Offshore outsourcing creates jobs, study says

A controversial study in the US says offshoring actually creates jobs in the long run. Grant Gross reports

Offshore outsourcing helps the US economy by lowering production costs for IT vendors and product costs for their customers and by helping to keep inflation low, according to a study released recently by the Information Technology Association of America (ITAA).

The economic benefits from offshore outsourcing will create more than 337,000 jobs by 2010, countering jobs lost through outsourcing, according to the study, undertaken by analyst firm Global Insight. ITAA says offshore outsourcing is a “net positive for American workers and the US economy”.

However, the Institute of Electrical and Electronics Engineers-USA (IEEE-USA), which represents US IT workers, disputed the study, saying Global Insight failed to factor in concerns about outsourcing such as national security and the future IT innovation in the US.

While the study seems to assume that displaced IT workers will quickly find jobs that’s often not the case, says IEEE-USA spokesman Ron Hira. A US Bureau of Labour Statistics survey last year found that of the 5.3 million US workers who lost their jobs between January 2001 and December 2003, 35% had not found jobs by January 2004, Hira says.

Combined with a push by the ITAA and many tech vendors for the US to increase the number of foreign workers allowed under H-1B visas, offshore outsourcing hurts many workers, Hira says.

“The bottom line result from the simulation is that US software workers are losers,” he says.

“And ITAA continues to undercut US software workers by arguing for more H-1Bs.”

However, Global Insight and outsourcing provider Sierra Atlantic are defending the study, saying the economic benefits of offshore outsourcing are real.

Large companies outsourcing their IT support and maintenance functions can eventually expect cost savings of 30-50%, while companies outsourcing portions of their new IT projects can expect savings of up to 40%, says GK Murthy, vice president of enterprise solutions at Sierra Atlantic.

The study links those savings with benefits to the overall economy. Currently, about a third of Sierra Atlantic customers tell Murthy they plan to hire additional workers with the savings they achieved with outsourcing, Murthy says.

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