Outsourcing is becoming an unstoppable juggernaut

InformationWeek Staff, Contributor

November 14, 2003

3 Min Read

David Post
Bradford C. Brown

This is the first of two columns on outsourcing. Post and Brown, lawyers that they are, have different views on the issue, so they will address it in point-counterpoint fashion. Brown presents his views first.

Outsourcing is becoming an unstoppable juggernaut.

It was therefore interesting to read the public warning issued by Andy Grove, the chairman of Intel, that the dominant position the United States has held in high technology is in deep trouble because software and technology-services businesses are being undermined by "cheap labor costs and strong incentives for new financial investments," according to a report in The Washington Post. A few days later in the same newspaper, Robert Reich, the former secretary of labor in the Clinton administration, said the opposite under the headline, "High-Tech Jobs Are Going Abroad! But That's OK." So who's right about outsourcing, Andy Grove or Robert Reich? Well, overseas outsourcing may be OK with Reich, but I agree with Grove.

Grove argues that the software and services industries are comparable to the steel and semiconductor industries. In both situations, the United States lost a large percentage of world market share until the federal government intervened. Like Reich, he understands that U.S. companies are under pressure to "cut costs and raise profits," but Grove worries that U.S. workers are being replaced. Reich, on the other hand, believes that worldwide innovation will generate high-tech jobs because "there's no infinite limit to the human mind. And there's no limit to the human needs that can be satisfied." True, but that isn't helping the displaced IT worker who has been looking for a job for the last nine months.

Grove, though, asks the hard question: "What is public policy?" He says further, "I'm hard put to find a document" pointing to any policy strategy. That's because there isn't one. He also points out that none of the presidential candidates has recognized the issue.

What's missing from the electoral debate is a discussion about a very important and fundamental public-policy issue for the IT sector: Is outsourcing something to worry about or just the result of a structural change caused by a global networked economy? Do we need to do something different to maintain the U.S. competitive advantage in technology? Isn't that an issue worthy of a national discussion at the highest levels of government?

Reich argues that to continue to lead, the federal government must continue to invest in basic R&D. If, however, the ultimate commercialized product or related service that results from the research is outsourced overseas, is that a productive use of taxpayer money?

Outsourcing is an issue the federal government needs to look at. Companies have a responsibility to their shareholders to maximize profit. Yet outsourcing raises a host of public-policy issues that haven't been addressed in that context, such as labor conditions, privacy, human rights, quality control, intellectual-property-rights enforcement, and national security. We may decide that outsourcing is fine, but before we do, we need more analysis and a broader public debate.

David Post is a Temple University law professor and senior fellow at the National Center for Technology and Law at the George Mason University School of Law. Reach him at [email protected]. Bradford C. Brown is chairman of the National Center for Technology and Law at the George Mason University School of Law. Reach him at [email protected].

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