Barack Obama Makes His (Pointless?) Play on Outsourcing

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Barack Obama has publicly stated (I assume in his Government, should he get in) that organizations who outsource overseas won’t get tax breaks. What tax breaks though? In the US, organizations don’t get tax breaks specifically for this. And what has an organization’s choice of outsourcing got to do with politics, I would add – surely the leaders of these organizations have their stockholders to answer to?

Maybe Barack is trying to win over the blue-collar masses of the US, but has he got his facts straight, and is it the right call to make?

Ann All on the IT Business Edge blog (link below) has commented on this issue on the IT Business Edge blog. Ann thinks that Obama’s statements are really addressing the migration of manufacturing work, but a blanket statement like this isn’t applicable carte blanche. The basis of the debate is Obama’s Patriot Employer Act which sets to provide incentives (in the form of tax credit) to American employers to create the right balance between US jobs and overseas jobs. On the face of it, it makes sense. But if you look into the matter deeper, should IT organizations who offshore part of their operation be worried?

Yes, I think. Outsourcing overseas has risen because of cheaper overseas labor costs, which means that overall, companies can remain competitive in the global market. True. But that isn’t it. The other fact is that the US, in the long run, cannot sustain the number of skilled workers to cope with demand. Growth is being inhibited due to the shortage of skilled workers. This is what is happening in India, right now. But the Indian education system is capable of churning out many more PhDs in appropriate business functions than the US is. I don’t think Obama should be penalizing organizations who tap into this human capital to achieve their business objectives.

So my prediction, should this go ahead, is an organizational conflict between the positive discrimination to the point of affirmative action towards US workers against what makes economic and business sense. IT managers are going to be stuck between a rock and a hard place, and will be further restricted by yet another corporate obstacle. Organizations will be led to make a compromise (or pay through the nose) to keep within quotas. But let me just clarify my point – I am all in favor of arresting the dwindling of the US tech sector – for sure. But is this the way to do it?

Hey, I am still thinking this one through and I haven’t concluded my thoughts on this – something instinctive tells me this is the wrong way to go. What are your thoughts? Please tell me!

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4 thoughts on “Barack Obama Makes His (Pointless?) Play on Outsourcing”

  1. on the comment ‘..what has an organization’s choice of outsourcing got to do with politics..’ I would argue that it has everything to do with politics. Every outsourced job is a job lost and furthermore its money and knowledge lost.

    Perhaps it should be a case of Tax breaks for companies that bring in work from outside rather than give it away or even better (and perhaps more to the point) it should be tax breaks for those companies who train the local residents.

    Perhaps if the US spent less money on war and more money on education and training they would not have to look to other countries for ‘cheap’ labour. How can anyone justify giving money and jobs away when there is unemployment in a country?

    Sure, it’s probably not as simple as that – never is.

    (Written by someone who is living in someone else’s country taking away a job from a local 🙂

  2. @Graeme = Thanks for sharing your view Graeme. I don’t think it is as simple as one job created overseas = one job lost domestically. Organizations have to look at their capability holistically and the total cost of ownership against the value created, whilst remaining competitve in their market. I think this the world balancing itself out, whether (from ones domestic standpoint) you like it or not, but *it won’t last forever*! Thanks Graeme!

  3. You are more than likely right. In this age of globalisation its hard to balance out the distribution of anything when we have such tight boundaries (borders) and at the same time a drive to expand, make money and survive no matter what.

    If we had no borders then this would not be an issue?

  4. @Graeme: Good question…. although I’m not sure I could answer it with anything but a philosophical statement as humans instictively create tribal structures and will define boundaries around them, whether real (like walls) or abstract (like status). If we had no borders, then how could we appoint leaders to anything but small tribes again?

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