THE OUTSOURCING WAR:

LET ECONOMICS TRIUMPH OVER POLITICS

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US was one of the prime supporters of free trade. US was least bothered about the concerns of many other developing countries when they raised their voices against job losses as a result of the cheap exports. But, this aggressiveness seems to have mellowed down in recent days. It always propagated that inefficient industries should be closed. One of the primary tasks of the U.S. Trade Representative's office was to keep a check on the world markets. It assesses the markets which are opening up and which are getting closed as a result of high tariffs and other quantitative restrictions. Now, with the growing efficiency of developing countries in the service sectors, many jobs in these sectors are being transferred to developing countries (of which a major chunk is coming to India). US is worried about the increasing joblessness but that seems paradoxical. It hails globalization but when it comes to the developing countries trying to reap the benefits of globalization, it raises all sorts of issues.

Recently the US government has tightened the visa norms. The number of H-1B visas issued to Indian software programmers fell to 65,000 from 1,95,000 in 2003. Analysts feel that this would increase outsourcing of jobs further, particularly to India. According to Craig Barrett, the chief executive of Intel, granting of fewer visas would force the companies to shift their jobs to countries like India, where there is no dearth of qualified engineers.

Despite no ban from the federal authorities on outsourcing, many States have initiated the process of putting restrictions on outsourcing government work to foreign countries. The lawmakers in the state of New Jersey have proposed a bill that stops firms to outsource any government related work to a foreign country. Succumbing to the public pressure, the government was forced to bring back a helpline for welfare recipients that was being outsourced to India. Similarly, the state of Indiana withdrew a $ 15 million contract from an American subsidiary of an Indian IT firm. Commenting on the move, the Indiana governor said that contract was not in tune with Indiana's vision of providing better and more job opportunities to local companies and workers. However, analysts feel that these decisions have been influenced by political pressure in the backdrop of coming presidential elections in the US.

The Indian Response

The Indian BPO industry is not taking the outcry against outsourcing in the US seriously. Indian BPO firms are no longer just call centers. Their activities now cover marketing and knowledge based services. These companies are now aspiring to become strategic partners for US companies. There is a sudden spurt in the number of venture capitalists willing to invest in different areas. Though, some software companies can't hide their concern over the legislations banning government related off-shoring in the long-run but, for now they are clear that, these legislature will have negligible effect on the current contracts with the private companies. Reacting to the whole issue, Narayana Murthy, Chairman and Chief Mentor of Infosys said that there is no issue to worry about. He termed the outcry as normal. He suggested that rather than getting worried and agitated, Indians should put forward their point of view and explain the advantages of off-shoring. He said that the present uncertain economic situation is responsible for the concern over the job losses in the US.

Many analysts feel that the opposition to outsourcing may not end with the US presidential elections. With many of the American States, coming out with legislations banning government contracts to other countries, the issue of off-shoring is going to be alive. Conditions for off-shoring may become favorable with the improvement in the performance of the US economy.

Bibliography:

1. Relocating the back office, Economist, Dec 11th 2003
2. The great hollowing-out myth, Economist , Feb 19th 2004
3. Stolen jobs?, Economist Dec 11th 2003
4. Braving the BPO backlash, The Hindu, Feb 29 2004
5. Outsourcing outcry http://www.bizjournals.com/twincities/stories/2004/03/08/focus1.html
6. Anti-outsourcing outcry in U. S. normal - Infosys Chief , The Hindu, June 15th 2003
7.Indian outsourcing unscathed by US outcry Wednesday, March 05, 2003 http://www.ciol.com/content/news/trends/103030501.asp
8. Outsourcing Outcry: How your job may go abroad, Mar 28, 2004 http://www.nynewsday.com/business/printedition/ny-bz-jobs0328,0,6028421.story?coll=ny-business-print
9.Job Outsourcing Could Lead to Bush Defeat, Feb. 28, 2004 http://www.newsmax.com/archives/articles/2004/2/28/130830.shtml
10. Outsourcing ban will backfire: Greenspan Press Trust of India in Washington March 13, 2004
11.Outsourcing - India readies to state its case, Asia Times March 2, 2004 http://www.atimes.com/atimes/South_Asia/FC02Df04.html