Buy Lines: Ban offshore outsourcing? Be careful what you wish for
- By Stan Soloway
- Feb 05, 2004
The issue of "offshoring" ? moving work from the United States to lower-cost locations overseas ? is taking off. Presidential candidates are talking about it; Congress has taken small steps toward banning it on federal contracts; and analysts of all stripes have weighed in with their perspectives.
The issue is complex and contentious, and lends itself to hyperbole and simplistic proposals.
For some companies, moving jobs offshore is an unavoidable reality. Global competition necessarily drives global responses and reactions. It is unfair to assert, as some have, that those companies are the Benedict Arnolds of corporate America.
In the face of a fiercely competitive international marketplace, these companies are doing what they must to succeed, including reducing redundancies and finding other more efficient ways to do business. Sometimes this involves moving work offshore.
Moreover, for many multinational companies, their effectiveness is often tied to their ability to provide integrated, global support to their customers.
Many analysts have suggested that the perceived problems associated with offshoring might be overstated. The McKinsey Global Institute concluded that U.S. companies save 58 cents for every dollar invested offshore, and typically reinvest those savings domestically.
Former Labor Secretary Robert Reich has argued that the actual number of jobs being taken offshore is only a small percentage of the technology work force and is likely to remain so for a wide range of practical business and security reasons. For instance, take note of Dell Inc.'s recent decision to close its call center in Bangalore, India.
Strategies are emerging for balancing the realities of global competitiveness with domestic employment concerns. For example, Barclays Bank and its principal union have entered into a collective bargaining agreement that allows for offshoring but also requires increased communication with the work force, re-training, placement support and more. Similar strategies are being developed or employed by a number of technology companies with both union and nonunion work forces.
For government contractors, the offshore issue has unique dimensions. For good and obvious reasons, the government always has a strong commitment to generate domestic employment. In fact, Congress has voted tentatively to bar the offshoring of federal jobs contracted-out as the result of some public-private competitions, and more hearings and bills are likely.
Meanwhile, several states are considering anti-offshoring legislation, and Pennsylvania recently enacted legislation offering tax incentives to companies that keep call centers in state.
Appealing as it may be to argue that taking jobs offshore should be banned on all government contracts, the reality is more complicated. The government market is not immune from the dynamics of the global economy and international trade.
On a practical level, the strategic integration of functions in many technology solutions can make it nearly impossible to segregate specific activities in a way that is either efficient or logical. Mandating such segregation could actually deny the government access to some of the very solutions and providers it seeks. Moreover, any consideration of banning offshoring on contracts also must include recognition of the higher prices the government likely will pay.
The government market is not identical to the commercial space, nor does it always face the same competitive pressures. Although moving jobs offshore happens rarely, if at all, on federal contracts, a legitimate debate and discussion of it is possible and appropriate.
The issue cannot be settled quickly or facilely. Congress should hold hearings, get input from real experts and consider carefully all the ramifications. On this issue, we should tread cautiously and think broadly.
Stan Soloway is president of the Professional Services Council and previously served as deputy undersecretary of defense. His e-mail is email@example.com.
Stan Soloway is a former deputy undersecretary of Defense and former president and chief executive officer of the Professional Services Council. He is now the CEO of Celero Strategies.