- The Washington Times - Wednesday, January 21, 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, including Maryland, voted on bills last year that would ban the use of taxpayer money on contracts with foreign workers. Though none of those measures passed, the states and several others are expected to consider similar bills this year.

Democratic presidential candidate John Kerry says he would require overseas call centers to disclose their location — the New Economy version of the “made in America” label.

The Massachusetts senator said he wouldn’t ban outsourcing, but would provide tax credits to companies that maintain U.S. factories and “close every single loophole that gives companies incentives to move jobs abroad.”

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., lobbying group Information Technology Professionals Association of America, which compiles data from nearly 100 antioutsourcing Web sites. Mr. Kirwin, who started the group 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,” he 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.”

Indian politicians and business leaders are worried their jobs could be in jeopardy. They have taken notice of the brewing backlash in the United States, where companies are replacing software developers with Indians who earn roughly one-sixth of what the U.S. workers command.

They are now promoting the economic benefits of migrating technology jobs to low-wage workers in the developing world.

Fear of a backlash was a major issue at a technology summit this month in Hyderabad, India. Indiana’s failed contract with Tata Consultancy Services, and customer complaints that prompted Dell Inc. to reroute some help desk calls from India to Idaho in November, worry Indians, who have received billions of dollars in outsourcing contracts.

“This is a matter of concern for all of us,” India’s info-tech minister, Arun Shourie, told officials from 30 Asian countries at the summit. “We must come together to find a consensus approach to fight this backlash.”

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

In a 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 — particularly for cash-strapped states. Connecticut, Florida, Indiana, Maryland, Michigan, New Jersey, New York and North Carolina all saw antioutsourcing bills introduced in 2003, but none passed, according to the National Conference of State Legislatures.

Maryland Delegate Pauline Menes, a Democrat, yesterday reintroduced the bill that would ban outsourcing of government work.

Virginia Delegate David Nutter, a Republican, also recently introduced a bill that encourages companies to keep jobs in the country, but does not ban outsourcing. The measure gives contract preference to companies based in the United States.

“This is the classic policy dilemma for legislators,” said National Conference of State Legislatures 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.’ ”

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.

“There is no job that is America’s God-given right anymore,” HP Chief Executive Carly Fiorina said. “We have to compete for jobs.”

Executives say transferring highly skilled jobs to foreigners allows companies to engineer products inexpensively and lets Americans focus on emerging fields such as nanotechnology.

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

Staff writer Marguerite Higgins contributed to this story from Washington.

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