Few topics are as complex and controversial as offshore outsourcing. As one of the most influential forces shaping how business is done, outsourcing is at the center of domestic politics, especially in a presidential election year.
Let's face the facts: Due to productivity improvements, structural changes in the economy, and the economic downturn in the United States and Europe, there has been a steady rise in unemployment in these regions, especially among white-collar professionals. Since 2001 in the IT sector alone, according to the U.S. Bureau of Labor Statistics, more than 500,000 people in IT professions in the United States have lost their jobs.
Outsourcing is generating significant political opposition, with many states enacting laws in the past 12 months that prevent government agencies from outsourcing their IT solutions work to non-U.S. companies. The United States Senate has also gotten into the act by introducing a clause in its spending bill that would impose curbs on outsourcing government business overseas. This should not have a major impact on the outsourcing trend since government contracts account for less than 5% of the offshore market including manufacturing.
However, if these measures were to become applicable to the private sector, it would create significant disruptions for companies that are in the process of outsourcing projects to offshore vendors. We believe this is an unlikely worst-case scenario. However, political opposition could create some impediments to the offshore outsourcing trend, especially in an election year.
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