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Home > Business > PTI > Report

Blocking outsourcing is retrogressive: Expert

November 03, 2003 17:37 IST

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.

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"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 Robert Reich, Brandeis University professor and former US labour secretary.

The fear about outsourcing is understandable, 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," 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 in the US. Already India has more than half a million IT professionals. It is adding two million college graduates a year, many of whom are attracted to the burgeoning IT sector.

He pointed out 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.

Outsourcing increases the possibilities of loss or theft of intellectual property, as well as sabotage, cyber terrorism, abuse by hackers and organised crime. As more IT is shipped abroad, the risks escalate. Therefore, smart companies will continue to keep their "core IT functions" in-house, and at home, he pointed out.

Further, as smart US companies outsource their more standard high-tech work, they are simultaneously shifting their in-house IT employees to more innovative, higher value-added functions, such as invention, creation, integration, key research and development and basic architecture.

"These core creative activities are at the heart of the companies' competitive future. They know they have to nourish them."

Another and most basic reason why high-tech work won't shift abroad is that high technology work entails the process of innovating. There is no finite limit to the ingenuity of the human mind. And there is no limit to human needs that can be satisfied.

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.

Bigger pay packages are also in store for the professions -- lawyers, bankers, venture capitalists, advertisers, marketers and managers -- who cluster around high-tech workers and who support innovative enterprises.

© Copyright 2006 PTI. All rights reserved. Republication or redistribution of PTI content, including by framing or similar means, is expressly prohibited without the prior written consent.

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Sub: What are the tangible benefits of Outsourcing to the U.S.?

What are the tangible benefits of Outsourcing to the U.S.? 1. Outsourcing SAVES jobs: When some jobs move, it allows companies to save several others ...

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