to highly fragmented ones. Fifty years ago, Detroit's River Rouge plant sucked in iron and coal at one end and spat out an automobile at the other. Now, auto firms source component parts from a vast array of domestic and foreign suppliers. Has U.S. manufacturing been vaporized in the process? No
--manufacturing production has risen about 40% over the past decade."
--Dartmouth economics professor Douglas A. Irwin in The Wall Street Journal, Jan. 28

"It isn't a matter of the number of qualified candidates in the U.S. being low, it's a matter of being able to fill a position for $30,000 a year in India versus $150,000 here in the U.S. We need to give tax breaks or some other financial incentive to corporations such that their bottom line isn't adversely affected by hiring within our own borders."
--Mitchell Ratner

"Aren't you a little worried about your own job, Bob? Don't you think Indians can write these articles? Better think about how you are going to support your family, like the rest of us."
--Lisa Pineau

With such a complex and deeply emotional subject, it's no surprise to see such a wide range of opinions, perspectives, and proposed solutions. But I've saved for last what I consider to be the most-thoughtful and productive analysis of offshore outsourcing: its benefits, its problems, and how the private and public sectors can collaborate to maximize the former and minimize the latter. The remarks are from a presentation given by Ron Hira, a public policy professor at Rochester Institute of Technology, at a conference titled "Shifting IT Resources Offshore: Panacea Or Pandora's Box" and hosted by the Northern Virginia Technology Council. The full presentation is available here, and here are some excerpts:

"Like most structural changes, there are winners *and* losers in offshoring. Will the world economy overall be a winner? Most likely. Will the U.S. be better off? We really don't know. Anyone who provides a definitive answer one way or the other is practicing fortune-telling. ... My own research has shown that a number of offshore outsourcing firms have stretched the guest-worker visa regulations (H-1B and L-1) to gain competitive advantage in the U.S. market. This process of exploiting the lax visa regulations has actually *accelerated* the process of offshoring and offshore outsourcing. ... It's long overdue for Congress to align the law and enforcement to its and the American people's intent on guest-worker visas. The visas should be used as a last resort, not a first choice for cheap labor. ...

"So, what do we do? 1) The federal government must begin regularly tracking the volume and nature of the jobs that are moving offshore. ... 2) Congress should strengthen H-1B and L-1 workforce protections and their enforcement. ... 3) Companies should be required to give adequate notice of their intentions to move work offshore. ... 4) Congress should rethink how U.S. workforce-assistance programs can be designed to help displaced high-tech workers become productive again. ... 5) Fundamental changes in U.S. immigration law ... should be made by Congress, and not by trade negotiators. ... 6) Congress should take affirmative steps to ensure that the U.S. retains the domestic human-resource and production capabilities needed to develop and utilize technologies deemed critical to homeland security. ... 7) As globalization narrows U.S. technology leadership, the Department of Defense and other government-security agencies will need to enhance their ability to acquire and assimilate foreign technologies. ... 8) The U.S. needs a coordinated national strategy designed to sustain its technological leadership and promote job creation. ...

"As someone with close family still in developing countries, in India in particular, I have personal interest in witnessing the revolution of tapping the incredible amount of idle human capital and knowledge in these countries. ... However, it's equally important for advocates of free trade to figure out how to *ensure* (not just assume) that we don't have a great deal of idle human capital in the U.S. It's not sufficient to call it 'painful' and hope for rosy development scenarios. Free-trade advocates should have an obligation, because it's within our country's own self-interest, to make sure that those who are displaced through no fault of their own have the means to transition into productive positions."

Hira's article is essential reading for anyone involved in or even just interested in the offshore debate
--he brings a refreshing open-mindedness to a subject that is currently plagued by ignorance, dogma, and rigidity.

Bob Evans
Editor in Chief
bevans@cmp.com


To discuss this column with other readers, please visit Bob Evans's forum on the Listening Post.

To find out more about Bob Evans, please visit his page on the Listening Post.

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