Offshore outsourcers grapple with U.S. backlash

NEW YORK – Though a variety of speakers at the OutsourceWorld show last week took pains to illustrate the benefits of offshore outsourcing — pointing to the availability of relatively low-cost, highly educated service providers around the world — a common theme among discussions taking place in the booths and aisles was the growing U.S. backlash against foreign IT competition.

The show was a part of TECHXNY in New York, which ended Thursday, and featured booths with outsourcing providers from all over the world, including Romania, the Philippines, China, Bulgaria, India, Egypt and even Nepal.

“A couple of people were here, pointing at me and telling me about how we are taking jobs away — they were quite militant,” said Nico van Rooyen, director of market development for B&Ti Solutions, a specialist in services for financial and insurance industries in Johannesburg, South Africa.

A common refrain among the offshore providers was that they would like to be seen as partners, not competitors.

“Our model is partnership,” said George Sharkov, chairman of Basscom, the association of Bulgarian software companies. “We want to establish long-term relationships with American companies. But you cannot tell us it’s our fault for taking jobs away; if the jobs don’t come to us they will go somewhere else — business people want to get high quality in the most cost-efficient way possible, and if they can see that can be done outside the U.S., they will do it.”

Show attendees readily acknowledged that offshore competition is a thorny problem for the U.S.

“I’m here to find out what’s going on with outsourcing; I’m not getting as much business as I used to and I think one of the reasons has to be because of offshore outsourcing,” said Albert Zee, president of Alz Production, a provider of business and financial graphics and presentation services, based in New York. “I have friends who are telling me that they are losing their jobs because of foreign competition.”

Several U.S. state legislators have proposed bills that would prevent government contracts from being awarded to offshore outsourcers, but Zee does not think protectionism is the answer. “I’m opposed to legislation that would restrict trade, on philosophical grounds,” he said, but conceded that he was unsure what the U.S. can do to shore up the erosion of jobs from foreign competition.

Other show attendees and industry observers said the only way for the U.S. to avoid permanent job losses was for companies to continue to innovate.

“Offshore providers will always be able to supply labor for certain types of jobs cheaper than the U.S., at the same or even better quality, that’s just a fact,” said Mallip Venkatesh, an associate program manager for New York City Transit Authority, who is originally from India. “So U.S. workers will have to settle for lower wages or see jobs go offshore. The only way to keep jobs in the U.S. or keep wages high is to continue to innovate, to invent new technologies that need to be developed and managed in the U.S.”

The U.S. has successfully dealt with foreign competition before, pointed out some industry observers.

“Some of the U.S. automakers managed to learn lessons from the Japanese, and those that were successful ended up buying some of who were not — Ford bought Jaguar, for example,” noted Alan Brody, president of IT marketing event management company Techmarketing, based in Scarsdale, New York.

U.S. workers are feeling particularly pinched because of the general downturn in the job market and the dislocation caused by foreign IT competition, said Brody and other industry observers.

“The answer is not to put the brakes on the process, which will cause the pain to last longer, but to speed up the retraining process,” Brody said.

Meanwhile, offshore companies shrugged off not only occasional antipathy from show attendees but poor show attendance, attributed by conference organizers to the weak U.S. economy. The companies said they needed to take whatever opportunities they could to engage U.S. business representatives in constructive dialogue.

“The show was a failure … from the point of view of signing deals,” said Basscom’s Sharkov. “But it’s all right, we need to come here and establish a presence.”

Other vendors agreed.

“It is important to come here and present a professional marketing presence; these things take time,” said Marian Hanganu, marketing manager for TotalSoft, a software company in Bucharest. And, said Hanganu, it will take time for U.S. companies and their foreign allies and competitors to sort out their respective roles in the future of IT.

“U.S. workers will find new jobs,” Hanganu said. “They need to become program managers, program designers.”

But Hanganu acknowledged U.S. workers will see competition from foreigners even in high-end jobs. “TotalSoft is changing strategy and wants to focus on developing our own products in the ERP (enterprise resource management) area, for example; we’re not as interested in doing offshore contract work.”