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3/31/2006
04:45 PM
Rob Preston
Rob Preston
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Down To Business: Offshorers Coming Out Of The Closet

Whether driven by some extrapolation of the Wal-Mart Effect or even the Madonna Effect, companies are starting to make noise about the work they're doing abroad.

Technology companies are coming out of the closet. Rather than hide the fact that they're moving more development and other work offshore, they’re publicizing it. Bill Gates and Michael Dell are posing for photos with Indian tech executives. Capgemini, EDS, and IBM are issuing press releases about the thousands of workers they plan to add abroad. Even big IT shops are less defensive than they used to be about their overseas ambitions. It's suddenly OK, if still not quite chic, to talk publicly about your global workforce.

For a parallel trend, consider Wal-Mart, which single-handedly pushed thousands of its manufacturer suppliers into low-cost China as part of its inexorable drive to beat down prices. While critics still portray the giant retailer as a glorified sweat shop and community wrecker, plenty of others give it credit for helping to keep U.S. inflation in check--the so-called Wal-Mart Effect. Rather than have to hide from the fact that cheap offshore manufacturing is behind its success, Wal-Mart can point to the good it bestows on consumers and the economy at large.

Likewise, as Fortune 1,000 companies move more of their work offshore and push their suppliers and partners to do the same, they're opening up about the overall economic benefits. Dell's public persona is now tied as much to the efficiencies of its global supply chain as to the quality of its products and service. IBM, which will employ about 55,000 people in India by next year, more than double the number it had there last year, talks not just about lowering its costs and the costs of customers, but also about accelerating the innovation of entire industries. IBM's huge multinational customers, by extension, are hoping to promote their own Wal-Mart Effects by leveraging the software and services developed offshore.

Of course, not every organization is eager to play up its offshoring exploits. A Government Accountability Office report issued last week shows that two states--Arizona and New Jersey--still prohibit offshoring as part of state contracts, while most of the 43 states that offshore work to administer at least one federal program must justify why they're doing so. For the most part, the federal government doesn't specify what can and can't be done offshore, but it's in no hurry to publicize what it's up to outside the United States.

Regardless of how you view this issue, understand that even negative publicity is pumping up the market. Call this the Madonna Effect. Want to draw attention to something? Fan the flames of controversy around it.

The single biggest boost to the Indian IT and professional services trade over the past couple of years, according to a top exec of one of India's leading IT and professional services firms, is none other than CNN's Lou Dobbs. That's right. It seems that the country's pre-eminent offshoring basher has piqued corporate America's interest in this subject. But instead of dissuading the Fortune 1,000 from turning abroad for software development, payroll, business consulting, customer support, HR, legal, and other services, Dobbs got those companies to investigate what all the fuss is about--and, to his chagrin, many of them like what they're learning.

Meantime, with U.S. tech unemployment at only 3%, congressional leaders now are talking openly about allowing more foreign-born professionals to work in the United States under temporary visas. One proposal would raise the cap on H-1B visas from 65,000 a year to 115,000, with an option to increase the cap 20% annually.

Globalization has officially arrived. Even that bastion of progressive thought leadership, The New York Times, in the person of columnist Thomas Friedman, now realizes that the "flat" business world in which we live won't be structured country by country. We can disagree on whether that trend ultimately serves our long-term economic interests, but there's no disagreeing on whether it will happen. It's here, to stay.

Rob Preston,
VP/Editor In Chief
rpreston@cmp.com


To find out more about Rob Preston, please visit his page.

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