ITAA panel debates outsourcing pros, cons

NEW YORK (09/25/2003) - Although the Bush administration sees good and bad in the recent trend toward offshore outsourcing, it has no plans to block companies from moving IT jobs to India or other countries. Instead, it plans to focus on developing an economic climate that helps create jobs in the U.S., an administration official said Wednesday.

"The answer to economic challenges is growth and innovation," said Chris Israel, a deputy assistant secretary at the U.S. Department of Commerce, speaking at an Information Technology Association of America (ITAA) panel on IT services outsourcing in New York. He cited the administration's support for increased investment in research and development, education and expanded trade authority for the president as part of its efforts to improve growth.

But Israel said he understands the ramifications of offshore outsourcing, such as downward pressure on salaries in the IT industry and the potential for a "reverse brain drain," where highly skilled and talented IT workers choose to work overseas instead of in the U.S. But he also noted that offshore development could have positive effects, such as driving prices down and productivity gains.

Although the Bush administration may be uncertain about the move to outsourcing and what it means for the IT industry, Phil Friedman, CEO of Computer Generated Solutions Inc., is not. Friedman, also a panelist at yesterday's event, said his New York-based company, a systems integrator and managed services provider, recently opened a technical services center with 300 jobs to fill.

The company got 3,000 applications in three days.

"That tells me the story," said Friedman, "We have plenty of talent. So we are not moving jobs (offshore) because we cannot find talent or we don't have the quality of talent in this country. But I'm wondering (if) in the rush to send jobs offshore, we, in some respects, are neglecting the moral responsibility we have with our employees.

"We need those technology skills. This country is making productivity gains only because of the technology we've been able to implement, and all of a sudden, we are abandoning those employees, and it's bothersome," said Friedman.

He said the offshore trend could also affect national defense. "One morning we will wake up 10 years from now and we will not have the skills needed to support the infrastructure of this country," said Friedman.

Countering that view was Gordon Coburn, senior vice president and chief financial officer at Cognizant Technology Solutions Corp., a Teaneck, N.J.-based offshore provider, who said the impetus behind IT offshore work parallels what has happened in manufacturing. Pointing to companies that tried to keep all their manufacturing in the U.S., "a lot of them don't exist anymore," he said.

Offshore work allows firms to remain competitive, said Coburn, freeing up money for R&D and marketing "to grow their business faster and therefore hire more people in the U.S."

"For a U.S. company to take the approach that 'No, I have to do it all here because I have to protect the jobs, in the end, it's going to cost more jobs here because they're not going to survive, because they won't be price-competitive," said Coburn. "On a long-term basis, I think that by our clients leveraging the offshore model, they are actually protecting American jobs."

Congress and the Bush administration could have an effect on offshore work in a number of ways: by using their power over regulated industries, such as financial services, to push companies to keep jobs in the U.S.; by passing legislation that sets "buy American" standards for federally purchased IT products; and by raising national security issues. The U.S. General Accounting Office is already examining some of those issues.

Israel said it's difficult to separate out the number of IT jobs lost because of outsourcing from those lost because of the industry downturn. He said there isn't "statistical data that shows one-to-one correlations."

Harris Miller, president of the Arlington, Va.-based ITAA, said that while the amount of offshore work remains relatively small given the size the industry, several analyst studies are predicting a sharp rise in offshore development. "The trends are getting a lot of attention," he said.

Priscilla Tate, director of the Technology Managers Forum, a group representing IT executives of large companies, argued that offshore development is taking a toll on U.S. workers. "Higher skilled jobs are going away," said Tate. "There are people who will not get jobs in the IT industry again -- they just have been replaced."

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