March 30, 2004 6:00 AM PST

Report: Offshore IT outsourcing helps economy

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In the latest salvo in a debate over sending tech work overseas, a report sponsored by an industry group concludes that the practice is good for the U.S. economy and its workers.

Offshore outsourcing of software and information technology services tasks not only is boosting the U.S. gross domestic product but also helping to generate U.S. jobs, including positions in the IT sector, according to the report. Released Tuesday, it was prepared by research firm Global Insight and sponsored by the Information Technology Association of America trade group.

ITAA's members include tech giants IBM, Electronic Data Systems and Accenture. These companies are among those that are locating operations in lower-wage countries such as India.

"While offshore IT software and services outsourcing has displaced and will continue to displace workers in IT software and services occupations, increased economic activity creates a wide range of new jobs--both IT and non-IT," the report states. "As the benefits compound over time, the U.S. economy operates more efficiently, achieves a higher level of output, creates more than twice the number of jobs than are displaced, and increases the average real wage."

The study comes as the practice of farming out high-skilled work to low-wage countries has become a hot-button issue and part of the U.S. presidential campaign. So-called offshoring also is pitting companies against workers. Technology professionals group IEEE-USA recently published a position paper with a dramatically different conclusion from that of the ITAA study. IEEE-USA said the outsourcing of high-wage jobs to low-wage countries poses a serious, long-term challenge to the United States' technological leadership, economic vitality and military security.

According to the new ITAA-sponsored report, 2.3 percent of total IT software and services spending by U.S. corporations in 2003 was devoted to offshore outsourcing activities. That figure will rise to 6.2 percent in 2008, the study says. During that same time period, total savings from offshoring are expected to climb from $6.7 billion to $20.9 billion.

The cost savings and use of offshore resources "lower inflation, increase productivity, and lower interest rates. This boosts business and consumer spending and increases economic activity," the report states.

The study says the benefits of offshore IT outsourcing added $33.6 billion to real gross domestic product in the United States last year. By 2008, real GDP is expected to be $124.2 billion higher than it would be in an environment in which offshore IT software and services outsourcing does not happen, according to the report.

The "incremental economic activity" from offshore IT outsourcing created more than 90,000 net new jobs in 2003, and is expected to create 317,000 net new jobs in 2008, according to the report.

Shipping software and IT services work abroad leads to higher real wages for U.S. workers through lower inflation and higher productivity, according to the study. Real wages were 0.13 percent higher in 2003 and are expected to be 0.44 percent higher in 2008, the study states.

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BALONEY says displaced programmer
I'm one of those IT professionals displaced by overseas outsourcing. I've been unemployed since November 2002. There are no jobs for me. I can't get a job in any other industry because no one wants to hire a displaced computer programmer. Don't hand me that baloney about selling out to foreign countries being good for the US economy.
Posted by (2 comments )
Reply Link Flag
Offshoring baloney
I agree with you, even though my job wasn't sent offshore. It's easy to say offshoring will double the number of jobs, because those who lose their jobs have to find another field to work in. In an effort to save the almighty dollar, companies will choose the easiest solution and not even consider what the effect is on the employees. Up until 40-50 years ago, a company would invest in a person and that person would invest in the company. Gold watches for retirement may be looked at now as a joke, but it at least showed the company thought enough of the person and their contribution to congratulate them on their service to the company. Too bad that doesn't happen now, unless you are an exec, then you get millions of dollars in stock and other benefits.

Maybe someone should suggest all telemarketer jobs should be sent offshore too.
Posted by kscherry2000 (8 comments )
Link Flag
BALONEY says displaced programmer
I'm one of those IT professionals displaced by overseas outsourcing. I've been unemployed since November 2002. There are no jobs for me. I can't get a job in any other industry because no one wants to hire a displaced computer programmer. Don't hand me that baloney about selling out to foreign countries being good for the US economy.
Posted by (2 comments )
Reply Link Flag
Offshoring baloney
I agree with you, even though my job wasn't sent offshore. It's easy to say offshoring will double the number of jobs, because those who lose their jobs have to find another field to work in. In an effort to save the almighty dollar, companies will choose the easiest solution and not even consider what the effect is on the employees. Up until 40-50 years ago, a company would invest in a person and that person would invest in the company. Gold watches for retirement may be looked at now as a joke, but it at least showed the company thought enough of the person and their contribution to congratulate them on their service to the company. Too bad that doesn't happen now, unless you are an exec, then you get millions of dollars in stock and other benefits.

Maybe someone should suggest all telemarketer jobs should be sent offshore too.
Posted by kscherry2000 (8 comments )
Link Flag
Sure...that right...and I am a martian!
Thats just like the trickle down theory, or pee theory. Big corps making more money will spend it on their employees and order more goods and services.

This translates into more money in their wallet and hiring more domestic help (Illegal aliens) to work at their bigger house.

While the American people (esp. the IT industry) are eating cat food to make ends meet. I kinda like the tuna myself.

Do they think we are that stupid? I guess the masses are 'cause they eat this **** they feed them as real data all the time.

WMD's anyone?
Posted by (2 comments )
Reply Link Flag
LOL!!!
You like the tuna ... o-m-g!

Anyway, you are right about American people eating this crap for dinner. IMHO, the American public, for the most part, are nothing more than a herd of sheep. Sheep willing to be led because they have lost the ability to think for themselves. I personally do not watch TV ... ever. Did not watch it as a kid either. I am not interested in being "fed". I am a free thinker and capable of free and intelligent thought. I am an American, but not your average American sheep ... willing to be led to slaughter. Don't get me wrong, I am damn proud to be an American ... just don't try to fit me into a mold.
Posted by (6 comments )
Link Flag
Sure...that right...and I am a martian!
Thats just like the trickle down theory, or pee theory. Big corps making more money will spend it on their employees and order more goods and services.

This translates into more money in their wallet and hiring more domestic help (Illegal aliens) to work at their bigger house.

While the American people (esp. the IT industry) are eating cat food to make ends meet. I kinda like the tuna myself.

Do they think we are that stupid? I guess the masses are 'cause they eat this **** they feed them as real data all the time.

WMD's anyone?
Posted by (2 comments )
Reply Link Flag
LOL!!!
You like the tuna ... o-m-g!

Anyway, you are right about American people eating this crap for dinner. IMHO, the American public, for the most part, are nothing more than a herd of sheep. Sheep willing to be led because they have lost the ability to think for themselves. I personally do not watch TV ... ever. Did not watch it as a kid either. I am not interested in being "fed". I am a free thinker and capable of free and intelligent thought. I am an American, but not your average American sheep ... willing to be led to slaughter. Don't get me wrong, I am damn proud to be an American ... just don't try to fit me into a mold.
Posted by (6 comments )
Link Flag
Figures Don't Lie?
There is an old saying: figures don't lie, but liars can sure figure. As most statisticians can attest, what questions are asked and how the questions are stated can skew results. Seeing the sponsors of the analysis, there is no doubt as to the outcome. These do not want to be cited as harming our economy, even though they may, in fact, be doing that. Sure, some jobs may be created here, but just how many hamburger stands can the country support?
Posted by (2 comments )
Reply Link Flag
Figures Don't Lie?
There is an old saying: figures don't lie, but liars can sure figure. As most statisticians can attest, what questions are asked and how the questions are stated can skew results. Seeing the sponsors of the analysis, there is no doubt as to the outcome. These do not want to be cited as harming our economy, even though they may, in fact, be doing that. Sure, some jobs may be created here, but just how many hamburger stands can the country support?
Posted by (2 comments )
Reply Link Flag
Unbelievable
This was definitely an interesting article.

"it was prepared by research firm Global Insight and sponsored by the Information Technology Association of America trade group.

ITAA's members include tech giants IBM, Electronic Data Systems and Accenture. These companies are among those that are locating operations in lower-wage countries such as India."

I wonder how biased a company can be when they're sitting in the pockets of the companies they report on.

I especially loved the part about lower interest rates and lowered prices...none of that will matter when Americans can't find work because all the jobs are overseas. This kind of move only helps one social class - big business. That's all. It doesn't help the working class citizens.

Moving the IT jobs overseas and then creating a report like this is a slap in the face of the american people. We're good enough to buy your product, but we're not good enough to work for you...oh and they must think we're complete idiots as well if they actually think anyone with any sense will believe this crap.
Posted by (2 comments )
Reply Link Flag
hear hear Amanda ...
That's all ... just wanted her to know that she is right on the money. My reply said much the same thing.
Posted by (6 comments )
Link Flag
You said it!
I agree with you completely. I can virtually guarantee you that if party A says one thing and party B says the diametric opposite, the truth lies almost exactly in the middle of the two arguments.
Offshoring is good for some, bad for others. End of story.
Posted by flatseven (2 comments )
Link Flag
Unbelievable
This was definitely an interesting article.

"it was prepared by research firm Global Insight and sponsored by the Information Technology Association of America trade group.

ITAA's members include tech giants IBM, Electronic Data Systems and Accenture. These companies are among those that are locating operations in lower-wage countries such as India."

I wonder how biased a company can be when they're sitting in the pockets of the companies they report on.

I especially loved the part about lower interest rates and lowered prices...none of that will matter when Americans can't find work because all the jobs are overseas. This kind of move only helps one social class - big business. That's all. It doesn't help the working class citizens.

Moving the IT jobs overseas and then creating a report like this is a slap in the face of the american people. We're good enough to buy your product, but we're not good enough to work for you...oh and they must think we're complete idiots as well if they actually think anyone with any sense will believe this crap.
Posted by (2 comments )
Reply Link Flag
hear hear Amanda ...
That's all ... just wanted her to know that she is right on the money. My reply said much the same thing.
Posted by (6 comments )
Link Flag
You said it!
I agree with you completely. I can virtually guarantee you that if party A says one thing and party B says the diametric opposite, the truth lies almost exactly in the middle of the two arguments.
Offshoring is good for some, bad for others. End of story.
Posted by flatseven (2 comments )
Link Flag
Yes, but what type of "value" is created?
If by value you mean increasing the GDP and corporate profits then the answer is yes. However, this is a double-edged sword.

The jobs that are created locally are more entry-level jobs. Employerss are now demanding that someone with over 10 years of experience accept entry level income wages due to depreciation of the job value by outsourcing to countries with lower income levels.

I will concede that a global economy is the next logical step in economic evolution, but who protects the local interests?

The politicians protect the corporate interests and vice versa. So who protects the interests of the displaced in this "new economy"?
Posted by (2 comments )
Reply Link Flag
Yes, but what type of "value" is created?
If by value you mean increasing the GDP and corporate profits then the answer is yes. However, this is a double-edged sword.

The jobs that are created locally are more entry-level jobs. Employerss are now demanding that someone with over 10 years of experience accept entry level income wages due to depreciation of the job value by outsourcing to countries with lower income levels.

I will concede that a global economy is the next logical step in economic evolution, but who protects the local interests?

The politicians protect the corporate interests and vice versa. So who protects the interests of the displaced in this "new economy"?
Posted by (2 comments )
Reply Link Flag
Unreal ...
This article is nothing more than a double-talking smoke-screen. Since we are a free-speech and pro-debate-every-f'ing-issue-until-it-bleeds kind of "society?" ... well, you get my point. Both sides of every issue must be thoroughly explored and beat to death - just like the lobbyists in DC whose only purpose is to protect the selfish interests of the the big businesses. Those same big businesses pay the big bucks to those lobbyists. So, what's to say that they aren't paying someone to write this assinine drivel about how offshoring is good for the economy? ...don't even go there. My question is this: does C/Net buy this crappola?!?! ... because you printed it, you buy into it? Or, is it just courageous journalism ... to present arguments from both sides --- true or untrue, smoke screen or not, paid-for-blither or not, fact or fiction ... All I know is that anybody can make up a bunch of numbers to "support" anything.
Posted by (6 comments )
Reply Link Flag
Unreal ...
This article is nothing more than a double-talking smoke-screen. Since we are a free-speech and pro-debate-every-f'ing-issue-until-it-bleeds kind of "society?" ... well, you get my point. Both sides of every issue must be thoroughly explored and beat to death - just like the lobbyists in DC whose only purpose is to protect the selfish interests of the the big businesses. Those same big businesses pay the big bucks to those lobbyists. So, what's to say that they aren't paying someone to write this assinine drivel about how offshoring is good for the economy? ...don't even go there. My question is this: does C/Net buy this crappola?!?! ... because you printed it, you buy into it? Or, is it just courageous journalism ... to present arguments from both sides --- true or untrue, smoke screen or not, paid-for-blither or not, fact or fiction ... All I know is that anybody can make up a bunch of numbers to "support" anything.
Posted by (6 comments )
Reply Link Flag
This message brought to you by...
...the same double-talkers who tell us that technology advances create more jobs. "We're going to have the same number of jobs at the same wages--we're just investing $1 million in new automated processes because we think it's so nifty."

I guess the new line is "Eliminating jobs actually CREATES jobs," which means they're not even going to the trouble of trying to deceive us anymore. Just lying in our faces and defying us to stop them.
Posted by gpm (5 comments )
Reply Link Flag
This message brought to you by...
...the same double-talkers who tell us that technology advances create more jobs. "We're going to have the same number of jobs at the same wages--we're just investing $1 million in new automated processes because we think it's so nifty."

I guess the new line is "Eliminating jobs actually CREATES jobs," which means they're not even going to the trouble of trying to deceive us anymore. Just lying in our faces and defying us to stop them.
Posted by gpm (5 comments )
Reply Link Flag
In-n-out Burger, here I come!
I'm a recent graduate, looking to make good on the twenty grand I borrowed to get through school. See I come from a poor family and mommy and daddy couldn't pay for me. I had to work my way through school, and I'm not bitter about that--really. But cripes, I'd like to be employable for a change. If you'd told me in 1998 that studying computer science and Japanese would be a waste of time... oh well. There's always In-n-out Burger. They pay 8$/hr to start and have benefits. So that's not much worse than the outfits I've seen lately that want to pay $10 A FREAKIN' HOUR for a degreed programmer. I call it "On-shore offshoring." Hell, why send the job all the way to India? Let's just pay Americans as if they were Indians, we'll save even more!
Hooray.
Posted by (2 comments )
Reply Link Flag
Congratulations on your new manufacturing job, John! [NT]
[NT]
Posted by gpm (5 comments )
Link Flag
In-n-out Burger, here I come!
I'm a recent graduate, looking to make good on the twenty grand I borrowed to get through school. See I come from a poor family and mommy and daddy couldn't pay for me. I had to work my way through school, and I'm not bitter about that--really. But cripes, I'd like to be employable for a change. If you'd told me in 1998 that studying computer science and Japanese would be a waste of time... oh well. There's always In-n-out Burger. They pay 8$/hr to start and have benefits. So that's not much worse than the outfits I've seen lately that want to pay $10 A FREAKIN' HOUR for a degreed programmer. I call it "On-shore offshoring." Hell, why send the job all the way to India? Let's just pay Americans as if they were Indians, we'll save even more!
Hooray.
Posted by (2 comments )
Reply Link Flag
Congratulations on your new manufacturing job, John! [NT]
[NT]
Posted by gpm (5 comments )
Link Flag
Outsourcing good for the economy???
Yes, if you subscribe to the alice-in-wonderland business model.

Word of caution for anyone interested in outsurcing programmers. You will probably spend alot of much time and money correcting errors and debugging.
Posted by (2 comments )
Reply Link Flag
Outsourcing good for the economy???
Yes, if you subscribe to the alice-in-wonderland business model.

Word of caution for anyone interested in outsurcing programmers. You will probably spend alot of much time and money correcting errors and debugging.
Posted by (2 comments )
Reply Link Flag
Outsourcing
Something to think about...If all the jobs are outsourced and the companies are making products who will buy those products? The ones who's jobs have been moved overseas? With what money? No job no money. How about the ones with the jobs? Well they can't afford the product with their wage. So the product sits on the shelf and the company dies because nobody is buying the product. America dies and the Indians buy it out. It will become a New India....
Posted by (2 comments )
Reply Link Flag
Outsourcing
Something to think about...If all the jobs are outsourced and the companies are making products who will buy those products? The ones who's jobs have been moved overseas? With what money? No job no money. How about the ones with the jobs? Well they can't afford the product with their wage. So the product sits on the shelf and the company dies because nobody is buying the product. America dies and the Indians buy it out. It will become a New India....
Posted by (2 comments )
Reply Link Flag
Cheaper goods and services
It seems like all the experts think that outsourcing will result in cheaper goods and services. While this may indeed be true they seem to have overlooked the fact that it won't matter that goods and services are cheaper because no one will have the money to purchase said goods and services.

Bush seems to think the answer is re-training for other jobs. What if we don't want other jobs? I like being in the IT industry and while there are other things I could do the fact is I chose this and I want to stay in this field.

Also has anyone noticed that all the people spouting this as a good thing for the US are the ones who have nothing currently to fear from this.

I do believe a global economy is a good idea but we keep outsourcing else where and no one is outsourcing to us. It would be different if we had some equallity across the board. Like if they had to pay the indians at least minimum wage (U.S.) with cost of living increases and benifits. Then it wouldn't be quite as attractive or if they could only outsource a certain percentage of their companys personel.

Sorry for the rant,

~Petaris
Posted by Petaris (2 comments )
Reply Link Flag
Cheaper goods and services
It seems like all the experts think that outsourcing will result in cheaper goods and services. While this may indeed be true they seem to have overlooked the fact that it won't matter that goods and services are cheaper because no one will have the money to purchase said goods and services.

Bush seems to think the answer is re-training for other jobs. What if we don't want other jobs? I like being in the IT industry and while there are other things I could do the fact is I chose this and I want to stay in this field.

Also has anyone noticed that all the people spouting this as a good thing for the US are the ones who have nothing currently to fear from this.

I do believe a global economy is a good idea but we keep outsourcing else where and no one is outsourcing to us. It would be different if we had some equallity across the board. Like if they had to pay the indians at least minimum wage (U.S.) with cost of living increases and benifits. Then it wouldn't be quite as attractive or if they could only outsource a certain percentage of their companys personel.

Sorry for the rant,

~Petaris
Posted by Petaris (2 comments )
Reply Link Flag
This study is ludicrous.
What do you expect study results to be when one is reviewing one's self? The sponsors of the study want to escape criticism for their outsourcing practices, so they created a study to say it was economically desirable. It may be economically desirable to them, but certainly not the overall economy. To say that this practice "boosts business and consumer spending and increases economic activity" is absurd. People with no jobs or lower paying jobs certainly cannot buy more. The rich business executives at IBM, EDS and Accenture can buy more and hire more domestic workers. To say that "Cost savings and use of offshoure resources increases productivity" is outrageous. It may increase productivity in other countries, but U.S. workers cannot exactly be more productive if they are unemployed. I'm sure the Republicans needed a study to justify this outsourcing practice for election time. I don't have the time to research it, but it would be very interesting to know who Global Insight really is. Probably a subsidiary of Haliburton.
Posted by (2 comments )
Reply Link Flag
This study is ludicrous.
What do you expect study results to be when one is reviewing one's self? The sponsors of the study want to escape criticism for their outsourcing practices, so they created a study to say it was economically desirable. It may be economically desirable to them, but certainly not the overall economy. To say that this practice "boosts business and consumer spending and increases economic activity" is absurd. People with no jobs or lower paying jobs certainly cannot buy more. The rich business executives at IBM, EDS and Accenture can buy more and hire more domestic workers. To say that "Cost savings and use of offshoure resources increases productivity" is outrageous. It may increase productivity in other countries, but U.S. workers cannot exactly be more productive if they are unemployed. I'm sure the Republicans needed a study to justify this outsourcing practice for election time. I don't have the time to research it, but it would be very interesting to know who Global Insight really is. Probably a subsidiary of Haliburton.
Posted by (2 comments )
Reply Link Flag
Offshore the authors jobs
The authors jobs writing this garbage should be offshored to India. I'm sure Indian spin doctors can write the same crap for less.

Who do they think is going to believe this stuff? I nominate this article for the spin doctor of the year award.
Posted by (2 comments )
Reply Link Flag
 

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