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Saturday Essay: Why Outsourcing is a "Tremendous Opportunity" for US Economy

Saturday Essay: Why Outsourcing is a "Tremendous Opportunity" for US Economy

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  • Offshore Outsourcing: Magic Bullet or Dirty Word?
  • 1 in 4 IT Jobs Going Offshore, Says Gartner; One Major "Offshoring Failure" in 2004 Predicted
  • IT Trends: "Intelligent Computing" is Greater Threat than Outsourcing

    One hot topic in this year's election is whether (and how) to stop U.S. companies from engaging in offshore outsourcing to India, China, and other countries. Dr. Adam Kolawa, the co-founder and CEO of Parasoft, is not convinced that limiting outsourcing in order to protect the U.S. economy is the answer.

    "Will regulating outsourcing produce the desired effect? I don't think so," Kolawa says.

    "Outsourcing actually offers the U.S. a tremendous opportunity, and not taking advantage of this opportunity would come at a significant cost to the U.S. economy," he continues. "It's important to recognize that outsourcing can help us develop trading relations with the nations to which we are outsourcing," Kolawa argues. "Such trading relations can lead to long-term opportunities for the U.S. For example, consider the evolution of the U.S.'s now vital trading relationship with Japan. At the end of World War II, Japan was largely undeveloped; if they remained that way, we might not have a trade deficit with them, but we also would have little to no trade with them."

    "As Japan first began to develop, they flooded the U.S. market with sometimes strange exports. By the late 1980s, there was fairly widespread fear that Japan's economic development was going to threaten the U.S. economy just as there is now fear that economic development in India and China will threaten the U.S. economy."

    The Japanese example, according to Kolawa, ought to teach us. "Did Japan's economic development ruin us? Hardly," he says.

    "In fact, starting around the early 1990s, Japan became a prime market for U.S. exports. Many U.S. companies (including Parasoft, the software development company of which I am the CEO and co-founder) enjoyed much success exporting products to Japan since the early 1990s. To this day, Parasoft and many other companies have continued to build and foster relationships with Japanese organizations relationships that have been key to our ability to weather U.S. recessions."

    "If Japan had remained a less-developed nation as many in the U.S. initially hoped it would Parasoft and other U.S. companies would not have been able to reap the benefits yielded by our exporting to Japan. Job growth would have been slower, tax revenues from corporate profits would have been reduced, and many fewer U.S. companies would have weathered the previous (early 1990s) and current recession."

    "Now, development in India and China is starting to promote new export opportunities. If it weren't for offshore outsourcing, these opportunities would not exist. We would continue to consider India and China to be nations that are not receptive to our technology exports (like we currently consider Africa and much of South America)."

    "I think that when we hear about short-term job losses that result from outsourcing to India and China, we also need to consider the long-term benefits of these nations developing into prime markets for U.S. exports. From my perspective as the CEO of a technology company, it appears that having these new markets offers U.S. businesses, U.S. workers (and prospective workers), and the US economy a tremendous opportunity for growth and expansion."

    Related Links:
  • Outsourcing "Has Been Going On Forever" - Intel's CEO
  • Offshore Outsourcing: Magic Bullet or Dirty Word?
  • 1 in 4 IT Jobs Going Offshore, Says Gartner; One Major "Offshoring Failure" in 2004 Predicted
  • IT Trends: "Intelligent Computing" is Greater Threat than Outsourcing
  • More Stories By Adam Kolawa

    Adam Kolawa is the co-founder and CEO of Parasoft, leading provider of solutions and services that deliver quality as a continuous process throughout the SDLC. In 1983, he came to the United States from Poland to pursue his PhD. In 1987, he and a group of fellow graduate students founded Parasoft to create value-added products that could significantly improve the software development process. Adam's years of experience with various software development processes has resulted in his unique insight into the high-tech industry and the uncanny ability to successfully identify technology trends. As a result, he has orchestrated the development of numerous successful commercial software products to meet growing industry needs to improve software quality - often before the trends have been widely accepted. Adam has been granted 10 patents for the technologies behind these innovative products.

    Kolawa, co-author of Bulletproofing Web Applications (Hungry Minds 2001), has contributed to and written over 100 commentary pieces and technical articles for publications including The Wall Street Journal, Java Developer's Journal, SOA World Magazine, AJAXWorld Magazine; he has also authored numerous scientific papers on physics and parallel processing. His recent media engagements include CNN, CNBC, BBC, and NPR. Additionally he has presented on software quality, trends and development issues at various industry conferences. Kolawa holds a Ph.D. in theoretical physics from the California Institute of Technology. In 2001, Kolawa was awarded the Los Angeles Ernst & Young's Entrepreneur of the Year Award in the software category.

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    Most Recent Comments
    GarryWert 10/09/09 04:13:00 AM EDT

    The primary job creation engine of the economy is the small businessman (or woman). Big corporations get the headlines because they usually affect people in larger numbers at one time. However their numbers are really not that meaningful when you look at the number of people employed in this country.

    angelina 07/23/09 04:35:00 AM EDT

    The growth of offshore outsourcing is a good thing for the US economy and the world economy because it democratises the rules of offshore resources presents a tremendous opportunity to remain competitive

    Angelina Jacob
    outsourcing uk jobs

    jasonglades 04/14/09 06:02:00 PM EDT

    I must admit I liked this essay very much. Keep it sharing with us such interesting essay writing ideas for students.

    NYT 09/09/04 02:24:00 PM EDT

    Uh-oh looks like at least one economics heavyweight disagrees.

    Paul A. Samuelson, the Nobel Prize-winning economist and professor emeritus at MIT, asserts in an upcoming article for the Journal of Economic Perspectives, that the assumption that the laws of economics dictate that the American economy will benefit in the long run from all forms of international trade, including the outsourcing abroad of call-center and software programming wrong.

    For more details there's a great article in the New York Times summarizing his counter-argument.

    Eric Jones 09/09/04 05:36:34 AM EDT

    If outsourcing is great for the U.S. Economy.
    And the job loss is temporary.
    Please show me the time table that will bring back the not just the IT jobs that have left but the manufacturing jobs that were lost to overseas cheap labour so Companies can make a buck.
    If outsourcing is great and such a boon why are CEO/CFO and other executive positions not on the list to be outsourced?
    Obviously if India can staff the same call center and programming shop for $200.00 dollars per-person vice the $1,000.00 per-person in the U.S. look how much the company would reap if it could outsource the more than six figure salary plus bonuses if you removed a few executives.
    No I do not agree that outsourcing is a way to open more trade markets, only a way to boast income for a company and its stockholders and owners.

    Shivetya 09/06/04 08:50:58 AM EDT

    Big corporations, the ones doing the outsourcing, do not provide the bulk of the jobs. For geeks, which to some implies having more intelligence than the common worker, some of you are dumber than the proverbial doorknob.

    The primary job creation engine of the economy is the small businessman (or woman). Big corporations get the headlines because they usually affect people in larger numbers at one time. However their numbers are really not that meaningful when you look at the number of people employed in this country. There are 138 MILLION people working in the US.

    How many jobs were outsourced? Now, looking back on history shouldn't we consider the 70s the age of outsourcing automobile workers? The 80s textile workers?

    As for the job creation. The capital gains tax cuts and similar equalizing of the percentage of income tax benefit the small business greatly. I know, I have four relatives with small businesses who have grosses from as low as 500k to nearly 5 million. Guess what, they have more money and they did exactly what was expected, they hired to grow even bigger.

    Now what will stop this? Simple, raising the taxes on the "evil rich". Sorry, the proposed plans will smack down more small businesses than anyone. The ones with the millions and billions have relatively no income and have the means to dodge nearly most forms of taxes.

    In the end the only proper way to deal with taxation is by consumption. The rich consume in a very big fashion and the fairtax will accomplish that.

    info 09/06/04 08:38:43 AM EDT

    When in feb the president's chief economic adviser, Greg Mankiw, wrote that the movement of U.S. jobs overseas due to cheaper labor costs would prove "a plus for the economy in the long run," and was simply "a new way of doing international trade," GOP House Speaker Dennis Hastert lambasted him, saying, "His theory fails a basic test of real economics."

    Communications Workers of America 09/04/04 07:09:28 AM EDT

    Join the CWA outsourcing web log (blog) of news articles on outsourcing and offshoring.

    The focus of the blog is the hollowing out of American companies: jobs are going abroad but companies are aggressively subcontracting operations in ways that reduce salaries and benefits and threaten union representation. The blog will contain news clips and analysis of the twin threats of outsourcing and offshoring. It will be published on a regular basis.

    If you would would like to receive this regularly or have contributions to the blog, please send an e-mail to Tony Daley at [email protected].

    Doogey 09/03/04 03:30:24 PM EDT

    Oh how I love these articles...have no fear outsourcing is here!

    Notice how the author says "can", not will: it *can* help, but will it? There is no guarantee. Like the other poster said, the conditions for Japan are different than today. I love how there is always some generality to these statements, like it can help the US economy... When, I ask, and in what way? Be specific!

    In the meantime, what am I supposed to do since It is very difficult to find the next software job? Should I go back to school for the umpteenth time and this time, get a degree in chemical engineering? What other career am I supposed to be trained into anyways? Oops I forgot, I am getting older, and now have children. Sure seems like the re-education theme is wearing thin. I am tired of getting educated, and then re-educated whenever some bozos talk generally about the *potential* for the US economy when we outsource jobs.

    I suspect that what will really happen is that we will cede technological superiority to other countries in years to come.

    Me Mybusiness 09/03/04 02:56:26 PM EDT

    The author doesn't get a few important facts:

    One, the difference between what happened in post-war Japan and what's happening now in India is that Japan created their own products (Sony, Yamaha, Honda, and Kawasaki aren't American-owned brands) in their own manufacturing facilities using their own work force - they didn't bid on production for North American companies and poach North American jobs.

    Second, Corporate America seems unable to see beyond their greedy noses.

    While outsourcing will no doubt greatly assist Corporate America in their never-ending crusade for more and more immediate profits and "maximizing stockholder value" (and screw the consequences), it does nothing for the average American (or Canadian). Do you remember them? They're the ones who actually do the work all day, not play golf, or polo, or gaze out the windows of their corner penthouse offices... The ones on whose backs the CxO's pleasures were "earned". Eventually, John Q Public will be unemployed.

    Beyond contributing to the eventual collapse of retail and service industries in North America due to decining customer bases, citizens being unemployed means no tax revenue for governments, and if enough citizens are unemployed, eventually no government will be able to raise moey to finance the things we've all become accustomed to - things like welfare, roads, schools, health, multi-billion dollar wars waged to protect Corporate America's profits, etc.

    Oh well, history show that all empires eventually crumble due to greed. Maybe it's time this one did, too...

    Rajesh Jain 09/03/04 12:28:08 PM EDT

    Bangalore will soon have a greater concentration of techies than Silicon Valley. The future of computing will be driven not by existing users but by new users. These are going to be from the world's emerging markets. They need computing at the price of a cellphone. They need computing as a utility. The next big thing in computing will be about building a platform which makes the two most important creations of the past - the computer and the Internet - available to the next users at a fraction of today's prices.

    Nitish Rele 09/03/04 12:20:28 PM EDT

    Has anyone heard of a book by N. Sivakumar of Bridgewater, New Jersey, called 'Debugging Indian Computer Programs - Dude, did I steal your job?'

    It was on the Amazon bestseller list sometime back, defends H1-B/L1 visa holders and their contributions to the US economy.