Debate Over Offshore Outsourcing Gets Louder

The volume turned up a notch last week at an outsourcing conference in New York held by the Strategic Research Institute. The conference, for the most part, extolled the benefits of IT outsourcing for customers and solution providers looking to leverage overseas labor rates that are often up to 50 percent lower than costs here in the United States. Not surprisingly, that's not sitting well with those Americans whose jobs have been displaced. And as they grow in numbers, so do their voices.

Demonstrators picketed outside the hotel where last week's conference was held, protesting the growing trend. The demonstrationmarked the first time that representatives of the Communications Workers of America, United Steel Workers and the IEEE, among others, had rallied together to protest offshore IT outsourcing. It certainly won't be the last. No doubt, to hear their plight is sobering. Protestor James Pace, a former programmer and systems analyst at Cigna, says he lost his $120,000-a-year job eight months ago because Cigna moved 200 IT positions overseas. Many other potential employers are moving work overseas; he now sells cars for $40,000 a year.

Protestor John Bauman lost his job as a project team leader at Northeast Utilities in 2002. While his job wasn't moved offshore, the trend has become so prevalent that he has yet to find a position in the IT industry. He recently held down a job as a FedEx driver during the holidays. "I know people who are selling insurance or even working at the supermarket just to make ends meet." Bauman is president of the Organization for the Rights of American Workers (www.toraw.org).

Clearly the demonstrators were heard and they definitely raised the level of sensitivity among those attending the conference. But the customer benefits of offshore outsourcing have the upper hand. Every dollar spent on offshore outsourcing generates $1.14 in economic benefits to the United States, according to a report released last year by McKinsey and Co. Moreover, those advocates of moving lower-level programming tasks offshore say it gives gives employees here opportunity to take on higher-level skills such as becoming business analysts, design experts, systems architects and database managers. "There are a lot of things that are very difficult to [outsource] offshore today," says Chris Brown, vice president of technology services at Cap Gemini Ernst and Young.

Pace, the IT professional turned car salesman, begs to differ. "I don't see where it's creating more jobs," says Pace, who volunteers his time as a legislative-affairs director for the group Rescue American Jobs (www.rescueamericanjobs.org). Toraw's Bauman doesn't refute the overall legality of using overseas solution providers. The problem, he says, is that there are corporations that bring employees in on L1 visas, which are considered intercompany transfers and are meant for companies actually doing business back and forth. "They are now using third-party vendors that only use those employees and they pay no taxes to the U.S."

The presidential candidates certainly have their own remedies in mind,namely offering tax incentives to keep jobs onshore. Presuming that such legislation goes through, chances are that most companies will chalk that up as the cost of doing business offshore.

Regardless of how it plays out, most pundits agree that offshore outsourcing will continue to accelerate this year and well into the future. Citing research by Forrester Research and the Bureau of Labor Statistics, McKinsey's widely discussed report says that 3.3 million jobs will go offshore by 2015, or 211,000 per year.

That's a lot of jobs. Somehow, though, those workers that seize this shift as an opportunity will be the ones to land on their feet and ideally thrive. Hopefully, employers and the government will do all they can to ease the transition. But as the history of globalization will attest, those who try to fight the trend outright are not going to win.