How the Presidential Election Will Impact IT Outsourcing

What will be the impact of the presidential election be on outsourcing IT services? We compare Obama's and Romney's positions on offshore outsourcing, domestic sourcing, skilled worker visas and public sector outsourcing.

By Stephanie Overby
Fri, November 02, 2012

CIO — The issue of offshore outsourcing and its impact on American jobs has been front and center throughout the 2012 U.S. presidential campaign. But as election day draws near, both President Barack Obama and former Massachusetts Governor Mitt Romney are singing more or less the same tune on the subject-offshoring is bad; job creation is good.

Obama v. Romney on IT Outsourcing

But what will be the actual impact of the presidential election on offshoring and outsourcing in general? Will a Romney administration set a different tone on the subject of offshore job creation if he takes office?

Would a second Obama term result in new taxes on offshoring or increased skilled worker visa requirements or restrictions? Will either candidate's policies encourage domestic sourcing? And what's to come for public sector outsourcing at a time when federal, state and local governments are under increasing cost pressures?

We looked at each of four key subjects--offshore outsourcing, domestic sourcing, skilled worker visas, and public sector outsourcing--to see what difference, if any, the man taking the oah of office next year might actually make.

1. Offshore IT Outsourcing

Obama has talked about ending tax breaks for companies that "ship jobs overseas" since his 2008 campaign, namely those parts of the tax code that enable enterprises to write off expenses incurred when moving business operations abroad. While that might affect companies that offshore IT services to themselves--setting up captive operations overseas--it would have no impact on those who outsource offshore to a third-party like IBM or Infosys.

Democrats have been pushing the issue of tax breaks for offshored work, but they've been pushing that since the 2004 election. They won't do anything if they control Congress and the White House next year either. A Romney administration will likely tone down the rhetoric but deliver the same results.

Expect that kind of talk to continue if Obama is elected, says David Rutchik, partner with outsourcing consultancy Pace Harmon. Action, however, may be less likely.

"Offshoring under an Obama administration and Democratic Congress is likely to remain under some pressure, at least with respect to rhetoric," Rutchik says. "The reality, though, is that offshoring is here to stay, and has been utilized significantly under the current Obama regime and will continue to be an important service delivery model for U.S. corporations to compete globally."

"Democrats have been pushing the issue of tax breaks for offshored work, but they've been pushing that since the 2004 election," says Norm Matloff, a professor of computer science at the University of California, Davis.

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