Offshoring’s Antidote: The Power of Persuasion?

Rochester Institute of Technology professor and author Ron Hira thinks offshoring our technology prowess is bad. If you are familiar with his book, Outsourcing America (co-written with his brother, Anil Hira), I’m sure you aren’t surprised.

In a recent interview with ComputerWorld editor Jamie Eckle, Hira provides some insight into his position.

I’d like to tackle a couple of his points—points that I wrestle with when I think about offshoring. First, he makes the argument that workers are the ones that will unduly suffer from offshoring, simply because as jobs move overseas the workers will face major wage competition. Yep, that’s true.

He also brings up, in the interview, the point that by offshoring innovation and research and development, America stands to undermine its technological and economic future. I agree.

But what is most compelling about Hira’s point of view is this: To curb offshoring, there has to be something in it for companies. Large, global companies that have shareholders answer first to those shareholders. Benevolence and patriotism aren’t their top driving forces (although I don’t think all, or even most, companies are malevolent and unpatriotic). What matters is how well their companies perform financially, and to improve finances, companies have to keep operating costs down. So if something can be done cheaper, better, faster somewhere else… why wouldn’t a company offshore?

Hira argues that the solution lies in the hands of the government. Tax loopholes that encourage offshoring should be closed, and tax incentives for companies that keep work here should be considered. President Obama has yet to make his stand on this issue, despite campaigning that he would fight to keep offshoring at bay. (To be fair, at least in my mind, there’s been quite a bit on Obama’s plate of late, and offshoring has undoubtedly been pushed way down the agenda.)

But I’d look further than the government. There has to be something more to persuade companies to keep work here. I don’t think our outsourcing and IT services are in such a shambles here that they can’t compete, performance-wise, with what’s offered across the oceans. Wages, of course, are at play, but we can’t go head to head on that one: we simply can’t lower wages. Maybe Ben Bernanke and the Federal Reserve have a solution…

If only it were a simple supply and demand problem. There’s clearly demand here:  Forty-three percent of CIOs recently surveyed said their IT departments are understaffed in relation to current workloads, according to a study of more than 1,400 CIOs sponsored by IT staffing firm Robert Half Technology. Of course there is supply. Unemployment continues to be one of the most pressing problems in the United States today.

Unfortunately, its not. The caveat, clearly, is money. The down economy has begot layoffs, which in turn has begot understaffed IT departments. And the down economy has begot tight budgets, which in turn begets few, if any, hires. Offshoring is a band-aid of sorts: companies can fill demand on smaller budgets.

So how to discourage companies from offshoring? I think the public—the market—needs to push harder to encourage companies that keeping as much work as possible here is not only the right thing to do, but the fiscally responsible thing as well. Government action can also help, but ultimately I think the most powerful persuasion will come from we the people.