Why Dutch Call For More Offshore Outsourcing Means U.S. Businesses Have To Follow Suit - InformationWeek

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IT Leadership // IT Strategy
Commentary
10/25/2005
08:21 AM
Paul McDougall
Paul McDougall
Commentary
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Why Dutch Call For More Offshore Outsourcing Means U.S. Businesses Have To Follow Suit

Regular readers of my blogs will know that, for the most part, I'm pro-offshoring. It's a hot-button issue, so it's not surprising that my inbox is usually stuffed with E-mails calling me, at best, misguided and, at worst, Propaganda Minister for the One World Conspiracy.

Regular readers of my blogs will know that, for the most part, I'm pro-offshoring. It's a hot-button issue, so it's not surprising that my inbox is usually stuffed with E-mails calling me, at best, misguided and, at worst, Propaganda Minister for the One World Conspiracy.Many of the missives come from U.S. tech workers who have seen their job move to India. I am not unsympathetic to their plight. Fearing for one's livelihood is no picnic. Nonetheless, I find it astounding that so many smart, skilled, educated individuals refuse to accept the fact that we now live in a global economy and global economic change is affecting businesses all over the world. Companies--and individuals--that don't adapt will see their fortunes fall very quickly.

Let's take the banking industry. On Monday, Dutch minister for economic affairs, Lauren Jan Brinkhorst, said that he believes more Dutch firms should offshore work to India as a way to become more globally competitive. He also wants to make it easier for Indian IT workers to obtain employment in the Netherlands. That would be great news for a major Dutch Bank like ABN Amro, which already outsources some IT work to India.

Now, imagine a scenario in which ABN Amro could use legions of lower-cost offshore workers, but major U.S. banks were legislatively prohibited from doing so. With significantly higher operating costs, would they be able to compete in the global marketplace against ABN Amro?

Would their CIOs have the resources and flexibility to deploy the IT networks and applications that can make the difference between winning and losing crucial new markets like China and, yes, India itself? I don't think so. They would lose out to international institutions operating at the peak of economic efficiency, thanks in part to offshore labor.

Their share prices would drop, their businesses would contract, and, ultimately, they would cut more jobs than would be lost to offshoring. This is the way the new global game works. If U.S. firms stop offshoring to save jobs, more U.S. jobs would be lost in the long run.

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