Ohio Bans Outsourcing – Another blow for Indian Software companies

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The U.S state of Ohio has now banned outsourcing of Government projects to any off-shoring companies outside of U.S. The Ohio Governor has gone ahead and declared:

“No Public Money should be spent on services provided Offshore. The purchase of offshore services with public funds undermines Economic Development, job creation and retention objectives”

Indian Outsourcing companies are already struggling with the sudden steep hike in Visa fees announced by U.S Congress just a few weeks back. Although, Outsourcing ban for Ohio government projects may not affect too many companies severely – the worrisome factor is that, this probably may be start a trend of similar such moves by other states as well.

If at all other states start declaring similar ban on outsourcing, it may cause a dent in Indian outsourcing Industry. Currently, U.S is struggling to cope up with high un-employment rates and many states may be forced to take such steps to calm majority of American people who blame outsourcing as the main cause of Un-Employment.

The low-cost advantage of outsourcing has been fast eroding through-out this decade, primarily due to the fact that software personnel salaries have been consistently rising. Now, with this ban Indian companies will have to employ more local Americans which will further increase the costs.

All is not lost though, the ban if becomes wide-spread will be limited to Government projects, which probably constitute not more than 5 percent. Majority of outsourcing business comes from Private American firms. It is highly unlikely, that private companies will start banning given the cost advantage (atleast as of now) outsourcing services offer.

Anyways, I biggest problem is that on one side, America talks about flat world, open markets and liberalization. On the other hand, they make moves which completely contradicts what they say. It is like a proverb that we have in Hindi

“Dikhane ke daat alag hote hai aur khane ke alag’ 

What is your view?

  1. Seshadri Thiru says

    Let us face it. There was nothing called “outsourcing”, until the year 2000. Then in a jiffy, the west understood that cheap (and skilled) labor was available in third world countries like India. Every company wanted a piece of the pie, and joined in outsourcing their jobs to India.

    Two questions come to my mind:

    Has this benefited Indian society as a whole? There are different points of view on this. Ask someone from the new elite IT society…….. .This person would say that he lives in the lap of luxury, thanks to the newly found riches. On the other hand, ask someone who has nothing to do with the IT sector – he would have nothing but sob stories, like how real estate prices have gone up 500 %, how there is a runaway inflation, and how miserable life has become.

    As much as someone from the IT sector would not like to admit this – economists believe that the divide between the super rich and the common man is too big to bridge. The newly economy, which is based on outsourced jobs has indeed created disharmony, and an underlying stress among various sections of society.

    The second question is : The west found India to be a great destination, for cheap & skilled labor. That being said, if they found another destination cheaper than India, why would they not move there? I know what the IT guy is thinking and I have heard this before – “No! that will not happen”.

    We will pray that doesn’t happen, but who knows – no one can predict the future.

  2. Karen Cayamanda says

    There will always be a demand for outsourcing in the US, because low costs will stay attractive to American firms/projects for as long as the economy stays down. The US’ problem is that it has trained citizens to be consumers (to keep money circulating in the economy) rather than producers; it gave the latter role to developing countries that are now being recognized for outsourcing services.

  3. Seshadri Thiru says

    I understand the resentment of Indians at what Ohio state has done, to curb outsourcing, and create jobs at the local level. I disagree when someone calls these measures “populist” or an “election year stunt”. Let us face it – Outsourcing grew under the Bush administration, and it is all about corporate greed – about how to hire cheap, skilled labor in third world countries.

    Outsourcing has created jobs in large numbers in India, but has created an artificial economy – Real estate prices have gone up many fold and so also the general cost of living. Outsourcing may benefit a section of society (the IT sector), but has cost others in India, dearly, in terms of the runaway inflation, making most essentials beyond the reach of the common man.

    Back here in the US, it is not just political compulsion, but the right thing to do. While it may hurt jobs in India, the administration has a duty to protect and create jobs locally. With most manufacturing already outsourced, the least the administration can do is take steps like the one the Ohio government has done.

    India would do well to create jobs of its own, instead of depending on the west for outsourced. After all, charity begins at home, and for the administration here, home is the US.

  4. June Harris says

    American companies have been selling their products/services to India and other countries, for decades.
    Colgate Palmolive, Coca Cola, GE, Ford, Gillette, General Motors, Johnson & Johnson, McDonalds, Pfizer, Pizza Hut, Amway, Caltex, Federal Express, Ogilvy and Mather, Microsoft, Whirlpool, and many more, have been selling their products to India and other countries for decades.
    Now, when some Indian companies are selling their services – outsourcing services, to America, everyone is crying.
    This is called DOUBLE STANDARDS; perfectly said:“Dikhane ke daat alag hote hai aur khane ke alag’
    People of China, India, Philippines, and other countries should stop using the products of American companies.

    1. raj says

      America can’t stop jobs from India and china because they jealous with growth of India and china .now they become going down and want ban IT jobs but its not possible for America.

    2. Jagannath A says

      the problems is.. even if they are US brands they are not manufactured in US ;) except software products. they have offices/factories here in India and employ Indian people.

      TCS has an office in Ohio. if the development happend there using local people, then they have no problems. the problem comes when the development happens in a foreign country.

      So in my opinion this move is perfectly fine considering the state of their own economy and unemployment rate.

      maybe a bland reasoning from my side, but the issue is not as big as media portrays it to be.

  5. Umasree Raghunath says

    Every country tries to keep its people have three essential things, Jobs, Food and Housing… Today we see the common man in US struggle to make these three. Outsourcing is not the only and primary reason for this state of affairs. Essential manufacturing products are not made in America and have left to the shores of China, Thailand, Vietnam, Philliphines and India long time ago. The consumer industry has close to 60% of foreign goods penetration and this is one segment that US should be looking at…. becasue right from Clothing, to Day to day durables, every thing is made out of America…. nextly,… companies like Foxconn which has the employees more than IBM, HP, Cisco and many other major IT gains put together indicates where the jobs are flowing. Today, there is a decline of jobs, decline of standards of living, but the tunnel is not towards an end. Only high paid IT jobs are drained by outsourcing…but there are thousands of jobs that are helpful to the common man working in factories and manufacturing units, that have to be saved too. Then alone, this vicious circle will come to an equivilibrium and US will not consider IT outsourcing as the biggest hurdle in its growth and sustainability.

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