05-03-2004, 08:06 PM
High-Tech Group: Outsourcing Threat Is 'Exaggerated'
By Paul Villella
April 1, 2004
A growing number of U.S. companies are sending work overseas in search of lower costs. India, with many educated English speakers, is a leading destination for the services sector. This "offshore outsourcing" is getting blamed for layoffs and slow job growth.
Offshore outsourcing has emerged as an issue in the Presidential campaign, as outsourcing spreads from the manufacturing sector into the service economy and affecting white-collar workers, many with higher wages and skill levels.
If youâre running a U.S. company and are sending some of your jobs overseas, you're what Democratic Presidential Candidate John Kerry calls a "Benedict Arnold CEO".
Threat Downplayed
Now, the American Electronics Association (AEA), the nation's largest high-tech business group, has sparked controversy by downplaying the threat posed to American jobs by offshore outsourcing.
AEA represents more than 3,000 companies with 1.8 million employees. Its 3,000+ member companies -- many of them with operations in the Washington area -- span the high-technology spectrum, from software, semiconductors, medical devices and computers to Internet technology, advanced electronics and telecommunications systems and services.
In a new white paper, "Offshore Outsourcing in an Increasingly Competitive and Rapidly Changing World," the AEA says that offshore outsourcing is just one part of todayâs dramatically changing and increasingly competitive world.
Outsourcing Not to Blame
The AEA argues that the weak international and domestic economy and productivity improvements are the primary cause of the lost jobs over the last three years -- not outsourcing. "Changes in the international marketplace are posing far more significant new competitive challenges for U.S. companies than is offshore outsourcing," the AEA says.
A recent Forrester Research study indicates that the U.S. service industry will send more than 3 million jobs overseas by 2015. Others cite even more unsettling numbers: "Nationwide, about 14 million jobs are in job categories that could be outsourced overseas fairly easily," says economist Cynthia Kroll of the University of California, Berkeley.
The AEA acknowledges that while some U.S. workers will be hurt, offshore outsourcing is likely to be a long-term benefit for the United States. If protectionist legislation should emerge from the states or Congress, high tech, as the largest exporter, stands to lose the most, the group says.
Global Competition Cited
"Today's world is increasingly competitive. Given the intense competition, many of the companies that outsource jobs overseas have no alternative, since that is exactly what their competitors are doing. Failure to do so will result in an even greater loss of jobs than would be lost to offshoring alone," says William Archey, AEAâs President and CEO.
"The decline of the world's economy, the end of the high-tech bubble, and dramatically improving productivity rates are the largest factors," Archey says. "The United States experienced a similar anxiety to offshore outsourcing in the late 1980s and early 1990s when there was a common view that Japan was going to take over the world. It didn't."
AEA argues that offshore outsourcing actually offers long-term benefits for the United States. For instance, it will force the U.S. labor market to become more competitive, AEA says.
"If protectionist legislation should emerge from the states or Congress, high-tech, as the largest exporter, stands to lose the most," says the AEAâs Archey, who claims that such legislative action could jeopardize $171 billion in U.S. high-tech exports.
Offshore outsourcing is an increasingly contentious issue. Companies need to be extremely careful when deciding on an outsourcing strategy. Executives need to understand and evaluate the potential risks and rewards of outsourcing to determine if it is right for their business â and their employees.
Paul Villella is President & CEO of HireStrategy, a full-service professional staffing firm providing executive search, contract and permanent placement solutions for companies and career management for individuals in the specialty skill areas of technology, sales, finance and accounting. HireStrategyâs customers include Fortune 500, middle market and emerging growth companies across diverse industries.
By Paul Villella
April 1, 2004
A growing number of U.S. companies are sending work overseas in search of lower costs. India, with many educated English speakers, is a leading destination for the services sector. This "offshore outsourcing" is getting blamed for layoffs and slow job growth.
Offshore outsourcing has emerged as an issue in the Presidential campaign, as outsourcing spreads from the manufacturing sector into the service economy and affecting white-collar workers, many with higher wages and skill levels.
If youâre running a U.S. company and are sending some of your jobs overseas, you're what Democratic Presidential Candidate John Kerry calls a "Benedict Arnold CEO".
Threat Downplayed
Now, the American Electronics Association (AEA), the nation's largest high-tech business group, has sparked controversy by downplaying the threat posed to American jobs by offshore outsourcing.
AEA represents more than 3,000 companies with 1.8 million employees. Its 3,000+ member companies -- many of them with operations in the Washington area -- span the high-technology spectrum, from software, semiconductors, medical devices and computers to Internet technology, advanced electronics and telecommunications systems and services.
In a new white paper, "Offshore Outsourcing in an Increasingly Competitive and Rapidly Changing World," the AEA says that offshore outsourcing is just one part of todayâs dramatically changing and increasingly competitive world.
Outsourcing Not to Blame
The AEA argues that the weak international and domestic economy and productivity improvements are the primary cause of the lost jobs over the last three years -- not outsourcing. "Changes in the international marketplace are posing far more significant new competitive challenges for U.S. companies than is offshore outsourcing," the AEA says.
A recent Forrester Research study indicates that the U.S. service industry will send more than 3 million jobs overseas by 2015. Others cite even more unsettling numbers: "Nationwide, about 14 million jobs are in job categories that could be outsourced overseas fairly easily," says economist Cynthia Kroll of the University of California, Berkeley.
The AEA acknowledges that while some U.S. workers will be hurt, offshore outsourcing is likely to be a long-term benefit for the United States. If protectionist legislation should emerge from the states or Congress, high tech, as the largest exporter, stands to lose the most, the group says.
Global Competition Cited
"Today's world is increasingly competitive. Given the intense competition, many of the companies that outsource jobs overseas have no alternative, since that is exactly what their competitors are doing. Failure to do so will result in an even greater loss of jobs than would be lost to offshoring alone," says William Archey, AEAâs President and CEO.
"The decline of the world's economy, the end of the high-tech bubble, and dramatically improving productivity rates are the largest factors," Archey says. "The United States experienced a similar anxiety to offshore outsourcing in the late 1980s and early 1990s when there was a common view that Japan was going to take over the world. It didn't."
AEA argues that offshore outsourcing actually offers long-term benefits for the United States. For instance, it will force the U.S. labor market to become more competitive, AEA says.
"If protectionist legislation should emerge from the states or Congress, high-tech, as the largest exporter, stands to lose the most," says the AEAâs Archey, who claims that such legislative action could jeopardize $171 billion in U.S. high-tech exports.
Offshore outsourcing is an increasingly contentious issue. Companies need to be extremely careful when deciding on an outsourcing strategy. Executives need to understand and evaluate the potential risks and rewards of outsourcing to determine if it is right for their business â and their employees.
Paul Villella is President & CEO of HireStrategy, a full-service professional staffing firm providing executive search, contract and permanent placement solutions for companies and career management for individuals in the specialty skill areas of technology, sales, finance and accounting. HireStrategyâs customers include Fortune 500, middle market and emerging growth companies across diverse industries.