US Bid To Block Outsourcing Is A Retrogressive Step

Washington: | Updated: Nov 4 2003, 05:30am hrs
The US attempts to block outsourcing work to low cost destinations like India made no sense as the future lay in creation of newer jobs through technological changes, a leading American academic has said.

There is no sense for us to try to protect or preserve high-tech jobs in America or block efforts by American companies to outsource. Our economic future is wedded to technological change, and most of the jobs of the future are still ours to invent, said Brandeis University professor and former US labour secretary, Robert Reich.

The fear about outsourcing is understandable, Prof Reich said adding that the over half of Fortune 500 companies say they are outsourcing software development or expanding their own development centres outside the United States.

Sixty eight per cent of more than 100 IT executives who responded to a survey last spring by CIO magazine said their offshore contracts will increase this year. By the end of 2004, 10 per cent of all IT jobs at American IT companies and 5 per cent in non-IT companies will move offshore, according to Gartner Co, a research and analyses firm. The trend is not surprising, Prof Reich said.

American companies are under intense pressure to reduce costs, and foreigners can do a lot of high-tech jobs more cheaply than they can be done here. Already India has more than half a million IT professionals. It is adding 2 million college graduates a year, many of whom are attracted to the burgeoning IT sector.

He pointed out that Congress let the cap on H-1B visas, issued to foreign high-tech workers, to shrink from 195,000 to its old level of 65,000, in order to make sure that more high-tech jobs go to Americans. Prof Reich says outsourcing will be naturally dammed and hence, it will not go out of control.

Outsourcing increases the possibilities of loss or theft of intellectual property, as well as sabotage, cyber terrorism, abuse by hackers and organised crime. Therefore, smart companies will continue to keep their core IT functions in-house, and at home, he says.

Outsourcing also poses quality control problems. A Gartner survey of 900 big US companies showed that outsourcing increases for the majority of companies difficulty in communicating and meeting deadlines. So it is unlikely that very complex engineering and design can be done more efficiently abroad.

Further, alongside outsourcing standard hi-tech work, smart US companies are simultaneously shifting their in-house IT employees towards innovation and R&D. Another and most basic reason why high-tech work wont shift abroad is that high technology work entails the process of innovating. Hence, even as the supply of workers around the world capable of high-tech innovation increases, the demand for innovative people is increasing in an even faster pace in the US.

Recessions temporarily slow such demand, of course, but the long-term trend is towards greater rewards to people who are at or near the frontiers of information technology as well as biotechnology, nanotechnology and new-materials technologies.