Executives face political backlash over outsourcing

Monday, January 19, 2004

SAN JOSE, Calif. -- Executives from Silicon Valley to Wall Street are adamant that shifting white-collar jobs from the United States to developing countries is good business, but a backlash is brewing.

Indiana's state government canceled a $15 million contract with an Indian consulting firm in November. And eight states voted on bills last year that would ban the use of taxpayer money on contracts with foreign workers. Though none of those measures passed, those states and several others are expected to consider similar bills this year.

Outsourcing critics say Americans have been complacent about the loss of technology jobs to overseas workers since the trend began in the late 1990s. But with elections in both the United States and India, they believe 2004 could be a turning point.

"Politicians can't outsource the vote," said Scott Kirwin, founder of the Wilmington, Del.-based lobbying group Information Technology Professionals Association of America, which compiles data from nearly 100 anti-outsourcing Web sites. Kirwin, who launched ITPAA after a large investment bank asked him to train the Indian worker who then replaced him, said only broad consumer revolt will reverse the trend.

"In the 1980s, many people boycotted companies that did business with the apartheid regime in South Africa," Kirwin said. "Many of those same people have more money today and don't like doing business with companies from countries that work against us politically, like France, or economically, like India and China. Consumer activism is an important part of putting the brakes on the outsourcing movement."

After his software development job was terminated in 2002, Florida's Mike Emmons decided to run for Congress on an anti-outsourcing agenda. His meager campaign funds come mostly from unemployed programmers who visit his Web site, OutsourceCongress. org. He is trying to get on the ballot for the Democratic primary this summer.

"This is hitting medical transcribers, financial analysts, radiologists, everyone," said Emmons, 41. "If you work at a desk, beware -- the foreigners are coming after your job."

Exceptions to rule

Business experts say India needn't worry; Indiana and Dell are high-profile exceptions to what has become the rule of outsourcing.

In a research report in mid-2003, Gartner Inc. predicted that at least one out of 10 technology jobs in the United States would move overseas by the end of 2004. Forrester Research predicts at least 3.3 million white-collar jobs and $136 billion in wages will shift from the United States to low-cost countries by 2015.

"The idea of a backlash makes for great press, and it makes for great rhetoric in an election year," said John C. McCarthy, vice president of research at Forrester. "But the reality is that every day there's a new customer with new cost savings from this. The economics are hugely compelling, and it's not going away."

The cost savings are tough to ignore for cash-strapped states. Connecticut, Florida, Indiana, Maryland, Michigan, New Jersey, New York and North Carolina all saw anti-outsourcing bills introduced in 2003, but none passed, according to the National Conference of State Legislatures.

"This is the classic policy dilemma," said NCSL research analyst Justin Marks. "You've got a $200 billion deficit for states, and they can save a lot of money by outsourcing. But the economy has lost a ton of jobs, and legislators are saying, 'I don't want to see more jobs in my district go away."'

Indiana Gov. Joe Kernan said he'd like to see "preference" for companies from his state in government contracts. In an interview, Kernan said the contract that Tata won shouldn't have been such an omnibus. No single Indiana firm could have met all its requirements, which included everything from speedier unemployment claims processing to 24-hour accessibility to government records.

Tata's bid was about $8 million lower than bids from two U.S. firms. Indiana officials subsequently restructured the contract, which is still open, to let Indiana companies partner with universities or other consulting firms and compete against multinationals.

"Hopefully some Indiana companies will be able to participate, but there are no guarantees," Kernan said. "We're not closing the door to companies from Bombay to Los Angeles."

Earlier this month, executives from Dell, Intel Corp., IBM Corp., Hewlett-Packard Co. and other companies urged the Bush administration to maintain its hands-off approach and not regulate outsourcing.

"There is no job that is America's God-given right anymore," HP chief Carly Fiorina said. "We have to compete for jobs."

Paid one-sixth of U.S. rate

Executives say transferring highly paid, highly skilled jobs to foreigners allows companies to engineer products inexpensively and lets Americans focus on emerging fields such as nanotechnology. The average American programmer commands $60 an hour; in India the rate is roughly one-sixth of that.

Proponents also say outsourcing develops work forces -- and in turn, consumers with buying power -- in fast-growing markets such as China, India and Russia.

Despite that daunting economic logic, outsourcing opponents say they hope to educate the public about the true cost of globalization.

"People are tired of everything being based upon the bottom line, where companies are getting richer and everyone else is losing out," said Marcus Courtney, organizer of the Seattle-based Washington Alliance of Technology Workers, which has 370 dues-paying members and 16,000 people on a free electronic mailing list.

"Indiana can save some money if they go with the Indian firm, but there's a cost to that savings -- it could put state residents out of work. Free trade is not free."

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